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EXHIBIT 10.18
PURCHASE AGREEMENT
Between
COLLEGIATE PACIFIC, INC.
And
[NAME OF PURCHASER]
February 29, 2000
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of February 29, 2000 (this
"Agreement"), between Collegiate Pacific, Inc., a corporation organized under
the laws of the State of Delaware (the "Company"), and
__________________________ (the "Purchaser"). The Purchaser and each of the
other purchasers of the Notes referred to herein are collectively referred to
herein as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company up to
an aggregate principal amount of $2,400,000.00 of the Company's Convertible
Subordinated Promissory Notes, due January 31, 2005 (the "Notes"), which are
convertible into shares of the Company's common stock, $.01 par value per share
(the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF NOTES; CLOSING
(a) The Closing.
(i) Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchasers and each
Purchaser shall, severally and not jointly, purchase from the Company
the principal amount of Notes set forth on Schedule 1 attached hereto
for an aggregate purchase price of up to $2,400,000.00 (the "Purchase
Price"). The closing of the purchase and sale of the Notes (the
"Closing") shall take place at the offices of the Company immediately
following the execution hereof or such later date as the parties hereto
shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) At the Closing the parties hereto shall deliver, in
accordance with and subject to the terms and conditions of this
Agreement, the following: (i) the Company shall deliver or cause to be
delivered Notes in the aggregate principal amount equal to the Purchase
Price, registered in the names of the Purchasers as set forth on
Schedule 1 attached hereto; (ii) each Purchaser shall deliver or cause
to be delivered its portion of the Purchase Price set forth on Schedule
1 in United States dollars; and (iii) each party hereto shall deliver
or cause to be delivered all other executed instruments, agreements and
certificates as are required to be delivered by or on their behalf at
the Closing.
(b) Form of Notes. The Notes shall be in the form of Exhibit A hereto.
(c) Certain Definitions. For purposes of this Agreement the following
terms shall have the following meanings:
"Closing Date" has the meaning set forth in Section 1.1(a) of
this Agreement.
"Closing" has the meaning set forth in Section 1.1(a) of this
Agreement.
"Commission" means the Securities and Exchange Commission.
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"Conversion Date" has the meaning assigned to such term in
Exhibit A.
"Conversion Price" has the meaning assigned to such term in
Exhibit A.
"Disclosure Materials" has the meaning set forth in Section
2.1(j) of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Entity" means any court, administrative agency
or commission or other governmental authority or agency, domestic or foreign,
including local authorities.
"Investment Letter" means the subscription agreement,
questionnaire and investment representations to be executed and delivered to the
Company by each Purchaser in substantially the same form as Exhibit B hereto.
"Liens" means all liens, encumbrances and other claims of any
kind.
"Material Adverse Effect" has the meaning set forth in Section
2.1(a) of this Agreement.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind
"Purchase Price" has the meaning set forth in Section 1.1(a)
of this Agreement.
"Registration Rights" means the registration rights as
described in Exhibit A.
"SEC Documents" has the meaning set forth in Section 2.1(j) of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities" means the Notes and Underlying Shares.
"Senior Debt" has the meaning set forth in Exhibit A.
"Subordination Agreement" means the form of agreement between
the Company and Chase Bank of Texas, National Association attached hereto as
Exhibit C. Each Purchaser shall be required to become a signatory to a
Subordination Agreement as a condition to the purchase of the Notes.
"Subsidiaries" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Transaction Documents" means this Agreement, the Notes and
Investment Letter.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Notes.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
(a) Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(i) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its
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incorporation, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as
currently conducted. The Company has one wholly-owned subsidiary,
Product Merchandising, Inc., a Florida corporation, (the "Subsidiary").
The Subsidiary is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Florida, with the
full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiary is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, could not, individually or in the
aggregate, (x) adversely affect the legality, validity or
enforceability of the Transaction Documents, (y) have a material
adverse effect on the results of operations, assets, prospects, or
condition (financial or otherwise) of the Company and the Subsidiary,
taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any Transaction
Document (any of the foregoing, a "Material Adverse Effect").
(ii) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation
by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each of
the Transaction Documents has been duly executed by the Company and
when delivered in accordance with the terms hereof shall constitute the
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its
respective articles of incorporation, certificate of incorporation,
by-laws or other charter documents.
(iii) Capitalization. The authorized, issued and outstanding
capital stock of the Company consists of 50,000,000 shares of Common
Stock, par value $.01 per share and 1,000,000 shares of preferred
stock, par value $.01 per share. As of the date hereof (after giving
effect to the reverse stock split hereinafter described), 3,468,366
shares of Common Stock are issued and outstanding and no shares of
preferred stock are outstanding. At the Company's annual meeting held
on January 14, 2000, the shareholders approved a reverse stock split of
the Company's Common Stock whereby each five shares of the Company's
Common Stock then outstanding became one share of the Company's new
Common Stock. No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.l(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a
result of the purchase and sale of the Notes hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by
which the Company or any Subsidiary is or may become bound to issue
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additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock.
(iv) Issuance of Notes. The Notes are duly authorized, and,
when issued in accordance with the terms hereof, shall be validly
issued, fully paid and nonassessable, free and clear of all Liens. The
Company has and at all times while the Notes are outstanding will
maintain an adequate reserve of duly authorized shares of Common Stock
to enable it to perform its conversion, exercise and other obligations
under this Agreement and the Notes. When issued in accordance with the
terms of the Notes, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, and free and clear of all
Liens.
(v) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not
(i) conflict with or violate any provision of its articles of
incorporation, bylaws or other charter documents (each as amended
through the date hereof) or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or
affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court
or Governmental Entity to which the Company is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), as could not, individually or
in the aggregate, have or result in a Material Adverse Effect. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for
violations which, individually and in the aggregate, could not have or
result in a Material Adverse Effect.
(vi) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, or make any filing or registration with, any court or other
federal, state, local or other Governmental Entity or other Person in
connection with the execution, delivery and performance by the Company
of the Transaction Documents other than where the failure to obtain
such consent, waiver, authorization or order, or to give or make such
notice or filing, could not have or result in, individually or in the
aggregate, a Material Adverse Effect.
(vii) Litigation; Proceedings. Except as specifically
disclosed in the Disclosure Materials (as hereinafter defined), there
is no action, suit, notice of violation, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or its Subsidiary or any of their respective
properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, individually or in the aggregate, have or
result in a Material Adverse Effect.
(viii) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received
notice of a claim that it is in default under or that it is in
violation of) its articles of incorporation, certificate of
incorporation, by-laws or other charter documents, any indenture,
promissory note, loan or credit agreement or any
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other agreement or instrument to which it is a party or by which it or
any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is in violation of
any statute, rule or regulation of any Governmental Entity, except as
could not individually or in the aggregate, have or result in,
individually or in the aggregate, a Material Adverse Effect.
(ix) Private Offering. Subject in part to the truth and
accuracy of the Purchasers' representations set forth in Section 2.2,
the offer, sale and issuance of the Securities as contemplated by this
Agreement are exempt from the registration requirement of the
Securities Act, and neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration
requirements of Section 5 of the Securities Act.
(x) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the 12-month period preceding the date
hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials being collectively
referred to herein as the "SEC Documents"). A schedule of such
documents is set forth in Schedule 2.1(j) hereto, and, together with
the Schedules to this Agreement, the Company's Registration Statement
on Form SB-2 as filed with the Commission on January 14, 2000, and
other documents and information furnished by or on behalf of the
Company at any time prior to the Closing, are collectively referred to
herein as the "Disclosure Materials." As set forth in Schedule 2.1(j),
Xxxx Xxxxxxxxxx was elected as an additional director of the Company
and President of the Company on January 14, 2000.
(xi) Investment Company. The Company is not, and is not an
"Affiliate person" of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(xii) Certain Fees. No fees or commissions will be payable by
the Company to any broker, financial advisor, finder, investment
banker, placement agent, or bank with respect to the transactions
contemplated hereby. The Purchasers shall have no obligation with
respect to such fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated hereby.
