SECURITIES PURCHASE AGREEMENT
EXHIBIT
10.1
Securities
Purchase Agreement dated as of November 13, 2006 (this “Agreement”)
by and
between GPS Industries, Inc., a Nevada corporation, with principal executive
offices located at Suite 214, 5500 152nd Street. Surrey, British Columbia,
Canada V35 S59 (the “Company”),
and
Great White Shark Enterprises, Inc., a Florida corporation (“GWSE”),
and
Leisurecorp LLC, a Dubai limited liability company (“Leisurecorp”)
(GWSE
and Leisurecorp are herein individually referred to as a “Buyer”
and
collectively the “Buyers”).
WHEREAS,
Buyers desire to purchase from the Company, and the Company desires to issue
and
sell to Buyers, upon the terms and subject to the conditions of this Agreement,
shares (the “Preferred Shares”) of the Company’s Series B Preferred Stock for an
aggregate purchase price of $15,740,890; and
WHEREAS,
in partial consideration of Buyers agreeing to purchase the Preferred Shares
hereunder, the Company shall issue five-year warrants, in the form attached
hereto as Exhibit A, to purchase shares of the Company’s common stock (the
“Common
Stock”)
at an
exercise price per share of $.122 (the “Warrants”).
WHEREAS,
concurrently with the execution of this Agreement, GWSE is making a short-term
loan in the amount of $1,500,000 to the Company, and Leisurecorp is making
a
short-term loan in the amount of $5,000,000 to the Company, which loans are
evidenced by those certain unsecured, promissory notes (each a “Promissory
Note”),
dated
as of the date hereof, issued by the Company to each of GWSE and
Leisurecorp.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
I.
PURCHASE
AND SALE OF PREFERRED SHARES AND WARRANT
A. Transaction.
Subject
to the satisfaction of the conditions set forth in Articles VI and VII, at
the
Closing (as defined below), each Buyer hereby severally agrees to purchase
from
the Company, and the Company hereby agrees to issue and sell to such Buyer
in a
transaction exempt from the registration and prospectus delivery requirements
of
the Securities Act of 1933, as amended (the “Securities
Act”),
Preferred Shares and Warrants as follows: (i) Leisurecorp hereby agrees to
purchase 1,000,000 Preferred Shares and Warrants to purchase 40,983,607 shares
of Common Stock for a purchase price of $10,000,000; and (ii) GWSE agrees to
purchase 300,000 Preferred Shares and the Warrants to purchase 12,295,082 shares
of Common Stock for a purchase price of $3,000,000. In addition, concurrent
with
the Closing, and conditioned upon the Closing, GWSE agrees to convert $2,740,890
of indebtedness currently owed to it by the Company into 274,089 shares of
Preferred Stock and Warrants to purchase 6,606,497 shares of Common Stock.
The
Buyers hereby agree to fund their respective Promissory Notes.
B. Purchase
Price; Form of Payment.
At the
closing of the purchase and sale of the Preferred Shares (the “Closing”),
(a)
the Company shall issue to GWSE 300,000 Preferred Shares and a Warrant to
purchase 12,295,082 shares of Common Stock, and GWSE shall pay the $3,000,000
purchase price for such securities by issuing a $1,500,000 wire transfer of
immediately available funds to the account of the Company as notified by the
Company and by canceling the entire balance (principal and all accrued interest)
then outstanding and owed to GWSE on its $1,500,000 Promissory Note; and (b)
the
Company shall issue to Leisurecorp 1,000,000 Preferred Shares and a Warrant
to
purchase 40,983,607 shares of Common Stock, and Leisurecorp shall pay its
$10,000,000 purchase price by issuing a $5,000,000 wire transfer of immediately
available funds to the account of the Company as notified by the Company and
by
canceling the entire balance (principal and all accrued interest) then
outstanding and owed to Leisurecorp on its $5,000,000 Promissory Note. In
addition, at the Closing the Company shall issue to GWSE 274,089 Preferred
Shares and Warrants to purchase 6,606,497 shares of Common Stock in exchange
for
the cancellation in full of the indebtedness listed on Exhibit F(1) having
an
aggregate unpaid balance of $2,740,890. The stock certificates representing
the
Preferred Shares and the Warrants shall be issued and delivered to Buyers or
their designated depository as instructed by the Buyers (which shall have been
duly authorized, issued and executed I/N/O, Buyer or, if the Company otherwise
has been notified, I/N/O Buyer’s nominee).
C. Additional
Investment Right.
During
the 120 calendar days following the date of the Closing, each Buyer, shall
have
the right to increase its investment, or make an additional investment in the
Company by purchasing additional shares of Preferred Stock and Warrants (the
“Additional
Securities”)
for
cash on the same terms as set forth in Article I. B. above (for each $10 cash
investment, the Buyers shall purchase one Preferred Share and a Warrant to
purchase 40.983607 shares of Common Stock). GWSE shall have the right to
increase its aggregate investment in the Preferred Shares and Warrants by
$3,000,000, and Leisurecorp shall have the right to increase its aggregate
investment in the Preferred Shares and Warrants by $10,000,000. Each Buyer
shall
have the right to assign (in whole or in part) its right to purchase Additional
Securities under this Article I. C. to one or more of its affiliates or
designees. In order to exercise the right to purchase Additional Securities,
the
Buyer and/or its designee shall deliver to the Company irrevocable written
notice of its election to make an additional investment, which notice shall
(i)
be delivered at least two business days prior to the proposed purchase date,
(ii) specify the amount of such additional investment, and (iii) if applicable,
identify the affiliated persons or designated entities who will purchase the
Additional Securities. If the right to purchase the Additional Securities is
exercised before the Closing by a Buyer or its assignee/designee, this Agreement
(and the Registration Rights Agreement) will be amended solely to reflect the
increased amount of investment by such Buyer or the addition of the
assignee/designee as an additional investor. In the event that the right to
purchase Additional Securities under this Article I. C. is exercised by any
Buyer or its assignee/designee after the Closing, such Buyer or
assignee/designee shall, at the time of the purchase of the Additional
Securities, execute a securities purchase agreement that is substantively
identical to this Agreement, which securities purchase agreement shall only
be
changed from this Agreement to reflect the Closing and the transactions
contemplated hereby. The parties to this Agreement hereby agree that at any
closing of the purchase of Additional Securities held after the Closing by
a
Buyer’s assignee/designee, such assignee/designee shall also enter, and become a
party to the Registration Rights Agreement entered into by the parties to this
Agreement at the Closing. The closing of any additional investment shall occur
on the proposed purchase date or as soon as possible thereafter and at a time
satisfactory to the party purchasing the Additional Securities (each a “Second
Closing”). At such Second Closing, the Buyer or its assignee shall pay the
purchase price by wire transfer of immediately available funds to the account
of
the Company, and the Company shall deliver the Warrants and stock certificates
representing the Preferred Shares purchased. As a condition to each Second
Closing, the Company shall be required to provide a certificate dated as of
the
date of the Second Closing (the “Second Closing Date”) executed by its Chief
Executive Officer certifying as to the matters set forth in paragraph D of
Article VII but shall substitute “Second Closing Date” for “Closing Date”).
2
II.
BUYER’S
REPRESENTATIONS AND WARRANTIES
Each
Buyer severally represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer
is
purchasing the Preferred Shares, the Common Stock issuable upon conversion
of
the Shares (the “Conversion
Shares”),
the
Warrants and the Common Stock issuable upon exercise of the Warrants (the
“Warrant
Shares”
and,
collectively with the Preferred Shares, the Conversion Shares and the Warrants,
the “Securities”),
for
its own account, for investment purposes only and not with a view towards or
in
connection with the public sale or distribution thereof in violation of the
Securities Act.
B. Buyer
is
(i) an “accredited investor” within the meaning of Rule 501 of Regulation D
under the Securities Act, (ii) experienced in making investments of the kind
contemplated by this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iv) able to afford the loss of its investment
in the Securities.
C. Buyer
understands that the Securities are being offered and sold by the Company in
reliance on an exemption from the registration requirements of the Securities
Act and equivalent state securities and “blue sky” laws, and that the Company is
relying upon the accuracy of, and Buyer’s compliance with, Buyer’s
representations and warranties set forth in this Agreement to determine the
availability of such exemption and the eligibility of Buyer to purchase the
Securities;
D. Buyer
understands that the Securities have not been approved or disapproved by the
Securities and Exchange Commission (the “Commission”)
or any
state or provincial securities commission.
E. This
Agreement has been duly and validly authorized, executed and delivered by Buyer
and is a valid and binding agreement of Buyer enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or the public
policy underlying such laws.
F. Since
June 1, 2006, neither such Buyer nor any person over which such Buyer has
control which (x) had knowledge of the transactions contemplated hereby, (y)
has
or shares discretion relating to such Buyer’s investments or trading or
information concerning such Buyer’s investments, including in respect of the
Securities, or (z) is subject to such Buyer’s review or input concerning such
affiliate’s investments or trading (collectively, “Trading
Affiliates”)
has,
directly or indirectly, effected or agreed to effect any short sale, whether
or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended (the
“1934
Act”))
with
respect to the Common Stock, granted any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Stock or otherwise sought to hedge its
position in the Common Stock.
3
III.
THE
COMPANY’S REPRESENTATIONS
The
Company represents and warrants to Buyers that:
A. Organization
and Qualification.
The
Company and each of its Subsidiaries (as defined below), if any, is a
corporation duly organized, validly existing and in good standing under the
laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry
on its business as and where now owned, leased, used, operated and conducted.
The Company and each of its Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership or use of property or the nature of the business conducted
by it makes such qualification necessary except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect.
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any document executed in connection with the transactions
contemplated by this Agreement, the Warrants, the Registration Rights Agreement
and the Shareholder Agreement to be entered into at the Closing by the Company
and the Buyers (the foregoing documents are herein collectively referred to
as
the “Transaction
Documents”),
(ii)
a material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impact on the Company’s
ability to perform under any of the Transaction Documents. “Subsidiaries”
means
any corporation or other organization, whether incorporated or unincorporated,
in which the Company owns, directly or indirectly, any equity or other ownership
interest.
B. Authorization;
Enforcement.
(i) The
Company has all requisite corporate power and authority to enter into and
perform this Agreement and the other Transaction Documents and to consummate
the
transactions contemplated hereby and thereby and to issue the Preferred Shares,
the Warrants, the Conversion Shares, and the Warrant Shares, in accordance
with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement
and the other Transaction Documents by the Company and the consummation by
it of
the transactions contemplated hereby and thereby (including without limitation,
the issuance of the Conversion Shares and the Warrant Shares) have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, its shareholders or any
third party is required, (iii) this Agreement has been, and the other
Transaction documents when executed, will be duly executed and delivered by
the
Company, and (iv) this Agreement constitutes, and upon execution and delivery
by
the Company of the other Transaction Documents, each of such instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
4
C. Capitalization.
(i) As
of the
date hereof, the authorized capital stock of the Company consists solely of
(i)
500,000,000 shares of Common Stock, of which 333,846,802 shares are issued
and
outstanding, 40 million shares are reserved for issuance pursuant to the
Company’s stock option plans, of which options for the purchase of 23,190,000
are outstanding, and 26,200,907 shares are reserved for issuance pursuant to
securities exercisable for, or convertible into or exchangeable for shares
of
Common Stock (excluding the shares issuable under the NIR Group Notes); and
(ii)
50,000,000 shares of preferred stock (the “Preferred
Stock”),
of
which no shares are outstanding but 15,000,000 shares have been designated
“Series A Preferred Stock.” As of the date hereof, except as set forth in this
paragraph and in Schedule C(i), there are no other securities exercisable for,
or convertible into or exchangeable for shares of capital stock of the Company,
and the Company has no contractual or other obligation to issue any shares
of
capital stock. The 375,000 shares of Series A Preferred Stock previously issued
by the Company have been automatically converted into shares of Common Stock
and
are no longer outstanding. There are no other authorized shares of capital
stock
or voting securities. The Company currently has a sufficient number of
authorized shares of Common Stock to cover all shares of Common Stock that
are
issuable as of the date of this Agreement if all currently issued and
outstanding options, warrants and convertible or exchangeable securities were
exercised, converted or exchanged on the date hereof.
