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EXHIBIT 4.1
INVESTMENT AND VOTING AGREEMENT
This Investment and Voting Agreement is made as of October 19, 1998,
between LAS VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation (the
"Company"), whose address is 0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx, Xxxxx 0, Xxx
Xxxxx, Xxxxxx 00000, and ASI GROUP, L.L.C., a Nevada limited liability company
(the "Purchaser"), whose address is c/o Agassi Enterprises, Inc., 0000 Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000.
SECTION 1
AUTHORIZATION AND SALE OF COMMON STOCK
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
Two Million Three Hundred Three Thousand Two Hundred Ninety (2,303,290) shares
(the "Shares") of its Common Stock ("Common Stock"), no par value.
1.2 SALE OF COMMON STOCK. Subject to the terms and conditions hereof,
and in reliance upon the representations, warranties and agreements of the
parties contained herein, the Company will issue and sell to the Purchaser, and
the Purchaser will buy from the Company, Two Million Three Hundred Three
Thousand Two Hundred Ninety (2,303,290) shares of Common Stock at a purchase
price of One Dollar and Eight and One-Half Cents ($1.085) per share, for an
aggregate purchase price of Two Million Five Hundred Thousand Dollars
($2,500,000.00).
1.3 ADJUSTMENT OF PRICE AND/OR TERMS. (a) If at any time and each time
within three (3) years after the Closing (as defined in Section 2.1 below), the
Company offers to sell or grants, sells or issues shares of its capital stock to
any persons or entity other than the Purchaser at a lower price per share than
the purchase price paid by the Purchaser for the Shares and/or on more favorable
terms and conditions than those afforded to the Purchaser in connection with the
purchase of the shares of Common Stock (taking into account any equitable
adjustment in accordance with the Anti-Dilution Provisions), the Company agrees
to retroactively apply such lower price and/or more favorable terms and
conditions to the Shares purchased by the Purchaser. At the Purchaser's request,
the Company shall either (i) issue the Purchaser additional shares of Common
Stock in the amount equal to (A) the amount of any such overpayment by the
Purchaser divided by (B) such lower price charged by the Company to any person
or entities or (ii) deliver to the Purchaser the amount of any such overpayment
in cash.
(b) If at any time after the Closing, while the Purchaser is an equity
holder of the Company or has options, warrants or other rights to acquire equity
of the Company, the Company offers to sell or grants, sells or issues shares of
its capital stock to any of Messrs. Xxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxx Xxxxxx
or Xxxxxx Enterprises Ltd. or their respective
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xxxxxxxxxx (xxxxxxxxxxxx, "Xxxxxx") at any price or for any consideration
(including, but not limited to, provision of services) the Company shall issue
the Purchaser additional shares of Common Stock so as to maintain the relative
proportionate equity ownerships of the Purchaser, on the one hand, and Boreta,
on the other hand, in the Company as they were immediately prior to such offer,
grant, sale or issuance, assuming the consummation of such offer, grant, sale or
issuance.
SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Common
Stock hereunder shall be held at the offices of the Company sixteen days from
the execution hereof (the "Closing"), or at such other time and place upon which
the Company and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates, registered in the Purchaser's name representing
Two Million Three Hundred Three Thousand Two Hundred Ninety (2,303,290) Shares
against payment of the purchase price therefor, by check payable to the Company
or wire transfer per the Company's instructions. The total purchase price shall
be paid by the Purchaser to the Company in one installment without interest
thereon.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B (which Schedule makes specific reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty to which such exception
shall apply), the Company represents and warrants to the Purchaser as follows:
3.1 DEFINITION OF MATERIAL. For purposes of this Section 3, material
shall mean anything having a value or effect of more than $50,000.
3.2 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Colorado and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction, and the failure to be
qualified will not have a material adverse affect on the Company's business as
now conducted or as now proposed to be conducted. The Company has furnished the
Purchaser with copies of its Articles of Incorporation and By-Laws, as amended.
Said copies are true, correct and complete and contain all amendments through
the Closing Date.
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3.3 CORPORATE POWER. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, at the Closing will
have all requisite legal and corporate power and authority to sell and issue the
Shares hereunder, to issue the Option (as defined below), to issue the Option
Shares (as defined below) upon exercise of the Option and to carry out and
perform its obligations under the terms of this Agreement.
3.4 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.5 CAPITALIZATION. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, of which 5,831,807 shares are
issued and outstanding, and 5,000,000 shares of Preferred Stock, of which no
shares are issued and outstanding. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. Options to
purchase 432,000 shares of Common Stock are issued and outstanding under the
Company's employee stock option plan. All outstanding securities of the Company
were issued in compliance with applicable federal and state securities laws.
Except as set forth above, there are no option, warrants or other rights to
purchase any of the Company's capital stock. Except as set forth in any
agreement entered into with the Purchaser, the Company is not a party or subject
to any agreement or understanding, and there is no agreement or understanding
between any persons that affects or related to the voting or giving of written
consents with respect to any security or the voting by a director of the
Company.
3.6 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Option Agreement (as defined
below) by the Company, the authorization, sale, issuance and delivery of the
Shares, the Option, and the Option Shares and the performance of all of the
Company's obligations hereunder and under the Option Agreement has been taken or
will be taken prior to the Closing. This Agreement and the Option Agreement,
when executed and delivered by the Company, shall constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms. The Shares, when issued in compliance with the provisions of
this Agreement, will be validly issued, fully paid and nonassessable the Option
Shares have been duly and validly reserved and, when issued in compliance with
the provisions of this Agreement, and the Option Agreement will be validly
issued, fully paid and nonassessable; and the Shares and Option Shares will be
free of any liens or encumbrances, other than any liens or encumbrances created
by or imposed upon the holders hereof through no action of the Company;
provided, however, that the Option Shares will be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein. The
Shares are not subject to any preemptive rights or rights of first refusal.
3.7 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser
its audited balance sheet and statements of operations and cash flow was of and
for the period ended December 31, 1997, and its combined unaudited balance sheet
and statements of operations
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and cash flows as of and for the period ended June 30, 1998 (collectively the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except that the unaudited financial statements do not contain
footnotes. The Financial Statements accurately set out and describe the
financial condition and operating results of the Company as of the dates, and
for the period, indicated therein. The financial statements for the year ended
December 31, 1997, were audited by Xxxxxx Xxxxxxxx LLP.
3.8 ABSENCE OF CHANGES. Since June 30, 1998: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no materially adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company other than
changes in the ordinary course of business, none of which, individually or in
the aggregate, has been materially adverse, (c) there has been no damage to,
destruction of or loss of physical property (whether or not covered by
insurance) materially and adversely affecting the business or operations of the
Company, (d) the Company has not declared or paid any dividend or made any
distribution on its stock, or redeemed, purchased or otherwise acquired any of
its stock, (e) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there has
been no resignation or termination of employment of any key officer, consultant
or employee of the Company, and the Company does not know of the impending
resignation or termination of employment of any such officer, consultant or
employee that if consummated would have a material adverse effect on its
business, (g) there has been no labor dispute involving the Company or its
employees and none is pending or, to the best of the Company's knowledge,
threatened, (h) there has not been any change, except in the ordinary course of
business, in the contingent obligations of the Company, by way of guaranty,
endorsement, indemnity, warranty or otherwise, (i) there have not been any loans
made by the Company to any of its employees, officers or directors other than
travel advances and office advances made in the ordinary course of business and
(j) to the best of the Company's knowledge, there has been no other event or
condition of any character pertaining to and materially and adversely affecting
the assets or business of the Company.
3.9 MATERIAL LIABILITIES. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate) except
(a) the liabilities and obligations set forth in the Financial Statements, (b)
liabilities and obligations which have been incurred subsequent to June 30,
1998, in the ordinary course of business which have not been in the aggregate
materially adverse, (c) liabilities and obligations under lease for its
principal offices and for equipment, and (d) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, and has good title to all of
its leasehold interests in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the
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lien of current taxes not yet due and payable. Each of the Company's assets is
in good repair and good, marketable and operating condition and is suitable for
the purposes for which it presently is being used and is intended to be used by
the Company and is adequate and suitable to meet all present and reasonably
anticipated future requirements of the Company. The Company's assets conform to
all applicable laws, ordinances, codes, rules and regulations, and the Company
has not received any notice to the contrary. The Company does not own, of record
or beneficially, any real property. Exhibit C sets forth a list and description
of all property leased or subleased to or by the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS; NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Articles or By-Laws, or, in any
material respect, of any term or provision of any mortgage, indebtedness,
indenture, contract, security agreement, agreement, instrument, judgment or
decree, and, to the best of its knowledge, is not in violation of any order,
statute, rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with this Agreement and the Option Agreement, and
the issuance of the Common Stock, the Option and the Option Shares have not
resulted and will not result in any violation of, or conflict with, or
constitute a default (or an event that might, with the passage of time or the
giving of notice or either of them, constitute a default) any of the terms of,
result in the termination of, result in the loss of any right under, or give to
any other person the right to cause such a termination of or loss under and will
be in compliance with, the Company's Articles, By-Laws and all of its
agreements, permits and licenses or any provision of federal, state, local or
foreign statute rule ordinance or regulation applicable to the Company or result
in the creation of, any mortgage, pledge, lien, encumbrance or charge upon any
of the capital stock, properties or assets of the Company in the creation,
maturation or acceleration of any liability or obligation of the Company or the
creation, maturation or acceleration of any liability or obligation of the
Company (or give to any other person the right to cause such a creation,
maturation or acceleration) and there is no such violation or default which
adversely affects the business of the Company or any of its properties or
assets.
