INVESTMENT AND VOTING AGREEMENT
This Investment and Voting Agreement is made as of October 19, 1998,
between LAS VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation (the
"Company"), whose address is 0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx, Xxxxx 0, Xxx
Xxxxx, Xxxxxx 00000, and ASI GROUP, L.L.C., a Nevada limited liability company
(the "Purchaser"), whose address is c/o Agassi Enterprises, Inc., 0000 Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000.
SECTION 1
AUTHORIZATION AND SALE OF COMMON STOCK
1.1 Authorization. The Company will authorize the sale and issuance of
Two Million Three Hundred Three Thousand Two Hundred Ninety (2,303,290) shares
(the "Shares") of its Common Stock ("Common Stock"), no par value.
1.2 Sale of Common Stock. Subject to the terms and conditions hereof,
and in reliance upon the representations, warranties and agreements of the
parties contained herein, the Company will issue and sell to the Purchaser,
and the Purchaser will buy from the Company, Two Million Three Hundred Three
Thousand Two Hundred Ninety (2,303,290) shares of Common Stock at a purchase
price of One Dollar and Eight and One-Half Cents ($1.085) per share, for an
aggregate purchase price of Two Million Five Hundred Thousand Dollars
($2,500,000.00).
1.3 Adjustment of Price and/or Terms.
(a) If at any time and each time within three (3) years after the
Closing (as defined in Section 2.1 below), the Company offers to sell or
grants, sells or issues shares of its capital stock to any persons or entity
other than the Purchaser at a lower price per share than the purchase price
paid by the Purchaser for the Shares and/or on more favorable terms and
conditions than those afforded to the Purchaser in connection with the
purchase of the shares of Common Stock (taking into account any equitable
adjustment in accordance with the Anti-Dilution Provisions), the Company
agrees to retroactively apply such lower price and/or more favorable terms and
conditions to the Shares purchased by the Purchaser. At the Purchaser's
request, the Company shall either (i) issue the Purchaser additional shares of
Common Stock in the amount equal to (A) the amount of any such overpayment by
the Purchaser divided by (B) such lower price charged by the Company to any
person or entities or (ii) deliver to the Purchaser the amount of any such
overpayment in cash.
(b) If at any time after the Closing, while the Purchaser is an
equity holder of the Company or has options, warrants or other rights to
acquire equity of the Company, the Company offers to sell or grants, sells or
issues shares of its capital stock to any of Messrs. Xxxx Xxxxxx, Xxxxxx
Xxxxxx and Xxxx Xxxxxx or Xxxxxx Enterprises Ltd. or their respective
affiliates (collectively, "Boreta") at any price or for any consideration
(including, but not limited to, provision of services) the Company shall issue
the Purchaser additional shares of Common Stock so as to maintain the relative
proportionate equity ownerships of the Purchaser, on the one hand, and Boreta,
on the other hand, in the Company as they were immediately prior to such
offer, grant, sale or issuance, assuming the consummation of such offer,
grant, sale or issuance.
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Common
Stock hereunder shall be held at the offices of the Company sixteen days from
the execution hereof (the "Closing"), or at such other time and place upon
which the Company and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates, registered in the Purchaser's name representing
Two Million Three Hundred Three Thousand Two Hundred Ninety (2,303,290) Shares
against payment of the purchase price therefor, by check payable to the
Company or wire transfer per the Company's instructions. The total purchase
price shall be paid by the Purchaser to the Company in one installment without
interest thereon.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B (which Schedule makes specific reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty to which such exception
shall apply), the Company represents and warrants to the Purchaser as follows:
3.1 Definition of Material. For purposes of this Section 3, material
shall mean anything having a value or effect of more than $50,000.
3.2 Organization and Standing; Articles and By-Laws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Colorado and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction, and the failure to be
qualified will not have a material adverse affect on the Company's business as
now conducted or as now proposed to be conducted. The Company has furnished
the Purchaser with copies of its Articles of Incorporation and By-Laws, as
amended. Said copies are true, correct and complete and contain all
amendments through the Closing Date.
3.3 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, at the Closing will
have all requisite legal and corporate power and authority to sell and issue
the Shares hereunder, to issue the Option (as defined below), to issue the
Option Shares (as defined below) upon exercise of the Option and to carry out
and perform its obligations under the terms of this Agreement.
3.4 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.5 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, of which 5,831,807 shares are
issued and outstanding, and 5,000,000 shares of Preferred Stock, of which no
shares are issued and outstanding. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. Options
to purchase 432,000 shares of Common Stock are issued and outstanding under
the Company's employee stock option plan. All outstanding securities of the
Company were issued in compliance with applicable federal and state securities
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laws. Except as set forth above, there are no option, warrants or other
rights to purchase any of the Company's capital stock. Except as set forth in
any agreement entered into with the Purchaser, the Company is not a party or
subject to any agreement or understanding, and there is no agreement or
understanding between any persons that affects or related to the voting or
giving of written consents with respect to any security or the voting by a
director of the Company.
3.6 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement and the Option Agreement
(as defined below) by the Company, the authorization, sale, issuance and
delivery of the Shares, the Option, and the Option Shares and the performance
of all of the Company's obligations hereunder and under the Option Agreement
has been taken or will be taken prior to the Closing. This Agreement and the
Option Agreement, when executed and delivered by the Company, shall constitute
valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms. The Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable the Option Shares have been duly and validly reserved and, when
issued in compliance with the provisions of this Agreement, and the Option
Agreement will be validly issued, fully paid and nonassessable; and the Shares
and Option Shares will be free of any liens or encumbrances, other than any
liens or encumbrances created by or imposed upon the holders hereof through no
action of the Company; provided, however, that the Option Shares will be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares are not subject to any preemptive rights or
rights of first refusal.
3.7 Financial Statements. The Company has delivered to the Purchaser
its audited balance sheet and statements of operations and cash flow was of
and for the period ended December 31, 1997, and its combined unaudited balance
sheet and statements of operations and cash flows as of and for the period
ended June 30, 1998 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except that the
unaudited financial statements do not contain footnotes. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the period,
indicated therein. The financial statements for the year ended December 31,
1997, were audited by Xxxxxx Xxxxxxxx LLP.
3.8 Absence of Changes. Since June 30, 1998: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no materially adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company other
than changes in the ordinary course of business, none of which, individually
or in the aggregate, has been materially adverse, (c) there has been no damage
to, destruction of or loss of physical property (whether or not covered by
insurance) materially and adversely affecting the business or operations of
the Company, (d) the Company has not declared or paid any dividend or made any
distribution on its stock, or redeemed, purchased or otherwise acquired any of
its stock, (e) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there
has been no resignation or termination of employment of any key officer,
consultant or employee of the Company, and the Company does not know of the
impending resignation or termination of employment of any such officer,
consultant or employee that if consummated would have a material adverse
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effect on its business, (g) there has been no labor dispute involving the
Company or its employees and none is pending or, to the best of the Company's
knowledge, threatened, (h) there has not been any change, except in the
ordinary course of business, in the contingent obligations of the Company, by
way of guaranty, endorsement, indemnity, warranty or otherwise, (i) there have
not been any loans made by the Company to any of its employees, officers or
directors other than travel advances and office advances made in the ordinary
course of business and (j) to the best of the Company's knowledge, there has
been no other event or condition of any character pertaining to and materially
and adversely affecting the assets or business of the Company.