(ii) Immediately
after giving effect to the transactions contemplated by this Agreement
(including the Amended Articles described in Article IV.H and the debt
conversion referred to in Article VII.I), the authorized capital stock of the
Company will consist of (i) 1,600,000,000 shares of Common Stock, of which
a
maximum of 376,533,966 shares will be issued and outstanding (assuming no
exercise of currently outstanding options or warrants, a true and complete
schedule of which is attached hereto as Schedule C(ii), and assuming that the
Company debt obligations listed in Exhibit F as subject to conversion are
converted prior to the Closing), 40 million shares will be reserved for issuance
pursuant to the Company’s stock option plans, of which options for the purchase
of 23,190,000 will be outstanding (assuming no exercise of currently outstanding
options), and 446,074,765 shares will be reserved for issuance pursuant to
then
outstanding agreements or then outstanding securities exercisable for, or
convertible into or exchangeable for shares of Common Stock; and 50,000,000
shares of preferred stock, of which 15,000,000 shares have been designated
Series A Preferred Stock (none of which will be outstanding), and 4,000,000
shares have been designated “Series B Convertible Preferred Stock,” of which
1,874,089 shares will be issued and outstanding. As of the Closing Date, except
as set forth in this paragraph and on Schedule C(ii), there will be no other
securities exercisable for, or convertible into or exchangeable for shares
of
Common Stock or Preferred Stock, the Company will have no contractual or other
obligation to issue any shares of capital stock, and there will be no other
authorized shares of capital stock or voting securities.
(iii)
All of
the Company’s outstanding shares of capital stock are duly and validly issued,
fully paid and nonassessable and were issued in compliance with state and
federal securities laws and were not issued in violation of any preemptive
or
similar rights.
5
(iv) The
Warrants and the Preferred Shares to be issued pursuant to this Agreement have
been duly authorized and when issued in accordance with the terms of this
Agreement will be fully paid and non-assessable and will be free and clear
of
any liens other than any liens created by the holder thereof, and will not
be
issued in violation of any preemptive or similar rights and will be issued
in
compliance with federal and state securities laws. At the Closing, the Common
Stock issuable upon conversion of the Preferred Shares and exercise of the
Warrants will be duly and validly, fully paid and non-assessable and will be
free and clear of any liens other than any liens created by the holder thereof,
and will not be issued in violation of any preemptive or similar rights and
will
be issued in compliance with federal and state securities laws.
(v) The
Company has issued options to purchase Common Stock and warrants exercisable
for
Common Stock on the terms and in the amounts set forth on Schedule C (the
“Convertible
Securities”).
Except for the Convertible Securities and except as otherwise set forth on
Schedule C, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and other similar rights) or agreements, orally
or in writing for the purchase or acquisition from the Company of any of its
shares of capital stock.
(vi) The
holders of Series B Preferred Shares will be entitled to the rights, preferences
and privileges as set forth in the Certificate of Designation (as defined
below). The Company has furnished to the Buyers true and correct copies of
the
Company's Articles of Incorporation as in effect on the date hereof
("Articles
of Incorporation")
and
the Company's By-laws, as in effect on the date hereof (the "By-laws"),
(vii) Except
for the Shareholder Agreement, the Company is not a party or subject to any
agreement or understanding relating to the voting or giving of written consents
with respect to any capital stock or by a director of the Company.
D. Acknowledgment
of Dilution.
The
Company understands and acknowledges the potentially dilutive effect to the
Conversion Shares and Warrant Shares issuable upon conversion of the Preferred
Shares or exercise of the Warrants. The Company further acknowledges that its
obligation to issue the Conversion Shares and Warrant Shares in accordance
with
this Agreement, the Articles of Incorporation, the Certificate of Designation,
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders
of
the Company.
E. No
Conflicts.
The
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance
and
reservation for issuance of the Conversion Shares and Warrant Shares) will
not
(i) conflict with or result in a violation of any provision of the Articles
of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice
or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable
to
the Company or any of its Subsidiaries or by which any property or asset of
the
Company or any of its Subsidiaries is bound or affected. The businesses of
the
Company and its Subsidiaries, if any, are not being conducted, and shall not
be
conducted so long as a Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity. Neither the Company
nor
any of its Subsidiaries is in violation of its Certificate or Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default under any material contract, agreement
or understanding to which it is a party or by which it or its assets or
properties is bound.
6
F. SEC
Documents; Financial Statements.
Since
December 31, 2004 the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to
herein as the “SEC
Documents”).
As of
their respective dates, the SEC Documents complied in all material respects
with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have
been
amended or updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents, including the notes thereto (the “Financial
Statements”),
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were complete and correct in all material respects as of their
respective dates, and were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated. The Financial Statements fairly present the consolidated financial
condition and operating results of the Company at the dates and during the
periods indicated therein (subject in the case of unaudited statements, to
normal and recurring year-end adjustments) Except as set forth in the Financial
Statements, the Company has no liabilities, contingent or otherwise, other
than
(i) liabilities incurred in the ordinary course of business subsequent to June
30, 2006 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which in the case
of
(i) or (ii), individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
G. Absence
of Certain Changes.
Since
December 31, 2005, there has been no material adverse change and no material
adverse development in the assets, liabilities, business, properties,
operations, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries.
H. Absence
of Litigation.
Except
as set forth in the SEC Documents, there is no action, suit, claim, proceeding,
inquiry, or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of
the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries, or their officers or directors in their capacity
as
such, that could have a Material Adverse Effect. There is no judgment, decree
or
order against the Company, or to the knowledge of the Company or any of its
Subsidiaries, against its officers or directors (in their capacities as such)
that could have a Material Adverse Effect.
7
I. Tax
Status.
Except
as set forth in Schedule H, the Company and each of its Subsidiaries has made
or
filed all federal, state, local and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries
has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to
be
due on such returns, reports and declarations, except those being contested
in
good faith and has set aside on its books provisions reasonably adequate for
the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating
to
the assessment or collection of any foreign, federal, state or local tax.
J. Disclosure.
All
information relating to or concerning the Company or any of its Subsidiaries
set
forth in this Agreement is true and correct in all material respects and the
Company has not omitted to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under
which
they were made, not misleading. No event or circumstance known to the Company
has occurred or exists with respect to the Company or any of its Subsidiaries
or
its or their business, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
K. Patents,
Copyrights, etc.
(i) The
Company and each of its Subsidiaries owns or possesses the requisite licenses
or
rights to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights ("Intellectual Property") necessary
to
enable it to conduct its business as now operated; there is no claim or action
by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it
to
conduct its business as now operated; to the best of the Company's knowledge,
the Company's or its Subsidiaries' current and intended products, services
and
processes do not infringe on any Intellectual Property or other rights held
by
any person; and the Company is unaware of any facts or circumstances which
might
give rise to any of the foregoing. The Company and each of its Subsidiaries
have
taken reasonable security measures to protect the secrecy, confidentiality
and
value of their Intellectual Property.
L. Acknowledgment
Regarding Buyers’ Purchase of Securities.
The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm’s length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers’ purchase of the Securities. The Company further represents to
each Buyer that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
8
M. No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any security
or
solicited any offers to buy any security under circumstances that would require
registration under the Securities Act of the issuance of the Securities to
the
Buyers.
N. No
Brokers.
Except
as set forth in Schedule N, the Company has taken no action which would give
rise to any claim by any person for brokerage commissions, transaction fees
or
similar payments relating to this Agreement or the transactions contemplated
hereby.
O. Environmental
Matters.
(i) There
are, to the best of the Company’s knowledge, with respect to the Company or any
of its Subsidiaries or any predecessor of the Company, no past or present
violations of Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company’s knowledge, threatened in connection with any of the
foregoing. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.
9
(iii) To
the
best of the Company’s knowledge there are no underground storage tanks on or
under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
P. Title
to Property.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries.
Any
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect.
Q. Internal
Accounting Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company’s board of directors, to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
R. Permits;
Compliance.
The
Company and each of its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"), and there is no action pending or, to
the
knowledge of the Company, threatened regarding suspension or cancellation of
any
of the Company Permits. Neither the Company nor any of its Subsidiaries is
in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since December 31, 2005, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations
would
not have a Material Adverse Effect.
S. Foreign
Corrupt Practices.
Neither
the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary
has,
in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
T. OTCBB.
The
Company is not in violation of the quotation requirements of the
Over-the-Counter Bulletin Board (the "OTCBB")
and
does not reasonably anticipate that the Common Stock will be removed by the
OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware
of
any facts or circumstances which might give rise to any of the
foregoing.
10
U. No
Investment Company.
The
Company is not, and upon the issuance and sale of the Securities as contemplated
by this Agreement will not be an “investment company” required to be registered
under the Investment Company Act of 1940 (an “Investment
Company”).
The
Company is not controlled by an Investment Company.
V. Certain
Registration Matters.
Assuming the accuracy of the Buyers’ representations and warranties set forth in
Article II, no registration under the Securities Act is required for the offer
and sale of the Conversion Shares and Warrant Shares by the Company to the
Buyers under the transaction documents.
W. Antitakeover
Matters.
(i) The
Company does not have 100 or more stockholders of record who have addresses
in
the State of Nevada appearing on the stock ledger of the Company.
(ii) The
Company, its stockholders, and its Board of Directors have taken all actions
required by Sections 78.378-78.3793 (inclusive) and Sections 78.411-78.444
(inclusive) (collectively, the Takeover Provisions) of the General Corporation
Law of the State of Nevada in connection with the transactions contemplated
by
this Agreement and the other Transaction Documents and no actions need be taken
by any other person or entity for the transactions contemplated by this
Agreement and the other Transaction Documents to be in compliance with the
Takeover Provisions.
X. Offering.
Subject
in part to the truth and accuracy of each Buyer’s representations and warranties
set forth in Article II, the offer, sale and issuance of the Securities as
contemplated by this Agreement are exempt from the registration requirements
of
the Securities Act and applicable state securities and “blue sky” laws, and
neither the Company nor any authorized agent acting on its behalf will take
any
action hereafter that would cause the loss of such exemption.
Y. Indebtedness.
Attached hereto as Schedule Y.1 is a true, complete and correct list of all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments as of October 31,
2006. The total amount of all Indebtedness (including, for this purpose, amounts
less than $50,000 and including all principal and accrued interest) outstanding
as of the date of this Agreement is $21,273,710, which number (excluding the
obligations listed on Schedule Y.2 incurred after October 31, 2006) has not
increased in the aggregate by more than $100,000 from October 31, 2006 through
the date of this Agreement. For the purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others; and (c) the present value of any lease and other similar
payments in excess of $50,000.
Z. NIR
Group Settlement.
On
November 8, 2006, the Company executed that certain Agreement (the “NIR Group
Settlement Agreement,” the form of which is attached hereto as Exhibit H) with
all of the buyers (the “NIR Group”) of the Company’s Callable Secured
Convertible Notes (the “NIR Group Notes”) listed under that certain Securities
Purchase Agreement, dated September 20, 2005, between the Company and the NIR
Group. Pursuant to the NIR Group Settlement Agreement, the Company has agreed
to
pay, and the NIR Group has agreed to accept, $2,800,000 in cash and warrants
to
purchase 3,000,000 shares of Common Stock as payment in full for all NIR Group
Notes and for the full release of all liens on the Company’s assets and all
other claims by the NIR Group against the Company.
11
IV.
CERTAIN
COVENANTS AND ACKNOWLEDGMENTS
A. Restrictive
Legend.
Each
Buyer acknowledges and agrees that, upon issuance pursuant to this Agreement,
the Securities (including any Warrant Shares and Conversion Shares) shall have
endorsed thereon a legend in substantially the following form (and a stop
transfer order may be placed against transfer of the Securities until such
legend has been removed):
“NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
[CONVERTIBLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR FOREIGN COUNTRY IN RELIANCE UPON
AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
FOREIGN COUNTRY. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.”
At
the
written request of any Buyer, the legend set forth above shall be removed and
the Company shall issue a certificate without such legend to the holder of
any
Security upon which it is stamped, if, (a) such Security is registered for
sale under an effective registration statement filed under the Securities Act
or
may otherwise be sold under Rule 144 or Regulation S without any
restriction as to the number of securities as of a particular date that can
be
immediately sold, or (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of counsel
in
comparable transactions, which opinion shall be reasonably acceptable to the
Company’s counsel, to the effect that a public sale or transfer of such security
may be made without registration under the Securities Act, which opinion shall
be accepted by the Company so that the sale or transfer is effected, or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 or
Regulation S.
B. Filings.
The
Company shall timely make all necessary filings with the Commission, including
by not limited to a Form D with respect to the Securities as required under
Regulation D, and “blue sky” filings required to be made by the Company in
connection with the sale of the Securities to Buyer as required by all
applicable Laws, and shall provide a copy thereof to Buyer promptly after such
filing.