(xiii) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and
sale of the Securities other than the Disclosure Materials and any
amendments and supplements thereto or (ii) solicited any offer to buy
or sell the Securities by means of any form of general solicitation or
advertising.
(xiv) Patents and Trademarks. The Company has, or has the
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and
rights which are necessary for use in connection with its business and
which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). To the best
knowledge of the Company, there is no existing infringement on any of
the Intellectual Property Rights.
(xv) Disclosure. All information relating to or concerning the
Company set forth in the Transaction Documents or provided to the
Purchasers or their respective representatives, agents and counsel in
connection with the transactions contemplated hereby
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is true and correct in all material respects and does not fail to state
any material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. The Company confirms that it has not provided to any of the
Purchasers or any of their representatives or agents any information
that constitutes or might constitute material non-public information
other than information that has specifically been identified to the
recipient as material non-public information in writing. The Company
understands and confirms that the Purchasers shall be relying on the
foregoing representation in effecting transactions in securities of the
Company.
(xvi) Registration Rights. Except as provided in the Note
attached hereto as Exhibit A, the Company has not granted or agreed to
grant any registration rights, including piggy-back registration
rights, to any Person.
(xvii) Environmental Compliance. To the best knowledge of the
Company (i) the conduct of the business at the Company in connection
with the ownership, use, maintenance or operation of any real property
which has ever been owned or leased by the Company, and the conduct of
business thereon, complies and complied with, and the Company is not in
violation of, any applicable federal, state, county or local statutes,
laws, regulations, rules, ordinances, codes, licenses, permits (granted
to the Company) or orders (naming the Company) of any governmental
authorities relating to environmental matters, including, without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 ("CERCLA"), and any other law, statute, ordinance
or regulation relating to the protection of the public health and/or
the environment, whether promulgated by the United States, any state,
municipality and/or other governmental body, each as amended
(hereinafter collectively referred to as "Environmental Laws"), (ii)
the conduct of the business at the Company is and has at all times been
performed in conformance with all Environmental Laws and regulations
pertaining thereto, and all permits or other documents required for the
conduct of the business in accordance with the Environmental Laws are
and at all times have been in full force and effect; (iii) there are no
notices of violation of any Environmental Laws requiring any work,
repairs, construction, capital expenditures or otherwise with respect
to the business of the Company which have been received by the Company,
and there are no writs, notices, injunctions, decrees, orders, liens or
judgments outstanding, no lawsuits based upon either the Environmental
Laws or the common law, claims, proceedings or investigations pending
relating to the operations of the Company with respect to the disposal
of hazardous wastes or hazardous substances by the Company, and (iv)
there has been no release (as defined in CERCLA) of a hazardous
substance (as defined in CERCLA) or hazardous waste or any similar
hazardous or toxic materials, substances, pollutants, contaminants or
wastes to the extent prohibited by the Environmental Laws, at or on any
premises which have ever been leased or owned by the Company, nor have
such premises been used at any time by any person as a landfill or a
waste disposal site for any hazardous substances or hazardous wastes.
(b) Representations and Warranties of the Purchasers. Each Purchaser
hereby, severally and not jointly, makes the following representations and
warranties to the Company.
(i) Authority. Such Purchaser or its authorized representative
has the requisite power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and to carry
out his obligations thereunder. The acquisition of the Securities to be
acquired hereunder by such Purchaser has been duly authorized by all
necessary action on the part of such Purchaser. This Agreement and
other Transaction
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Documents have been duly executed by such Purchaser or its authorized
representative and, when delivered by such Purchaser in accordance with
the terms hereof and thereof constitutes the valid and legally binding
obligation of such Purchaser, enforceable against him in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
(ii) Investment Intent. Such Purchaser is acquiring the
Securities to be acquired hereunder by such Purchaser for his own
account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to such Purchaser's
right, subject to the provisions of this Agreement and the Note, at all
times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(iii) Experience of Purchaser. Each Purchaser (i) has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of his investment in the
Securities and has the financial ability to assume the monetary risk
associated therewith, (ii) is able to bear the complete loss of his
investment in the Securities, (iii) has received such other documents
and information as he has requested and has had the opportunity to ask
questions of, and receive answers from, the Company and its management
concerning the Company and the terms and conditions of the offering of
the Securities and to obtain additional information, (iv) is not an
entity formed solely to make this investment, (v) is not relying upon
any statements or instruments made or issued by any person other than
the Company and its officers in making his decision to invest in the
Securities, and (iv) will execute and deliver to the Company an
Investment Letter in substantially the form as attached hereto as
Exhibit B.
(iv) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser acknowledges that an investment in the Securities is
speculative and involves a high degree of risk. Such Purchaser is able
to bear the economic risk of an investment in the Securities to be
acquired hereunder by such Purchaser, and, at the present time, is able
to afford a complete loss of such investment.
(v) Access to Information. Such Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that he has been
afforded (i) the opportunity to ask such questions as he has deemed
necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Securities, and the merits and risks of investing in the Securities,
(ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties,
management and prospects sufficient to enable him to evaluate his
investment and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the
Disclosure Materials. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or his
representatives, agents or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of
the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
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(vi) Reliance. Such Purchaser understands and acknowledges
that (i) the Securities to be acquired by him hereunder are being
offered and sold to him without registration under the Securities Act
in a private placement that is exempt from the registration provisions
of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance. Each Purchaser hereby agrees to
cooperate with the Company if, as required by law or the Commission to
confirm the availability of an exemption from the registration
requirements of the Securities Act for the transactions contemplated
herein, the Company shall reasonably request additional information
from such Purchaser.
ARTICLE 3.
OTHER AGREEMENTS OF THE PARTIES
(a) Transfer Restrictions.
(i) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements thereof. In connection
with any transfer of any Securities other than pursuant to an effective
registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company, hereby consents to and
agrees to register (i) any transfer of Securities by one Purchaser to
another Purchaser, and agrees that no documentation other than executed
transfer documents shall be required for any such transfer, and (ii)
any transfer by any Purchaser to an Affiliate (as such term is defined
under Rule 405 promulgated under the Securities Act) of such Purchaser
or to an Affiliate of another Purchaser, or any transfers among any
such Affiliates. Any such Purchaser or Affiliate transferee shall have
the rights of a Purchaser under this Agreement and the Note.
(ii) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the
Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
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Underlying Shares shall not contain the legend set forth above
if the conversion of Notes or other issuances of Underlying Shares, as
the case may be, occurs at any time while a registration statement is
effective under the Securities Act or, in the event there is not an
effective registration statement at such time, if in the opinion of
counsel to the Company such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission). The Company
agrees that it will provide each Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from
such legend at such time as such legend is no longer required
hereunder. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section 3.1(b).
(b) Acknowledgment of Dilution. The Company acknowledges that the
issuance of, Underlying Shares upon conversion of the Notes may result in
dilution of the outstanding shares of Common Stock. The Company further
acknowledges that its obligation to issue Underlying Shares in accordance with
the Notes is unconditional and absolute regardless of the effect of any such
dilution.
(c) Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. If at any time prior to the date on which the Purchasers may
resell all of their Underlying Shares without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act (as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the benefit of and enforceable by
the Purchasers) the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act in the time period that
such filings would have been required to have been made under the Exchange Act.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
(d) Increase in Authorized Shares. At such time as the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from converting the full outstanding principal
amount of Notes that remain unconverted at such date due to the unavailability
of a sufficient number of shares of authorized but unissued or re-acquired
Common Stock, the Board of Directors of the Company shall promptly (and in any
case within 45 Business Days from such date) prepare and mail to the
shareholders of the Company proxy materials requesting authorization to amend
the Company's certificate of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least a number of
shares equal to the sum of (i) all shares of Common Stock then outstanding, (ii)
the number of shares of Common Stock issuable on account of all outstanding
warrants, options and convertible securities (other than the Notes) and on
account of all shares reserved under any stock option, stock purchase, warrant
or similar plan, and (iii) 100% of the number of Underlying Shares as would then
be issuable upon a conversion in full of the then outstanding Notes. In
connection therewith, the Board of
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Directors shall (x) adopt proper resolutions authorizing such increase, (y)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the shareholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (z) within 5 Business Days of obtaining
such shareholder authorization, file an appropriate amendment to the Company's
certificate of incorporation to evidence such increase.