3.9 Material Liabilities. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate) except
(a) the liabilities and obligations set forth in the Financial Statements, (b)
liabilities and obligations which have been incurred subsequent to June 30,
1998, in the ordinary course of business which have not been in the aggregate
materially adverse, (c) liabilities and obligations under lease for its
principal offices and for equipment, and (d) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.10 Title to Properties and Assets; Liens, etc. The Company has good
and marketable title to its properties and assets, and has good title to all
of its leasehold interests in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the lien of current taxes not yet due
and payable. Each of the Company's assets is in good repair and good,
marketable and operating condition and is suitable for the purposes for which
it presently is being used and is intended to be used by the Company and is
adequate and suitable to meet all present and reasonably anticipated future
requirements of the Company. The Company's assets conform to all applicable
laws, ordinances, codes, rules and regulations, and the Company has not
received any notice to the contrary. The Company does not own, of record or
beneficially, any real property. Exhibit C sets forth a list and description
of all property leased or subleased to or by the Company.
3.11 Compliance with Other Instruments; None Burdensome, etc. The
Company is not in violation of any term of its Articles or By-Laws, or, in any
material respect, of any term or provision of any mortgage, indebtedness,
indenture, contract, security agreement, agreement, instrument, judgment or
decree, and, to the best of its knowledge, is not in violation of any order,
statute, rule or regulation applicable to the Company where such violation
would materially and adversely affect the Company. The execution, delivery
and performance of and compliance with this Agreement and the Option
Agreement, and the issuance of the Common Stock, the Option and the Option
Shares have not resulted and will not result in any violation of, or conflict
with, or constitute a default (or an event that might, with the passage of
time or the giving of notice or either of them, constitute a default) any of
the terms of, result in the termination of, result in the loss of any right
under, or give to any other person the right to cause such a termination of or
loss under and will be in compliance with, the Company's Articles, By-Laws and
all of its agreements, permits and licenses or any provision of federal,
state, local or foreign statute rule ordinance or regulation applicable to the
Company or result in the creation of, any mortgage, pledge, lien, encumbrance
or charge upon any of the capital stock, properties or assets of the Company
in the creation, maturation or acceleration of any liability or obligation of
the Company or the creation, maturation or acceleration of any liability or
obligation of the Company (or give to any other person the right to cause such
a creation, maturation or acceleration) and there is no such violation or
default which adversely affects the business of the Company or any of its
properties or assets.
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3.12 Intangible Assets.
(a) The Company (i) owns or has the right to use, free and clear of
all liens, claims and restrictions, all Intellectual Property (as hereinafter
defined) used in the conduct of its business as now conducted or as proposed
to be conducted without infringing upon or otherwise acting adversely to the
right or claimed right of any person under or with respect to any of the
foregoing, and (ii) is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner of, license
of, or other claimant to, any patent, trademark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise. "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable) and whether or not reduced
to practice, all improvements thereto, and all patents, patent applications
and patent disclosures, together with all reissuance, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and producing processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software and information systems, programs,
(including data and related documentation), whether owned or leased by the
Company, (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium). The Company has taken all
necessary action to maintain and protect each item of Intellectual Property
that it owns or uses and has never granted any sublicense or similar right to
any third party with respect to such Intellectual Property.
(b) The Company owns and has the unrestricted right to use all
Intellectual Property required for or incidental to the development,
construction and operation of the SportPark segment of its business, free and
clear of any rights, liens or claims of others, including without limitation,
former employers of all current and former employees, consultants, officers,
directors and shareholders of the Company.
(c) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the stockholders and directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company has ever received any charge, complaint, claim, demand
or notice alleging any such interference, infringement, misappropriation or
violation (including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party). No third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of the Company.
(d) Exhibit D identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual Property, each
pending patent application or application for registration which the Company
has made with respect to any of its Intellectual Property, and each license,
agreement or other permission which the Company has granted to any third party
with respect to any of its Intellectual Property. The Company has delivered
to the Purchaser correct and complete copies of all such patents,
5
registrations, applications, licenses, agreements and permissions (as amended
to date). Exhibit D also identifies each trade name or unregistered trademark
used by the Company in connection with any of its businesses. With respect to
each item of Intellectual Property required to be identified in Exhibit D:
(i) the Company possesses all right, title and interest in and to the item,
free and clear of any Liens, license or other restriction, (ii) the item is
not subject to any outstanding injunction, judgment, order, decree, ruling or
charge, (iii) no action, suit proceeding hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of each of the
shareholders and the directors and officers (and employees with responsibility
for Intellectual Property matters) of the Company, is threatened which
challenges the legality, validity, enforceability, use or ownership of the
item and (iv) the Company has never agreed to indemnify any person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
3.13 Litigation, etc. There is no suit, action, hearing, investigation,
claim or litigation, or legal, administrative, arbitration or other proceeding
pending or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company, its business or any of its property or
assets, before any court, arbitrator, or federal, state, municipal or other
governmental board, department, agency or instrumentality, and there is no
basis for any such action. There is no judgment, decree, injunction, ruling,
award, charge, order or writ of any court, governmental department,
commission, agency, instrumentality, arbitration or other person outstanding
against, binding upon or involving the Company, its business, any directors or
officers of the Company. None of the matters set forth on Exhibit B could
result in any material adverse effect. The Company owns policies of casualty,
liability or other forms of insurance which provide coverages in amount and
scope sufficient to cover every claim, action, cause of action, suit,
proceeding, litigation, arbitration or investigation arising out of, related
to, or in connection with those matters listed on the schedule of exception.
Neither the Company nor any of its directors, officers or employees is
currently charged with, or is currently under investigation with respect to,
any violation of any provision of any foreign, federal, state or local law or
administrative regulation in respect of the business of the Company. The
Company is not in default with respect to any judgment, decree, injunction,
ruling, award, order or writ of any foreign, federal, state, municipal agency
or other governmental department, board, commission, bureau, agency or
instrumentality.
3.14 Employees. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. There
are no controversies pending nor, to the best knowledge of the Company any
basis of any such controversies, between the Company and any of its employees.