12
The
Company also agrees that it shall, on or prior to the Closing Date, take any
other such action as the Company shall reasonably determine is necessary to
qualify the Securities for sale to Buyers under such “blue sky” laws (or to
obtain an exemption therefrom), and shall provide evidence of any such action
so
taken to Buyers on or prior to the Closing Date; provided that Company shall
not
be required to (a) qualify to generally do business in any jurisdiction
where it would not otherwise be required to qualify but for this subsection
or
(b) subject itself to taxation in any such jurisdiction.
C. Reporting
Status.
So long
as Buyers beneficially own any of the Securities, the Company shall file all
reports required to be filed by it with the Commission pursuant to Section
13 or
15(d) of the Exchange Act or any reports or filings that are required by the
OTCBB.
D. Registration
Rights.
The
Company shall grant to Buyers demand and piggyback rights with respect to the
Conversion Shares and the Warrant Shares pursuant to the terms of a Registration
Rights Agreement, the form of which is attached hereto as Exhibit B, to be
delivered to Buyers at the Closing.
E. Use
of
Proceeds.
The
proceeds received by the Company from the sale of the Preferred Shares pursuant
to this Agreement shall be expended by the Company solely as set forth in the
Use of Proceeds delivered to the Buyers in connection with the execution of
this
Agreement (the “Use of Proceeds”).
F. No
Integration.
The
Company shall not make any offers or sales of any security (other than the
Preferred Shares and the Warrants offered hereby) under circumstances that
would
require registration of the Preferred Shares, the Warrants, the Conversion
Shares or the Warrant Shares under the Securities Act or cause the offering
of
the Preferred Shares and the Warrants to be integrated with any other offering
of securities by the Company for the purpose of any stockholder approval
provision application to the Company or its securities.
G. Securities
Laws Disclosure; Publicity.
The
Company shall not publicly disclose the name of a Buyer, or issue a press
release or otherwise make a public statement or a filing with the Commission
or
any regulatory agency or trading market regarding the transactions contemplated
by this Agreement or the fact that the Buyer is an investor in the Company
without the prior consent of such Buyer in each instance (each a “Public
Statement”), unless such Public Statement is required by applicable law or the
rules of any securities exchange on which the securities of the Company are
then
listed or traded, in which case the Buyer shall have the right to review such
Public Statement at least 96 hours in advance of the proposed release or filing
and the Buyer may not unreasonably withhold or delay its consent to such release
or filing . No Buyer may make a Public Statement without the prior consent
of
the Company, such consent not to be unreasonably withheld or delayed.
H. Amendment
to Articles of Incorporation.
The
Company shall, as soon as possible, use its best efforts to take all steps
necessary to amend Article Four of the Company’s Articles of Incorporation
solely to increase the number of authorized shares of Common Stock to
1,600,000,000 shares (the amendment to the Articles of Incorporation is herein
referred to as the “Amended
Articles”),
in a
form satisfactory to Leisurecorp LLC in its sole discretion. Such action shall
include, but not be limited to, obtaining the consent of the Company’s Board of
Directors and shareholders as required by applicable law, filing with the
Commission a proxy statement or information statement (the “Shareholder
Statement”), and complying with all rules, regulations and filing requirements
of the Commission, the Nevada Corporation Law, and the OTCBB. The Buyers hereby
agree to vote any shares of Common Stock that they may own at the time that
the
Company solicits for the approval of the Amended Articles in favor of the
Amended Articles.
13
I. Additional
Listings.
The
Company shall use its best efforts to cause its Common Stock to be listed on
(i)
the Nasdaq Global Market or the Nasdaq Capital Market (“Nasdaq”) on or before
July 1, 2007, and (ii) the Dubai International Financial Exchange by December
31, 2007.
J. Signing
Authority.
From
and after the date hereof until the earlier of such time as (i) the Company
is
listed on Nasdaq or (ii) both this Agreement is terminated under Article VII
and
the Promissory Notes have been repaid in full, Xxxx Xxxxxxx (“Xxxxxxx”) shall be
an Executive Vice President of the Company and the Company shall not (through
any officer, director, employee or otherwise), make any payment (or series
of
related payments) or agree to make any payment (or series of related payments)
or issue or agree to issue securities of the Company in lieu of any payment
to
be made by or on behalf of the Company (a “Securities Issuance”) (a) in excess
of $25,000, without the express written approval of Xxxxxxx (whether or not
covered by the Use of Proceeds) and (b) in excess of $100,000 (whether or not
covered by the Use of Proceeds), without having the signature of Xxxxxxx on
(x)
the check or other financial instrument pursuant to which such payment will
be
made, on (y) the wire transfer instructions authorizing the wire transfer
pursuant to which such payment will be made or (z) in the case of a Securities
Issuance, specific authorization for such Securities Issuance including the
number of shares or securities to be issued and the terms thereof.
K. NIR
Group Settlement.
The
Company shall pay all amounts due pursuant to the NIR Group Settlement as soon
as possible, but in no event later than five business days following the date
of
this Agreement, and the Company shall take all actions necessary to satisfy
the
condition set forth in Article V(P) as soon as possible.
V.
CLOSING
DATE
Subject
to the satisfaction or waiver of the closing conditions in Article VI and VII,
the Closing shall occur at the law offices of Xxxxxxxx Chance US LLP, 00 Xxxx
00xx Xxxxxx, Xxx Xxxx, XX 00000 at 10:00 a.m. as soon as practicable (but in
any
event within seven business days) following the date on which the Amended
Articles have been filed in the office of the Nevada Secretary of State and
such
Amended Articles are in full force and effect, or such other date as Company
and
all Buyers shall agree; provided, however, that the Closing Date shall not
be
later than March 31, 2007.
14
VI.
CONDITIONS
TO THE COMPANY’S OBLIGATIONS
Each
Buyer understands that the Company’s obligation to sell the Preferred Shares and
issue the Warrants on the Closing Date to such Buyer pursuant to this Agreement
is conditioned upon:
A. The
Amended Articles shall have been duly and validly filed in the office of the
Nevada Secretary of State, and shall be in full force and effect.
B. Payment
by each Buyer to Company of the purchase price in the manner specified in
Article I. B.
C. The
representations and warranties of such Buyer contained in this Agreement shall
be true and correct as of the Closing Date as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such representations and
warranties shall be true and correct as of such specified date) and the Buyer
shall have performed, in all material respects, all covenants and agreements
of
Buyer required to be performed by it pursuant to this Agreement on or before
the
Closing Date.
D. There
shall not be in effect any law or order, ruling, judgment or writ of any court
or public or governmental authority or self regulatory organization restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by
this
Agreement.
E. Delivery
by the Buyers to the Company of executed counterparts of the Registration Rights
Agreement.
F. The
conversion of the indebtedness listed on Exhibit F(2) into Preferred Shares,
Common Stock and Warrants in accordance with the Debt Exchange Agreement (the
form of which is attached hereto as Exhibit G) entered into by the Company
and
each debtor listed on Exhibit F(2).
VII.
CONDITIONS
TO BUYERS’ OBLIGATIONS
The
Company understands that Buyers’ obligation to purchase the Securities on the
Closing Date pursuant to this Agreement is conditioned upon:
A. The
Amended Articles shall have been approved in accordance with all applicable
laws
and the Company’s Articles of Incorporation and shall have been duly and validly
filed in the office of the Nevada Secretary of State, and shall be in full
force
and effect.
B. The
Commission shall have cleared the Shareholder Statement, and the Shareholder
Statement shall have been duly delivered to all shareholders who are required
by
the rules of the Commission and the Nevada Corporation Law.
15
C. No
Event
of Default (as defined in the Promissory Notes) shall have occurred and be
continuing under any Promissory Note as of the Closing Date.
D. Delivery
by the Company to Buyers of the Preferred Shares and the Warrants (I/N/O Buyers
or I/N/O Buyers’ nominee) in the amounts set forth in Article I.B.
E. Delivery
by the Company to Buyers of executed counterparts of the Registration Rights
Agreement.
F. Investment
by Buyers of $13,000,000 of cash under this Agreement and the cancellation
and
exchange of $2,740,892 of indebtedness by GWSE.
G. The
representations and warranties of the Company contained in this Agreement shall
be true and correct on the Closing Date as if made on the Closing Date (except
for representations and warranties which, by their express terms, speak as
of
and relate to a specified date, in which case such representations and
warranties shall be true and correct as of such specified date) and the Company
shall have performed, in all respects, all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date.
H. The
Chief
Executive Officer of the Company shall have delivered a certificate to the
Buyers, dated as of the Closing Date, certifying that the condition set forth
in
paragraph D above has been fulfilled.
I. The
conversion of the indebtedness listed on Exhibit F(2) into Preferred Shares
and
Warrants in accordance with the Debt Exchange Agreement (the form of which
is
attached hereto as Exhibit G) entered into by the Company and each debtor listed
on Exhibit F(2).
J. There
shall not be in effect any law or order, ruling, judgment or writ of any court
or public or governmental authority or self regulatory organization restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by
this
Agreement.
K. The
Certificate of Designation shall have been filed with the Secretary of State
of
the State of Nevada and shall be in full force and effect.
L. The
election of Xxxxxx Xxxx and Xxxxxxx Xxxx Xxxxxxxx or such other persons as
are
designated by Leisurecorp prior to the Closing as Preferred Directors (as
defined in the Certificate of Designation) as additional directors on the
Company’s Board of Directors, such election to become effective immediately
following the Closing.
M. Receipt
by Buyers of a legal opinion of the Company’s counsel, in the form of Exhibit C
attached hereto.
N. The
Company’s Board of Directors shall have amended the Company’s bylaws as set
forth in Exhibit D, and such bylaw amendment shall be in full force and
effect.
O. The
Company, each of the Buyers, Xxxx Xxxx and Xxxxxx Xxxxxx shall have executed
and
delivered the Shareholder Agreement in the form attached hereto as Exhibit
E.
16
P. The
Company shall have completed the NIR Group Settlement, including the
cancellation of all NIR Group Notes, the release of liens and security interests
on the Company’s assets granted in favor of the NIR Group, and the payment of
the entire settlement payment (in cash and by the issuance of additional
warrants) in accordance with the NIR Group Settlement Agreement.
VIII.
TERMINATION
A. Termination
by Mutual Written Consent.
This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned, for any reason and at any time prior to the Closing Date, by the
mutual written consent of the Company and any Buyer.
B. Termination
by Buyers.
This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned by any Buyer at any time prior to the Closing Date, if (i) the Company
shall have failed to comply with any of its covenants or agreements contained
in
this Agreement, (ii) there shall have been a breach by the Company of any
representation or warranty made by it in this Agreement, (iii) there shall
have
occurred any event or development, or there shall be in existence any condition,
having or reasonably likely to have a Material Adverse Effect, (iv) an Event
of
Default (as defined in the Promissory Notes) shall have occurred under any
Promissory Note, or (v) the Company shall have failed to satisfy the conditions
provided in Article VII by March 31, 2007.
C. Termination
by the Company.
This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned by the Company at any time prior to the Closing Date, if (i) Buyers
shall have failed to comply with any of its covenants or agreements contained
in
this Agreement or (ii) there shall have been a breach by Buyers of any
representation or warranty made by it in this Agreement.
D. Effect
of Termination.
In the
event of the termination of this Agreement pursuant to this Article VIII, this
Agreement shall thereafter become void and have no effect, and neither party
hereto shall have any liability or obligation to the other party hereto in
respect of this Agreement, except as expressly provided herein; provided,
however, that neither party shall be released from any liability hereunder
if
this Agreement is terminated and the transactions contemplated hereby abandoned
by reason of (i) willful failure of such party to perform its obligations
hereunder or (ii) any misrepresentation made by such party of any matter set
forth herein.
IX.
SURVIVAL;
INDEMNIFICATION
A. The
representations, warranties and covenants made by each of the Company and each
Buyer in this Agreement, the annexes, schedules and exhibits hereto and in
each
instrument, agreement and certificate entered into and delivered by them
pursuant to this Agreement shall survive the Closing and the consummation of
the
transactions contemplated hereby. In the event of a breach or violation of
any
of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of
any
investigation made by or on behalf of such party on or prior to the Closing
Date.
17
X.
GOVERNING
LAW; JURISDICTION
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is
improper.
XI.
COUNTERPARTS;
EXECUTION
This
Agreement may be executed in two (2) counterparts, each of which when so
executed and delivered shall be an original, but both of which counterparts
shall together constitute one and the same instrument. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties
hereto.
XII.
HEADINGS
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
XIII.