(e) Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities to pay existing bank debt, $994,307.26 of debt owed to Xxxxxxx
X. Xxxxxxxxxx by the Company will be exchanged for $994,307.26 of Notes, with
the remaining proceeds to be used for working capital and general corporate
purposes.
(f) Conversion Obligations of the Company. The Company shall honor
conversions of the Notes and shall deliver Underlying Shares in accordance with
the respective terms and conditions and time periods set forth in the Notes.
(g) Exchange of Shareholder Debt. The Company owes Xxxxxxx X.
Xxxxxxxxxx, a shareholder, officer and director of the Company ("Shareholder"),
the amount of $994,307.26. The Company and Shareholder have agreed at Closing to
exchange the $994,307.26 debt owed to Shareholder for $994,307.26 of Notes.
ARTICLE 4.
CLOSING CONDITIONS
(a) Conditions Precedent to the Obligation of the Company to Sell the
Notes. The obligation of the Company to sell the Notes hereunder is subject to
the satisfaction or waiver by the Company, at or before the Closing, of each of
the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser shall
be true and correct in all material respects as of the date when made
and as of the Closing Date, as though made on and as of such date.
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to
the Closing.
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
(iv) Delivery of Investment Letter. Each Purchaser shall have
executed and delivered to the Company an Investment Letter
substantially in the form of Exhibit B.
(v) Delivery of Subordination Agreement. Each Purchaser shall
have executed and delivered to the Company a Subordination Agreement in
the form of Exhibit C.
(vi) Performance by Shareholder. Shareholder shall execute
such releases and other documents as may be reasonably required to
effect the exchange of Shareholder debt for Notes.
PURCHASE AGREEMENT
- 11 -
12
(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Notes. The obligation of each Purchaser hereunder to acquire and
pay for the Notes is subject to the satisfaction or waiver by such Purchaser, at
or before the Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in this
Agreement and in the other Transaction Documents shall be true and
correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date.
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing.
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the other Transaction
Documents.
(iv) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, whichever is more recent, last filed prior
to the date of this Agreement, no event which had a Material Adverse
Effect and no material adverse change in the financial condition or
prospects of the Company shall have occurred which is not disclosed in
the Disclosure Materials.
(v) Shares of Common Stock. On or prior to the Closing Date,
the Company shall have duly reserved the number of Underlying Shares
required by the Transaction Documents to be reserved for issuance upon
conversion of the Notes.
(vi) Delivery of Notes. The Company shall have delivered to
each Purchaser, or such Purchaser's designee, the Notes, registered in
the name of such Purchaser, or designee, each substantially in the form
of Exhibit A.
ARTICLE 5.
MISCELLANEOUS
(a) Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Notes pursuant hereto. The Purchasers shall be responsible for their own
respective tax liability that may arise as a result of the investment hereunder
or the transactions contemplated by this Agreement.
(b) Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Notes and the Investment Letter contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
(c) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:00 p.m. (Dallas, Texas
time) on a
PURCHASE AGREEMENT
- 12 -
13
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in the Purchase Agreement later than 5:00 p.m. (Dallas, Texas
time) on any date and earlier than 11:59 p.m. (Dallas, Texas time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Collegiate Pacific, Inc.
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
With copies to:
-------------------------
-------------------------
-------------------------
-------------------------
If to any Purchaser or the Purchasers, to the addresses and facsimiles set forth
on Schedule 1.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person. Non-delivery of copies of any notice as specified above
shall not affect the validity of any notice given to any party to this Agreement
in accordance with the terms of this Agreement.
(d) Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers; or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
(e) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns,
including any Persons to whom any Purchaser transfers Notes. The assignment by a
party of this Agreement or any rights hereunder shall not affect the obligations
of such party under this Agreement.
(g) No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to permitted assignees under Section 5.6,
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person. The obligations of the Purchasers under this Agreement and the
other Transaction Documents are several and not joint and no Purchaser shall be
responsible for any obligations of any other Purchaser.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
PURCHASE AGREEMENT
- 13 -
14
(i) Survival. The representations, warranties, agreements and covenants
contained in this Agreement shall survive the Closing and the conversion of the
Notes.
(j) Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
(k) Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement. In no event will any party
publicly or otherwise disclose the name of any Purchaser without such
Purchaser's prior written consent.
(l) Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
(m) Remedies. Each of the parties to this Agreement acknowledges and
agrees that the other parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions of this
Agreement in any action instituted in any court of the United States of America
or any state thereof having jurisdiction over the parties to this Agreement and
the matter, in addition to any other remedy to which they may be entitled, at
law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this Note Purchase
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
THE COMPANY:
COLLEGIATE PACIFIC, INC.
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
THE PURCHASER:
-----------------------------------------
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
PURCHASE AGREEMENT
- 14 -
15
AMENDED
SCHEDULE 1
PURCHASER NOTE AMOUNT NOTE NUMBER
--------- ----------- -----------
1. Xxxxxxx X. Xxxxxxxxxx $1,500,000.00 01
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
2. Xxxxxxx Brothers Trust 100,000.00 03
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.,
Trustee
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
3. Xxxxxx X. Xxxxxxx 26,000.00 04
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
4. Xxxxxx X. Xxxxxxx, XXX 20,000.00 05
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Southwest Securities, Inc.,
Custodian
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
5. Xxxxxxx X. Xxxxxxx, XXX 4,000.00 06
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Southwest Securities, Inc.,
Custodian
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
16
PURCHASER NOTE AMOUNT NOTE NUMBER
--------- ----------- -----------
6. Xxxxxxxxxx Foundation $ 50,000.00 07
Line and Grove Streets
X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx,
Trustee
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
7. Xxxxxxx Xxxxxxxxxx 100,000.00 08
Line and Grove Streets
X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
8. JIBS Equities, L.P. 50,000.00 09
a Delaware limited partnership
Line and Grove Streets
X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx,
General Partner
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
9. Penn Footwear Retirement Trust 50,000.00 10
Line and Grove Streets
X.X. Xxx 00
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx,
General Partner
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10. Xxxxxx X. Xxxxxx or Xxxxxx X. Xxxxxx 50,000.00 11
Joint Tenants With Right Of Survivorship
X.X. Xxx XX00000
Xxxxxx Xxxxx, Xxxx Xxxxxx
Bahamas
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
17
PURCHASER NOTE AMOUNT NOTE NUMBER
--------- ----------- -----------
11. Xxxxx X. Xxxx $ 100,000.00 12
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
12. H.I. Xxxxxxxx XXX Rollover 50,000.00 14
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Texas Community Bank &
Trust, N.A., Custodian
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
13. The Xxxx X. Xxxxx GST Trust 120,000.00 15
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx, Trustee
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
14. Xxxxxx Xxxxxxxxxx XXX 10,000.00 16
0000 Xxxxxxxx Xxx
Xxxxxxxxxx, Xxxxx 00000
Attention: Southwest Securities, Inc.,
Custodian
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
15. Xxxxxx Xxxxxxxxxx and 5,000.00 17
Xxxxxxxxx Xxxxxxxxxx
0000 Xxxxxxxx Xxx
Xxxxxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000 -------------
$2,235,000.00
18
SCHEDULE 2.1(c)
COLLEGIATE PACIFIC, INC. (CPI)
OUTSTANDING OPTIONS, WARRANTS, SCRIPT RIGHTS TO CALLS OR COMMITMENTS
--------------------------------------------------------------------------------
WARRANTS OPTIONS OPTIONS
ISSUED TO WARRANTS WARRANTS ISSUED TO ISSUED TO
FORMER ISSUED TO ISSUED TO FORMER EXECUTIVES &
EXECUTIVE OF EXECUTIVE OF LICENSOR OF EXECUTIVES & EMPLOYEES EMPLOYEES
DSSI (2) CPI (3) CPI (4) DSSI (5) CPI (6)
OUTSTANDING JUNE 30,1999 (1 ) 98,973 - 0 - 40,000 32,000 41,500
OPTIONS AND WARRANTS ISSUED - 0 - 30,000 - 0 - - 0 - - 0 -
OPTIONS AND WARRANTS EXERCISED - 0 - - 0 - - 0 - (27,000) (1,000)
OUTSTANDING JANUARY 31,1999 98,973 30,000 40,000 5,000 40,500
EXERCISE PRICE OF OUTSTANDING
WARRANTS AND OPTIONS $ 5.05 $ 10.00 $ 12.50 $ 1.25 $ 9.38
(1) ALL THE WARRANT AND OPTIONS HAVE BEEN ADJUSTED TO REFLECT THE 1 FOR 5
REVERSE SPLIT OF THE COLLEGIATE PACIFIC, INC. COMMON STOCK AS APPROVED
BY THE STOCKHOLDERS OF COLLEGIATE PACIFIC, INC. ON JANUARY 14, 1999.
