[MVP LETTERHEAD]
January 7, 1998
Board of Directors
Grafix Time Corp. d/b/a Carrera Golf
0000 Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
Dear Gentlemen:
This letter embodies the terms of our agreement concerning an exempt
private placement of the common stock of Grafix Time Corporation d/b/a Carrera
Golf ("Carrera Golf" or the "Company"), to be purchased by Merlin Venture
Partners ("MVP") and/or its financing partners, all as more fully set forth
below and in the exhibits attached hereto and incorporated herein by reference.
The stock purchase by MVP and the required restructuring of the Company, which
will occur contemporaneously as set forth below, are referred to collectively as
"the Funding." The Company and MVP are jointly referred to as the "parties"
herein.
CURRENT STATUS OF THE COMPANY
Carrera Golf is a New York corporation in good standing, publicly traded on
the NASDAQ Electronic Bulletin Board under the symbol "CRRA." The Company has
16,026,886 shares of its common stock issued and outstanding. 12,000,000 of
those shares are owned by Xx. Xxxxx Xxxxx ("Xxxxx"), who is neither an officer
nor a director of the Company. The Company has 50,000,000 common shares and
5,000,000 preferred shares authorized, with -0- shares of preferred stock issued
and outstanding. The Company's fiscal year ends September 30. The Company is
current in its reporting with the Securities and Exchange Commission (the
"SEC").
OVERVIEW OF THE FUNDING
It is the intent of the parties that the Funding be completed on or before
February 28, 1998, subject to satisfaction of the contingencies set forth below.
Carrera Golf will effect a 2:3 reverse split of all issued and outstanding
common stock of the Company, resulting in 10,684,591 shares issued and
outstanding, of which Xxxxx will own 8,000,000. The Company will then redeem
7,000,000 shares of Xxxxx'x stock, prior to the investment of any funds into
Carrera Golf by MVP. The foregoing restructuring by the Company will leave the
Company with 3,684,591 shares of common stock issued and outstanding.
Thereafter, MVP will purchase 7,000,000 shares of the Company's common stock in
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an exempt, private placement transaction, for $7,000,000 ($1.00 per share). Xx.
Xxxxx Xxxxxx or his lawful designee(s) shall receive a transaction fee of
$700,000 at closing. At the conclusion of the Funding, the Company will have
10,684,591 shares issued and outstanding, of which MVP will own 7,000,000, or
65.5 %. Concurrent with the Funding, all of the current Carrera Golf directors
except Xxxx X. Xxxxxxxx shall resign. A new Board of Directors will be named by
MVP. Said Board of Directors shall include Xxxxx.
USE OF PROCEEDS FROM THE FUNDING
The Company will utilize the proceeds of the funding as follows:
Pay Ahuja Redemption Note $ 2,000,000
Pay Huntington Bank Note 1,300,000
Pay Transtar Note 1,000,000
Transaction Fee 700,000
Working Capital 2,000,000
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Total $ 7,000,000
CONTINGENCIES TO THE FUNDING
1. The parties shall exchange all requisite information, and the
parties shall complete their due diligence reviews of each
other. The parties shall execute confidentiality,
non-disclosure, and non-circumvention agreements in form
acceptable to the parties' respective counsels.
2. Carrera Golf shall file a Report on Form 8-K concerning the
signing of an agreement with MVP, and disclosing the terms of
this agreement.
3. The Company's Board of Directors shall approve a 2:3 reverse
split of the Company's issued and outstanding common stock,
subject to completion of the Funding. Xxxxx, as majority
shareholder, will approve this reverse split. This will leave
10,684,591 shares of common stock issued and outstanding, of
which Xxxxx will own 8,000,000.
4. Ahuja and the Company shall enter into a Redemption Agreement,
in form substantially similar to Exhibit A attached hereto and
whose substance shall be approved by MVP's counsel. Said
Redemption Agreement shall, among other things, obligate Ahuja
to sell 7,000,000 of his Carrera Golf shares back to the
Company on the closing date, for $ 2,000,000. This redemption
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of Xxxxx'x shares by the Company shall be contingent upon
completion of the Funding. Upon completion of contingencies
1 and 2, and immediately prior to the private placement
investment by MVP, there will be 3,684,591 shares of the
Company's common stock issued and outstanding.
5. MVP and the Company shall execute a stock purchase agreement,
pursuant to which MVP shall purchase 7,000,000 shares of
Carrera Golf common stock from the Company in an exempt
private placement, for $ 7,000,000. The Company shall make all
required filings with federal and state securities regulators
concerning this private placement, to the satisfaction of
MVP's counsel. Following this step of the Funding, there will
be 10,684,591 shares of the Company's common stock issued and
outstanding, of which MVP will own 7,000,000, or 65.5 %. Ahuja
would own 1,000,000 shares, or 9.4%. The current public
shareholders would own the remaining 2,684,591 shares, or
25.1%.
6. All of the Company's directors, except Xxxx X. Xxxxxxxx, shall
resign, and MVP shall appoint a new Board of Directors for the
Company, which shall include Ahuja.
FIRST RIGHT TO COMPLETE FUNDING
By signing this letter agreement, Carrera Golf is granting MVP a first
right to complete the Funding on or before February 28, 1998. MVP is committing
to complete its due diligence of the Company as soon as practicable, and
complete the Funding as set forth herein. The Company hereby grants MVP a first
right to complete the Funding on the above terms, through February 28, 1998. In
the event the Company decides to pursue any other funding proposal, the Company
shall notify MVP in writing. MVP shall then have ten (10) business days from the
date of receipt of the Company's notice to complete the Funding. If MVP is
unable to complete the Funding within ten (10) business days of the Company's
notice, the Company shall be free to pursue the other funding proposal, without
any continuing obligation to MVP.
I have enclosed two originals of this agreement. If the foregoing
accurately reflects the terms of our agreement, please sign where indicated
below, and return a fully executed original to me using the enclosed Federal
Express Letter Pack.
Kindest regards,
/S/ XXXXX XXXXXX
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Xxxxx Xxxxxx
Principal
Merlin Venture Partners
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Xxxxxx and accepted this 12th day of January, 1998:
GRAFIX TIME CORPORATION:
/S/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx, Acting President
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