SEVERABILITY
This
Agreement shall be deemed severable, and the invalidity or unenforceability
of
any term or provision hereof shall not affect the validity or enforceability
of
this Agreement or of any other term or provision hereof. Furthermore, in lieu
of
any such invalid or unenforceable term or provision, the parties hereto intend
that there shall be added as a part of this Agreement a provision as similar
in
terms to such invalid or unenforceable provision as may be possible and be
valid
and enforceable.
XIV.
ENTIRE
AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This
Agreement and the Documents constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of such parties. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by both parties. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
18
XV.
NOTICES
Except
as
may be otherwise provided herein, any notice or other communication or delivery
required or permitted hereunder shall be in writing and shall be delivered
personally, or sent by telecopier machine or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally, or by telecopier machine or overnight courier service as
follows:
| A. | if to the Company, to: |
|
Xxxxx
000
0000
000xx Xxxxxx
Xxxxxx,
Xxxxxxx Xxxxxxxx
Xxxxxx
X00 X00
Attn:
Chief Executive Officer
Telecopier:
(000) 000-0000
with
a copy to:
Xxxx
& Xxxxx
0000
Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
ATTN:
Xxxxx X. Xxxxxxxx, Esq.
Telecopier:
(000) 000-0000
|
|
| B. | If to a Buyer, to the address set forth on the signature page: |
The
Company or any Buyer may change the foregoing address by notice given pursuant
to this Article XV.
XVI.
ASSIGNMENT
This
Agreement shall not be assignable by either of the parties hereto without the
prior written consent of the other party, and any attempted assignment contrary
to the provisions hereby shall be null and void; provided, however, that any
Buyer may assign its rights and obligations hereunder, in whole or in part,
to
any affiliate of such Buyer.
19
XVII.
REMEDIES
CUMULATIVE
In
the
event that the Company fails to observe or perform any covenant or agreement
to
be observed or performed under this Agreement, any Buyer may proceed to protect
and enforce its rights by suit in equity or action at law, whether for specific
performance of any term contained in this Agreement or for an injunction against
the breach of any such term or in aid of the exercise of any power granted
in
this Agreement or to enforce any other legal or equitable right, or to take
any
one or more of such actions, without being required to post a bond. None of
the
rights, powers or remedies conferred under this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.
20
IN
WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
executed and delivered on the date first above written.
| “COMPANY” | ||
| GPS Industries, Inc., | ||
| a Nevada corporation | ||
| By: | ||
| Name: | ||
| Title: | ||
In
order
to induce the Buyers to enter into this Agreement, we, Xxxxxx X. Xxxxxx, Xx.
and
Xxxxxxx Xxxx, hereby agree to vote, or give written consent with respect to,
any
and all shares of Common Stock that we own in favor of the Amended Articles
as
described in Article IV.H of this Agreement.
| _________________________________ | _____________________________ |
| Xxxxxx X. Xxxxxx, Xx. | Xxxxxxx Xxxx |
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
21
“BUYER”
LEISURECORP
LLC
By:_________________________
Name:
Title:
Investment
Amount: $10,000,000
Number
of
Preferred Shares: 1,000,000
Number
of
Warrant Shares: 40,983,607
Address
for Notice:
Xxxxx
Xxxxxxx
Chief
Executive Officer
Istixxxxx
Xxxxxxx
X.X.
Xxx
00000, Xxxxx, XXX
Xxlephone:
x0000-0000000
Telecopy:
x0000-0000000
E-mail: Xxxxx.Xxxxxxx@xxxxxxxxx.xx
22
“BUYER”
GREAT
WHITE SHARK ENTERPRISES, INC.
By:_________________________
Name:
Title:
Investment
Amount: $3,000,000 cash; $2,740,890 cancellation of indebtedness
Number
of
Preferred Shares: 574,089
Number
of
Warrant Shares: 18,901,579
Address
for Notice:
Great
White Shark Enterprises, Inc.
501
Xxxxx
X0X, Xxxxxxx, XX 00000
Xxtn:
Xxxx Xxxxxxx
Telephone:
(000) 000-0000
Telecopy:
(000) 000-0000
E-mail:
Xxxx.Xxxxxxx@xxxx.xxx
23
EXHIBIT
A
CERTIFICATE
OF DESIGNATION
[SEE
EXHIBIT 4.1 OF THE FORM 8-K TO WHICH THIS SECURITIES PURCHASE AGREEMENT IS
ATTACHED
A
-1
EXHIBIT
B
REGISTRATION
RIGHTS AGREEMENT
[SEE
EXHIBIT 10.2 OF THE FORM 8-K TO WHICH THIS SECURITIES PURCHASE AGREEMENT IS
ATTACHED]
B
-1
EXHIBIT
C
[DRAFT]
_________,
200_
Buyers
Listed on Signature Page
Dear
Ladies and Gentlemen:
We
have
represented GPS Industries, Inc., a Nevada corporation (the “Company”),
in
connection with that certain Securities Purchase Agreement dated as of November
__, 2006 by and among the Company and the Buyers (as such term is defined
therein) (the “Purchase
Agreement”).
We
are rendering this opinion letter to you pursuant to Article VII. M. of the
Purchase Agreement. Unless otherwise defined herein, the capitalized terms
used
herein shall have the meanings therefor set forth in the Purchase Agreement.
| A. |
Reviewed
Documents:
|
In
rendering the opinions expressed below, we have reviewed and examined originals
or copies of the following (collectively, the “Reviewed
Documents”):
1. The
Purchase Agreement;
2. The
Warrants;
3. The
Registration Rights Agreement;
4. The
Shareholder Agreement;
5. The
Certificate of Designation, as filed with the Secretary of State of the State
of
Nevada on ________, 200_.
6. The
Company’s Articles of Incorporation (the “Articles”)
and
Bylaws (“Bylaws”),
each
as amended to date;
7. A
Certificate of Good Standing for the Company dated ___________, 200_ issued
by
the Nevada Secretary of State [DATE TO BE WITHIN 3 BUSINESS DAYS];
C
- 1
8. A
Certificate dated the date hereof executed by Xxxxxx X. Xxxxxx, Xx., Chief
Executive Officer of the Company, a copy of which is attached hereto (the
“Officer’s
Certificate”);
and
9. Resolutions
of the Board of Directors of the Company adopted at meetings convened on
November 3, 2006 and ________, 2006 authorizing, among other things, (i) the
execution and delivery of the Purchase Agreement, the Registration Rights
Agreement and the Warrants, (ii) filing of the Certificate of Designation,
and
(iii) the performance of the transactions contemplated thereby, and the
reservation of the Warrant Shares.
The
agreements listed in items 1-4 above are hereinafter referred to as the
“Opined
Agreements”.
| B. |
Assumptions:
|
With
your
permission, we have made (and are relying upon) the following assumptions,
all
without any investigation, inquiry or consideration by us and regardless of
the
reasonableness of such assumptions (although we have no actual current knowledge
that such assumptions are unreasonable):
1. All
information furnished to us is accurate and complete; all documents submitted
to
us as original or certified documents are genuine; the original or certified
documents of all copies submitted to us as conformed or photocopies thereof
conform to the originals thereof; and all signatures on all documents are
genuine.
2. All
natural persons who have executed any of the Reviewed Documents have the legal
capacity to do so.
3. All
proceedings necessary to authorize the actions of the Buyers (collectively,
the
“Nonclient
Parties”)
have
been taken; (b) each of the Nonclient Parties has all requisite legal
capacity, power and authority to enter into and perform the Opined Agreements
to
which it, he or she is a party and any other agreements contemplated thereby
to
which it, he or she is a party (collectively along with such Opined Agreements,
the “Nonclient
Agreements”),
and
to perform the transactions contemplated thereby; (c) all Nonclient
Agreements are the legal, valid and binding obligations of the Nonclient Parties
signatory thereto enforceable against such Nonclient Parties in accordance
with
their terms; and (d) the execution and performance by the Nonclient Parties
of the Nonclient Agreements to which they are a party will not violate any
charter, bylaw, organizational documents, law, rule, regulation, agreement
or
covenant to which such Nonclient Parties are subject.
4. The
representations and warranties as to the factual matters contained in the
Reviewed Documents are true and correct.
C
- 2
5. All
certificates and reports obtained by us from officers, managers, directors,
representatives, partners or public officials are accurate and
complete.
6. Except
for the Reviewed Documents, there are no other documents or agreements between
the Company and the Nonclient Parties that would expand or otherwise modify
the
obligations of the Company under the Opined Agreements or that would have any
effect on the opinions rendered herein.
7. No
fraud,
dishonesty, forgery, coercion, duress or breach of fiduciary duty exists or
will
exist with respect to any matter relevant to our opinions herein.
8. We
call
to your attention that the Opined Agreements purport to be governed by the
laws
of the State of New York. We are not licensed to practice law in such State,
and
we are not rendering herein, expressly, by implication or otherwise, any
opinions based upon or about New York law. To the extent that any laws of the
State of New York or of any other jurisdiction, other than the internal law
of
the State of California, the Federal laws of the United States of America,
or
the Chapter 78 of the Nevada General Corporation Law, may bear upon or otherwise
be relevant to any of our opinions expressed herein, we have assumed (without
rendering any opinion to such effect) that such other laws are in all respects
material to this opinion substantively identical to the laws of the State of
California, without regard to conflict of law provisions, and would not cause
any of such opinions to be incorrect or misleading, or cause us otherwise to
change or reword such opinions.
| C. |
Knowledge:
|
Whenever
a statement hereinbelow is qualified by “known to us,” “to our knowledge” or
similar phrase, it means that, during the course of our representation of the
Company for the purposes of this opinion letter, (1) no information that
would give those lawyers who participated in the preparation and negotiation
of
the Opined Agreements or this opinion letter (collectively, the “Participants”)
actual
knowledge of the inaccuracy of such statement has come to their attention;
(2) we have not undertaken any independent investigation or inquiry to
determine the accuracy of such statement; and (3) no inference as to
our knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our prior representation of the
Company.
| D. |
Opinions:
|
Based
upon the foregoing and subject to the assumptions, limitations and
qualifications set forth herein, we are of the opinion that:
1. Based
solely upon the Company’s Articles of Incorporation and Bylaws, the Good
Standing Certificate and the Officers’ Certificate, the Company is duly
incorporated, validly existing and in good standing under the laws of Nevada.
C
- 3
2. The
Company has the requisite corporate power and corporate authority to (a) own
and
use its properties and assets, (b) carry on its business as currently conducted,
and (c) enter into and to consummate the transactions contemplated by each
of
the Opined Agreements and otherwise to carry out its obligations thereunder.
3. The
execution and delivery by the Company of the Opined Agreements and the
performance by the Company of its obligations thereunder, have been duly and
validly authorized by the Board of Directors of the Company, no other corporate
action on the part of the Company or its stockholders is necessary to authorize
such execution and delivery.
4. The
Opined Agreements have been duly and validly executed and delivered by the
Company and constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms.
5. The
rights, preferences and privileges of the Preferred Shares are as stated in
the
Certificate of Designation filed with the Secretary of State of the State of
Nevada on ________, 200_. The Preferred Stock and the Warrants have been duly
authorized and when issued and delivered by the Company in accordance with
the
terms of the Purchase Agreement will be validly issued and fully paid and
nonassessable. The shares of Common Stock of the Company which will be issued
to
the Buyers upon conversion of the shares of Preferred Shares and exercise of
the
Warrants have been duly authorized, and upon issuance and delivery in accordance
with the Articles of Incorporation and the Warrants, will be validly issued,
fully paid and nonassessable.
6. The
execution, delivery and performance by the Company of the Opined Agreements
and
the consummation of the transactions contemplated thereby did not and will
not
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Articles of Incorporation, Certificate of
Designation or By-laws of the Company; (b) conflict with or result in a
violation or breach of any term or provision of any applicable law that in
our
experience is typically applicable to offerings of securities of the type
contemplated by the Purchase Agreement or any order known to us applicable
to
the Company (other than such conflicts, violations or breaches (i) which could
not in the aggregate reasonably be expected to materially adversely affect
the
validity or enforceability of the Opined Agreements or to have a material
adverse effect on the business or condition of the Company or (ii) as would
occur solely as a result of the identity or the legal or regulatory status
of
the Buyers); or (c) to our knowledge (i) conflict with or result in a violation
or breach of, (ii) constitute (with or without notice or lapse of time or both)
a default under, (iii) require the Company to obtain any consent, approval
or
action of, make any filing with or give any notice to any person which is not
a
governmental or regulatory body, (iv) result in the creation or imposition
of
any lien upon the Company or any of its assets and properties, under any
contract, instrument, agreement or license known to us to which the Company
is a
party or by which any of its assets and properties is bound and which,
individually or in the aggregate with other such contracts, instruments,
agreements and licenses, is material to the validity or enforceability of the
Agreements or to the business or condition of the Company.