(2) THE WARRANTS WERE ISSUED TO THE FORMER CEO OF DSSI IN CONJUNCTION WITH
HIS ACTIVITIES PRIOR TO THE MERGER OF DSSI AND COLLEGIATE PACIFIC, INC.
THE TERMS OF THE WARRANT WERE EXTENDED AT THE MEETING OF THE
STOCKHOLDERS OF DSSI ON FEBRUARY 17, 1998 TO APPROVE THE MERGER WITH
COLLEGIATE PACIFIC, INC. THE WARRANTS WILL EXPIRE ON MARCH 30, 2000.
(3) THE WARRANTS WERE ISSUED TO THE CEO OF COLLEGIATE PACIFIC, INC. IN
CONNECTION WITH A LOAN GUARANTY AND PLEDGE. THE WARRANTS WILL EXPIRE ON
SEPTEMBER 14, 2004.
(4) THE WARRANTS WERE ISSUED TO A LICENSOR OF COLLEGIATE PACIFIC, INC. IN
CONNECTION WITH THE GRANTING OF A LICENSE TO COLLEGIATE PACIFIC, INC.
FOR WEB RELATED ACTIVITIES. THE WARRANTS WILL EXPIRE ON APRIL 24, 2004.
(5) THE OPTIONS ISSUED TO THE FORMER EXECUTIVES AND EMPLOYEES OF DSSI IN
CONJUNCTION WITH THE 1994 STOCK OPTION PLAN. THE TERMS OF THE OPTIONS
WERE EXTENDED AT THE MEETING OF THE STOCKHOLDERS OF DSSI ON FEBRUARY
17, 1998 TO APPROVE THE MERGER WITH COLLEGIATE PACIFIC, INC. THE
REMAINING OPTIONS WILL EXPIRE ON JULY 16, 2002.
(6) THE OPTIONS ISSUED TO EXECUTIVES AND EMPLOYEES OF DSSI IN CONJUNCTION
WITH THE 1998 COLLEGIATE PACIFIC, INC. STOCK OPTION PLAN. THE OPTIONS
WILL EXPIRE ON FEBRUARY 24, 2009.
19
SCHEDULE 2.1(j)
FORM FILING DATE
---- -----------
1. 10QSB February 16, 1999
2. 10QSB/A February 17, 1999
3. 10QSB May 17, 1999
4. 8-K July 22, 1999
5. 8-A12B September 9, 1999
6. 424B3 September 21, 1999
7. 10QSB November 15, 1999
8. 14A December 16, 1999
9. SB-2 January 14, 2000
10. 10-QSB February 14, 2000
On January 14, 2000, the Board of Directors of the Company expanded the
Board of Directors and elected Xxxx Xxxxxxxxxx as an additional director of the
Company. The Board of Directors also elected Xxxx Xxxxxxxxxx as President of the
Company, replacing Xxxxxxx X. Xxxxxxxxxx. Xxxxxxx X. Xxxxxxxxxx retained his
position as Chairman of the Board and Chief Executive Officer.
Xxxx Xxxxxxxxxx, age 29, is the son of Xxxxxxx X. Xxxxxxxxxx. From 1997
through 1999, Xxxx Xxxxxxxxxx served as Vice President of Sales and Marketing of
Sport Supply Group, Inc., a New York Stock Exchange company engaged in the
direct marketing of sports related equipment. From 1994 through 1997, Xxxx
Xxxxxxxxxx served as Vice President of Youth Sales for Sport Supply Group, Inc.
20
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF l933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF THE SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 8 HEREIN)
PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THAT CERTAIN SUBORDINATION AGREEMENT
EFFECTIVE AS OF JANUARY 20, 2000 BY COLLEGIATE PACIFIC, INC. AND HOLDER NAMED
HEREIN IN FAVOR OF CHASE BANK OF TEXAS, NATIONAL ASSOCIATION OR THE HOLDER OF
SENIOR INDEBTEDNESS REFERRED TO IN SUCH SUBORDINATION AGREEMENT.
NOTE NO. ____
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
February ___, 2000 $____________
FOR VALUE RECEIVED, the undersigned, Collegiate Pacific Inc., a
Delaware corporation (the "Company"), hereby promises to pay to the order of
____________________ ("Holder"), the principal amount of _____________
($________) in lawful money of the United States of America, together with
interest on the outstanding portion thereof for the period such sums are unpaid,
all in accordance with the provisions of this Note.
1. Payment of Principal and Interest.
(a) The outstanding principal amount of this Note is due and
payable in a single installment on January 31, 2005 (the "Maturity
Date").
(b) Interest hereunder shall be computed on the basis of the
actual number of days elapsed based on a 365 or 366 day year, as the
case may be.
(c) Interest will accrue at a variable rate per annum equal to
the Prime Rate (hereinafter defined) plus two and one-half (2 1/2)
percentage points, payable monthly on the tenth (10th) day of each
calendar month, commencing April 10, 2000 and continuing regularly
thereafter on the tenth (10th) day of each succeeding month and on the
Maturity Date. The Prime Rate will be determined on the date hereof for
the period from the date hereof until April 1, 2000. Thereafter, the
Prime Rate will be determined on the last Business Day (hereinafter
defined) of March 2000 for the calendar quarter from April 1, 2000 to
July 1, 2000 and on the last Business Day of every June, September,
December and March thereafter until the Maturity Date for each of the
respective following calendar quarters.
(i) "Prime Rate" means the "prime rate" published
from time to time in the Money Rates column of The Wall Street
Journal (Central Edition); provided, however, if the Money
Rates column
21
of The Wall Street Journal (Central Edition) ceases to be
published or otherwise does not designate a "prime rate" as of
any Business Day, "Prime Rate" shall mean the rate of interest
per annum publicly announced by The Chase Manhattan Bank as
its prime rate in effect at its principal office in New York
City; in each case each change in such rate shall be effective
from and including the Business Day such change is published
or announced, as the case may be.
(ii) "Business Day" means any day that is not a
Saturday, Sunday or other day on which commercial banks in New
York City, New York or Dallas, Texas are authorized or
required by law to remain closed. If the last or appointed day
for the taking of any action or the expiration of any right
required or granted in this Warrant is not a Business Day,
then such action may be taken or such right may be exercised
on the following Business Day.
(d) Notwithstanding any provision to the contrary contained in
this Note, it is expressly agreed and provided that the total liability
of the Company hereunder for payments in the nature of interest shall
not exceed the maximum lawful rate authorized under the laws of the
State of Texas or such greater rate as may be authorized by other
governmental authority applicable to the indebtedness evidenced hereby
(the "Maximum Rate"), and, without limiting the foregoing, in no event
shall the rate of interest when aggregated with any other sums in the
nature of interest which the Company may be obligated to pay hereunder
exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by law and applicable to this Note is
increased or decreased by statute or any official action of the State
of Texas or the United States of America subsequent to the date hereof,
the new maximum contract rate of interest allowed by law will be the
Maximum Rate of interest applicable to this Note from the effective
date forward, unless such application is precluded by applicable
statute, official action, or rule of law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid to Holder by
the Company in connection with the indebtedness evidenced by this Note,
such excess shall be applied by Holder to the unpaid principal balance
of this Note or be refunded to the Company, the manner of handling such
excess to be at Holder's election.