To the knowledge of the Company, and the directors and officers (and employees
with responsibility for employment matters) of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not bound by any collective bargaining agreement, nor
has the Company experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has not
committed any unfair labor practice. None of the shareholders or the
directors or officers (or employees with responsibility for employment
matters) of the Company has any knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
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3.15 Employee Agreements. There are no pension, profit-sharing, bonus,
group insurance, death benefit, vacation pay, severance pay, sick leave,
holiday pay, welfare, or any other employee benefit or "fringe benefit" plans
or arrangements relating to the current or former employees or consultants of
the Company. In addition, there are no employment, deferred compensation,
collective bargaining, retainer, savings, consulting, non-competition,
retirement or incentive agreements, contracts, plans or arrangements relating
to, with or for the benefit of any officers or employees of the Company or
other persons.
3.16 Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever; none of said
officers, directors or shareholders, or any members of their immediate
families, are indebted to the Company or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or
with which the Company has a business relationship, or any firm or corporation
which competes with the Company, except that officers, directors and/or
shareholders of the Company may own less than 1% of the stock of
publicly-traded companies which may compete with the Company. No officer,
director or shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any contract with the Company. The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.17 Material Contracts and Obligations. Attached hereto as Exhibit E
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by the Company; or which involve transactions or
proposed transactions between the Company and its officers, directors,
affiliates or any affiliate thereof. Copies of certain of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by the Purchaser and its counsel. All
of such agreements and contracts are valid, binding and in full force and
effect in all respects, assuming due execution by the other parties to such
agreements and contracts. To the best knowledge of the Company, the Company
and each other party to each such agreement and contract has performed all
obligations required to be performed by it thereunder and is not in breach or
default, and is not alleged to be in breach or default, in any respect
thereunder, and no event has occurred and no condition or state of facts
exists (or would exist upon the giving of notice or the lapse of time or any
of them) that would become or cause a breach, default or event of default
thereunder, would give to any person the right to cause such a termination or
would cause an acceleration of any obligation thereunder.
3.18 Registration Rights. Except as set forth in this Agreement, the
Company is not under any contractual obligation to register (as defined in
Section 8.1 below) any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.19 Governmental Consent, etc. No consent, approval, order or
authorization of (of designation, declaration or filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Common Stock, or the consummation of any other transaction contemplated
hereby, except qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) or the offer and sale of
the Common Stock under applicable estate securities laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
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3.20 Offering. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Common Stock and the Option Shares (as defined in Section 7.6 below) to be
issued in conformity with the terms of this Agreement, and the issuance of the
Option Shares upon exercise of the Option, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "Securities Act").
3.21 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.22 Tax Matters. The Company (a) has timely filed all tax returns that
are required to have been filed by it with all appropriate federal, state,
county and local governmental agencies (and all such returns fairly reflect
the Company's operations for tax purposes), (b) has timely paid all taxes owed
by it for which it is obligated to withhold from amounts owing to any employee
(including without limitation social security taxes), creditor or third party
(other than taxes the validity of which are being contested in good faith by
appropriate proceedings), and (c) has not waived any statute of limitations
with respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency. The assessment of any additional taxes for a period
for which returns have been filed is not expected to exceed the recorded
liability therefor, and there are no material unresolved questions or claims
concerning the Company's tax liability. The Company's tax returns have not
been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to
any of said returns which, if determined adversely to the Company, would
result in the assertion by any taxing authority of any valid deficiency in any
material amount for taxes.
3.23 Insurance. With respect to each insurance policy maintained by the
Company: (a) the policy is legal, valid, binding, enforceable and in full
force and effect, (b) the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
consummation of the transactions contemplated hereby, (c) neither the Company
nor any other party to the policy is in breach of default (including with
respect to the payment of premiums or the giving of notices) and (d) no party
to the policy has repudiated any provision thereof. The Company has been
covered since its formation by insurance in type, scope and amount that (x)
meet the minimum requirements of any contract, lease or agreement to which the
Company is a party and (y) is customary and reasonable for the business in
which it has engaged during such period including, without limitation, fire,
casualty, liability and key-man life (on the lives of Xxx and Xxxx Xxxxxx)
insurance polices. The Company has not failed to give any notice or present
any claim under any insurance policy in a due and timely fashion.
3.24 Environmental and Safety Regulations. The Company is not in
violation of any environmental laws or regulations, including without
limitation any and all applicable federal, state and local laws, regulations
and ordinances relating to air and water pollution and handling and disposal
of chemical and hazardous materials (hereinafter the "Environmental Laws").
The Company possesses all of the authorizations, permits and approvals
required to be obtained by applicable Environmental Laws; neither the Company
nor any stockholder has received any notice from any governmental authority or
has knowledge of any governmental inquiry or investigation or any other claim,
suit or proceeding against or involving the Company with respect to any actual
or alleged violation of any applicable Environmental Law and all hazardous
waste and chemical waste materials have been disposed of in accordance with
8
all applicable Environmental Laws. There have been no spills, dumping,
discharge or clean-up of hazardous waste or chemical materials in violation of
any Environmental Laws on or at any premises owned or any premises occupied by
the Company.
3.25 Employee Benefit Plans.
(a) The Company has never maintained or contributed to, and does
not maintain or contribute to any Employee Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974, as amended. The Company has
not incurred any liability under ERISA (including any withdrawal liability) or
under the Internal Revenue Code of 1986, as amended Code (the "Code"), with
respect to any Employee Benefit Plan.
(b) The Company does not contribute to, nor has ever had
contributed to and has never been required to contribute to any multi-employer
plan or has any liability (including withdrawal liability) under any
multi-employer plan.
(c) The Company does not maintain or contribute to, nor has it ever
maintained or contributed to, nor has it ever been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
3.26 Minute Books. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately.
3.27 Legal Compliance. The Company has complied with all applicable
laws, statutes, and ordinances (including without limitation all rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings
and charges thereunder) of federal, state, local and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against it alleging any failure to so comply. The Company has all
permits, certificates, licenses, approvals and other authorizations required
in connection with the operation of its business, all of which are valid and
effective. No notice has been issued and no investigation or review is
pending or threatened by any governmental entity with respect to (a) any
alleged violation by the Company of any law, statute or ordinance, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge,
policy or guideline of any federal, state, local or foreign governmental
entity(or agency thereof), or (b) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Company.
3.28 LVDGT Agreement. The Investment Agreement (the "LVDGT Agreement")
entered into as of the date hereof between LVDGT and SAGC and attached as
Annex 3.28 hereto is valid, binding and in full force and effect.
3.29 SAGC. The Company's most significant asset is the Company's equity
holding in Saint Xxxxxxx Golf Corporation, a Nevada corporation ("SAGC"). The
Company owns 2 million shares of the Common Stock of SAGC (collectively, the
"SAGC Shares"). Each of the SAGC Shares has been duly authorized, validly
issued, fully paid and nonassessable. The Company has good, valid and
marketable title to the SAGC Shares, free and clear of any lien, charge,
encumbrance, security interest, claim or fight of others of whatever nature.