C
- 4
7. No
consent, approval or action of, filing with or notice to any federal, state
or
local governmental authority on the part of the Company (other than those that
have been obtained, made or given, as he case may be, and are in full force
and
effect) is required in connection with the execution, delivery and performance
of the Opined Agreements or the consummation of the transactions contemplated
thereby, except (a) as disclosed in the Purchase Agreement, (b) where the
failure to obtain any such consent, approval or action, to make any such filing
or to give any such notice could not reasonably be expected to materially
adversely affect the validity or enforceability of the Opined Agreements or
to
have a material adverse effect on the business or condition of the Company
or
(c) those as would be required solely as a result of the identity or the legal
or regulatory status of the Buyers.
8. To
our
knowledge, there is no action, proceeding or investigation pending or overtly
threatened against the Company before any court or administrative agency that
questions the validity of the Opined Agreements or that might result, either
individually or in the aggregate, in any material adverse change in the assets,
financial condition, or operations of the Company and none that questions the
validity of the Opined Agreements or the Certificate of Designation or any
action taken or to be taken in connection therewith.
9. Based
in
part upon the representations of the Company and the Buyers contained in the
Purchase Agreement, the offer, issuance, sale and delivery of the Preferred
Shares and the Warrants in accordance with the terms of the Purchase Agreement,
and the issuance and delivery of the Common Stock issuable upon conversion
of
the Preferred Shares and exercise of the Warrants in accordance with the terms
of the Certificate of Designation and the Warrants constitute transactions
exempt from the registration requirements of the Securities Act of 1933, as
amended.
| E. |
Qualifications:
|
Notwithstanding
anything to the contrary contained in this letter, our opinions expressed above
are limited by and subject to the following:
1. Applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium and other
similar laws and court decisions relating to, limiting or affecting the rights
of contract obligors or obligees (including, without limitation, laws relating
to fraudulent conveyances, preferences and equitable
subordination).
C
- 5
2. General
principles of equity (whether considered in a suit in equity or at law). In
that
connection, we neither express nor imply any opinion as to the availability
of
the remedies of specific performance, injunctive relief, or any other equitable
remedy, all of which are subject to limitations imposed by applicable law and
to
the discretion of the court before which such proceedings may be brought.
3. The
requirement that a party to a contract act in a commercially reasonable manner,
and in compliance with an implied covenant of good faith and fair dealing.
4. We
express no opinion with respect to the validity, binding effect or
enforceability of any provision of any Opined Agreement that purports to do
any
of the following:
(a) Obligate
any person to take any action to the extent such action would cause such person
to violate applicable law.
(b) Designate
New York law or the law of any other jurisdiction as the law applicable to
the
Opined Agreements and the transactions contemplated thereby.
(c) Impose
liability upon any person or entity (“Person”)
for
payment of attorneys’ fees and costs in any action or proceeding that proceeds
to judgment, except to the extent that (i) such agreement requires payment
of attorneys’ fees and costs to the prevailing party in such action or
proceedings, and (ii) any such fees are reasonable.
(d) Define
good faith or commercially reasonable behavior.
(e) Indemnify
or otherwise exonerate a Person from the consequences of such Person’s actions
or inactions, negligent, wrongful or illegal acts, or violations of law,
including, without limitation, applicable securities laws, or when such
indemnification or exoneration is contrary to public policy, it being
acknowledged that certain defenses, such as waiver, estoppel and laches, may
not
be waivable in any event.
(f) Allow
a
party to withhold “unreasonably” or in its “sole discretion” its consent to, or
approval of, any action or proposed action of another party.
(g) Waive
the
rights of a party to a jury trial or to object to jurisdiction or venue, or
to
assert any defense based on lack of jurisdiction or venue.
(h) Provide
that (i) rights, powers or remedies are not exclusive, or (ii) some or
all rights, powers or remedies are cumulative and may be exercised in addition
to or with any other rights, powers or remedies, or (iii) the election of
some particular right, power or remedy does not preclude recourse to one or
more
others, or (iv) any single or partial exercise of any right, power or
remedy does not preclude any other or further exercise thereof or the exercise
of any other right, power or remedy or that rights, powers, or remedies may
be
exercised in such order or manner as a party may determine; (v) failure to
exercise (or delay in exercising) rights, powers or remedies will not operate
as
laches or estoppel with respect to, or a waiver of, such rights, powers or
remedies; (vi) failure to enforce strict performance of the terms of any of
the Opined Agreements shall not constitute a waiver of a party’s rights under
the Opined Agreements; or (vii) failure to exercise (or delay in
exercising) rights, powers or remedies will not extend any cure period or be
deemed a cure of any default.
C
- 6
(i) Provide
that the legality or enforceability or provisions in an Opined Agreement or
any
instrument or agreement required thereunder remains unaffected or unimpaired
if
a material provision of the Opined Agreement is invalid, illegal or
unenforceable.
(j) Provide
that a waiver of a condition in one situation shall not constitute a waiver
of
such condition in other situations, or that waivers, releases, modifications,
amendments, revisions, revocations, terminations, changes and variations in
or
to any Opined Agreement must be in writing; (ii) waive vaguely or broadly
stated rights or unknown future rights; (iii) waive the benefits of any
statutory, regulatory or constitutional rights, unless and to the extent the
statute, regulation, or constitution explicitly allows such waiver;
(iv) waive rights to damages; (v) waive rights that pursuant to
certain applicable statutes and rules of law or public policy cannot be waived
prospectively by an obligor or indemnitor; or (vi) provide that conduct
shall not constitute a waiver of a Person’s rights or remedies or that one
Person’s conduct shall not constitute a waiver of another Person’s rights or
remedies.
(k) Bind
or
have legal effect against any Person other than the Company.
(l) Determine
the validity or effectiveness of governmental actions or the actions of other
third parties.
| F. |
Other
Limitations:
|
The
opinions and other matters in this letter are qualified in their entirety and
subject to the following:
1. We
are
members of the State Bar of California. We neither express nor imply any opinion
as to the laws of any jurisdiction other than the internal laws of the State
of
California, the Nevada Corporate Law and the Federal laws of the United States
of America that are, in our experience, normally applicable to transactions
contemplated by the Purchase Agreement. The foregoing laws considered by us
exclude, and we neither express nor imply any opinion as to: (a) laws of any
counties, cities, towns, municipalities and special political subdivisions
and
any agencies thereof; or (b) any state “blue sky” or foreign securities laws,
rules or regulations.
2. The
opinions expressed above concern only the effect of laws as currently in effect.
This letter and the matters addressed herein are as of the date hereof, and
we
undertake no, and hereby disclaim any, obligation to advise you of any change
in
any mater set forth herein, whether based on a change in the law, a change
in
any fact relating to the Company or any other Person, or any other circumstance.
This opinion letter is limited to the matters expressly stated herein and no
opinions are to be inferred or may be implied beyond the opinions expressly
set
forth herein.
C
- 7
3. We
neither express nor imply any opinion as to (a) the financial condition or
solvency of the Company; (b) the ability (financial or otherwise) of the Company
or any other Person to meet its respective obligations under the Opined
Agreements; (c) the conformity of the Opined Agreements to any term sheet or
commitment letter; or (d) the compliance of the transactions contemplated
by the Purchase Agreement with any regulations or governmental requirements
applicable to any Person other than the Company.
4. This
opinion letter was prepared, and should be interpreted, in accordance with
the
Business Law Section of the State Bar of California, 2005
Report of the Corporations Committee of the Business Law Section of the State
Bar of California Regarding Legal Opinions in Business
Transactions,
and the
Business Law Section of the State Bar of California, 2004
Report on Third-Party Remedies Opinions
(including its eleven appendices). Without limiting the generality of the
foregoing, with respect to our opinions set forth above as to the Company’s
corporate power and corporate authority, we interpret that phrase to mean that
the action would not be ultra
xxxxx
with
respect to the Company and such phrase does not extend to any Federal, state
or
local authorizations or approvals.
5. Except
for the Reviewed Documents, we have not conducted any review of any of the
Company’s operations or of any other person’s or entity’s operations, or of any
agreement that may have been executed by, or which may now be binding upon,
any
of them, nor have we reviewed our internal files or any files of the Company
or
of any other person or entity relating to transactions to which any of them
may
be a party, or conducted inquiries of any governmental officials or other
persons or entities, or of any public records, other than as expressly stated
in
this opinion letter.
6. This
opinion letter is rendered to the Buyers in connection with the transactions
contemplated by the Purchase Agreement and may not be relied on by any Person
other than the Buyers or by the Buyers in any other context. Accordingly, this
letter may not be reproduced, delivered to or relied upon by any other Person,
and it may not be relied upon for any other purpose whatsoever, except that
it
may be examined and referred to by counsel for the Buyers.
|
Very
truly yours,
XXXX
& XXXXX
Professional
Corporation
|
C
- 8
EXHIBIT
D
AMENDMENT
TO BYLAWS
[SEE
EXHIBIT 3.1 OF THE FORM 8-K TO WHICH THIS SECURITIES PURCHASE AGREEMENT IS
ATTACHED]
D
- 1
EXHIBIT
E
SHAREHOLDER
AGREEMENT
This
SHAREHOLDER AGREEMENT (this “Shareholder
Agreement”)
is
made and entered into as of _______ __, 200_ by and between GPS Industries,
Inc., a Nevada corporation (the “Company”),
Leisurecorp LLC, a Dubai limited liability company (“Leisurecorp”),
Great
White Shark Enterprises, Inc., a Florida corporation (“GWSE”)(GWSE
and Leisurecorp are herein collectively referred to as the “Investors”),
Xxxxxx X. Xxxxxx, Xx. and Xxxxxxx Xxxx (Xx. Xxxxxx and Xx. Xxxx are herein
collectively referred to as the “Conversion
Shareholders).
WHEREAS,
Leisurecorp, GWSE and the Company have entered into that certain Securities
Purchase Agreement, dated as of November 13, 2006 (the “Securities
Purchase Agreement”),
pursuant to which Leisurecorp and GWSE are acquiring, and may in the future
acquire, shares of the Company’s newly issued Series B Convertible Preferred
Stock (the “Preferred
Stock”),
and
warrants to purchase shares of the Company’s common stock (the “Common
Stock”)
on the
terms and subject to the conditions set forth in the Securities Purchase
Agreement.
WHEREAS,
the Conversion Shareholders have entered into certain Debt Exchange Agreements
with the Company pursuant to which Xxxxxxx Xxxx has acquired shares of Preferred
Stock and warrants to purchase Common Stock, and Xxxxxx X. Xxxxxx, Xx. has
acquired shares of Common Stock and warrants to purchase additional shares
of
Common Stock.
WHEREAS,
the Investors and the Conversion Shareholders, in their capacity as holders
of
shares of Preferred Stock and/or Common Stock, agree that it is desirable to
enter into this Shareholder Agreement.
WHEREAS,
the Company has determined that it is in its best interests to grant the
Investors the rights set forth herein.
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereby agree as follows:
1. REPRESENTATIONS
AND WARRANTIES. The Company and each of the Investors and the Conversion
Shareholders (each, a “Shareholder”
and
collectively, the “Shareholders”)
hereby
represents and warrants to the other parties to this Agreement as
follows:
(a) Authority;
Binding Obligation.
The
Company and each Shareholder represents and warrants that it has all necessary
power and authority to enter into this Shareholder Agreement and perform all
of
his/its obligations hereunder. This Shareholder Agreement has been duly and
validly executed and delivered by the Shareholder and constitutes a valid and
legally binding obligation of the Company and such Shareholder in accordance
with its terms.
E
- 1
(b) Ownership
of Shares.
Each
Shareholder represents and warrants that it is the record holder of the number
of shares of Preferred Stock, Common Stock and warrants to purchase shares
of
Common Stock listed under such Shareholders’ name on the signature page hereto
(the shares of Preferred Stock and Common Stock listed on the signature page,
together with shares of Preferred Stock the Investor may acquire under the
Securities Purchase Agreement and the shares that the Shareholder may acquire
after the date hereof upon the conversion of the Preferred Stock or the exercise
of the warrants listed on the signature page, are herein referred to as such
Shareholders’ “Shares”).
Each
Shareholder represents and warrants that it currently has, and will throughout
the term of the Agreement have sole voting power and sole power of disposition
over his/its Shares, with no restrictions on the voting rights, rights of
disposition or otherwise, subject to applicable laws and the terms of this
Shareholder Agreement.
(c) No
Conflicts.