3.12 INTANGIBLE ASSETS.
(a) The Company (i) owns or has the right to use, free
and clear of all liens, claims and restrictions, all
Intellectual Property (as hereinafter defined) used
in the conduct of its business as now conducted or as
proposed to be conducted without infringing upon or
otherwise acting adversely to the right or claimed
right of any person under or with respect to any of
the foregoing, and (ii) is not obligated or under any
liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner of, license
of, or other claimant to, any patent, trademark,
trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the
conduct of its business or otherwise. "Intellectual
Property" means (a) all inventions (whether
patentable or unpatentable) and whether or not
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reduced to practice, all improvements thereto, and
all patents, patent applications and patent
disclosures, together with all reissuance,
continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all
translations, adaptations, derivations and
combinations thereof and including all goodwill
associated therewith, and all applications,
registrations and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all
applications, registrations and renewals in
connection therewith, (d) all mask works and all
applications, registrations and renewals in
connection therewith, (e) all trade secrets and
confidential business information (including ideas,
research and development, know-how, formulas,
compositions, manufacturing and producing processes
and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing
and cost information, and business and marketing
plans and proposals), (f) all computer software and
information systems, programs, (including data and
related documentation), whether owned or leased by
the Company, (g) all other proprietary rights and (h)
all copies and tangible embodiments thereof (in
whatever form or medium). The Company has taken all
necessary action to maintain and protect each item of
Intellectual Property that it owns or uses and has
never granted any sublicense or similar right to any
third party with respect to such Intellectual
Property.
(b) The Company owns and has the unrestricted right to
use all Intellectual Property required for or
incidental to the development, construction and
operation of the SportPark segment of its business,
free and clear of any rights, liens or claims of
others, including without limitation, former
employers of all current and former employees,
consultants, officers, directors and shareholders of
the Company.
(c) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties,
and none of the stockholders and directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Company has
ever received any charge, complaint, claim, demand or
notice alleging any such interference, infringement,
misappropriation or violation (including any claim
that the Company must license or refrain from using
any Intellectual Property rights of any third party).
No third party has interfered
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with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property
rights of the Company.
(d) Exhibit D identifies each patent or registration
which has been issued to the Company with respect to
any of its Intellectual Property, each pending patent
application or application for registration which the
Company has made with respect to any of its
Intellectual Property, and each license, agreement or
other permission which the Company has granted to any
third party with respect to any of its Intellectual
Property. The Company has delivered to the Purchaser
correct and complete copies of all such patents,
registrations, applications, licenses, agreements and
permissions (as amended to date). Exhibit D also
identifies each trade name or unregistered trademark
used by the Company in connection with any of its
businesses. With respect to each item of Intellectual
Property required to be identified in Exhibit D: (i)
the Company possesses all right, title and interest
in and to the item, free and clear of any Liens,
license or other restriction, (ii) the item is not
subject to any outstanding injunction, judgment,
order, decree, ruling or charge, (iii) no action,
suit proceeding hearing, investigation, charge,
complaint, claim or demand is pending or, to the
knowledge of each of the shareholders and the
directors and officers (and employees with
responsibility for Intellectual Property matters) of
the Company, is threatened which challenges the
legality, validity, enforceability, use or ownership
of the item and (iv) the Company has never agreed to
indemnify any person for or against any interference,
infringement, misappropriation, or other conflict
with respect to the item.
3.13 LITIGATION, ETC. There is no suit, action, hearing, investigation,
claim or litigation, or legal, administrative, arbitration or other proceeding
pending or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company, its business or any of its property or assets,
before any court, arbitrator, or federal, state, municipal or other governmental
board, department, agency or instrumentality, and there is no basis for any such
action. There is no judgment, decree, injunction, ruling, award, charge, order
or writ of any court, governmental department, commission, agency,
instrumentality, arbitration or other person outstanding against, binding upon
or involving the Company, its business, any directors or officers of the
Company. None of the matters set forth on Exhibit B could result in any material
adverse effect. The Company owns policies of casualty, liability or other forms
of insurance which provide coverages in amount and scope sufficient to cover
every claim, action, cause of action, suit, proceeding, litigation, arbitration
or investigation arising out of, related to, or in connection with those matters
listed on the schedule of exception. Neither the Company nor any of its
directors, officers or employees is currently
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charged with, or is currently under investigation with respect to, any violation
of any provision of any foreign, federal, state or local law or administrative
regulation in respect of the business of the Company. The Company is not in
default with respect to any judgment, decree, injunction, ruling, award, order
or writ of any foreign, federal, state, municipal agency or other governmental
department, board, commission, bureau, agency or instrumentality.
3.14 EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company. There are no
controversies pending nor, to the best knowledge of the Company any basis of any
such controversies, between the Company and any of its employees. To the
knowledge of the Company, and the directors and officers (and employees with
responsibility for employment matters) of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not bound by any collective bargaining agreement, nor
has the Company experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has not committed
any unfair labor practice. None of the shareholders or the directors or officers
(or employees with responsibility for employment matters) of the Company has any
knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company.
3.15 EMPLOYEE AGREEMENTS. There are no pension, profit-sharing, bonus,
group insurance, death benefit, vacation pay, severance pay, sick leave, holiday
pay, welfare, or any other employee benefit or "fringe benefit" plans or
arrangements relating to the current or former employees or consultants of the
Company. In addition, there are no employment, deferred compensation, collective
bargaining, retainer, savings, consulting, non-competition, retirement or
incentive agreements, contracts, plans or arrangements relating to, with or for
the benefit of any officers or employees of the Company or other persons.
3.16 CERTAIN TRANSACTIONS. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever; none of said officers,
directors or shareholders, or any members of their immediate families, are
indebted to the Company or have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company, except that officers, directors and/or shareholders of the
Company may own less than 1% of the stock of publicly-traded companies which may
compete with the Company. No officer, director or shareholder, or any member of
their immediate families, is, directly or indirectly, interested in any contract
with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.17 MATERIAL CONTRACTS AND OBLIGATIONS. Attached hereto as Exhibit E
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is
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a party or by which it is bound that are material to the conduct and operations
of its business and properties, which provide for payments to or by the Company;
or which involve transactions or proposed transactions between the Company and
its officers, directors, affiliates or any affiliate thereof. Copies of certain
of such agreements and contracts and documentation evidencing such liabilities
and other obligations have been made available for inspection by the Purchaser
and its counsel. All of such agreements and contracts are valid, binding and in
full force and effect in all respects, assuming due execution by the other
parties to such agreements and contracts. To the best knowledge of the Company,
the Company and each other party to each such agreement and contract has
performed all obligations required to be performed by it thereunder and is not
in breach or default, and is not alleged to be in breach or default, in any
respect thereunder, and no event has occurred and no condition or state of facts
exists (or would exist upon the giving of notice or the lapse of time or any of
them) that would become or cause a breach, default or event of default
thereunder, would give to any person the right to cause such a termination or
would cause an acceleration of any obligation thereunder.
3.18 REGISTRATION RIGHTS. Except as set forth in this Agreement, the
Company is not under any contractual obligation to register (as defined in
Section 8.1 below) any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.19 GOVERNMENTAL CONSENT, ETC. No consent, approval, order or
authorization of (of designation, declaration or filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Common Stock, or the consummation of any other transaction contemplated hereby,
except qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) or the offer and sale of the Common
Stock under applicable estate securities laws, which filings and qualifications,
if required, will be accomplished in a timely manner.
3.20 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Common
Stock and the Option Shares (as defined in Section 7.6 below) to be issued in
conformity with the terms of this Agreement, and the issuance of the Option
Shares upon exercise of the Option, constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act").
3.21 BROKERS OR FINDERS. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.22 TAX MATTERS. The Company (a) has timely filed all tax returns that
are required to have been filed by it with all appropriate federal, state,
county and local governmental agencies (and all such returns fairly reflect the
Company's operations for tax purposes), (b) has timely paid all taxes owed by it
for which it is obligated to withhold from amounts owing
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to any employee (including without limitation social security taxes), creditor
or third party (other than taxes the validity of which are being contested in
good faith by appropriate proceedings), and (c) has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to a tax assessment or deficiency. The assessment of any additional
taxes for a period for which returns have been filed is not expected to exceed
the recorded liability therefor, and there are no material unresolved questions
or claims concerning the Company's tax liability. The Company's tax returns have
not been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to any
of said returns which, if determined adversely to the Company, would result in
the assertion by any taxing authority of any valid deficiency in any material
amount for taxes.
3.23 INSURANCE. With respect to each insurance policy maintained by the
Company: (a) the policy is legal, valid, binding, enforceable and in full force
and effect, (b) the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
consummation of the transactions contemplated hereby, (c) neither the Company
nor any other party to the policy is in breach of default (including with
respect to the payment of premiums or the giving of notices) and (d) no party to
the policy has repudiated any provision thereof. The Company has been covered
since its formation by insurance in type, scope and amount that (x) meet the
minimum requirements of any contract, lease or agreement to which the Company is
a party and (y) is customary and reasonable for the business in which it has
engaged during such period including, without limitation, fire, casualty,
liability and key-man life (on the lives of Xxx and Xxxx Xxxxxx) insurance
polices. The Company has not failed to give any notice or present any claim
under any insurance policy in a due and timely fashion.