No person or entity has any power or right, whether or not shared with any
9
other person or entity, to dispose of or direct the disposition of any SAGC
Shares or vote or direct the voting of any SAGC Shares. The Company hereby
makes the same representations and warranties as contained in Section 3 of the
LVDGT Agreement with respect to SAGC for the benefit of the Purchaser, which
representations and warranties are incorporated herein by reference in their
entirety.
3.30 Disclosure. This Agreement with the Exhibits hereto and all
information provided by the Company to the Purchaser do not contain any untrue
statement of a fact or omit to state a fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 Experience. It has experience in evaluating and investing in
private placement transactions of securities in companies so that it is
capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests.
4.2 Investment. It is acquiring the Shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Shares
have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature
of the investment intent and the accuracy of the Purchaser's representations
as expressed herein.
4.3 Rule 144. It acknowledges that the Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. It is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market
for the shares, the availability of certain current public information about
the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected
through a "brokers transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three month period not
exceeding specified limitations.
4.4 Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and
has had the opportunity to review the Company's facilities. It has also had
an opportunity to ask questions of officers of the Company, which questions
were answered to its satisfaction. It understands that such discussions, as
well as any written information issued by the Company, were intended to
describe certain aspects of the Company's business and prospects but were not
a thorough or exhaustive description. However, no investigation by, or
furnishing of information to, the Purchaser shall affect or modify the
representations, warranties and agreements of the Company set forth herein or
the right of the Purchaser to rely exclusively thereon and to seek and obtain
all damages and other remedies available to the Purchaser in connection with
the breach of any of the representations, warranties and covenants contained
herein.
10
4.5 Authorization. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms subject to (a) the laws of
bankruptcy and the laws affecting creditor's rights generally and (b) the
availability of equitable remedies.
4.6 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the
Purchaser, any liability for brokerage or finder's fees or agents' commissions
or any similar charges in connection with this Agreement.
4.7 Required SEC Filings. The Purchaser acknowledges that within 10
days after the Closing, it will be required to file a Schedule 13D or Schedule
13G, as appropriate, or Schedule 13G, as appropriate, and a Form 3 with the
Securities and Exchange Commission.
SECTION 5
THE PURCHASER'S CONDITIONS TO CLOSING
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the below-listed conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto. If at the Closing Date any of the conditions specified in this
Agreement shall not have been fulfilled, the Purchaser shall, at the
Purchaser's election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights Investor may have by
reason of such nonfulfillment.
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true, complete and
correct when made, and shall be true, complete and correct on the Closing
Date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 Good Standing Certificate. The Company shall have delivered to the
Purchaser a certificate of good standing of the Company under the laws of the
State of Colorado.
5.5 Legal Matters. All matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been reasonably
approved by counsel to the Purchaser.
5.6 Co-Sale Agreement. The Purchaser and Xxxx Xxxxxx, the Company, Xxx
Xxxxxx and Xxxx Xxxxxx shall each have entered into a Co-Sale Agreement which
shall have a term of two years in the form attached hereto as Exhibit F.
5.7 LVDGT Agreement. The transactions contemplated by the LVDGT
Agreement have been consummated or are being consummated simultaneously
herewith.
11
5.8 Merger. The terms of the proposed merger between the Company and
SAGC shall be entirely satisfactory, in both form and substance, to the
Purchaser in its sole discretion. Without limiting the foregoing, the terms
of such merger shall provide that the Purchaser's economic interest in the
Company shall not be diluted by the consummation of such merger.
5.9 Voting Agreement. The voting agreement by and among the Purchaser
and the individuals listed therein (the "Voting Agreement"), in the form
attached hereto as Exhibit A, has been executed and is valid, binding and in
full force and effect.
5.10 Opinion of the Company's Counsel. The Purchaser shall have
received from Krys, Boyle, Xxxxxxxx & Xxxxxx, P.C., counsel to the Company, an
opinion dated the Closing Date, in form and substance satisfactory to the
Purchaser, to the effect that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado, and the Company
has the requisite corporate power and authority to own it properties and to
conduct its business.
(b) The Company is not presently required to be qualified to do
business as a foreign corporation in any state or jurisdiction of the United
States.
(c) The Company has the requisite corporate power and authority to
execute, deliver and perform this Agreement and the Option Agreement. The
Agreement and the Option Agreement have been duly and validly authorized by
the Company, duly executed and delivered by an authorized officer of the
Company and constitutes legal, valid and binding obligations of the Company,
subject to bankruptcy and other laws of general application affecting the
rights and remedies of creditors and except insofar as the enforceability of
the indemnification provisions of Section 8.11 of the Agreement may be limited
by applicable laws and except that no opinion need be given as to the
availability of equitable remedies.
(d) The capitalization of the Company is as follows:
(i) The authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, of which 5,831,807 shares are issued and
outstanding, and 5,000,000 shares of Preferred Stock, of which no shares are
issued and outstanding. The outstanding shares have been duly authorized and
validly issued, and are fully paid and nonassessable. Options to purchase
432,000 shares of Common Stock are issued and outstanding under the Company's
employee stock option plan. All outstanding securities of the Company were
issued in compliance with applicable federal and state securities laws.
Except as set forth above, there are no option, warrants or other rights to
purchase any of the Company's capital stock.
(ii) Preferred Stock. 5,000,000 shares of Stock, of which no
shares are issued and outstanding.
(iii) Common Stock. 15,000,000 shares of Common Stock, of
which (A) 5,831,807 shares are issued and outstanding and (B) 2,303,290 shares
are being purchased pursuant to this Agreement. All such shares of Common
Stock have been duly authorized, issued and delivered and are validly
outstanding, fully paid and nonassessable and were issued in compliance with
all applicable federal and state securities laws and approved by all requisite
shareholder action.
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(iv) Except for (A) the rights of first refusal contained in
Section 9 hereof; (B) 347,975 shares of Common Stock reserved for issuance
upon the exercise of the stock option granted herein, (C) 432,000 shares of
Common Stock reserved for issuance to employees and consultants upon exercise
of outstanding stock options, there are no preemptive rights or, to the best
of counsel's knowledge, options, warrants, conversion privileges or other
rights (or agreements of any such rights) outstanding to purchase or otherwise
obtain any of the Company's securities.
(e) The certificates representing shares of Common Stock are in due
and proper form and have been duly and validly executed by the officers of the
Company named thereon.
(f) The execution, delivery, performance and compliance with the
terms of this Agreement and the Option Agreement do not violate any provision
of any federal, state or local law, rule or regulation or of any judgment,
writ, decree or order binding upon the Company or any provision of the
Company's amended Articles of Incorporation ("Articles") or By-Laws.