The
Company and each Shareholder represents and warrants that the execution,
delivery and performance of this Agreement by it/him will not violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become
a
default) under any agreement to which the Company or Shareholder is party,
which
violation, conflict or breach could prevent such party from fully performing
its
obligations under this Agreement in accordance with its terms or affect the
rights or benefits of any other party to this Agreement.
2. VOTING
AGREEMENT.
(a) General
Agreement.
During
the term of this Agreement, the Investors agree to vote all of their Shares
in
accordance with the provisions of this Agreement. Provided that GWSE receives
notice from Leisurecorp prior to the time any action is required to be taken
as
a shareholder of the Company (at a meeting or by written consent, which notice
may be oral at a meeting that both Investors attend in person), GWSE hereby
agrees to vote all of its Shares or to grant consents or approvals in respect
of
all of its Shares, in connection with any meeting of the shareholders of the
Company or any action by written consent in lieu of a meeting of shareholders
of
the Company, in accordance with such oral or written instructions of Leisurecorp
as required above. Notwithstanding the foregoing, GWSE shall not be obligated
to
vote or cause to be voted any of GWSE’s Shares in a manner instructed by
Leisurecorp in a shareholder action involving the election of directors of
the
Company except as set forth in Section 2.(b).
(b) Election
of Directors.
The
Investors acknowledge and agree that pursuant to the Certificate of Designations
for the Preferred Stock, the holders of shares of the Preferred Stock have
the
right, voting as a separate class, to elect three members of the Company’s Board
of Directors (the “Preferred
Directors”).
During the term of this Agreement, each Investor agrees to vote all of its
shares of Preferred Stock (whether now owned or hereafter acquired under the
Securities Purchase Agreement) in such manner as may be necessary to elect
(and
maintain in office) as Preferred Directors the following individuals (each
a
“Designee):
(i) Two
persons designated in writing by Leisurecorp (the “Leisurecorp Designees”);
and
(ii) One
person designated in writing by GWSE.
E
- 2
(c) Changes
in Designees.
From
time to time during the term of this Agreement, either Leisurecorp or GWSE,
may
in its sole discretion:
(i) notify
the other Investor in writing of its election to remove from the Company’s Board
of Directors any incumbent Preferred Director who occupies a Board seat for
which such stockholder is entitled to designate the Designee; or
(ii) notify
the other Investor in writing of its election to select a new Designee for
election as a Preferred Director for which such stockholders are entitled to
designate the Designee (whether to replace a prior Designee or to fill a vacancy
in such Board seat);
(iii) In
the
event of such an initiation of a removal or selection of a Designee under this
section, the Investors shall take such reasonable actions as are necessary
to
facilitate such removals or elections, including, without limitation, voting
or
giving consents with respect to all of their shares of Preferred Stock to cause:
(a) the removal from the Company’s Board of Directors of the Designee or
Designees so designated for removal; and (b) the election to the Company’s Board
of Directors of any new Designee or Designees so designated.
(d) Additional
Agreements.
Each of
GWSE and Leisurecorp covenant and agree that it will not abstain or fail to
vote
or give a consent with respect to the Shares to the extent that it has received
direction from the other in accordance with the terms of this Agreement and
for
so long as such Shareholder holds Shares and is subject to this Section 2
Additionally, the parties covenant and agree that the Leisurecorp Designees
shall be the Reviewing Preferred Directors.
3. RESTRICTION
ON TRANSFER.
(a) Except
with the prior written consent of the Investors (or if the proposed transferor
is an Investor, the other Investor), each Shareholder agrees that it shall
not
sell, transfer, assign, convey, gift or otherwise dispose of, whether
voluntarily or involuntarily by operation of law or otherwise (each, a
“transfer”),
any
of its Shares, or to pledge, grant a security interest in or otherwise encumber
any Shares, except in compliance with this Shareholder Agreement. Any purported
transfer, pledge, grant of security interest in or other encumbrance of any
Shares other than in accordance with this Shareholder Agreement shall, in
addition to constituting a breach of this Shareholder Agreement, be null and
void and ineffective to convey any interest in such Shares. Nothing in this
Agreement shall restrict the transfer, pledge, grant of security interest in
or
other encumbrance of any other shares of Common Stock any Shareholder owns
as of
the date of this Agreement.
(b) Notwithstanding
the foregoing, commencing on November 1, 2007, each Shareholder shall have
the
right to transfer in any 90 day period, a number of shares of Common Stock
equal
to 1% of the number of shares Common Stock listed as outstanding in the
Company’s latest Form 10-Q or Form 10-K (whichever is filed more recently) (in
the event of a stock split or other similar event since the filing of the last
Form 10-Q or Form 10-K, the number of shares that may be sold shall be
appropriately adjusted to reflect such event). Any portion of such 1% that
is
not transferred in any 90-day period shall be carried forward and may be
transferred hereunder in subsequent periods. Any transfer of Shares permitted
under this Section 3(b) shall thereafter no longer be subject to
Section 2 and Section 3 and the other provisions of this Shareholder
Agreement.
E
- 3
(c) The
provisions of the Section 3 shall not apply to any transfer of Shares by any
Shareholder to (a) any constituent partner or member of a Shareholder which
is a
partnership or limited liability company, (b) an affiliate of a Shareholder
which is a corporation, partnership or limited liability company, (c) any
employee of any Shareholder, or in the case of an individual Shareholder, (d)
(i) either during his lifetime or upon his death by inter
vivos trust,
will or intestacy to his ancestors, descendants or spouse, or to any custodian
or trustee for the account or benefit of such individual Shareholder or his
ancestors, descendants or spouse or (ii) to a revocable trust (but not an
irrevocable trust) established by such individual for the benefit of himself,
or
his ancestors, descendants or spouse or (e) with respect to Leisurecorp, to
Island Global Yachting or any affiliate thereof; provided,
however,
that
the permitted transferee pursuant to subsection (a)-(d) shall receive and hold
such Shares subject to all of the terms of this Shareholder Agreement. All
Shares acquired by such affiliated entities or persons from any Shareholder
(other than Shares held by Island Global Yachting or its affiliate) shall be
aggregated with those of such Shareholder for the purpose of determining the
number of shares available for sale under Section 3(b).
(d) Notwithstanding
anything to the contrary in this Shareholder Agreement, no transfer of any
Shares under Section 3(b) or 3(c) may occur (i) unless and until the Company
and
the other Shareholders shall have received written notice of the proposed
transfer setting forth the circumstances and details thereof at least five
days
prior to its effectiveness, or (ii) in violation of any of the provisions of
the
Securities Act of 1933, as amended, or any applicable state securities
laws.
(e) The
restriction imposed on the transfer, pledge, grant of security interest in
or
other encumbrance of Shares under this Section 3 shall terminate on the earlier
of December 31, 2008 and the listing of the Company’s Common Stock on either the
Nasdaq Global Market or the Nasdaq Capital Market.
(f) The
Company shall not be required to and hereby agrees not (i) to reflect on
its books any transfer of Shares that shall have been transferred in violation
of any of the provisions of this Shareholder Agreement or (ii) to treat the
purported transferee as the owner of such Shares or to accord the purported
transferee the right to vote such Shares or to receive dividends
thereon.
4. BOARD
OBSERVER RIGHTS. Leisurecorp may, from time to time, notify the Secretary of
the
Company in writing of two persons that it has designated as its “Board
Observers,” and GWSE may, from time to time, notify the Company in writing of
one person that it has designated as its Board Observer. The foregoing Board
Observers are in addition to the Preferred Directors that the holders of the
Preferred Stock are entitled to elect to the Board of Directors under the
Certificate of Designations. The Company hereby agrees to invite all of the
Board Observers to attend all meetings (including telephonic meetings) of the
Board of Directors in a nonvoting capacity and to provide (at the same time
as
it provides to the directors) each of the Board Observers copies of all notices,
consents, Board of Director review materials, and all other materials it
provides to the directors.
E
- 4
5. COVENANTS
OF THE COMPANY. The Company agrees to use its best efforts to ensure that the
rights given to the Shareholders hereunder are effective and that the
Shareholders enjoy the benefits thereof. Such actions include, without
limitation, the use of the Company’s reasonable best efforts to enforce the
terms of this Shareholder Agreement and to inform the shareholders of any breach
hereof (to the extent the Company has knowledge thereof). The Company will
not,
by any voluntary action, avoid or seek to avoid the observance or performance
of
any of the terms to be performed hereunder by the Company, but will at all
times
in good faith assist in the carrying out of all of the provisions of this
Shareholder Agreement and assist the Shareholders in the exercise and
enforcement of their rights and the performance of their obligations hereunder.
6. SPECIFIC
PERFORMANCE. The Investors acknowledge that it would be impossible to determine
the amount of damages that would result from any breach of any of their
obligations under Section 2 of this Shareholder Agreement and that the remedy
at
law for any breach, or threatened breach, would likely be inadequate and,
accordingly, agrees that the other Investors shall, in addition to any other
rights or remedies which it may have at law or in equity, be entitled to seek
such equitable and injunctive relief as may be available from any court of
competent jurisdiction to restrain an Investor from violating any of its
obligations under Section 2. In connection with any action or proceeding for
such equitable or injunctive relief, each Investors hereby waives any claim
or
defense that a remedy at law alone is adequate and agrees, to the maximum extent
permitted by law, to have its obligations under Section 2 specifically enforced
against it, without the necessity of posting bond or other security, and
consents to the entry of equitable or injunctive relief against it enjoining
or
restraining any breach or threatened breach of Section 2 of this Shareholder
Agreement.
7. EXPIRATION;
TERMINATION. Except as otherwise set forth in this Agreement, this Shareholder
Agreement shall terminate upon the earliest to occur of the following:
(i) the written agreement of the Investors; (ii) the dissolution,
bankruptcy or insolvency of the Company; (iii) at such time as Leisurecorp
owns less than 25% of the number of shares of Preferred Stock that it purchased
under the Securities Purchase Agreement; (iv) the consummation by the
Company of the sale of all or substantially all of its assets and business;
(v) the consummation of a merger or consolidation of the Company with or
into a third party (other than a reincorporation merger) in which the Preferred
Stock is converted into the right to receive cash, securities or other
consideration; and (vi) December 31,
2009.
8. MISCELLANEOUS.
(a) Legend
on Share Certificates.
Each
certificate representing any Shares (including shares issued after the date
hereof) , and all certificates issued in transfer thereof or substitution
therefor, shall be endorsed by the Company with a legend reading substantially
as follows:
“THE
SHARES EVIDENCED HEREBY ARE SUBJECT TO A SHAREHOLDER AGREEMENT, AS MAY BE
AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST
FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON
ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND
BY
ALL THE PROVISIONS OF THAT SHAREHOLDER AGREEMENT, INCLUDING CERTAIN RESTRICTIONS
ON VOTING, TRANSFER AND OWNERSHIP SET FORTH THEREIN.”
E
- 5
(b) Entire
Agreement.
This
Shareholder Agreement constitutes the entire agreement of the parties hereto
with reference to the transactions contemplated hereby and supersedes all other
prior agreements, understandings, representations and warranties, both written
and oral, between the parties or their respective representatives, agents or
attorneys, with respect to the subject matter hereof.
(c) Parties
in Interest.
This
Shareholder Agreement shall be binding upon and inure solely to the benefit
of
the Investors and their respective successors, assigns, and other legal
representatives, as the case may be. Nothing in this Shareholder Agreement,
express or implied, is intended to confer upon any other person, other than
the
Investors or their respective successors, assigns, and other legal
representatives, as the case may be, any rights, remedies, obligations or
liabilities under or by reason of this Shareholder Agreement.
(d) Assignment.
This
Shareholder Agreement shall not be assignable by law or otherwise without the
prior written consent of the other parties hereto; provided, however, that
either GWSE or Leisurecorp may assign any of its rights and obligations
hereunder to any entity which may acquire all or substantially all of its
assets, shares or business or to any entity with or into which it may be
consolidated or merged.
(e) Modifications;
Waivers.
This
Shareholder Agreement shall not be amended, altered or modified in any manner
whatsoever, except by a written instrument executed by the Company and by both
Investors. No waiver of any breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no
such
waiver shall be deemed a waiver of any subsequent breach of the same or similar
nature.
(f) Severability.
Any
term or provision of this Shareholder Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity and unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Shareholder
Agreement in any other jurisdiction. If any provision of this Shareholder
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
(g) Governing
Law.
This
Shareholder Agreement shall be deemed to be made in and in all respects shall
be
interpreted, construed and governed by and in accordance with the laws of the
State of New York, without regard to the conflict of law principles
thereof.