2. Prepayment. Subject to the prior written approval of Senior Creditor
(as defined in Section 8 of this Note), this Note may be prepaid in whole or in
part, at any time after the second anniversary hereof without penalty or premium
but with interest accrued on the amount being prepaid to the date of prepayment;
provided that Holder shall be entitled to ten (10) Business Days' notice prior
to any prepayment of principal or interest hereunder, and upon receipt of such
notice Holder may elect to convert the Note into the Company's Common Stock,
$.01 par value per share (the "Common Stock") pursuant to the following section
in lieu of receiving such payment. Any payments made to Holder by the Company
hereunder will be applied first to accrued but unpaid interest and then to
principal.
3. Conversion.
(a) Holder shall have the right at any time, at Holder's
option, to convert all or any part of the outstanding principal amount
of, and accrued but unpaid interest on, this Note into shares of Common
Stock at a conversion price equal to $3.30 per share. Holder may
exercise its conversion right hereunder by delivering written notice of
conversion ("Underlying Shares"), together with this original Note, to
the Company, in which case Holder will be deemed for all purposes to be
Holder of the number of shares of Common Stock issuable upon such
conversion as specified in such notice of conversion, and Holder will
be deemed for all purposes to be Holder of a replacement Note on terms
identical to the terms hereof, in the principal amount of that portion
of this Note not converted in such conversion, if any. As soon as
practicable
22
after receipt of notice of conversion and this Note, the Company will
issue a certificate evidencing the number of shares of Common Stock
into which this Note or a portion of this Note has been converted and a
replacement Note evidencing the remaining principal balance of the Note
outstanding, if any.
(b) The Company will not issue fractional shares upon any
conversion of this Note into shares of Common Stock. In lieu of any
such fractional shares, if Holder would otherwise be entitled to a
fraction of a share of Common Stock upon conversion, it will be
entitled to receive a cash payment (without interest) determined by
multiplying:
(i) The fractional interest to which Holder would
otherwise be entitled; and
(ii) $3.30.
4. Adjustments to Conversion Shares.
(a) If, at any time after the date hereof and before the
conversion of this Note, the Company effects a split, subdivision or
combination of the Common Stock or makes or issues, or fixes a record
date for the determination of holders of its Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Company, then Holder shall be entitled to receive, upon conversion
hereof, the number of shares of Common Stock and other securities that
it would have received had it converted this Note immediately prior to
such event and had thereafter, during the period from the date of such
event to and including the conversion date, retained such shares,
giving application to all adjustments called for during such period
under this Section 4.
(b) If, at any time after the date hereof and before the
conversion of this Note, there is any reclassification of the Company's
securities or any reorganization of the Company or any combination,
merger or consolidation of the Company with or into another person, or
any sale of all or substantially all of the Company's assets to any
other person, then, as a part of such event, provision shall be made so
that Holder is thereafter entitled to receive, upon conversion of this
Note, the number of shares or other securities or property to which a
holder of shares issuable upon conversion immediately prior to such
event would have been entitled on such event. In any such case,
appropriate adjustment shall be made so that the rights of Holder
before and after such event are as nearly equivalent as possible.
5. Certain Legal Restrictions.
(a) The Company shall not be obligated to sell or issue any
shares of Common Stock upon the conversion of this Note or otherwise
unless the issuance and delivery of such shares shall comply with all
relevant provisions of law and other legal requirements including,
without limitation, any applicable federal or state securities laws and
the requirements of any stock exchange upon which shares of the Common
Stock may then be listed. As a condition to the conversion of this Note
or the sale by the Company of any additional shares of Common Stock to
Holder, the Company may require Holder to make such representations and
warranties as may be necessary to assure the availability of an
exemption from the registration requirements of applicable federal or
state securities laws. The Company shall not be liable for refusing to
sell or issue any shares if the Company cannot obtain authority from
the appropriate regulatory bodies deemed by the Company to be necessary
to lawfully sell or issue such shares. In addition, the Company shall
have no obligation to Holder, express or implied, to list, register or
otherwise qualify any of
23
Holder's shares of Common Stock. The shares of Common Stock issued upon
the conversion of this Note may not be transferred except in accordance
with applicable federal or state securities laws. At the Company's
option, the certificate evidencing shares of Common Stock issued to
Holder may be legended as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Company shall keep at its principal place of business
a register in which the Company shall provide for the registration of
this Note and for the registration of transfer of this Note. Every Note
presented or surrendered for registration or transfer shall be duly
endorsed, or shall be accompanied by a written instrument of transfer
duly executed, by Holder or his attorney duly authorized in writing.
Every Note so made and delivered in exchange for this Note shall in all
other respects be in the same form and have the same terms as this
Note.
(c) This Note will not be transferable, except upon the
conditions specified in this Section 5(c), which conditions, among
other things, are intended to insure compliance with the provisions of
the Securities Act of 1933, as amended (the "Securities Act"). Any
proposed transfer of this Note shall comply with all relevant
provisions of law and other legal requirements including, without
limitation, any applicable federal or state securities laws and the
requirements of any stock exchange upon which shares of the Common
Stock issuable upon conversion of this Note may then be listed. As a
condition to registering the transfer of this Note, the Company may
require Holder to make such representations and warranties as may be
necessary to assure the availability of an exemption from the
registration requirements of applicable federal or state securities
laws.
6. Loss, Theft, Destruction of Notes. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and in the case of any such loss, theft or destruction,
upon receipt of any indemnity bond in such reasonable amount as the Company may
determine, or, in the case of any such mutilation upon surrender for
cancellation of this Note, the Company will make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Note, a new Note of like tenor and
principal amount and dated as of the date to which interest has been paid on the
lost, stolen, destroyed or mutilated Note. Every Note so made and delivered in
replacement for this Note shall in all other respects be in the same form and
have the same terms as this Note.
7. Registered Holders. Prior to due presentment for registration of
transfer of any Note, the Company may deem and treat the registered holder
thereof as the absolute owner thereof for the purposes of receiving payment of
or on account of the principal of and premium, if any, and interest on such Note
and for the purposes of any notices, waivers or consents thereunder, and
payments of any Note shall be made only to or upon the order in writing of the
registered holder thereof.
24
8. Subordination. The indebtedness represented by this Note and the
payment of the principal and interest on this Note will be subordinated, to the
extent and in the manner provided in that certain subordination agreement
executed by Company, Holder and Senior Creditor (herein defined) dated effective
January 20, 2000 and executed of even date herewith (the "Subordination
Agreement") to the prior payment in full of all Senior Indebtedness, as defined
in the Subordination Agreement.
(a) "Senior Creditor" means Chase Bank of Texas, National
Association, its successors, transferees and assigns.
9. Events of Default. An "Event of Default" will exist hereunder if any
one or more of the following events occurs and is continuing:
(a) The Company fails to make any payment under this Note when
due and such default continues for 30 days;
(b) The Company fails to perform any of its covenants or
agreements hereunder and such failure continues for thirty (30) days
after receipt of written notice of such default from Holder;
(c) The Company
(i) Applies for or consents to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of the
Company or of all or a substantial part of its assets;
(ii) Files a voluntary petition in bankruptcy, admits
in writing that it is unable to pay its debts as they become
due or generally does not pay its debts as they become due;
(iii) Makes a general assignment for the benefit of
creditors;
(iv) Files a petition or answer seeking
reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency laws;
(v) Files an answer admitting the material
allegations of, or consents to, or defaults in answering, a
petition filed against it in any bankruptcy, reorganization or
insolvency proceeding; or
(vi) Takes corporate action for the purpose of
effecting any of the foregoing.
(d) An involuntary petition or complaint is filed against the
Company seeking bankruptcy or reorganization or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of the Company,
or of all or substantially all of its assets, and such petition or
complaint is not dismissed within 90 days of the filing thereof; or an
order, order for relief, judgment or decree is entered by any court of
competent jurisdiction or other competent authority approving a
petition or complaint seeking reorganization of the Company or
appointing a receiver, custodian, trustee, intervenor or liquidator of
the Company, or of all or substantially all of its assets.