(g) All consents, approvals, orders or authorizations of, and all
qualifications, registrations, designations, declarations or filings with, any
federal or state governmental authority on the part of the Company required in
connection with the consummation of the transactions contemplated by this
Agreement and the Option Agreement have been obtained and are effective as of
the Closing, and such counsel is not aware of any proceedings, or threat
thereof, which question the validity thereof.
(h) Based in part upon the representations of the Purchaser in this
Agreement, the offer and sale of the Common Stock pursuant to the terms of
this Agreement are exempt from the registration requirements of Section 5 of
the Securities Act by virtue of Section 4(2) thereof, and from the
qualification requirements of the securities laws of the State of Nevada, or
all requisite permits, qualifications and orders have been obtained.
(i) Except as set forth on the Schedule of Exceptions attached to
the Agreement as Exhibit B, such counsel is not aware of any action,
proceeding or investigation pending against the Company or any of its
officers, directors or employees, or that any of the foregoing has received
any threat thereof, which questions the validity of the Agreement or the right
of the Company or its officers, directors and employees to enter into such
agreement or which might result, either individually or in the aggregate, in
any adverse change in the assets, condition, affairs or prospects of the
Company, nor is such counsel aware of any litigation pending, against the
Company or any of its officers, directors or employees' or that any of the
foregoing has received any threat thereof, by reason of the proposed
activities of the Company, the past employment relationships of its officers,
directors or employees, or negotiations by the Company or any of its officers
or directors with possible investors in the Company.
(j) The Company is not in violation of any provisions of its
Articles or Bylaws, and neither of such documents is in violation of any
provision of the Corporation Law of the State of Colorado.
5.11 No Material Adverse Change. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the business or any of the assets, results of
operations, liabilities, prospects or conditions, financial or otherwise, of
the Company.
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SECTION 6
THE COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares at the Closing is,
at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 Representations. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Legal Matters. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any of the shares
of Common Stock and the Option Shares:
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of operations and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form similar information of the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in
any event within 45 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations and consolidated statements
of cash flows of the Company and its subsidiaries, if any, for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail and signed, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of the Company.
(c) Within 15 days after the end of each fiscal month, unaudited
consolidated balance sheets of the Company as of the end of such month,
unaudited consolidated statements of operations including income statements,
and unaudited consolidated rolling cash flow projections for each month and
for the current fiscal year to date. Such financial statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied (other than accompanying notes), all in reasonable detail
subject to year-end audit adjustments.
(d) Promptly after each meeting or the execution of an action by
written consent, copies of the minutes of proceedings or actions by written
consent of the Company's Board of Directors and shareholders.
(e) With reasonable promptness, such other information and data
with respect to the Company and its subsidiaries, if any, as the Purchaser may
from time to time reasonably request.
14
(f) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to visit
and inspect any of the properties of the Company or any of its subsidiaries,
to examine its books of account and records, and to discuss their affairs,
finances and accounts with their officers, all at such reasonable times as
often as may be reasonably requested, provided, however, that the Company
shall not be obligated to provide any information, other than to the
representatives of the Purchaser on the Board of Directors, that it reasonably
considers to be a trade secret or to contain confidential information.
7.2 Assignment of Rights to Financial Information. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by the
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that the Purchaser may
assign such rights to a parent, subsidiary or affiliate of the Purchaser upon
notice to the Company thereof.
7.3 Use of Proceeds. The Company shall completely segregate the
proceeds from the sale of the Shares from all other funds of the Company.
These funds shall be strictly and exclusively used for the purchase of equity
securities of SAGC and shall not be used for any other purposes. All such
purchases shall be on terms and conditions satisfactory to the Purchaser. The
Company shall maintain a separate accounting for the use of these proceeds and
provide a copy of such accounting to the Purchaser upon request.
7.4 Rule 144 Reporting. With a view to making available to the
Purchaser the benefits of certain rules and regulations of the Securities and
Exchange Commission which may permit the sale the Option Shares to the public
without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) Use its best efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) So long as the Purchaser owns any Restricted Securities (as
defined in Section 8.1 hereof) furnish to the Purchaser forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company filed with
the Securities and Exchange Commission, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtained by the Company as the Purchaser may reasonably request in availing
itself of any due or regulation of the Securities and Exchange Commission
allowing the Purchaser to sell any such securities without registration.
7.5 Protective Provisions. For so long as the Purchaser or its
assignees is a holder of any shares of the Common Stock or Option Shares, the
Company shall not without the Purchaser's prior written consent:
(a) change any of the terms of Common Stock or any amendment,
addition, change, modification or deletion of any portion of the By-Laws or
Articles of the Company;
(b) authorize or issue (i) any class or series of Preferred Stock
or other securities having rights senior to the Common Stock, or (ii) any
rights to purchase or any securities or instruments convertible or
exchangeable into any such Preferred Stock and other securities of the
Company;
15
(c) sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or effect any merger, consolidation,
reorganization or amalgamation of the Company, with another corporation;
(d) adopt a statutory plan of share exchange;
(e) redeem or repurchase (or enter into any agreement to become so
obligated) any shares of Common Stock or Common Stock (other than pursuant to
employee stock vesting or repurchase employee stock agreements;
(f) enter into any transaction with or increase the compensation
paid or issue any securities of the Company or SAGC, rights or options to
purchase any securities of the Company or SAGC or any instrument convertible
or exchangeable into or payable or satisfied with any securities of the
Company or SAGC or any other compensation derived from or based on the profits
or securities of the Company or SAGC to any of Boreta or SAGC or any of their
respective affiliates or approve, allow or agree to any of the foregoing;
(g) take or fail to take any action with respect to any shares of
capital stock of SAGC or rights to purchase any such capital stock owned or
under the control of the Company (including, but not limited to, the sale,
transfer, assignment, disposition, exchange, conversion, pledge or voting of
such shares, the granting of any proxies with respect to such shares, or
entering into any agreement or arrangement with respect to any of the
foregoing);
(h) dissolve or liquidate the Company and/or its assets or close
the business of the Company; or
(i) file a petition to appoint a receiver for the Company or file a
voluntary petition for bankruptcy, insolvency or to make any assignment for
the benefit of creditors of the Company
7.6 Grant of Stock Options. Simultaneously with the execution hereof,
the Company and the Purchaser are entering into an option agreement (the
"Option Agreement") attached as annex A hereto pursuant to which the Company
is granting the Purchaser an option (the "Option") to purchase from the
Company Three Hundred Forty Seven Thousand Nine Hundred Seventy Five (347,975)
shares of Common Stock of the Company (the "Option Shares"), as such number
may be adjusted pursuant to the terms of the Option Agreement. The Option may
be exercised from time to time in full or in part by the Purchaser at any time
prior to the tenth year anniversary of the Closing. The Option shall be
exercisable at a purchase price of $1.8392 per share, subject to adjustment as
described therein. The Company agrees that the Option Shares issued upon the
exercise by Purchaser of the Option shall carry the same registration rights
as set forth in Section 8 of this Agreement and be considered "Registrable
Securities" under the terms of such Section 8.