3.24 ENVIRONMENTAL AND SAFETY REGULATIONS. The Company is not in
violation of any environmental laws or regulations, including without limitation
any and all applicable federal, state and local laws, regulations and ordinances
relating to air and water pollution and handling and disposal of chemical and
hazardous materials (hereinafter the "Environmental Laws"). The Company
possesses all of the authorizations, permits and approvals required to be
obtained by applicable Environmental Laws; neither the Company nor any
stockholder has received any notice from any governmental authority or has
knowledge of any governmental inquiry or investigation or any other claim, suit
or proceeding against or involving the Company with respect to any actual or
alleged violation of any applicable Environmental Law and all hazardous waste
and chemical waste materials have been disposed of in accordance with all
applicable Environmental Laws. There have been no spills, dumping, discharge or
clean-up of hazardous waste or chemical materials in violation of any
Environmental Laws on or at any premises owned or any premises occupied by the
Company.
3.25 EMPLOYEE BENEFIT PLANS.
(a) The Company has never maintained or contributed to,
and does not maintain or contribute to any Employee
Benefit Plan as defined in the Employee Retirement
Income Security Act of
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1974, as amended. The Company has not incurred any
liability under ERISA (including any withdrawal
liability) or under the Internal Revenue Code of
1986, as amended Code (the "Code"), with respect to
any Employee Benefit Plan.
(b) The Company does not contribute to, nor has ever had
contributed to and has never been required to
contribute to any multi-employer plan or has any
liability (including withdrawal liability) under any
multi-employer plan.
(c) The Company does not maintain or contribute to, nor
has it ever maintained or contributed to, nor has it
ever been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for
current or future retired or terminated employees,
their spouses, or their dependents (other than in
accordance with Code Section 4980B).
3.26 MINUTE BOOKS. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately.
3.27 LEGAL COMPLIANCE. The Company has complied with all applicable
laws, statutes, and ordinances (including without limitation all rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and
charges thereunder) of federal, state, local and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced against
it alleging any failure to so comply. The Company has all permits, certificates,
licenses, approvals and other authorizations required in connection with the
operation of its business, all of which are valid and effective. No notice has
been issued and no investigation or review is pending or threatened by any
governmental entity with respect to (a) any alleged violation by the Company of
any law, statute or ordinance, rule, regulation, code, plan, injunction,
judgment, order, decree, ruling, charge, policy or guideline of any federal,
state, local or foreign governmental entity(or agency thereof), or (b) any
alleged failure to have all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of the business of the
Company.
3.28 LVDGT AGREEMENT. The Investment Agreement (the "LVDGT Agreement")
entered into as of the date hereof between LVDGT and SAGC and attached as Annex
3.28 hereto is valid, binding and in full force and effect.
3.29 SAGC. The Company's most significant asset is the Company's equity
holding in Saint Xxxxxxx Golf Corporation, a Nevada corporation ("SAGC"). The
Company owns 2 million shares of the Common Stock of SAGC (collectively, the
"SAGC Shares"). Each of the SAGC Shares has been duly authorized, validly
issued, fully paid and
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12
nonassessable. The Company has good, valid and marketable title to the SAGC
Shares, free and clear of any lien, charge, encumbrance, security interest,
claim or fight of others of whatever nature. No person or entity has any power
or right, whether or not shared with any other person or entity, to dispose of
or direct the disposition of any SAGC Shares or vote or direct the voting of any
SAGC Shares. The Company hereby makes the same representations and warranties as
contained in Section 3 of the LVDGT Agreement with respect to SAGC for the
benefit of the Purchaser, which representations and warranties are incorporated
herein by reference in their entirety.
3.30 DISCLOSURE. This Agreement with the Exhibits hereto and all
information provided by the Company to the Purchaser do not contain any untrue
statement of a fact or omit to state a fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with
respect to the purchase of the Shares as follows:
4.1 EXPERIENCE. It has experience in evaluating and investing in
private placement transactions of securities in companies so that it is capable
of evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Shares have
not been registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
4.3 RULE 144. It acknowledges that the Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a "brokers
transaction" or in transactions directly with a "market maker" and the number of
shares being sold during any three month period not exceeding specified
limitations.
4.4 ACCESS TO DATA. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and has
had the
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opportunity to review the Company's facilities. It has also had an opportunity
to ask questions of officers of the Company, which questions were answered to
its satisfaction. It understands that such discussions, as well as any written
information issued by the Company, were intended to describe certain aspects of
the Company's business and prospects but were not a thorough or exhaustive
description. However, no investigation by, or furnishing of information to, the
Purchaser shall affect or modify the representations, warranties and agreements
of the Company set forth herein or the right of the Purchaser to rely
exclusively thereon and to seek and obtain all damages and other remedies
available to the Purchaser in connection with the breach of any of the
representations, warranties and covenants contained herein.
4.5 AUTHORIZATION. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms subject to (a) the laws of
bankruptcy and the laws affecting creditor's rights generally and (b) the
availability of equitable remedies.
4.6 BROKERS OR FINDERS. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the Purchaser,
any liability for brokerage or finder's fees or agents' commissions or any
similar charges in connection with this Agreement.
4.7 REQUIRED SEC FILINGS. The Purchaser acknowledges that within 10
days after the Closing, it will be required to file a Schedule 13D or Schedule
13G, as appropriate, or Schedule 13G, as appropriate, and a Form 3 with the
Securities and Exchange Commission.
SECTION 5
THE PURCHASER'S CONDITIONS TO CLOSING
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the below-listed conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto. If at the Closing Date any of the conditions specified in this
Agreement shall not have been fulfilled, the Purchaser shall, at the Purchaser's
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other rights Investor may have by reason of such
nonfulfillment.
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true, complete and
correct when made, and shall be true, complete and correct on the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing
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Date, and certifying, among other things, to the fulfillment of the conditions
specified in Sections 5.1 and 5.2 of this Agreement.
5.4 GOOD STANDING CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of good standing of the Company under the laws of the
State of Colorado.
5.5 LEGAL MATTERS. All matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been reasonably
approved by counsel to the Purchaser.
5.6 CO-SALE AGREEMENT. The Purchaser and Xxxx Xxxxxx, the Company, Xxx
Xxxxxx and Xxxx Xxxxxx shall each have entered into a Co-Sale Agreement which
shall have a term of two years in the form attached hereto as Exhibit F.
5.7 LVDGT AGREEMENT. The transactions contemplated by the LVDGT
Agreement have been consummated or are being consummated simultaneously
herewith.
5.8 MERGER. The terms of the proposed merger between the Company and
SAGC shall be entirely satisfactory, in both form and substance, to the
Purchaser in its sole discretion. Without limiting the foregoing, the terms of
such merger shall provide that the Purchaser's economic interest in the Company
shall not be diluted by the consummation of such merger.
5.9 VOTING AGREEMENT. The voting agreement by and among the Purchaser
and the individuals listed therein (the "Voting Agreement"), in the form
attached hereto as Exhibit A, has been executed and is valid, binding and in
full force and effect.
5.10 OPINION OF THE COMPANY'S COUNSEL. The Purchaser shall have
received from Krys, Boyle, Xxxxxxxx & Xxxxxx, P.C., counsel to the Company, an
opinion dated the Closing Date, in form and substance satisfactory to the
Purchaser, to the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Colorado, and the Company has the requisite
corporate power and authority to own it properties
and to conduct its business.
(b) The Company is not presently required to be qualified
to do business as a foreign corporation in any state
or jurisdiction of the United States.
(c) The Company has the requisite corporate power and
authority to execute, deliver and perform this
Agreement and the Option Agreement. The Agreement and
the Option Agreement have been duly and validly
authorized by the Company, duly
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executed and delivered by an authorized officer of
the Company and constitutes legal, valid and binding
obligations of the Company, subject to bankruptcy and
other laws of general application affecting the
rights and remedies of creditors and except insofar
as the enforceability of the indemnification
provisions of Section 8.11 of the Agreement may be
limited by applicable laws and except that no opinion
need be given as to the availability of equitable
remedies.
(d) The capitalization of the Company is as follows:
(i) The authorized capital stock of the Company
consists of 15,000,000 shares of Common
Stock, of which 5,831,807 shares are issued
and outstanding, and 5,000,000 shares of
Preferred Stock, of which no shares are
issued and outstanding. The outstanding
shares have been duly authorized and validly
issued, and are fully paid and
nonassessable. Options to purchase 432,000
shares of Common Stock are issued and
outstanding under the Company's employee
stock option plan. All outstanding
securities of the Company were issued in
compliance with applicable federal and state
securities laws. Except as set forth above,
there are no option, warrants or other
rights to purchase any of the Company's
capital stock.
(ii) PREFERRED STOCK. 5,000,000 shares of Stock,
of which no shares are issued and
outstanding.
(iii) COMMON STOCK. 15,000,000 shares of Common
Stock, of which (A) 5,831,807 shares are
issued and outstanding and (B) 2,303,290
shares are being purchased pursuant to this
Agreement. All such shares of Common Stock
have been duly authorized, issued and
delivered and are validly outstanding, fully
paid and nonassessable and were issued in
compliance with all applicable federal and
state securities laws and approved by all
requisite shareholder action.
(iv) Except for (A) the rights of first refusal
contained in Section 9 hereof; (B) 347,975
shares of Common Stock reserved for issuance
upon the exercise of the stock option
granted herein, (C) 432,000 shares of Common
Stock reserved for issuance to employees and
consultants upon exercise of outstanding
stock options,
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there are no preemptive rights or, to the
best of counsel's knowledge, options,
warrants, conversion privileges or other
rights (or agreements of any such rights)
outstanding to purchase or otherwise obtain
any of the Company's securities.