10. Remedies. Upon the occurrence of any Event of Default, Holder may,
at its option, declare the entire unpaid balance of principal and accrued
interest (if any) on this Note to be immediately due and payable; provided,
however, upon the occurrence of any of the Events of Default described in
Section 9(b) or (c) above, the entire
25
unpaid balance of principal and accrued interest on this Note will, without any
action by Holder, immediately become due and payable without demand for payment,
presentment, protest, notice of protest and nonpayment, or other notice of
default, notice of acceleration and intention to accelerate or any other notice,
all of which are expressly waived by the Company. Upon the occurrence of any
Event of Default, Holder will also have all rights and remedies that are granted
to a creditor under the laws of the State of Texas.
11. Waivers. Except as otherwise expressly set forth above, the Company
waives notice, presentment, demand for payment, protest, notice of protest and
nonpayment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other notice
or formalities of any kind, and consents, to all extensions without notice for
any period or periods of time and partial payments before or after maturity, all
without prejudice to Holder.
12. Collection Costs. If this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings at
law or in equity or in bankruptcy, receivership or other court proceedings, the
Company promises to pay all costs and expenses of collection including, but not
limited to, court costs and reasonable attorneys' fees of Holder hereof.
13. Choice of Law. The interpretation, performance and enforcement of
this Note shall be governed by the laws of the State of Texas, as applicable,
without reference to the conflict of laws provisions thereof.
14. Registration Rights.
(a) Optional Registrations.
(i) If the Company decides to register any of its
Common Stock or securities convertible into or exchangeable
for Common Stock under the Securities Act on a form which is
suitable for an offering for cash of shares of the Company
held by third parties and which is not a registration solely
to implement an employee benefit plan or a transaction to
which Rule 000, X-0 or any other similar rule of the
Securities and Exchange Commission (the "Commission") is
applicable, the Company will promptly give written notice to
the Holder, and the Company will use all reasonable efforts to
effect the registration under the Securities Act of all
Underlying Shares that the Holder requests be included in such
registration by a written notice delivered to the Company
within fifteen (15) days after the notice given by the
Company. The Holder agrees that any securities it requests to
be included in a the Company registration pursuant to this
Section 14(a) shall be included by the Company on the same
form of registration statement as has been selected by the
Company for the securities the Company is registering for sale
for its own account.
(ii) If the registration involves an underwritten
public offering, the Company will not be required to register
Underlying Shares in excess of the amount that the principal
underwriter reasonably and in good faith recommends may be
included in such offering (a "Cutback"), which recommendation,
and supporting reasoning, shall be delivered in writing to the
Holder. If such a Cutback occurs, the number of shares that
are entitled to be included in the registration and
underwriting shall first be allocated to the Company for
securities being sold for its own account and thereafter shall
be allocated to the Holder requesting inclusion in the
registration.
(iii) If the Company elects to terminate any
registration filed under this Section 14(a), the Company will
have no obligation to register the securities sought to be
included by the Holder in
26
such registration. If the Company includes in such
registration any securities to be offered by it, all expenses
of the registration and offering and the reasonable fees and
expenses of not more than one independent counsel for the
Holder will be borne by the Company, except that the Holder
will bear underwriting discounts and commissions attributable
to its Underlying Shares being registered and transfer taxes
on shares being sold by it.
(b) Required Registrations.
(a) Subject to the limitations on registration set
forth in Section 14(e) below, if the Holder notifies the
Company in writing that the Holder intends to offer for public
sale any Underlying Shares, the Company will cause the
Underlying Shares as may be requested by the Holder to be
included in a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"). In connection with
one (1) registration made by the Company pursuant to this
Section 14(b), all expenses of such registration and the
reasonable fees and expenses of not more than one independent
counsel for the Holder will be borne by the Company, except
that the Holder will bear underwriting discounts and
commissions and transfer taxes on shares being sold by the
Holder. The Company shall not be required to file any
registration statement for securities other than shares of
Common Stock, although any conversion of this Note may be
conditioned upon such registration statement becoming
effective, to the extent that the conversion relates to
Underlying Shares covered by the Holder's written notice of an
intended public offering. In connection with all other
registrations made by the Company pursuant to this Section
14(b), all expenses of any such registrations (other than
audit and "blue sky" fees and expenses, which fees and
expenses will be borne by the Company) shall be borne by the
Holder; provided, however, that if the Company for its own
account or any other holder of shares elects to register its
shares under this Section 14(b) as permitted below, the
expenses of such registration shall be borne pro rata by all
parties to the registration based upon the ratio that the
number of such shares being registered by such entity bears to
the total number of shares to be registered pursuant to this
Section 14(b). Except as provided in Section 14(c), this
Section 14(b) will not apply to a request for registration on
Form S-3 (or successor form) which will be governed by Section
14(c). In the event any registration attempted under this
Section 14(b) pursuant to which the Company would be
responsible for the above expenses of the Holder is not
consummated, then the Company shall pay such expenses and
shall remain responsible for the above expenses of the Holder
with respect to one (1) consummated registration under this
Section 14(b).
(c) The registration statement filed pursuant to the request
of the Holder may include other securities of the Company, with respect
to which "piggyback" registration rights have been granted, and may
include securities of the Company being sold for the account of the
Company; provided, however, that if the Company shall request inclusion
in any registration pursuant to this Section 14(b) of the securities
being sold for its own account, or if other persons shall request
inclusion in any registration pursuant to this Section 14(b), the
Holder shall, on behalf of all entities requesting inclusion in such
registration, offer to include such securities in the offering and may
condition such offer on their acceptance of any other reasonable
conditions (including, without limitation, if such offering is
underwritten, that such requesting holders agree in writing to enter
into an underwriting agreement with usual and customary terms).
Notwithstanding any other provisions of this Section 14(b), if the
representative of the underwriters advises the Holder in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting
or registration shall be allocated first to the Holder,
27
second to the Company and thereafter to the holders requesting
inclusion in the registration on the basis of the number of shares each
requesting holder requests be included bears to the total number of
shares of all requesting holders that have been requested be included
in such registration. If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter or the Holder. The securities so
excluded shall also be withdrawn from registration.
(d) Form S-3.
(i) Once the Company is eligible to effect a
registration of its securities under Form S-3 (or a successor
form), the Holder will have the right to request and have
effected registrations of shares of its Underlying Shares on
Form S-3 as long as the aggregate proposed offering price is
not less than $1,000,000 for any such registration.
(ii) Upon written request of the Holder, the Company
will cause the registration of all Underlying Shares on Form
S-3 or such successor form to the extent requested by the
Holder. All expenses incurred in connection with such
registration requested pursuant to this Section 14(c) shall be
borne by the Holder; provided, however, that if the Company
for its own account or any other holder of shares elects to
register its shares as permitted below, the expenses of such
registration shall be borne pro rata by all parties to the
registration based upon the ratio that the number of such
shares registered by such entity bears to the total number of
shares to be registered; provided, further, however, that if
the Holder elects to treat this request as a required
registration pursuant to Section 14(b) above, then the
Company, if requested by the Holder, will bear all such
expenses as provided in such Section to the extent that it
would be required to pursuant to said Section.
(iii) The registration statement filed pursuant to
the request of the Holder may include other securities of the
Company, with respect to which "piggyback" registration rights
have been granted, and may include securities of the Company
being sold for the account of the Company; provided, however,
that any Cutback shall be dealt with in the same manner as the
second paragraph of Section 8(b).
(e) Procedure for Registration. Whenever the Company is
required under Section 14 to register Common Stock, it agrees to the
following:
(i) Use all reasonable efforts to prepare promptly
for filing with the Commission a registration statement and
such amendments and supplements to said registration statement
and the prospectus as may be necessary to keep the
registration statement effective and to comply with the
provisions of the Securities Act for the period necessary to
complete the proposed public offering, but not more than 180
days;
(ii) Furnish to each selling holder such copies of
each preliminary and final prospectus and such other documents
as such holder may reasonably request to facilitate the public
offering of its Common Stock;
(iii) Enter into any underwriting agreement with
provisions reasonably required by the proposed underwriter for
the selling holders, if any; and
28
(iv) Use all reasonable efforts to register or
qualify the Common Stock covered by the registration statement
under the securities or "blue-sky" laws of such jurisdictions
as any selling holder may reasonably request, although the
Company will not have to register in any states that require
it to qualify to do business or subject itself to general
service of process, and for a registration under Section
14(a), the Company will not be required to register in more
states than are necessary to permit the sale of the
securities.