7.7 Principal Business. The Company shall ensure that all its principal
shareholders, officers and directors (a) direct or refer all opportunities
relating to, similar to or of the same nature as SAGC's Sports Park business
exclusively to SAGC, (b) not realize any profit or gain with respect to such
opportunities to the detriment or in lieu of the Company or SAGC and (c) not
otherwise misappropriate any corporate opportunity.
7.8 Merger. The Company shall amend the merger agreement (the "Merger
Agreement") dated as of January 20, 1998 with SAGC such that upon consummation
of the merger, the Purchaser will receive equity interests in the surviving
company having terms, conditions, rights, designations, preferences and values
at least as favorable as those of the Shares. Notwithstanding the foregoing,
no amendment of or modification to the Merger Agreement shall be made without
the prior approval of the Purchaser.
16
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS; INDEMNIFICATION
8.1 Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934 as amended
or any similar federal statute and the rules and regulations of the
Commissions thereunder all as the same shall be in effect at the time.
"Holder" shall mean the Purchaser and any person holding Registrable
Securities or shares to whom the rights under this Section 8 have been
transferred in accordance with Section 8.2 hereof.
"Registrable Securities" means (i) the Option Shares; and (ii) any Common
Stock of the Company issued or issuable in respect of the Option Shares or
other securities issued or issuable pursuant to the conversion of the shares
upon any Recapitalization or any Common Stock otherwise issued or issuable
with respect to the Shares provided however that shares of Common Stock or
other securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or (B)
sold or are available for sale in the opinion of counsel to the Company in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are or may be removed upon the
consummation of such sale.
The term "register," "registered" and "registration" refer to a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses
as defined below, incurred by the Company in complying with Sections 8.5, 8.6
and 8.7, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the notes and regulations of the Commission
thereunder all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered
by the holders.
8.2 Restriction on Transferability. The Shares shall not be sold,
assigned, transferred or pledged except upon satisfaction of the conditions
specified in this Section 8, which conditions are intended to ensure
compliance with the provisions of the Securities Act.
17
8.3 Restrictive Legend. Each certificate representing (i) the Shares,
and (ii) any other securities issued in respect of the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
events, shall (unless otherwise permitted by the provisions of Section 8.4
below) be stamped or otherwise imprinted with a legend in the following form
(in addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
The Purchaser consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Shares in order to
implement the restrictions on transfer established in this Section 8.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution of Restricted Securities by the
Purchaser to a parent, subsidiary or affiliate of the Purchaser), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall
be accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (ii) a "no action" letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder
to the Company. Each certificate evidencing the Restricted Securities
Transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
8.3 above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for such holder and the Company such legend is
not required in order to establish compliance with any provision of the
Securities Act.
8.5 Request for Registration.
(a) Request for Registration. If the Company shall receive from
the Purchaser at any time a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
18
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws, and appropriate compliance with the Securities Act) and
as would permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or holders
joining in such request as are specified in a written request received by the
Company within twenty (20) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this Section 8.5:
(A) After the Company has initiated one such registration
pursuant to this Section 8.5(a);
(B) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred twenty (120) days after the effective date of, a
Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(b) Subject to the foregoing clauses (A) and (B), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Purchaser.
The registration statement filed pursuant to the request of the
Purchaser may include other securities of the Company, with respect to which
registration rights have been granted, and may include securities of the
Company being sold for the account of the Company.
(c) Underwriting. The right of any Holder to registration pursuant
to Section 8.5 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of
the Purchaser and such holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he or she holds.
8.6 The Company Registration.
(a) Notice of Registration. If at any time or from time to time
the Company shall determine to register of its securities, either for its own
account or the account of a Holder or Holders, other than a registration
relating solely to employee benefit plans or a post effective amendment to the
registration statement for the Company's initial public offering, the Company
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under the sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made within 20 days after receipt of such written notice
from the Company, by any Holder.
19
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and any other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 8.6, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities to be included in such registration. The Company
shall so advise all Holders and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such holders at the time of filing
the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of
shares allocated to any Holder or other shareholder to the nearest 100 shares.
If any Holder or other shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall
not be transferred in a public distribution prior to 90 days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require. The Company may
include shares of Common Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 8.6, so long as the amount of
Registrable Securities otherwise includable in such registration statement
would not thereby be diminished.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 8.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
8.7 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders).
(b) If a request complying with the requirements of Section 8.7(a)
hereof is delivered to the Company, the provisions of Section 8.5(a)(i) and
(ii) and Section 8.5(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Section 8.5(c)
hereof shall apply to such registration.
8.8 Expenses of Registration. All Registration Expenses incurred in
connection with the registration pursuant to Section 8.5, 8.6 and 8.7 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating
to securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the
basis of the number of shares registered.
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8.9 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section
8, the Company will keep each Holder advised in writing as to the initiation
of each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days, and prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement effective for
at least one hundred twenty (120) days, provided that no such registration
shall constitute a shelf registration under Rule 415 promulgated by the
Commission under the Securities Act;
(b) Enter into a written underwriting agreement in customary form
and substance reasonably satisfactory to the Company, the Holders and the
managing underwriting or underwriters of the public offering of such
securities, if the offering is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number
of copies of the registration statement, preliminary prospectus' final
prospects and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders may reasonably
request within ten (10) days prior to the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business a
foreign corporation in any jurisdiction where it is not so qualified;
(e) Notify the Holders (of if they have appointed an
attorney-in-fact, such attorney-in-fact) participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) Prepare and file with the Commission promptly upon the request
of such registration statement or prospectus which, in the reasonable opinion
of counsel for such Holders, is required under the Securities Act or the rules
and regulations thereunder in connection with the distribution of the
Registration Securities by such Holders;
(h) Prepare and promptly file with the Commission, and promptly
notify such Holders or their attorney-in-fact of the filing of, such amendment
or supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances in which they
were made;
21
(i) In case any of such Holders or any underwriter for any such
Holders is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly
upon request such amendment or amendments to such registration statement and
such prospectus as may be necessary to permit compliance with the requirements
of the Securities Act;
(j) Advise such Holders or their attorney-in-fact, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(k) At the request of any such holder, furnish on the effective
date of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the underwriting
agreement, (i) an opinion, dated each such date, of the counsel representing
the Company for the purpose of such registration, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
covering such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto, proceedings under state
and federal securities laws other matters relating to the Company, the
securities being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and (ii) to the extent the
Company's accounting firm, is willing to do so, a letter dated each such date,
from the independent public accountants of the Company, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
stating that they are independent public accountants within the meaning of the
Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the
registration statement or the prospectus or any amendment or supplement
thereto comply in all material respects with the applicable accounting
requirements of the Securities Act, and additionally covering such other
financial matter, including information as to the period ending not more than
five (5) business days prior to the data of such letter with respect to the
registration statement and prospectus, as the underwriters or such requesting
Holder or Holders may reasonably request.