(e) The certificates representing shares of Common Stock
are in due and proper form and have been duly and
validly executed by the officers of the Company named
thereon.
(f) The execution, delivery, performance and compliance
with the terms of this Agreement and the Option
Agreement do not violate any provision of any
federal, state or local law, rule or regulation or of
any judgment, writ, decree or order binding upon the
Company or any provision of the Company's amended
Articles of Incorporation ("Articles") or By-Laws.
(g) All consents, approvals, orders or authorizations of,
and all qualifications, registrations, designations,
declarations or filings with, any federal or state
governmental authority on the part of the Company
required in connection with the consummation of the
transactions contemplated by this Agreement and the
Option Agreement have been obtained and are effective
as of the Closing, and such counsel is not aware of
any proceedings, or threat thereof, which question
the validity thereof.
(h) Based in part upon the representations of the
Purchaser in this Agreement, the offer and sale of
the Common Stock pursuant to the terms of this
Agreement are exempt from the registration
requirements of Section 5 of the Securities Act by
virtue of Section 4(2) thereof, and from the
qualification requirements of the securities laws of
the State of Nevada, or all requisite permits,
qualifications and orders have been obtained.
(i) Except as set forth on the Schedule of Exceptions
attached to the Agreement as Exhibit B, such counsel
is not aware of any action, proceeding or
investigation pending against the Company or any of
its officers, directors or employees, or that any of
the foregoing has received any threat thereof, which
questions the validity of the Agreement or the right
of the Company or its officers, directors and
employees to enter into such agreement or which might
result, either individually or in the aggregate, in
any adverse change in the assets, condition, affairs
or prospects of the Company, nor is such counsel
aware of any litigation pending, against the Company
or any of its
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officers, directors or employees' or that any of the
foregoing has received any threat thereof, by reason
of the proposed activities of the Company, the past
employment relationships of its officers, directors
or employees, or negotiations by the Company or any
of its officers or directors with possible investors
in the Company.
(j) The Company is not in violation of any provisions of
its Articles or Bylaws, and neither of such documents
is in violation of any provision of the Corporation
Law of the State of Colorado.
5.11 NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the business or any of the assets, results of
operations, liabilities, prospects or conditions, financial or otherwise, of the
Company.
SECTION 6
THE COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 LEGAL MATTERS. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any of the shares
of Common Stock and the Option Shares:
(a) As soon as practicable after the end of each fiscal
year, and in any event within 90 days thereafter,
consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal
year, and consolidated statements of operations and
consolidated statements of cash flows of the Company
and its subsidiaries, if any, for such year, prepared
in accordance with
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generally accepted accounting principles and setting
forth in each case in comparative form similar
information of the previous fiscal year, all in
reasonable detail and audited by independent public
accountants of national standing selected by the
Company.
(b) As soon as practicable after the end of the first,
second and third quarterly accounting periods in each
fiscal year of the Company and in any event within 45
days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end
of each such quarterly period, and consolidated
statements of operations and consolidated statements
of cash flows of the Company and its subsidiaries, if
any, for such period and for the current fiscal year
to date, prepared in accordance with generally
accepted accounting principles (other than for
accompanying notes), all in reasonable detail and
signed, subject to changes resulting from year-end
audit adjustments, by the principal financial or
accounting officer of the Company.
(c) Within 15 days after the end of each fiscal month,
unaudited consolidated balance sheets of the Company
as of the end of such month, unaudited consolidated
statements of operations including income statements,
and unaudited consolidated rolling cash flow
projections for each month and for the current fiscal
year to date. Such financial statements shall be
prepared in accordance with generally accepted
accounting principles consistently applied (other
than accompanying notes), all in reasonable detail
subject to year-end audit adjustments.
(d) Promptly after each meeting or the execution of an
action by written consent, copies of the minutes of
proceedings or actions by written consent of the
Company's Board of Directors and shareholders.
(e) With reasonable promptness, such other information
and data with respect to the Company and its
subsidiaries, if any, as the Purchaser may from time
to time reasonably request.
(f) For so long as the Purchaser is eligible to receive
reports under this Section 7.1, it shall also have
the right, at its expense, to visit and inspect any
of the properties of the Company or any of its
subsidiaries, to examine its books of account and
records, and to discuss their affairs, finances and
accounts with their officers, all at such reasonable
times as often as may be
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reasonably requested, provided, however, that the
Company shall not be obligated to provide any
information, other than to the representatives of the
Purchaser on the Board of Directors, that it
reasonably considers to be a trade secret or to
contain confidential information.
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by the
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that the Purchaser may assign
such rights to a parent, subsidiary or affiliate of the Purchaser upon notice to
the Company thereof.
7.3 USE OF PROCEEDS. The Company shall completely segregate the
proceeds from the sale of the Shares from all other funds of the Company. These
funds shall be strictly and exclusively used for the purchase of equity
securities of SAGC and shall not be used for any other purposes. All such
purchases shall be on terms and conditions satisfactory to the Purchaser. The
Company shall maintain a separate accounting for the use of these proceeds and
provide a copy of such accounting to the Purchaser upon request.
7.4 RULE 144 REPORTING. With a view to making available to the
Purchaser the benefits of certain rules and regulations of the Securities and
Exchange Commission which may permit the sale the Option Shares to the public
without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under
the Securities Act, at all times;
(b) Use its best efforts to file with the Securities and
Exchange Commission in a timely manner all reports
and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) So long as the Purchaser owns any Restricted
Securities (as defined in Section 8.1 hereof) furnish
to the Purchaser forthwith upon request a written
statement by the Company as to its compliance with
the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company
filed with the Securities and Exchange Commission,
and such other reports and documents of the Company
and other information in the possession of or
reasonably obtained by the Company as the Purchaser
may reasonably request in availing itself of any due
or regulation of the Securities and Exchange
Commission
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allowing the Purchaser to sell any such securities
without registration.
7.5 PROTECTIVE PROVISIONS. For so long as the Purchaser or its
assignees is a holder of any shares of the Common Stock or Option Shares, the
Company shall not without the Purchaser's prior written consent:
(a) change any of the terms of Common Stock or any
amendment, addition, change, modification or deletion
of any portion of the By-Laws or Articles of the
Company;
(b) authorize or issue (i) any class or series of
Preferred Stock or other securities having rights
senior to the Common Stock, or (ii) any rights to
purchase or any securities or instruments convertible
or exchangeable into any such Preferred Stock and
other securities of the Company;
(c) sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or effect any
merger, consolidation, reorganization or amalgamation
of the Company, with another corporation;
(d) adopt a statutory plan of share exchange;
(e) redeem or repurchase (or enter into any agreement to
become so obligated) any shares of Common Stock or
Common Stock (other than pursuant to employee stock
vesting or repurchase employee stock agreements;
(f) enter into any transaction with or increase the
compensation paid or issue any securities of the
Company or SAGC, rights or options to purchase any
securities of the Company or SAGC or any instrument
convertible or exchangeable into or payable or
satisfied with any securities of the Company or SAGC
or any other compensation derived from or based on
the profits or securities of the Company or SAGC to
any of Boreta or SAGC or any of their respective
affiliates or approve, allow or agree to any of the
foregoing;
(g) take or fail to take any action with respect to any
shares of capital stock of SAGC or rights to purchase
any such capital stock owned or under the control of
the Company (including, but not limited to, the sale,
transfer, assignment, disposition, exchange,
conversion, pledge or voting of such shares, the
granting of any proxies with respect to such shares,
or entering into any agreement or arrangement with
respect to any of the foregoing);
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21
(h) dissolve or liquidate the Company and/or its assets
or close the business of the Company; or
(i) file a petition to appoint a receiver for the Company
or file a voluntary petition for bankruptcy,
insolvency or to make any assignment for the benefit
of creditors of the Company
7.6 GRANT OF STOCK OPTIONS. Simultaneously with the execution hereof,
the Company and the Purchaser are entering into an option agreement (the "Option
Agreement") attached as annex A hereto pursuant to which the Company is granting
the Purchaser an option (the "Option") to purchase from the Company Three
Hundred Forty Seven Thousand Nine Hundred Seventy Five (347,975) shares of
Common Stock of the Company (the "Option Shares"), as such number may be
adjusted pursuant to the terms of the Option Agreement. The Option may be
exercised from time to time in full or in part by the Purchaser at any time
prior to the tenth year anniversary of the Closing. The Option shall be
exercisable at a purchase price of $1.8392 per share, subject to adjustment as
described therein. The Company agrees that the Option Shares issued upon the
exercise by Purchaser of the Option shall carry the same registration rights as
set forth in Section 8 of this Agreement and be considered "Registrable
Securities" under the terms of such Section 8.
7.7 PRINCIPAL BUSINESS. The Company shall ensure that all its principal
shareholders, officers and directors (a) direct or refer all opportunities
relating to, similar to or of the same nature as SAGC's Sports Park business
exclusively to SAGC, (b) not realize any profit or gain with respect to such
opportunities to the detriment or in lieu of the Company or SAGC and (c) not
otherwise misappropriate any corporate opportunity.
7.8 MERGER. The Company shall amend the merger agreement (the "Merger
Agreement") dated as of January 20, 1998 with SAGC such that upon consummation
of the merger, the Purchaser will receive equity interests in the surviving
company having terms, conditions, rights, designations, preferences and values
at least as favorable as those of the Shares. Notwithstanding the foregoing, no
amendment of or modification to the Merger Agreement shall be made without the
prior approval of the Purchaser.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS; INDEMNIFICATION
8.1 CERTAIN DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
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"XXXXXXXX XXX" shall mean the Securities Exchange Act of 1934 as
amended or any similar federal statute and the rules and regulations of the
Commissions thereunder all as the same shall be in effect at the time.