(f) Limitation on Registration. The Company is not required to
file a registration statement requested under Sections 14(b) or 14(c)
prior to the earlier of (i) twenty- four (24) months from the date of
this Agreement, or (ii) ninety (90) days following the effective date
of any other registration statement initiated by the Company except for
registrations being initiated solely to implement an employee's benefit
plan. The Company is not required to file a registration statement
requested under Section 14(b) unless requested by holders owning in the
aggregate a majority of the Underlying Shares. The Company may postpone
the filing of any registration statement required under Sections 14(b)
or 14(c) for a reasonable period of time, not to exceed ninety (90)
days, if the Company has been advised by legal counsel that such filing
would require the disclosure of a material fact, and the Company
determines reasonably and in good faith that such disclosure would have
a material adverse effect on the Company. In addition, if (i) in the
good faith judgment of the Board of Directors of the Company, a
required registration under Section 14(b) or 14(c) would be seriously
detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of
such registration statement at such time, and (ii) the Company shall
furnish to the Holder a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company for such registration statement to be filed in the near future
and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer
such filing for a period of not more than one hundred eighty (180) days
after receipt of the request of the Holder, and, provided further, that
the Company shall not defer its obligation in this manner more than
once in any twelve-month period.
(g) Indemnification. Subject to applicable law, the Company
will indemnify each underwriter and the Holder and each person
controlling any of them, against all claims, losses, damages and
liabilities, including legal and other expenses reasonably incurred,
arising out of any untrue or allegedly untrue statement of a material
fact contained in the registration statement, or any omission or
alleged omission to state a material fact required to be stated in the
registration statement or necessary to make the statements not
misleading, or arising out of any violation by the Company of the
Securities Act, any state securities or "blue-sky" laws or any
applicable rule or regulation. This indemnification will not apply to
any claims, losses, damages or liabilities to the extent they may have
been caused by an untrue statement or omission based upon information
furnished in writing to the Company by such underwriter, the Holder, or
controlling person, respectively, expressly for use in the registration
statement. With respect to such untrue statement or omission in the
information furnished in writing to the Company by the Holder, such
person will indemnify the underwriters, the Company, its directors and
officers, the other persons selling securities under the registration
statement and each person controlling any of them against any losses,
claims, damages, expenses or liabilities to which any of them may
become subject as a result of such untrue statement or omission
(including those incurred in connection with investigating or defending
against such claims).
29
(h) Rule 144 Requirements. The Company will file with the
Commission such information as the Commission may require and will make
available Rule 144 under the Securities Act (or any successor exemptive
rule).
(i) Obligations of Investor and Others in a Registration. The
Holder agrees timely to furnish such information regarding such person
and the securities sought to be registered and to take such other
action as the Company may reasonably request in connection with the
registration, qualification or compliance. The Company agrees that, in
connection with any offering undertaken pursuant to Section 14(b), the
Holder shall have the right if it deems an underwriter or underwriters
necessary or appropriate, to designate such underwriter(s), which
underwriters shall be reasonably acceptable to the Company and subject
to the written approval of the Company, which approval shall not be
unreasonably withheld. If the registration involves an underwriter, the
Holder agrees, upon the request of such underwriter, not to sell any
unregistered securities of the Company for a period of ninety (90) days
following the effective date of the registration statement for such
offering and to enter into an underwriting agreement with such
underwriters containing usual and customary terms and provisions.
(j) Preparation: Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Note, the Company will give the holders
of Underlying Shares registered under such registration statement,
their underwriters, if any, and one counsel or firm of counsel and one
accountant or firm of accountants representing all the holders of
Underlying Shares to be registered under such registration statement,
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary in the opinion of such holders' and
such underwriters' respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act.
(k) Rule 144A. The Company agrees that, upon the request of
any holder of Underlying Shares or any prospective purchaser of
Underlying Shares designated by a holder, the Company shall promptly
provide (but in any case within 15 days of a request) to such holder or
potential purchaser, the following information:
(i) a brief statement of the nature of the business
of the Company and any Subsidiaries and the products and
services they offer;
(ii) the most recent consolidated balance sheets and
profit and losses and retained earnings statements, and
similar financial statements of the Company for the two most
recent fiscal years (such financial information shall be
audited, to the extent reasonably available); and
(iii) such other information about the Company, any
Subsidiaries, and their business, financial condition and
results of operations as the requesting holder or purchaser of
such Underlying Shares shall request in order to comply with
Rule 144A, as amended, and the antifraud provisions of the
federal and state securities laws.
The Company hereby represents and warrants to any such requesting
holder and any prospective purchaser of Underlying Shares from such holder that
the information provided by the Company pursuant to this Section 14(j)
30
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
COLLEGIATE PACIFIC, INC.
By:
--------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
-----------------------------------------
HOLDER
31
EXHIBIT B
Name of Purchaser:
-----------------
Amount of Subordinated Convertible
Promissory Note:
-----------------
COLLEGIATE PACIFIC, INC.
SUBSCRIPTION AGREEMENT, QUESTIONNAIRE AND INVESTMENT REPRESENTATION
THE SECURITIES BEING SUBSCRIBED TO HEREBY AND THE UNDERLYING
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER APPLICABLE
STATE SECURITIES LAWS.
FURTHER, THE SECURITIES BEING SUBSCRIBED TO MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO TRANSACTIONS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES
LAWS, OR COMPLIANCE THEREWITH.
1. INSTRUCTIONS. This subscription agreement, questionnaire and
investment representation must be executed and delivered by each prospective
purchaser of the Subordinated Convertible Promissory Notes (the "Note") of
Collegiate Pacific, Inc. (the "Company") being offered (the "Offering") by the
Company.
If the purchaser is a partnership, it must furnish a copy of its
partnership agreement and such further information as may be required to satisfy
the Company that such partnership is a pre-existing business entity which was
not formed specifically for the purpose of making this investment. If the
purchaser is a business trust (XXX, Xxxxx plan trust, qualified pension and/or
profit sharing plan trust, custodial account or other such account) or a
corporation or other legal entity, unless otherwise indicated, all responses are
being made on behalf of each of the principal beneficiaries of the trust and the
shareholders of the corporation. In addition, you must furnish the Company with
a copy of the instrument (including all amendments) creating the entity.
Your answers will be kept strictly confidential at all times; provided,
however, that the Company may disclose the information provided for the purpose
of proving compliance with any and all applicable laws, including securities and
tax laws.
Any questions regarding this document or your investment should be
directed to Xx. Xxxxxxx X. Xxxxxxxxxx, Collegiate Pacific, Inc., 00000 Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxx 00000, Telephone: (000) 000-0000.
32
2. General Information.
Age:
---------------
Residence Address:
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Telephone:
----------------------------------------------------
Social Security No.:
----------------------------------------------------
Occupation:
----------------------------------------------------
Describe Current Employment:
-------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
How Long:
----------------------------------------------------
3. Net Worth and Income.
Net Worth (exclusive of homes, household furnishings and automobiles):
-----------------------------------------------------------------------
Net Worth (inclusive of homes, household furnishings and automobiles):
-----------------------------------------------------------------------
Taxable Income for 1999 and 2000 (estimate):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Please attach any and all documentation which you feel is necessary to
verify your net worth. In addition, you agree upon request of the
Company to deliver to a designated officer of the Company copies of
your 1999 and 2000 (estimate) state (if any) and federal income tax
returns.
33
4. Knowledge and Experience in Business and Financial Affairs. Briefly
and generally describe all principal positions held during the last ten (10)
years or since your graduation from college, if earlier. (Attach a resume in
lieu of completing this question if you prefer.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Have you invested with the Company previously:
Yes No
------------- -------------
Have you ever invested in any "restricted" stock or unmarketable
securities previously:
Yes No
------------- -------------
If so, please briefly explain the nature of the investments:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(In lieu of answering the two immediately preceding questions, you may
attach such information as you feel is necessary to provide the
information requested.)