(h) Jurisdiction
and Venue.
Each
party hereby irrevocably submits to the exclusive jurisdiction of the state
and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper.
E
- 6
(i) Attorney’s
Fees.
The
prevailing party in any litigation, arbitration, mediation, bankruptcy,
insolvency or other proceeding (“Proceeding”)
relating to the enforcement or interpretation of this Shareholder Agreement
may
recover from the unsuccessful party all fees and disbursements of counsel
(including expert witness and other consultants’ fees and costs) relating to or
arising out of (a) the Proceeding (whether or not the Proceeding results in
a judgment) and (b) any post-judgment or post-award Proceeding including,
without limitation, one to enforce or collect any judgment or award resulting
from any Proceeding. All such judgments and awards shall contain a specific
provision for the recovery of all such subsequently incurred costs, expenses,
fees and disbursements of counsel.
(j) Counterparts.
This
Shareholder Agreement may be executed in one or more counterparts (including
by
facsimile), each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
(k) Notices.
All
notices, requests, instructions and other communications to be given hereunder
by any party to the other shall be in writing and shall be deemed given if
personally delivered, telecopied (with confirmation) or mailed by registered
or
certified mail, postage prepaid (return receipt requested), to such party at
its
address set forth below or such other address as such party may specify to
the
other party by notice provided in accordance with this Section
7(k).
If
to the
Company, to:
Xxxxx
000
0000
000xx Xxxxxx
Xxxxxx,
Xxxxxxx Xxxxxxxx
Xxxxxx
X00 X00
Attn:
Chief Executive Officer
Telecopier:
(000) 000-0000
and
If
to
Shareholders, to the addresses specified on the signature page
hereof.
(l) Advice
of Counsel.
Each
Shareholder acknowledges that, in executing this Shareholder Agreement, such
Shareholder has had the opportunity to seek the advice of independent legal
counsel, and has read and understood all of the terms and provisions of this
Shareholder Agreement. The parties acknowledge that the Company’s counsel, Xxxx
Xxxxx Professional Corporation (“Xxxx
& Xxxxx”),
prepared this Shareholder Agreement on behalf of and in the course of its
representation of the Company. Xxxx & Xxxxx represents the Company only, and
does not represent, and owes no duty, to any of the Shareholders. Xxxx &
Xxxxx has therefore advised the Shareholders to seek the advice of independent
counsel with respect to this Shareholder Agreement.
(m) Actions
as Shareholders.
The
Investors and the Conversion Shareholders are entering into this Shareholder
Agreement in their capacity as the record or beneficial owners of the shares
of
the Company’s securities. Nothing in this Shareholder Agreement shall be deemed
in any manner to limit the discretion of any member of the Company’s Board of
Directors, including either Conversion Shareholders or any affiliate or designee
of either Investors, to take any action, or fail to take any action, in his
or
her capacity as a director or officer of the Company
E
- 7
IN
WITNESS WHEREOF, the parties hereto have executed this Shareholder Agreement
as
of the date first above written.
By:_____________________________
Name:
Title:
SHAREHOLDERS:
GREAT
WHITE SHARK ENTERPRISES, INC.
_____________________________________
By:
Number
of
shares of Preferred Stock as of the date of this Agreement: 574,089
Number
of
shares underlying warrants as of the date of this Agreement:
18,901,579
Address
for Notices:
Great
White Shark Enterprises, Inc.
000
Xxxxx
X0X, Xxxxxxx, XX 00000
Attn:
Xxxx Xxxxxxx
Telephone:
(000) 000-0000
Telecopy:
(000) 000-0000
LEISURECORP
LLC
_____________________________________
By:
Number
of
shares of Preferred Stock as of the date of this Agreement:
1,000,000
Number
of
shares underlying warrants as of the date of this Agreement:
40,983,607
Address
for Notices:
Xxxxx
Xxxxxxx
Chief
Executive Officer
Xxxxxxxxx
Xxxxxxx
X.X.
Xxx
00000, Xxxxx, XXX
Telephone:
x0000-0000000
Telecopy:
x0000-0000000
E
- 8
XXXXXX
X.
XXXXXX, XX.
_____________________________________
By:
Xxxxxx X. Xxxxxx, Xx.
Number
of
shares of Common Stock subject to this Agreement: 12,295,082
Number
of
shares underlying warrants as of the date of this Agreement:
3,073,770
Address
for Notices:
GPS
Industries, Inc., Xxxxx 000
0000
000xx Xxxxxx
Xxxxxx,
Xxxxxxx Xxxxxxxx
Xxxxxx
V35 S59
XXXXXXX
XXXX
_____________________________________
By:
Xxxxxxx Xxxx
Number
of
shares of Preferred Stock as of the date of this Agreement: 300,000
Number
of
shares underlying warrants as of the date of this Agreement:
12,295,082
Address
for Notices:
X.
Xxxx
Holdings LLC
0000
Xxxxxxxxx Xxxxx,
Xxxxxxx,
Xxxxxxxxxxxx 00000
E
- 9
EXHIBIT
F
(1)
Indebtedness to be cancelled and exchanged for Preferred Shares Warrants under
Article I.B:
Great
White Shark Enterprises, Inc.:
| · |
$3
million Term Loan from GWSE dated December 3, 2004.
|
Balance
outstanding = $2,454,166
| · |
Short
term loan from GWSE, March 1, 2005 plus accumulated interest =
$567,902
|
| · |
Interest
on $3M loan & quarterly royalties =
$115,319
|
| · |
Royalty
payments = $875,000
|
| · |
Sundry
accounts payable = $16,741
|
Total
amount owed to GWSE = $4,029,128
Total
amount of debt to be converted into Series B Preferred Shares =
$2,740,892
Balance
of remaining outstanding debt owed to GWSE = $1,288,236
(2)
Indebtedness to be cancelled and exchanged for Preferred Shares and Warrants
pursuant to Article VII.F:
Xxxxxxx
Xxxx:
| · |
Short
term working capital loans, amounting to
$5,147,165
|
| · |
Interest
accrued on such loans, amounting to
$313,449
|
Total
amount owed to Xxxxxxx Xxxx on short term working capital loans =
$5,460,614
Total
amount of debt to be converted into Series B Preferred Shares and Warrants=
$3,000,000
Xxxxxx
X.
Xxxxxx, Xx.:
| · |
Promissory
note = $471,560
|
| · |
Short
term loan = $12,869
|
| · |
Vacation
Pay = $140,483
|
| · |
Accrued
Interest = $158,928
|
Total
amount owed to Xxxxxx X. Xxxxxx Xx. = $783,840
Total
amount of debt to be converted into shares of common stock and warrants =
$750,000
F
- 1
EXHIBIT
G
DEBT
EXCHANGE AGREEMENT
This
Debt
Exchange Agreement (this “Agreement”) is entered into as of ________ , 2006, by
and between GPS Industries, Inc., a Nevada corporation (the “Company”), and the
undersigned lender (the “Lender”).
WHEREAS,
the Company is indebted to the Lender in the amount set forth on Exhibit A,
which indebtedness arose from those loans and other transactions listed on
Exhibit A (collectively, the “Indebtedness”).
WHEREAS,
the Company intends to establish a new series of its preferred stock to be
designated as its Series B Convertible Preferred Stock (the “Series B Preferred
Stock”) which Series B Preferred Stock shall have the rights, preferences and
privileges set forth in the “GPS Industries, Inc. Certificate of Designation of
the Series B Convertible Preferred Stock” (the form of which is attached hereto
as Exhibit B); and
WHEREAS,
the Company intends to sell both shares of its Series B Preferred Stock and
warrants to purchase common stock (the “Warrants”) to investors in a private
placement (the “Private Placement”); and
WHEREAS,
as a condition of the Private Placement, the Indebtedness is required to be
cancelled and converted into or exchanged for the Company’s securities; and
WHEREAS,
the Board of Directors of the Company has determined that it is in the best
interests of the Company and its stockholders that the Indebtedness be exchanged
by the Lender thereof prior to the scheduled repayment date of the Indebtedness;
and
WHEREAS,
to induce the Lender to convert its Indebtedness, the Company has offered to
issue to the Lender (i) one share of Series B Preferred Stock and a Warrant
to
purchase 40.98361 shares of the Company’s common stock in exchange for (ii) each
$10.00 of Indebtedness that is cancelled and converted; and
WHEREAS,
the Lender wishes to accept this offer and to so exchange or convert its
Indebtedness into shares of Series B Preferred Stock and Warrants upon the
foregoing terms.
NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Conditioned
on the closing of the Private Placement, the Lender hereby agrees to convert
or
exchange the entire balance of the Indebtedness into ___________ shares of
Series B Preferred Stock and Warrants to purchase _______ shares of common
stock
(collectively, the “Conversion Securities”). The conversion or exchange of the
Indebtedness into Conversion Securities shall become effective concurrently
with
the closing of the Private Placement. Promptly following the date hereof, but
in
any event prior to the conversion or exchange, the Lender agrees to return
all
evidences its Indebtedness to the Company for cancellation (provided that the
Lender’s failure to do so shall in no way effect the status of its Indebtedness
as being canceled). The Lender’s agreement to convert and cancel its
Indebtedness shall expire if the closing of the Private Placement has not
occurred by the close of business on March 31, 2007.
G
- 1
2. The
Company hereby agrees to issue the Conversion Securities to the Lender as a
result of such conversion, and the Lender agrees to accept the Conversion
Securities as payment in full for the Indebtedness. The Company agrees to
deliver to the Lender the stock certificate and warrant agreement that evidence
the Conversion Securities promptly after the closing of the Private
Placement.
3. The
Lender is an “accredited investor” within the meaning of Regulation D
promulgated under the Securities Act of 1933, as amended (the “Act”). The Lender
has a preexisting personal or business relationship with the Company or one or
more of its officers or control persons. By reason of the Lender’s business or
financial experience, or by reason of the business or financial experience
of
the Lender’s financial advisor who is unaffiliated with and who is not
compensated, directly or indirectly, by the Company, the Lender is capable
of
evaluating the risks and merits of converting its Indebtedness on the terms
set
forth herein and of protecting the Lender’s own interests in connection
therewith.
4. The
Conversion Securities and the shares of the Company’s Common Stock issuable upon
conversion thereof are being acquired for the Lender’s own account, not as a
nominee or agent, and not with a view to or in connection with the sale or
distribution of any part thereof.
5. The
Lender understands that the issuance of the Conversion Securities upon
conversion of its Indebtedness will not be registered under the Act on the
grounds that such issuance is exempt from registration under the Act, and that
the reliance of the Company on such exemption is predicated in part on the
Lender’s representations set forth in this Agreement. The Lender understands
that the Conversion Securities and the shares of the Company’s Common Stock
issuable upon conversion or exercise thereof are restricted securities within
the meaning of Rule 144 under the Act, and must be held indefinitely unless
they
are subsequently registered or an exemption from such registration is
available.
6. The
Lender acknowledges that it has had an opportunity to discuss the terms of
the
Private Placement and the business, affairs and current prospects of the Company
with its officers. The Lender further acknowledges having had access to
information about the Company that it has requested.
7. The
Lender represents and warrants to the Company that it owns its Indebtedness
free
and clear of any liens and has the right to exchange its Indebtedness and accept
the Conversion Securities as payment in full of the entire Indebtedness without
the consent of any other person.
G
- 2
IN
WITNESS WHEREOF, and intending to be legally bound hereby, the undersigned
have
entered into this Agreement as of the date set forth above.
|
THE
COMPANY:
GPS
INDUSTRIES, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
THE
LENDER:
|
||
|
Name
|
||
G
- 3
EXHIBIT
A
Indebtedness:
1. Promissory
Note, dated ______, in the principal amount of $_______
2. Accrued
and unpaid interest through the date hereof on the Promissory Note:
$_______
3. [describe
any other indebtedness…]
G
- 4
EXHIBIT
H
AGREEMENT
[SEE
EXHIBIT 10.4 OF THE FORM 8-K TO WHICH THIS SECURITIES PURCHASE AGREEMENT IS
ATTACHED]
H
-
1
DISCLOSURE
SCHEDULES
These
disclosure schedules (these “Schedules”) are furnished by GPS Industries, Inc.,
a Nevada corporation (the “Company”), pursuant to the Securities Purchase
Agreement dated as of November 13, 2006 (the “Purchase Agreement”), by and among
the Company and the Buyers identified on the signatures pages
thereto.