"HOLDER" shall mean the Purchaser and any person holding Registrable
Securities or shares to whom the rights under this Section 8 have been
transferred in accordance with Section 8.2 hereof.
"REGISTRABLE SECURITIES" means (i) the Option Shares; and (ii) any
Common Stock of the Company issued or issuable in respect of the Option Shares
or other securities issued or issuable pursuant to the conversion of the shares
upon any Recapitalization or any Common Stock otherwise issued or issuable with
respect to the Shares provided however that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction or (B) sold or are
available for sale in the opinion of counsel to the Company in a single
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are or may be removed upon the consummation of such sale.
The term "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except Selling
Expenses as defined below, incurred by the Company in complying with Sections
8.5, 8.6 and 8.7, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 8.3 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the notes and regulations of the Commission
thereunder all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the holders.
8.2 RESTRICTION ON TRANSFERABILITY. The Shares shall not be sold,
assigned, transferred or pledged except upon satisfaction of the conditions
specified in this Section 8, which conditions are intended to ensure compliance
with the provisions of the Securities Act.
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8.3 RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
and (ii) any other securities issued in respect of the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
events, shall (unless otherwise permitted by the provisions of Section 8.4
below) be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF
THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
The Purchaser consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Shares in order to
implement the restrictions on transfer established in this Section 8.
8.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution of Restricted Securities by the
Purchaser to a parent, subsidiary or affiliate of the Purchaser), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities Transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the
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appropriate restrictive legend set forth in Section 8.3 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for such holder and the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
8.5 REQUEST FOR REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall
receive from the Purchaser at any time a written
request that the Company effect any registration with
respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration (including,
without limitation, filing post-effective
amendments, appropriate qualifications under
applicable blue sky or other state
securities laws, and appropriate compliance
with the Securities Act) and as would permit
or facilitate the sale and distribution of
all or such portion of such Registrable
Securities as are specified in such request,
together with all or such portion of the
Registrable Securities of any Holder or
holders joining in such request as are
specified in a written request received by
the Company within twenty (20) days after
such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to
take any action to effect, any such registration
pursuant to this Section 8.5:
(A) After the Company has initiated one
such registration pursuant to this
Section 8.5(a);
(B) During the period starting with the
date sixty (60) days prior to the
Company's good faith estimate of
the date of filing of, and ending
on a date one hundred twenty (120)
days after the effective date of, a
Company-initiated registration;
provided that the Company is
actively employing in good faith
all reasonable efforts to cause
such registration statement to
become effective;
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25
(b) Subject to the foregoing clauses (A) and (B), the
Company shall file a registration statement covering
the Registrable Securities so requested to be
registered as soon as practicable after receipt of
the request or requests of the Purchaser.
The registration statement filed pursuant to the
request of the Purchaser may include other securities
of the Company, with respect to which registration
rights have been granted, and may include securities
of the Company being sold for the account of the
Company.
(c) UNDERWRITING. The right of any Holder to registration
pursuant to Section 8.5 shall be conditioned upon
such holder's participation in such underwriting and
the inclusion of such holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed
by a majority in interest of the Purchaser and such
holder with respect to such participation and
inclusion) to the extent provided herein. A Holder
may elect to include in such underwriting all or a
part of the Registrable Securities he or she holds.
8.6 THE COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time
to time the Company shall determine to register of
its securities, either for its own account or the
account of a Holder or Holders, other than a
registration relating solely to employee benefit
plans or a post effective amendment to the
registration statement for the Company's initial
public offering, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any
related qualification under the sky laws or
other compliance), and in any underwriting
involved therein, all the Registrable
Securities specified in a written request or
requests, made within 20 days after receipt
of such written notice from the Company, by
any Holder.
(b) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public
offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice
given pursuant to Section 8.6(a)(i). In such event
the right of any Holder to registration pursuant to
this Section 8.6 shall be conditioned upon such
Holder's
- 25 -
26
participation in such underwriting and the inclusion
of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All
Holders proposing to distribute their securities
through such underwriting shall (together with the
Company and any other shareholders distributing their
securities through such underwriting) enter into an
underwriting agreement in customary form with the
managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision
of this Section 8.6, if the managing underwriter
determines that marketing factors require a
limitation of the number of shares to be
underwritten, the managing underwriter may limit the
Registrable Securities to be included in such
registration. The Company shall so advise all Holders
and the number of shares of Registrable Securities
that may be included in the registration and
underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by
such holders at the time of filing the registration
statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may
round the number of shares allocated to any Holder or
other shareholder to the nearest 100 shares. If any
Holder or other shareholder disapproves of the terms
of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn
from such registration, and shall not be transferred
in a public distribution prior to 90 days after the
effective date of the registration statement relating
thereto, or such other shorter period of time as the
underwriters may require. The Company may include
shares of Common Stock held by shareholders other
than Holders in a registration statement pursuant to
this Section 8.6, so long as the amount of
Registrable Securities otherwise includable in such
registration statement would not thereby be
diminished.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any
registration initiated by it under this Section 8.6
prior to the effectiveness of such registration
whether or not any Holder has elected to include
securities in such registration.
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27
8.7 REGISTRATION ON FORM S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or
successor form or forms. After the Company has
qualified for the use of Form S-3, in addition to the
rights contained in the foregoing provisions of this
Section 8, the Holders of Registrable Securities
shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities
to be disposed of and the intended methods of
disposition of such shares by such Holder or
Holders).
(b) If a request complying with the requirements of
Section 8.7(a) hereof is delivered to the Company,
the provisions of Section 8.5(a)(i) and (ii) and
Section 8.5(b) hereof shall apply to such
registration. If the registration is for an
underwritten offering, the provisions of Section
8.5(c) hereof shall apply to such registration.
8.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with the registration pursuant to Section 8.5, 8.6 and 8.7 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the basis
of the number of shares registered.
8.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 8,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its
best efforts to cause such registration statement to
become and remain effective for at least one hundred
twenty (120) days, and prepare and file with the
Commission such amendments to such registration
statement and supplements to the prospectus contained
therein as may be necessary to keep such registration
statement effective for at least one hundred twenty
(120) days, provided that no such registration shall
constitute a shelf registration under Rule 415
promulgated by the Commission under the Securities
Act;
(b) Enter into a written underwriting agreement in
customary form and substance reasonably satisfactory
to the Company, the
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28
Holders and the managing underwriting or underwriters
of the public offering of such securities, if the
offering is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such
registration and to the underwriters of the
securities being registered such reasonable number of
copies of the registration statement, preliminary
prospectus' final prospects and such other documents
as such underwriters may reasonably request in order
to facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the
securities covered by such registration statement
under such state securities or blue sky laws of such
jurisdictions as such participating Holders may
reasonably request within ten (10) days prior to the
original filing of such registration statement,
except that the Company shall not for any purpose be
required to execute a general consent to service of
process or to qualify to do business a foreign
corporation in any jurisdiction where it is not so
qualified;
(e) Notify the Holders (of if they have appointed an
attorney-in-fact, such attorney-in-fact)
participating in such registration, promptly after it
shall receive notice thereof, of the time when such
registration statement has become effective or a
supplement to any prospectus forming a part of such
registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact
promptly of any request by the Commission for the
amending or supplementing of such registration
statement or prospectus or for additional
information;
(g) Prepare and file with the Commission promptly upon
the request of such registration statement or
prospectus which, in the reasonable opinion of
counsel for such Holders, is required under the
Securities Act or the rules and regulations
thereunder in connection with the distribution of the
Registration Securities by such Holders;
(h) Prepare and promptly file with the Commission, and
promptly notify such Holders or their
attorney-in-fact of the filing of, such amendment or
supplement to such registration statement or
prospectus as may be necessary to correct any
statements or omissions if, at the time when a
prospectus relating to such
- 28 -
29
securities is required to be delivered under the
Securities Act, any event has occurred as the result
of which any such prospectus or any other prospectus
as then in effect would include an untrue statement
of a material fact or omit to state any material fact
necessary to make the statements therein not
misleading in light of the circumstances in which
they were made;
(i) In case any of such Holders or any underwriter for
any such Holders is required to deliver a prospectus
at a time when the prospectus then in effect may no
longer be used under the Securities Act, prepare
promptly upon request such amendment or amendments to
such registration statement and such prospectus as
may be necessary to permit compliance with the
requirements of the Securities Act;
(j) Advise such Holders or their attorney-in-fact,
promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of
such registration statement or the initiation or
threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(k) At the request of any such holder, furnish on the
effective date of the registration statement and, if
such registration includes an underwritten public
offering, at the closing provided for in the
underwriting agreement, (i) an opinion, dated each
such date, of the counsel representing the Company
for the purpose of such registration, addressed to
the underwriters, if any, and to the Holder or
Holders making such request, covering such matters
with respect to the registration statement, the
prospectus and each amendment or supplement thereto,
proceedings under state and federal securities laws
other matters relating to the Company, the securities
being registered and the offer and sale of such
securities as are customarily the subject of opinions
of issuer's counsel provided to underwriters in
underwritten public offerings, and (ii) to the extent
the Company's accounting firm, is willing to do so, a
letter dated each such date, from the independent
public accountants of the Company, addressed to the
underwriters, if any, and to the Holder or Holders
making such request, stating that they are
independent public accountants within the meaning of
the Securities Act and that in the opinion of such
accountants the financial statements and other
financial data of the Company included in the
registration
- 29 -
30
statement or the prospectus or any amendment or
supplement thereto comply in all material respects
with the applicable accounting requirements of the
Securities Act, and additionally covering such other
financial matter, including information as to the
period ending not more than five (5) business days
prior to the data of such letter with respect to the
registration statement and prospectus, as the
underwriters or such requesting Holder or Holders may
reasonably request.