5. Consideration for Purchase. The undersigned (the "Purchaser") hereby
agrees to purchase a Note at a purchase price of $____________ and under the
terms and conditions as set forth in the Purchase Agreement dated February 16,
2000 (the "Agreement").
6. Understandings of the Purchaser. The Purchaser acknowledges,
understands and agrees that:
(a) The Company reserves the right to reject all or any part of this
subscription in its sole discretion.
(b) The Purchaser will be promptly notified by the Company whether this
subscription has been accepted, either in whole or in part, and if not accepted
in whole, agrees to accept the return of a proportionate part of the funds
tendered to the Company as a refund or a return, and in either case without
interest or deduction.
(c) The Note will bear a legend restricting transfer as described in
the Agreement.
34
(d) Neither the Note Stock nor the shares of the Company's Common Stock
into which the Note may be converted have been registered under the Securities
Act of 1933, as amended, or any applicable state law (collectively, the
"Securities Acts"); further, such securities may not be sold, offered for sale,
transferred, pledged, hypothecated or otherwise disposed of except in compliance
with the Securities Acts; further, the legal consequences of the foregoing mean
that the Purchaser must bear the economic risk of the investment in the Note for
an indefinite period of time; further, if the Purchaser desires to sell or
transfer all or any part of the Note or the Common Stock issuable upon
conversion thereof, the Company may require the Purchaser's counsel to provide a
legal opinion that the transfer may be made without registration under the
Securities Acts; further, other restrictions discussed elsewhere herein and in
the Agreement and Note may be applicable; and further, the Purchaser is subject
to the restriction on transfer described herein and in the Agreement and the
Company will issue stop transfer orders with the Company's transfer agent to
enforce such restrictions.
(e) No federal or state agency has made any findings or determination
as to the fairness of an investment in the Company or made any recommendation or
endorsement of this investment.
7. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) My commitment to investments that are not readily marketable is not
disproportionate to my net worth, and my investment in the Note will not cause
such overall commitment to become excessive.
(b) I have the financial ability to bear the economic risks of my
investment, have adequate means of providing for my current needs and personal
contingencies, and have no need for liquidity in this investment.
(c) The aggregated purchase price for the Note does not exceed 10% of
my net worth.
(d) I have evaluated the high risks of investing in the Company and
have such knowledge and experience in financial and business matters in general
and in particular with respect to this type of investment that I am capable of
evaluating the merits and risks of any investment in the Note.
(e) I have carefully read the Agreement, including the exhibits and
schedules thereto, and I have been given the opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of this
investment, and to obtain additional information necessary to verify the
accuracy of the information I desired in order to evaluate my investment, and in
evaluating the suitability of this investment I have not relied upon any
representations or other information (whether oral or written), other than that
furnished to me by the Company or its representatives. The Company has delivered
to me copies of its 1999 Annual Report, that certain Company Proxy Statement
dated December 17, 1999, that certain Form SB-2 Registration Statement filed
with the Securities and Exchange Commission on January 14, 2000, and that
certain Form 10-QSB filed with the Securities and Exchange Commission on
February 14, 2000.
(f) I have had the opportunity to discuss with my professional, legal,
tax and financial advisors the suitability of an investment in the Company for
my particular tax and financial situation and all information that I have
provided to the Company concerning myself and my financial position is correct
and complete as of the
35
date set forth below, and if there should be any material change in such
information prior to my admission as a noteholder of the Company, I will
immediately provide such information to the Company.
(g) The residence set forth above is my true and correct residence, and
I have no present intention of becoming a resident or domiciliary of any other
state or jurisdiction.
(h) In making the decision to purchase the Note, I have relied solely
upon independent investigations made by me or on my behalf.
(i) I am acquiring the Note for my own personal account, for investment
purposes only, and am not purchasing with a view to, or for, the resale,
distribution, subdivision or fractionalization thereof.
(j) I am neither a member of, nor am I affiliated with or employed by a
member of, the National Association of Securities Dealers, Inc., nor am I
employed by or affiliated with a broker-dealer registered with the Securities
and Exchange Commission nor with any similar agency of any state. (Please advise
the Company in writing of any exceptions to this statement.)
(k) I am an accredited purchaser: Yes No
---------- ----------
If your answer to this representation was yes, please check
one or more of the following, if applicable:
(1) I am an institutional investor within the meaning
of Rule 501(a)(1) or Regulation D.
-------
(2) I am a private business development company for
purposes of Section 202(a)(22) of the Investment Advisors Act
of 1940.
-------
(3) I am a non-profit organization within Section
501(c)(3) of the Internal Revenue Code.
------
(4) I am an Employee Benefit Plan subject to ERISA
and have a plan fiduciary which is a bank, insurance company
or registered investment advisor or I have total assets of at
least $5,000,000.
--------
(5) I am an executive officer, director or principal
stockholder of the Company.
-------
(6) I am an individual whose present net worth (or
whose joint net worth with my spouse) excess $1,000,000.
------
(7) I am an individual who had income in excess of
$200,000 in each of the last two years or joint income with my
spouse in excess of $300,000 in each of those years, and
reasonably expect to have income in excess of those levels in
the current year.
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36
(8) I am an entity all of whose equity owners are
accredited investors under paragraphs 1, 2, 3, 4, 6 or 7
above.
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The foregoing representations, warranties, agreements, undertakings and
acknowledgments are made by me with the intent that they be relied upon in
determining my suitability as a purchaser of the Note. In addition, I agree to
notify the Company immediately of any change in any representation, warranty or
other information. If more than one person is signing this agreement, each
representation, warranty and undertaking herein shall be a joint and several
representation, warranty and undertaking of each such person. If the Purchaser
is a partnership, corporation, trust or other entity, the Purchaser further
represents and warrants that the entity was not specifically formed to acquire
the Note. If the Purchaser is a partnership, the Purchaser further represents
that the funds to make this investment were not derived from additional capital
contributions of the partners of such partnership.
8. Indemnity by Purchaser. The Purchaser understands and acknowledges
that the Company is relying upon the representations, warranties and agreements
made by the Purchaser to and with the Company herein and, thus, hereby agrees to
indemnify the Company, its officers and directors, agents, attorneys and
employees, and agrees to hold each of them harmless from and against any and all
loss, damage, liability or expense, including reasonable attorneys' fees, that
it or any of them may suffer, sustain or incur by reason of or in connection
with any misrepresentation or breach of warranty or agreement made by the
Purchaser under this Agreement, or in connection with the sale or distribution
by the Purchaser of the securities he is purchasing in this Offering in
violation of the Securities Acts or any other applicable law.
9. Miscellaneous Provisions.
(a) Further Assurances. At any time and from time to time after the
date of this Agreement, each party shall execute such additional instruments and
take such other and further actions as may be reasonably requested by any other
party to confirm or perfect title to any property transferred hereunder or
otherwise to carry out the intent and purpose of this agreement.
(b) WAIVER. Any failure on the part of any party hereunder to comply
with any of their obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed; however, waiver on one
occasion does not operate to effectuate a waiver on any other occasion.
(c) HEADINGS. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas.
(e) NO ORAL MODIFICATION. This agreement may be amended solely in
writing, and only after the mutual agreement of the parties affected thereby.
37
(f) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties, covenants and agreements contained herein shall
survive the date and execution of this Agreement.
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Name of Subscriber (please print)
Date:
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Signature of Subscriber or Trustee or Custodian,
as applicable
Address:
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Social Security No.:
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If this is a joint subscription, please complete the following:
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Name of Subscriber (please print)
Date:
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Signature of Subscriber
Address:
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Social Security No.:
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CHECK ONE: (Tenants in Common)
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(Joint Tenants with Right of Survivorship)
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38
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This subscription is accepted on this _______ day of ____________________, 2000.
COLLEGIATE PACIFIC, INC.
By:
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Authorized Representative