8.10 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 8.
8.11 Indemnification.
(a) The Company will defend, indemnify and hold the Purchaser, each
Holder, each of its officers, directors and partners, and each person
controlling the Purchaser and each such Holder within the meaning of Section
15 of the Securities Act, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities (or actions
in respect thereof), including without limitation, any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on (i) any breaches of the representations, warrants or covenants
contained herein, or (ii) any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement, prospectus,
22
offering circular or other document or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, and each such holder, each of its officers and directors, and each
person controlling such holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to
be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company each to its directors and
officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement prospectus' offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein. Notwithstanding
the foregoing, the liability of each Holder under this subsection (b) shall be
limited to an amount equal to the initial public offering price of the shares
sold by such Holder, unless such liability arises out of or is based on
willful conduct by such Holder.
(c) Each party entitled to indemnification under this Section 8.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall, when applicable, permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 8
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
23
the Indemnifying Party shall not assume the defense for matter as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.12 Transfer of Registration Rights. The rights to cause the Company
to register securities granted the Purchasers under Sections 8.5, 8.6 and 8.7
may be assigned to a transferee or assignee in connection with any transferor
assignment of Registrable Securities by the Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws and (ii) such assignee or transferee acquires at least 10,000 of the
Shares (appropriately adjusted for Recapitalization). Notwithstanding the
foregoing, the rights to cause the Company to register securities may be
assigned to any parent, subsidiary or affiliate of the Purchaser, without
compliance with item (ii) above, provided, written notice thereof is promptly
given to the Company.
8.13 Standoff Agreement. Each Holder agrees, so long as such Holder
holds at least five percent (5%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, it will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, a the case may be, for such period of time (not to exceed one
hundred and twenty (120) days) from the effective date of such registration as
may be requested by the underwriters; provided that the officers and directors
of the Company who own stock of the Company also agree to such restrictions.
SECTION 9
THE PURCHASER'S RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. The Company hereby grants to the Purchaser
the right of first refusal to purchase its pro rata share of all or any part
of any New Securities (as defined in this Section 9.1) which the Company may,
from time to time, propose to sell and issue. The Purchaser's pro rata share,
for purposes of this right of first refusal, is the ratio that the sum of the
number of shares of Common Stock then held by the Purchaser bears to the sum
of the total number of shares of Common Stock then outstanding and the number
of shares of Common Stock issuable upon conversion of the then outstanding
Preferred Stock convertible into Common Stock.
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred
Stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into said shares of
Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) the Shares and the Option Shares, (ii)
securities offered to the public generally pursuant to a registration
statement or pursuant to Regulation A under the Securities Act, (iii)
securities issued in the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company or its shareholders own not less than fifty-one percent
(51%) of the voting power of the surviving or successor corporation, (iv)
shares of the Company's Common Stock or related options exercisable for such
Common Stock issued to employees, officers and directors of the Company
24
pursuant to any arrangement approved by the Board of Directors of the Company,
(v) stock issued pursuant to any rights or agreements, including without
limitation convertible securities, options, warrants, provided that the rights
of first refusal established by this Section 9.1 apply with respect to the
initial sale or grant by the Company of such rights or agreements, and (vi)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give the Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Purchaser shall have fifteen (15)
days from the date of receipt of any such notice to agree to purchase up to
the Purchaser's respective pro rata share of such New Securities for the price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Purchaser fails to exercise such right of
first refusal within said fifteen (15) day period, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by the Purchaser at the price and upon
the terms no more favorable to the purchasers of such securities than
specified in the Company's notice. In the event the Company has not sold the
New Securities or entered into an agreement to sell the New Securities within
said ninety (90) day period (or sold and issued New Securities in accordance
with the foregoing within sixty (60) days from the date of said agreement),
the Company shall not thereafter issue or sell any of such New Securities,
without first offering such securities in the manner provided above.
(d) The right of first refusal hereunder is not assignable except
to a parent, subsidiary or affiliate of the Purchaser, without the prior
written consent of the Company, which consent will not be unreasonably
withheld.
SECTION 10
INDEMNIFICATION
10.1 Survival of Representations. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall
survive the Closing, but all claims for damages made by virtue of such
representations, warranties and agreements shall be made under this Section
10. The representations and warranties set forth herein are cumulative, and
any limitation or qualification set forth in any one representation and
warranty therein shall not limit or qualify any other representation and
warranty therein.
10.2 Indemnification by the Company. Notwithstanding any term in this
Agreement to the contrary, the Company, shall indemnify, defend, save and hold
the Purchaser and its officers, directors, employees, agents and Affiliates
(excluding Xxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and the Company; collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious (collectively, "Purchaser Damages") asserted against, imposed
upon, resulting to, required to be paid by or incurred by any Purchaser
Indemnitees, directly or indirectly, in connection with, arising out of, which
25
could result in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Company in this Agreement, in any
certificate or document furnished pursuant hereto by the Company or any other
agreement to which the Company is or is to become a party, or (b) a breach or
nonfulfillment of any covenant or agreement made by the Company in or pursuant
to this Agreement or in any other agreement to which the Company is or is to
become a party.
10.3 Indemnification by Purchaser. The Purchaser shall indemnify,
defend, save and hold the Company and its officers, directors, employees,
agents and Affiliates (excluding Xxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and the
Purchaser; (collectively, "Company Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious (collectively, "Company Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Company Indemnitees,
directly or indirectly, in connection with, arising out of, which would result
in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Purchaser in this Agreement or in any
certificate or document furnished pursuant hereto by buyer or any other
agreement to which the Purchaser is a party and (b) a breach of nonfulfillment
of any covenant of agreement made by the Purchaser in or pursuant to this
Agreement and in any other agreement to which the Purchaser is a party.
10.4 Notice of Claims. If any Purchaser Indemnitee or Company
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Company Damages, as the case
may be ("Damages"), for which it is entitled to indemnification under this
Section 10, such Indemnified Party shall so notify the party or parties from
whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The failure of an
Indemnified Party to give any notice required by this Section shall not affect
any of such party's rights under this Section 10 or otherwise except and to
the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
10.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or
settle the same, provided that the Indemnified Party shall give the
Indemnifying Party advance notice of any proposed compromise or settlement.
The Indemnified Party shall permit the Indemnifying Party to participate in
the defense of any such action or suit through counsel chosen by the
Indemnifying Party, provided that the fees and expense of such counsel shall
be borne by the Indemnifying Party. If the Indemnified Party permits the
Indemnifying Party to undertake, conduct and control the conduct and
settlement of such action or suit, (a) the Indemnifying Party shall not
thereby permit to exist any encumbrance upon any asset of the Indemnified
Party; (b) the Indemnifying Party shall not consent to any settlement that
does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; (c) the Indemnifying Party shall permit the Indemnified Party to
participate in such conduct or settlement through counsel chosen by the
26
Indemnified Party; and (d) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving
the foregoing notice to the Indemnifying Party and prior to the assumption of
the conduct and control of such action or suit by the Indemnifying Party.