8.10 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 8.
8.11 INDEMNIFICATION.
(a) The Company will defend, indemnify and hold the
Purchaser, each Holder, each of its officers,
directors and partners, and each person controlling
the Purchaser and each such Holder within the meaning
of Section 15 of the Securities Act, and each
underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses,
damages or liabilities (or actions in respect
thereof), including without limitation, any of the
foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on
(i) any breaches of the representations, warrants or
covenants contained herein, or (ii) any untrue
statement (or alleged untrue statement) of a material
fact contained in any registration statement,
prospectus, offering circular or other document or
any amendment or supplement thereto, incident to any
such registration, qualification or compliance, or
based on any omission (or alleged omission) to state
therein a material fact required to be stated therein
or necessary to make the statements therein, light of
the circumstances in which they were made, not
misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated
under the Securities Act applicable to the Company in
connection with any such registration, qualification
or compliance, and the Company will reimburse
Purchaser, and each such holder, each of its officers
and directors, and each person controlling such
holder, each such underwriter and each person who
controls any such underwriter, for any legal and any
other expenses reasonably
- 30 -
31
incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability
or action, provided that the Company will not be
liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out
of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in
reliance upon and in conformity with written
information furnished to the Company by an instrument
duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to
which such registration, qualification or compliance
is being effected, indemnify the Company each to its
directors and officers, each underwriter, if any, of
the Company's securities covered by such a
registration statement, each person who controls the
Company or such Holder, each of its officers and
directors and each person controlling such Holder
within the meaning of Section 15 of the Section 15 of
the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material
fact contained in any such registration statement
prospectus' offering circular or other document, or
any omission (or alleged omission) to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, and will reimburse the Company, such
Holders, such directors, officers, persons,
underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with
investigating or defending any such claim, loss,
damage, liability or action, in each case to the
extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration
statement prospectus, offering circular or other
document in reliance upon and in conformity with
written information furnished to the Company by an
instrument duly executed by such Holder and stated to
be specifically for use therein. Notwithstanding the
foregoing, the liability of each Holder under this
subsection (b) shall be limited to an amount equal to
the initial public offering price of the shares sold
by such Holder, unless such liability arises out of
or is based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this
Section 8.11 (the "Indemnified Party") shall give
notice to the party required
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32
to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be
sought, and shall, when applicable, permit the
Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at
such party's expense, and provided further that the
failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 8 unless
the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the
Indemnifying Party shall not assume the defense for
matter as to which there is a conflict of interest or
separate and different defenses. No Indemnifying
Party, in the defense of any such claim or
litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment
or enter into any settlement which does not include
as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim
or litigation.
8.12 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted the Purchasers under Sections 8.5, 8.6 and 8.7
may be assigned to a transferee or assignee in connection with any transferor
assignment of Registrable Securities by the Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities laws
and (ii) such assignee or transferee acquires at least 10,000 of the Shares
(appropriately adjusted for Recapitalization). Notwithstanding the foregoing,
the rights to cause the Company to register securities may be assigned to any
parent, subsidiary or affiliate of the Purchaser, without compliance with item
(ii) above, provided, written notice thereof is promptly given to the Company.
8.13 STANDOFF AGREEMENT. Each Holder agrees, so long as such Holder
holds at least five percent (5%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, it will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, a the
case may be, for such period of time (not to exceed one hundred and twenty (120)
days) from the effective date of such registration as may be requested by the
underwriters; provided that the officers and directors of the Company who own
stock of the Company also agree to such restrictions.
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33
SECTION 9
THE PURCHASER'S RIGHT OF FIRST REFUSAL
9.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to the Purchaser
the right of first refusal to purchase its pro rata share of all or any part of
any New Securities (as defined in this Section 9.1) which the Company may, from
time to time, propose to sell and issue. The Purchaser's pro rata share, for
purposes of this right of first refusal, is the ratio that the sum of the number
of shares of Common Stock then held by the Purchaser bears to the sum of the
total number of shares of Common Stock then outstanding and the number of shares
of Common Stock issuable upon conversion of the then outstanding Preferred Stock
convertible into Common Stock.
(a) Except as set forth below, "New Securities" shall
mean any shares of capital stock of the Company
including Common Stock and Preferred Stock, whether
now authorized or not, and rights, options or
warrants to purchase said shares of Common Stock or
Preferred Stock, and securities of any type
whatsoever that are, or may become, convertible into
said shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does
not include (i) the Shares and the Option Shares,
(ii) securities offered to the public generally
pursuant to a registration statement or pursuant to
Regulation A under the Securities Act, (iii)
securities issued in the acquisition of another
corporation by the Company by merger, purchase of
substantially all of the assets or other
reorganization whereby the Company or its
shareholders own not less than fifty-one percent
(51%) of the voting power of the surviving or
successor corporation, (iv) shares of the Company's
Common Stock or related options exercisable for such
Common Stock issued to employees, officers and
directors of the Company pursuant to any arrangement
approved by the Board of Directors of the Company,
(v) stock issued pursuant to any rights or
agreements, including without limitation convertible
securities, options, warrants, provided that the
rights of first refusal established by this Section
9.1 apply with respect to the initial sale or grant
by the Company of such rights or agreements, and (vi)
stock issued in connection with any stock split,
stock dividend or recapitalization by the Company.
(b) In the event the Company proposes to undertake an
issuance of New Securities, it shall give the
Purchaser written notice of its intention, describing
the type of New Securities, and the price and terms
upon which the Company proposes to issue the same.
The Purchaser shall have fifteen (15) days from the
date of receipt of any such notice to agree to
purchase up to the
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34
Purchaser's respective pro rata share of such New
Securities for the price and upon the terms specified
in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to
be purchased.
(c) In the event the Purchaser fails to exercise such
right of first refusal within said fifteen (15) day
period, the Company shall have ninety (90) days
thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within sixty (60)
days from the date of said agreement) to sell the New
Securities not elected to be purchased by the
Purchaser at the price and upon the terms no more
favorable to the purchasers of such securities than
specified in the Company's notice. In the event the
Company has not sold the New Securities or entered
into an agreement to sell the New Securities within
said ninety (90) day period (or sold and issued New
Securities in accordance with the foregoing within
sixty (60) days from the date of said agreement), the
Company shall not thereafter issue or sell any of
such New Securities, without first offering such
securities in the manner provided above.
(d) The right of first refusal hereunder is not
assignable except to a parent, subsidiary or
affiliate of the Purchaser, without the prior written
consent of the Company, which consent will not be
unreasonably withheld.
SECTION 10
INDEMNIFICATION
10.01 SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall be made under this Section 10. The
representations and warranties set forth herein are cumulative, and any
limitation or qualification set forth in any one representation and warranty
therein shall not limit or qualify any other representation and warranty
therein.
10.02 INDEMNIFICATION BY THE COMPANY. Notwithstanding any term in this
Agreement to the contrary, the Company, shall indemnify, defend, save and hold
the Purchaser and its officers, directors, employees, agents and Affiliates
(excluding Xxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and the Company; collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not the
underlying demands, claims,
- 34 -
35
allegations, etc., of third parties are meritorious (collectively, "Purchaser
Damages") asserted against, imposed upon, resulting to, required to be paid by
or incurred by any Purchaser Indemnitees, directly or indirectly, in connection
with, arising out of, which could result in, or which would not have occurred
but for, (a) a breach of any representation or warranty made by the Company in
this Agreement, in any certificate or document furnished pursuant hereto by the
Company or any other agreement to which the Company is or is to become a party,
or (b) a breach or nonfulfillment of any covenant or agreement made by the
Company in or pursuant to this Agreement or in any other agreement to which the
Company is or is to become a party.
10.03 INDEMNIFICATION BY PURCHASER. The Purchaser shall indemnify,
defend, save and hold the Company and its officers, directors, employees, agents
and Affiliates (excluding Xxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and the
Purchaser; (collectively, "Company Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not the
underlying demands, claims, allegations, etc., of third parties are meritorious
(collectively, "Company Damages") asserted against, imposed upon, resulting to,
required to be paid by or incurred by any Company Indemnitees, directly or
indirectly, in connection with, arising out of, which would result in, or which
would not have occurred but for, (a) a breach of any representation or warranty
made by the Purchaser in this Agreement or in any certificate or document
furnished pursuant hereto by buyer or any other agreement to which the Purchaser
is a party and (b) a breach of nonfulfillment of any covenant of agreement made
by the Purchaser in or pursuant to this Agreement and in any other agreement to
which the Purchaser is a party.