Nothing
in the Schedules constitutes an admission of any liability or obligation of
the
Company to any third party, nor an admission to any third party against the
Company’s interests. Unless otherwise stated, all statements made herein are
made as of the date of execution of the Purchase Agreement. The Schedules are
qualified in their entirety by reference to specific provisions of the Purchase
Agreement. The disclosures in these Schedules are deemed disclosures against
the
representations and warranties in the section of the Purchase Agreement to
which
they expressly relate and to no other representation or warranty in the Purchase
Agreement.
The
representations and warranties made by the Company in the Purchase Agreement
are
qualified by, and subject to the exceptions noted in, the information set forth
in these Schedules. The inclusion or disclosure of any item or information
in
the Schedules shall not be construed as an admission that such item or
information is material to the Company, and any inclusion in the Schedules
shall
expressly not be deemed to constitute an admission, or otherwise imply, that
any
such item or information is material or creates measures for materiality for
the
purposes of the Purchase Agreement.
Headings
have been inserted on the sections of the Schedules for convenience of reference
only and shall to no extent have the effect of amending or changing the express
description of the sections as set forth in the Purchase Agreement. Capitalized
terms used herein but not otherwise defined shall have the meanings set forth
in
the Purchase Agreement.
Schedule
C
Capitalization
(i) Warrants
to purchase 26,200,907 shares of Common Stock are currently issued and
outstanding.
Subject
to certain conditions, the Company has agreed to issue to the shareholders
of
Optimal Golf Solutions warrants to purchase 4,000,000 shares of Common Stock
on
April 1, 2007. In addition, in connection with the purchase of Optimal Golf
Solutions, Inc. in November 2004, the Company agreed to issue to the sellers
a
total of 40,000,000 shares of Common Stock, of which 30,392,082 shares still
must be issued. The foregoing 30,392,082 shares are included in the number
of
shares issued and outstanding immediately after the transactions contemplated
by
this Agreement in Article III.C.(ii).
As
described in Article IV, J, the Company has agreed to grant the NIR Group
warrants to purchase 3,000,000 shares of Common Stock, which warrants shall
have
an exercise price of $0.122 per share.
H
- 2
The
Company has entered into an arrangement with GWSE (the “GWSE Purchase Order
Facility”) for purchase order inventory financing whereby GWSE advances funds on
signed purchase orders, secured by the contract inventory and receivable. These
advances bear interest at 18% per annum. In addition, as additional
consideration for the advances, the Company has agreed to issue to GWSE shares
of Common Stock at the rate of 100,000 shares per $250,000 advanced, adjusted
proportionately for the actual contract advance. As of October 31, 2006, the
Company was committed to issue 394,104 shares under this arrangement, although
the actual issuances will not take place until the repayment of the advances.
On
November 5, 2006 the Company was notified that its obligation to pay $2,000
of
fees for services rendered to an advisor involved in the recent UK patent
litigation has become due and owing. Accordingly, the Company is obligated
to
issue shares for the $2,000 obligation, by issuing 32,258 shares at a price
of
$0.062 per share.
H
- 3
(ii)
The
following warrants and options will be outstanding immediately following the
Closing:
|
Outstanding
Warrants
|
Expiry
Date
|
Exercise
Price
|
Number
of
Shares
|
|||||||
|
Convertible
Preferred Series A
|
||||||||||
|
-
Warrant conversion, 3yr term
|
Expires
Aug 3 2007
|
$
|
0.167
|
880,281
|
||||||
|
-
Warrant conversion 3yr term
|
Expires
Oct 27, 2007
|
$
|
0.124
|
592,978
|
||||||
|
Other
Warrants
|
||||||||||
|
Xxxxxxx
X. Xxxxxxxxx Warrants For $200,000 Common Shares
|
||||||||||
|
2,857,143
common shs x .25%
|
Expires
Aug 24, 2007
|
$
|
0.10
|
714,285
|
||||||
|
Shaar
Fund
|
Expires
Oct 29, 2007
|
$
|
0.32
|
200,000
|
||||||
|
Xxxxxx
Inc.
|
Expires
Jun/08
|
$
|
0.05
|
1,000,000
|
||||||
|
Xxxxxx
Inc. - Dec. 27, 2004 LOC renewal
|
Expires
Dec/09
|
$
|
0.05
|
500,000
|
||||||
|
Xxxxxx
Inc. - March 14, 2005 LOC renewal
|
Expires
Mar/08
|
$
|
0.10
|
1,000,000
|
||||||
|
Xxxxxx
Inc. - October 2005 LOC renewal
|
Expires
Sep/08
|
$
|
0.10
|
1,000,000
|
||||||
|
Windsor
Capital Finance
|
Expires
Mar/07
|
$
|
0.06
|
250,000
|
||||||
|
Windsor
Capital Finance
|
Expires
Mar/07
|
$
|
0.07
|
250,000
|
||||||
|
Xxxx
Xxxx
|
Expires
March 23/07
|
$
|
0.15
|
666,667
|
||||||
|
Norton
Lane Advisors
|
Expires
May 3, 2008
|
$
|
0.20
|
2,250,000
|
||||||
|
Norton
Lane Advisors
|
Expires
May 3, 2008
|
$
|
0.30
|
2,350,000
|
||||||
|
JMS
Capital Investors With Warrants
|
||||||||||
|
Xxx
Xxx warrant
|
Expires
Jan/07
|
$
|
0.15
|
500,000
|
||||||
|
Xxxxx
Xxxxx warrant
|
Expires
Apr/07
|
$
|
0.15
|
250,000
|
||||||
|
WWG
Trust #13
|
Expires
Dec/07
|
$
|
0.15
|
500,000
|
||||||
|
Great
White Shark Enterprises Loan For $3,000,000
|
||||||||||
H
-
4
|
Warrants
Owing Per Agmt, 3 Yr Term
|
Expires
Dec/07
|
$
|
0.15
|
2,000,000
|
||||||
|
3
Year Warrants issued to Agent Xxxxxxxxx Tsouvelekakis
|
Expires
Jun/08
|
$
|
0.25
|
2,187,500
|
||||||
|
3
Year Warrants issued to Agent Blue Capital Inc.
|
Expires
Jun/08
|
$
|
0.18
|
1,640,625
|
||||||
|
3
Year Warrants issued to Agent Blue Capital Inc.
|
Expires
Jun/08
|
$
|
0.12
|
928,571
|
||||||
|
3
Year Warrants issued to Lionheart Associates
|
Expires
Sep/08
|
$
|
0.25
|
324,000
|
||||||
|
3
Year Warrants issued to Ocean Avenue Advisors
|
Expires
Sep/08
|
$
|
0.25
|
216,000
|
||||||
|
NIR
Warrants @ $0.25 (Subject to Anti-dilution
provisions)
|
||||||||||
|
-
1st Tranche
|
Expires
Sep 20, 2010
|
$
|
0.25
|
3,000,000
|
||||||
|
-
2nd Tranche
|
Expires
Oct 28, 2010
|
$
|
0.25
|
1,500,000
|
||||||
|
-
3rd Tranche
|
Expires
Dec 9, 2010
|
$
|
0.25
|
1,500,000
|
||||||
|
Total
Outstanding Warrants
|
26,200,907
|
|||||||||
|
Stock
Options Outstanding
|
||||||||||
|
Issued
Oct. 10, 2003
|
630,000
|
$
|
0.100
|
|||||||
|
Issued
Dec 21, 2005
|
5,860,000
|
$
|
0.05
- $0.08
|
|||||||
|
Issued
September 2006
|
1,700,000
|
$
|
0.05
- $0.07
|
|||||||
|
Issued
October 2006
|
15,000,000
|
0.061
|
||||||||
|
Total
Outstanding Options
|
23,190,000
|
|||||||||
In
addition to the outstanding warrants listed in the above table, as part of
the
NIR Group Settlement Agreement, the Company has agreed to issued to the NIR
Group warrants to purchase 3,000,000 shares of Common Stock at an exercise
price
of $0.122 per share (see, Article III.Z).
Subject
to certain conditions, the Company has agreed issue to the shareholders of
Optimal Golf Solutions warrants to purchase 4,000,000 shares of Common Stock
on
April 1, 2007.
H
-
5
Schedule
HTax
Status
The
Company has not filed tax returns in Canada. The Company has accumulated
significant losses in Canada and does not believe there is any amount payable
to
the Canadian tax authorities.
The
Company has filed all applicable US federal tax returns except its 2005 U.S.
federal tax return which was due on September 15, 2006. The return has been
prepared and is expected to be filed in November 2006. The Company does not
believe there is any liability or amount payable to the U.S. federal tax
authorities as the Company did not generate any federal taxable income in 2005.
The
Company is currently in arrears in remitting payroll withholding amounts to
the
Canadian tax authorities. The amount of withholdings overdue for remittance
amounts to Cdn$284,530. There are additional penalty and interest amounts due
on
these remittances amounting to approximately Cdn$62,000. The payroll
withholdings incur the penalty on late payment and interest at the rate of
8%
per annum until paid. Once the withholdings, penalties and interest are paid
there are no further consequences. Unless the Company obtains the consent of
the
Canada Revenue Agency to defer some portion of the amount owed, the Company
intends to pay the entire balance of unpaid withholding amounts, plus penalties
and interest, upon the receipt of funds from the $6,500,000 bridge loan obtained
from the Buyers.
Schedule
NNo
Brokers
The
Company is a party to a letter agreement, dated January 18, 2006, with TM
Capital Corp. (“TM Capital”) pursuant to which the Company has agreed to pay TM
Capital Corp a cash fee of $200,000 at the closing of a financing arranged
exclusively with Great White Shark Enterprises or its affiliates and/or a group
of Dubai based investors with which the Company had previous
discussions.
Schedule
YIndebtedness
(1) Indebtedness
as of October 31, 2006
|
Short
Term Loans:
|
$
|
|||
|
Xxxx
Xxxx
|
5,147,165
|
|||
|
Blue
& Gold Ventures
|
465,000
|
|||
|
Synapse
Ventures - Xxxxxx Xxxxxx
|
107,241
|
|||
|
Optimal
Golf Solution - GWSE
|
286,726
|
|||
|
Xxxxxx
Xxxx
|
85,000
|
|||
|
Xxxxxx
Inc.
|
100,000
|
|||
H
-
6
|
Accrued
Interest:
|
||||
|
Xxx
Xxxxxx
|
158,929
|
|||
|
Synapse
Ventures - Xxxxxx Xxxxxx
|
112,378
|
|||
|
Xxxx
Xxxx
|
313,449
|
|||
|
Manufacturing
Line of Credit
|
237,732
|
|||
|
GWSE:
Interest on 125,000 payments
|
82,500
|
|||
|
Optimal
Shareholders - Patent Purchase o/s balance
|
350,589
|
|||
|
GWSE
Interest on short term loan
|
286,726
|
|||
|
Blue
& Gold Ventures
|
203,567
|
|||
|
Miscellaneous
Accruals:
|
||||
|
Sherb
Audit
|
120,000
|
|||
|
Xxx
Xxxxxx Accrual of past vacation pay earned
|
140,483
|
|||
|
Horrow
Sports
|
66,545
|
|||
|
Xxxx
& Xxxxx PC
|
100,000
|
|||
|
Revenue
Canada
Payroll
Remittances
|
284,530
|
|||
|
Revenue
Canada
Penalties
& Interest
|
60,968
|
|||
|
Xxxxx
Legal
Unbilled
fees and expenses
|
80,697
|
|||
|
Bank
Indebtedness:
|
||||
|
Xxxxxx
Line of Credit
|
1,500,000
|
|||
|
Manufacturing
Line of Credit
|
1,400,000
|
|||
|
Long
Term Loan: Xxxxxx Xxxxxx Xx.
|
471,414
|
|||
|
Purchase
Order Financing Loans
|
||||
|
Through
GWSE
|
857,368
|
|||
|
Liability
Associated with Optimal Golf Acquisition
|
2,948,725
|
|||
|
Term
Loan from GWSE
|
2,454,166
|
|||
|
NIR
Convertible Debt
|
2,599,820
|
|||
|
Present
Value of Real Estate Leases
|
100,513
|
|||
|
Miscellaneous
items less than $50,000
|
151,478
|
|||
|
$
|
21,273,710
|
(2) Indebtedness
incurred since October 31, 2006.
$395,000
of additional advances under the GWSE Purchase Order Facility to fund inventory
purchases for new purchase orders the Company has received.
$300,000
under a short-term, unsecured loan from Xxxxx Xxxxx to fund the payment
currently due to the shareholders of Optimal Golf Solutions, Inc. The loan
from
Xx. Xxxxx bears interest at a rate of 12% per annum and is required to be repaid
in cash from the proceeds of the $6,500,000 bridge loan obtained from the
Buyers.
H
-
7