10.6 Good Faith Efforts to Settle Disputes. The Purchaser and the
Company agree that, prior to commencing any litigation against the other
concerning any matter with respect to which such party intends to claim a
right of indemnification in such proceeding, the respective chief executive
officers (or officers holding such authority) of such parties shall meet in a
timely manner and attempt in good faith to negotiate a settlement of such
dispute during which time such officers shall disclose to the others all
relevant information relating to such dispute. In the event that the parties
are unable to amicably resolve the matter or matters in dispute, the parties
shall submit all matters still in dispute to arbitration in accordance with
the arbitration rules of the American Arbitration Association. The Purchaser
shall select an arbitrator and the Company shall select an arbitrator and the
two arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators shall be final and binding on the parties. Such matter shall
be submitted to arbitration within thirty (30) days from the date that either
the Company or the Purchaser declares that any matter in dispute cannot be
amicable resolved. All costs and expenses of arbitration shall be paid
equally by the Purchaser on one hand and the Company on the other. Any cash
or other monetary award shall be paid within thirty (30) days of the
arbitrators final decision. Arbitration shall be held in Las Vegas, Nevada.
SECTION 11
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of Colorado.
11.2 Events of Default and Remedies.
(a) For purpose of this Agreement, the term "Event of Default"
shall mean the occurrence or happening of any breach or violation of or
default in the observation or performance of any term, agreement, covenant,
representation, warranty, condition or stipulation contained or referred to in
this Agreement by any party to this Agreement.
(b) (i) Upon the occurrence of an Event of Default, the
non-defaulting party shall have all rights and remedies afforded by law or
equity, including the remedy of specific performance, it being recognized that
the Common Stock and Option Shares and the rights and benefits to be derived
therefrom are unique and special. Any party awarded a money judgment against
the other shall be entitled to recover in addition thereto interest thereon at
the rate of twelve percent (12%) per annum.
(ii) Each right, power and remedy provided for in this
Agreement, or now or hereafter existing at law or in equity shall be
cumulative and may be exercised successively or concurrently and shall be in
addition to every other such right, power or remedy. The exercise or
beginning of the exercise by either party of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise of
all such other rights, powers or remedies. No failure or delay on the party
of any party to exercise any such right, power or remedy shall operate as a
waiver thereof. No waiver by a party will be effective unless and until it is
in writing and signed by an authorized representative of such party.
27
(c) Each party will pay to the other, in addition to all other sums
due all costs and expenses (including, without limitation, attorneys' fees,
brokerage fees and accountants' fees) reasonably incurred by or on behalf of a
party in exercising and protecting their rights and remedies hereunder,
enforcing the obligations of the other party hereunder and defending any
unsuccessful counterclaim, cross-claim or other claim asserted by the other
party.
11.3 Set Off. In addition to, and not in lieu of, any and all other
remedies which the Purchaser otherwise may have at law or in equity, or
pursuant to this Agreement, the Purchaser shall have the right to set off,
counterclaim and recoup any loss against any amounts to be paid to the Company
under this Agreement.
11.4 Nonexclusivity. The foregoing set off right and the
indemnification provision set forth in Section 8 are in addition to, and not
in lieu or derogation of, any statutory, equitable or common law remedy the
Purchaser may have arising out of or as a result of this Agreement or for
breach of representations, warranties or covenants herein. Neither the
exercise of nor the failure to exercise the set off right set forth in Section
10.3 shall constitute an election of remedies.
11.5 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby.
11.6 Anti-Dilution Provisions. The "Anti-Dilution Provisions" shall
provide that in the event that any of the securities referenced herein as
presently constituted, shall be changed into or exchanged for a different
number or kind of securities or interests of the Company or of another entity
(whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares, sale of assets or
otherwise), or if the number of such securities shall be increased through the
payment of a dividend, or if the Company makes any other distribution of
securities or other property including cash in respect of such securities,
then there shall be substituted for and added to such securities, as the case
may be, theretofore subject or which may become subject to the terms of this
Agreement, the number and kind of securities, interests or property into which
each outstanding security shall be so changed, or for which each such security
shall be exchanged, or to which each such security shall be entitled, as the
case may be, and the purchase price per security appropriately adjusted.
11.7 Assignment; Successors and Assigns. The rights and obligations of
the Company and the rights of the Purchaser to purchase the Shares shall not
be assignable without the written consent of the other; provided, however, the
Purchaser may assign its rights and obligations under this Agreement to a
parent, subsidiary or affiliate of the Purchaser upon notice to the Company
thereof. Except as otherwise provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
11.8 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom endorsement of any such amendment, waiver, discharge or
termination is sought.
28
11.9 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to the Purchaser, at its address set forth on the
cover page of this Agreement, or at such other address as the Purchaser shall
have furnished to the Company in writing, or (b) if to any other holder of any
Shares or Option Shares, at such address as such holder shall have furnished
the Company in writing, or, until any such holder so furnishes an address to
the Company, then to and at the address of the last holder of such Shares or
Option Shares who has so furnished an address to the Company, or (c) if to the
Company, one copy shall be sent to its address set forth on the cover page of
this Agreement and addressed to the attention of the Corporate Secretary, or
at such other address as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given or received, as the
case may be, when delivered if delivered personally, when sent by confirmed
facsimile to the correct facsimile number, or, if sent by mail, at the earlier
of its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
11.10 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares or Option Shares, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Except as provided in Section 10.8 hereof, any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach of default under this Agreement or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to
any holder, shall be cumulative and not alternative.
11.11 Expenses. Except as otherwise provided herein, the Company and
the Purchaser shall each bear their own expenses incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.13 Confidentiality. Neither party shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party. This
provision shall not apply, however, to any announcement or written statement
which in the opinion of counsel to such party is required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange.
11.14 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
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11.15 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
11.16 Third Party Beneficiary. It is understood that the Purchaser is a
specific intended third party beneficiary of the LVDGT Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
"PURCHASER"
ASI GROUP, L.L.C.,
a Nevada limited liability company
By: Sunbelt Communications Company, a Member
By: /s/ Xxxxx Xxxx Xxxxxx
Name: Xxxxx Xxxx Xxxxxx
Title: President
"COMPANY"
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.,
a Colorado corporation
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: President
The undersigned, Saint Xxxxxxx Golf Corporation, a Nevada corporation,
acknowledges that, by virtue of entering into this Agreement, the Purchaser is
a specific intended third party beneficiary of the LVDGT Agreement.
SAINT XXXXXXX GOLF CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
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