10.04 NOTICE OF CLAIMS. If any Purchaser Indemnitee or Company
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred or
will suffer or incur any Purchaser Damages or Company Damages, as the case may
be ("Damages"), for which it is entitled to indemnification under this Section
10, such Indemnified Party shall so notify the party or parties from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Section 10 or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
10.05 THIRD PARTY CLAIMS. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnifying Party,
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36
provided that the fees and expense of such counsel shall be borne by the
Indemnifying Party. If the Indemnified Party permits the Indemnifying Party to
undertake, conduct and control the conduct and settlement of such action or
suit, (a) the Indemnifying Party shall not thereby permit to exist any
encumbrance upon any asset of the Indemnified Party; (b) the Indemnifying Party
shall not consent to any settlement that does not include as an unconditional
term thereof the giving of a complete release from liability with respect to
such action or suit to the Indemnified Party; (c) the Indemnifying Party shall
permit the Indemnified Party to participate in such conduct or settlement
through counsel chosen by the Indemnified Party; and (d) the Indemnifying Party
shall agree promptly to reimburse the Indemnified Party for the full amount of
any Damages including fees and expenses of counsel for the Indemnified Party
incurred after giving the foregoing notice to the Indemnifying Party and prior
to the assumption of the conduct and control of such action or suit by the
Indemnifying Party.
10.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. The Purchaser and the
Company agree that, prior to commencing any litigation against the other
concerning any matter with respect to which such party intends to claim a right
of indemnification in such proceeding, the respective chief executive officers
(or officers holding such authority) of such parties shall meet in a timely
manner and attempt in good faith to negotiate a settlement of such dispute
during which time such officers shall disclose to the others all relevant
information relating to such dispute. In the event that the parties are unable
to amicably resolve the matter or matters in dispute, the parties shall submit
all matters still in dispute to arbitration in accordance with the arbitration
rules of the American Arbitration Association. The Purchaser shall select an
arbitrator and the Company shall select an arbitrator and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators shall
be final and binding on the parties. Such matter shall be submitted to
arbitration within thirty (30) days from the date that either the Company or the
Purchaser declares that any matter in dispute cannot be amicable resolved. All
costs and expenses of arbitration shall be paid equally by the Purchaser on one
hand and the Company on the other. Any cash or other monetary award shall be
paid within thirty (30) days of the arbitrators final decision. Arbitration
shall be held in Las Vegas, Nevada.
SECTION 11
MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Colorado.
11.2 EVENTS OF DEFAULT AND REMEDIES. (a) For purpose of this Agreement,
the term "Event of Default" shall mean the occurrence or happening of any breach
or violation of or default in the observation or performance of any term,
agreement, covenant, representation, warranty, condition or stipulation
contained or referred to in this Agreement by any party to this Agreement.
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(b) (i) Upon the occurrence of an Event of Default, the
non-defaulting party shall have all rights and
remedies afforded by law or equity, including the
remedy of specific performance, it being recognized
that the Common Stock and Option Shares and the
rights and benefits to be derived therefrom are
unique and special. Any party awarded a money
judgment against the other shall be entitled to
recover in addition thereto interest thereon at the
rate of twelve percent (12%) per annum.
(ii) Each right, power and remedy provided for in this
Agreement, or now or hereafter existing at law or in
equity shall be cumulative and may be exercised
successively or concurrently and shall be in addition
to every other such right, power or remedy. The
exercise or beginning of the exercise by either party
of any one or more of such rights, powers or remedies
shall not preclude the simultaneous or later exercise
of all such other rights, powers or remedies. No
failure or delay on the party of any party to
exercise any such right, power or remedy shall
operate as a waiver thereof. No waiver by a party
will be effective unless and until it is in writing
and signed by an authorized representative of such
party.
(c) Each party will pay to the other, in addition to all other sums due
all costs and expenses (including, without limitation, attorneys' fees,
brokerage fees and accountants' fees) reasonably incurred by or on behalf of a
party in exercising and protecting their rights and remedies hereunder,
enforcing the obligations of the other party hereunder and defending any
unsuccessful counterclaim, cross-claim or other claim asserted by the other
party.
11.3 SET OFF. In addition to, and not in lieu of, any and all other
remedies which the Purchaser otherwise may have at law or in equity, or pursuant
to this Agreement, the Purchaser shall have the right to set off, counterclaim
and recoup any loss against any amounts to be paid to the Company under this
Agreement.
11.4 NONEXCLUSIVITY. The foregoing set off right and the
indemnification provision set forth in Section 8 are in addition to, and not in
lieu or derogation of, any statutory, equitable or common law remedy the
Purchaser may have arising out of or as a result of this Agreement or for breach
of representations, warranties or covenants herein. Neither the exercise of nor
the failure to exercise the set off right set forth in Section 10.3 shall
constitute an election of remedies.
11.5 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby.
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38
11.6 ANTI-DILUTION PROVISIONS. The "Anti-Dilution Provisions" shall
provide that in the event that any of the securities referenced herein as
presently constituted, shall be changed into or exchanged for a different number
or kind of securities or interests of the Company or of another entity (whether
by reason of merger, consolidation, recapitalization, reclassification,
split-up, combination of shares, sale of assets or otherwise), or if the number
of such securities shall be increased through the payment of a dividend, or if
the Company makes any other distribution of securities or other property
including cash in respect of such securities, then there shall be substituted
for and added to such securities, as the case may be, theretofore subject or
which may become subject to the terms of this Agreement, the number and kind of
securities, interests or property into which each outstanding security shall be
so changed, or for which each such security shall be exchanged, or to which each
such security shall be entitled, as the case may be, and the purchase price per
security appropriately adjusted.
11.7 ASSIGNMENT; SUCCESSORS AND ASSIGNS. The rights and obligations of
the Company and the rights of the Purchaser to purchase the Shares shall not be
assignable without the written consent of the other; provided, however, the
Purchaser may assign its rights and obligations under this Agreement to a
parent, subsidiary or affiliate of the Purchaser upon notice to the Company
thereof. Except as otherwise provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
11.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
endorsement of any such amendment, waiver, discharge or termination is sought.
11.9 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Purchaser, at its address set forth on the cover page of
this Agreement, or at such other address as the Purchaser shall have furnished
to the Company in writing, or (b) if to any other holder of any Shares or Option
Shares, at such address as such holder shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Shares or Option Shares who has
so furnished an address to the Company, or (c) if to the Company, one copy shall
be sent to its address set forth on the cover page of this Agreement and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given or received, as the case
may be, when delivered if
- 38 -
39
delivered personally, when sent by confirmed facsimile to the correct facsimile
number, or, if sent by mail, at the earlier of its receipt or 72 hours after the
same has been deposited in a regularly maintained receptacle for the deposit of
the United States mail, addressed and mailed as aforesaid.
11.10 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares or Option Shares, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Except as provided in Section 10.8 hereof, any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach of
default under this Agreement or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
11.11 EXPENSES. Except as otherwise provided herein, the Company and
the Purchaser shall each bear their own expenses incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.
11.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.13 CONFIDENTIALITY. Neither party shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party. This
provision shall not apply, however, to any announcement or written statement
which in the opinion of counsel to such party is required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange.
11.14 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11.15 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
11.16 THIRD PARTY BENEFICIARY. It is understood that the Purchaser is a
specific intended third party beneficiary of the LVDGT Agreement.
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40
The foregoing Agreement is hereby executed as of the date first above
written.
"PURCHASER" "COMPANY"
ASI GROUP, L.L.C., LAS VEGAS DISCOUNT GOLF & TENNIS,
a Nevada limited liability company INC., a Colorado corporation
By: Sunbelt Communications Company,
-------------------------------
a Member
By /s/ Xxxx Xxxxxx
-------------------------------
By /s/ Xxxxx Xxxx Xxxxxx Name: Xxxx Xxxxxx
--------------------------- Title: President
Name: Xxxxx Xxxx Xxxxxx
Title: President
The undersigned, Saint Xxxxxxx Golf Corporation, a Nevada corporation,
acknowledges that, by virtue of entering into this Agreement, the Purchaser is a
specific intended third party beneficiary of the LVDGT Agreement.
SAINT XXXXXXX GOLF CORPORATION
By: /s/ Xxx Xxxxxx
-----------------------
Name: Xxx Xxxxxx
Title: President
- 40 -
41
EXHIBIT A
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 19, 1998 by and among ASI Group, L.L.C., a
Nevada limited liability company ("ASI"), c/o Agassi Enterprises, Inc., 0000
Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000, and the individuals
and entities listed on the signature page hereto (collectively "Boreta").
WITNESSETH:
WHEREAS, ASI and Las Vegas Discount Golf & Tennis, Inc., a Colorado corporation
("LVDGT"), are entering into an investment and voting agreement (the "ASI
Agreement") pursuant to which, among other things, ASI is buying shares of
common stock of LVDGT; and
WHEREAS, LVDGT and Saint Xxxxxxx Golf Corporation, a Nevada corporation
("SAGC"), are entering into an investment agreement (the "LVDGT Agreement")
pursuant to which, among other things, LVDGT is buying shares of preferred stock
of SAGC; and
WHEREAS, in order to induce each other to enter into the ASI Agreement, ASI and
Boreta desire to enter into this Voting Agreement with respect to all the
capital stock of LVDGT and SAGC now owned or controlled by and/or hereafter
acquired or coming under the control of any of them respectively (collectively,
the "Shares). Exhibit A lists all Shares currently owned or controlled by Boreta
or ASI;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. RESTRICTIONS ON AND VOTING OF SHARES.
(a) During the term of this Agreement, Boreta agrees that it
will not sell, assign, pledge or otherwise dispose of, or grant any proxies with
respect to, the Shares, or enter into any contract, option or other arrangement
or understanding with respect to the sale, assignment, pledge or other
disposition, directly or indirectly, of the Shares except as expressly
contemplated by the LVDGT Agreement or the ASI Agreement.
(b) Boreta and ASI agree that, during the term of this
Agreement, they will vote the Shares either of them is entitled to vote, in
person or by proxy, at any annual, special or other meeting of the holders of
capital stock of LVDGT or SAGC, as the case may be, and at any adjournments
thereof or pursuant to any consent in lieu of a meeting, or otherwise, as
mutually agreed by ASI and Boreta (provided that no party will be so required to
vote its shares if the subject action implemented in accordance with such mutual
agreement, would in any manner adversely effect the interests of Boreta in LVDGT
or SAGC or the interests of ASI in LVDGT and indirectly in SAGC, as the case may
be, or adversely affect the value of the Shares (or any securities into which
such shares might be exchanged)).
- 1 -
42
Section 2. SUBSEQUENT ACQUISITIONS. If at any time after the first to
occur of the closing of the transactions contemplated by the LVDGT Agreement or
the ASI Agreement, while ASI is an equity holder of LVDGT or SAGC or has
options, warrants or other rights to acquire equity of either or both of LVDGT
and/or SAGC, either of LVDGT or SAGC offers to sell or grants, sells or issues
shares of its capital stock to any of Boreta or their respective affiliates at
any price or for any consideration (including, but not limited to, provision of
services), Boreta shall transfer or cause to be transferred to ASI Shares so as
to maintain the relative proportionate direct and indirect (by virtue of
ownership of LVDGT capital stock) equity ownerships of ASI, on the one hand, and
Boreta, on the other hand, in each of LVDGT and SAGC as they were immediately
prior to such offer, grant, sale or issuance, assuming the consummation of such
offer, grant, sale or issuance.
Section 3. TERM OF AGREEMENT. Except as otherwise specifically provided
herein, this Agreement will be effective as of the closing of the transactions
contemplated by the ASI Agreement (the "Effective Date"). The obligations of ASI
and Boreta under this Agreement will terminate as of the date ASI no longer
holds any equity interest, options, warrants or rights to purchase any equity
interest in or instruments convertible or exchangeable into equity interests of
SAGC or LVDGT or their respective successors.
Section 4. REPRESENTATIONS AND WARRANTIES OF BORETA. Boreta represents
and warrants to ASI as of the date and as of the Effective Date hereof that:
(a) Boreta is the record owner of the Shares and the
Shares represent all of the capital stock of SAGC or
LVDGT owned of record by Boreta, directly or
indirectly;
(b) Boreta has full legal power and authority to execute
and deliver this Agreement;
(c) the Shares are free and clear of all proxies; and
(d) Boreta has duly executed and delivered this
Agreement.
Section 5. REPRESENTATIONS AND WARRANTIES OF ASI. ASI represents and
warrants to Boreta as of the date and as of the Effective Date hereof that:
(a) ASI is the record owner of the Shares and the Shares
represent all of the capital stock of SAGC or LVDGT
owned of record by ASI, directly or indirectly;
(b) ASI has full legal power and authority to execute and
deliver this Agreement;
(c) the Shares are free and clear of all proxies; and
- 2 -
43
(d) ASI has duly executed and delivered this Agreement.
Section 6. STOCK OPTIONS OWNED BY BORETA OR ASI. It is agreed that any
Shares obtained by Boreta or ASI after the date hereof upon exercise of any
option to purchase Shares or which otherwise become held of record by Boreta
shall in all events be deemed to be "Shares" or subject to this Agreement.
Section 7. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms of were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity without the
necessity of posting bond or other security or showing actual damages.
Section 8. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by confirmed facsimile to the correct
facsimile number or otherwise delivered by hand or by messenger, addressed (a)
if to ASI, at its address set forth on the cover page of this Agreement, or at
such other address as ASI shall have furnished to the Company in writing, or (b)
if to any of Boreta, at such address as listed on the signature page hereto.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or if sent by confirmed facsimile to the correct facsimile
number, upon the sending of such facsimile, or, if sent by mail, at the earlier
of its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
Section 9. BINDING EFFECT. Upon execution and delivery of this
Agreement by ASI, this Agreement shall become effective as to Boreta at the time
Boreta executes and delivers this Agreement. This Agreement shall inure to the
benefit of and, subject to applicable law, be binding upon the parties hereto
and their respective heirs, personal representatives, successors and assigns.
Section 10. ASSIGNMENT. This Agreement will be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns provided that neither this Agreement nor any rights hereunder may be
assigned by either party without first obtaining the prior written consent of
the other party.
Section 11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without giving
effect to the principles of conflict of laws thereof.
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44
Section 12. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
Section 13. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction hereof.
Section 14. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 15. AMENDMENT; WAIVER. No amendment or waiver of any provision
of this Agreement or consent to departure therefrom shall be effective unless in
writing and signed by ASI and Boreta, in the case of an amendment, or by the
party which is the beneficiary of any such provision, in the case of a waiver or
a consent to departure therefrom.
Section 16. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, covenants, arrangements, communications,
representations and warranties, whether oral or written, by either party with
respect thereto.
Section 17. OBLIGATIONS. The obligations of Boreta hereunder are joint
and several.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
all as of the day and year first above written.
ASI GROUP, L.L.C. BORETA:
By:
------------------------------------- ------------------------------
Xxxxx Xxxx Xxxxxx XXXX XXXXXX
Member
------------------------------
XXXXXX XXXXXX
------------------------------
XXXX XXXXXX
BORETA ENTERPRISES LTD
By:
---------------------------
Name:
Title:
- 4 -
45
EXHIBIT A
----------------------------------------------------- -------------------------------- ------------------------------
Company Shareholder Number of Shares Held
----------------------------------------------------- -------------------------------- ------------------------------
----------------------------------------------------- -------------------------------- ------------------------------
Saint Xxxxxxx Golf Corporation Xxxx Xxxxxx 110,000
----------------------------------------------------- -------------------------------- ------------------------------
Saint Xxxxxxx Golf Corporation Xxxxxx Xxxxxx 110,000
----------------------------------------------------- -------------------------------- ------------------------------
Las Vegas Discount Golf & Tennis, Inc.(1) Xxxx Xxxxxx 1,837,637
----------------------------------------------------- -------------------------------- ------------------------------
Las Vegas Discount Golf & Tennis, Inc.(2) Xxxxxx Xxxxxx 1,723,288
----------------------------------------------------- -------------------------------- ------------------------------
Las Vegas Discount Golf & Tennis, Inc.(3) Xxxx Xxxxxx 1,059,374
----------------------------------------------------- -------------------------------- ------------------------------
Las Vegas Discount Golf & Tennis, Inc. Boreta Enterprises Ltd. 1,304,445
----------------------------------------------------- -------------------------------- ------------------------------
Las Vegas Discount Golf & Tennis, Inc.(4) ASI Group, L.L.C. 2,303,290
----------------------------------------------------- -------------------------------- ------------------------------
--------
(1) Includes 1,823,810 shares held directly and 13,827 shares which
represent Xxxx Xxxxxx'x share of the Common Stock held by Boreta Enterprises
Ltd.
(2) Includes 544,699 shares held directly, 897,589 shares which represent Xxxxxx
Xxxxxx'x share of the Common Stock held by Boreta Enterprises Ltd. and 281,000
shares underlying Stock Options held by Xxxxxx Xxxxxx.
(3) Includes 536,345 shares held directly, 393,029 shares which represent Xxxx
Xxxxxx'x share of the Common Stock held by Boreta Enterprises Ltd. and 130,000
shares underlying Stock Options held by Xxxx Xxxxxx.
(4) ASI Group, L.L.C. also has options for the purchase of 347,975 shares of the
Common Stock of Las Vegas Discount Golf & Tennis, Inc.
46
EXHIBIT B
SCHEDULE OF EXCEPTIONS
All disclosures on this Schedule provide exceptions to the corresponding
representations made in the Agreement.
Section 3.4 SUBSIDIARIES. The Company has the following subsidiaries:
1. Saint Xxxxxxx Golf Corporation
2. Las Vegas Discount Golf & Tennis Rainbow, Inc.
3. Las Vegas Discount Golf & Tennis Development Corp.
4. All-American SportPark, Inc.
5. All-American Golf, LLC
Section 3.13 LITIGATION. In 1995, Giant Ride, Inc. filed suit in the
District Court of Xxxxx County, Nevada, against Saint Xxxxxxx Golf Corporation
("SAGC") claiming that SAGC has breached a contract to purchase a giant slide
for Saint Xxxxxxx' Las Vegas SportPark. Giant Ride, inc. is seeking an
unspecified amount of damages. SAGC denies that it had a contract to purchase
such a slide.
Section 3.15 EMPLOYEE AGREEMENTS. The Company and its subsidiaries have
employment and consulting agreements as follows:
1. Employment Agreement with Xxxx Xxxxxx
2. Employment Agreement with Xxxxxx X. Xxxxxx
3. Employment Agreement with Xxxxx Xxxxxxx
The Company also has employee benefit plans referred to below
concerning Section 3.25.
Section 3.16 CERTAIN TRANSACTIONS. The Company owns 66.7% of the
outstanding Common Stock of Saint Xxxxxxx Golf Corporation ("SAGC").
Effective August 1, 1994, the Company granted SAGC a license to use all
of its trademarks, trade names and other commercial names and symbols for so
long as such trademarks, trade names and other commercial names and symbols are
being used by SAGC.
Certain facilities used by the Company and SAGC are leased by the
Company from Xxxx Xxxxxx. The Company leases approximately 15,500 square feet of
warehouse space and 6,000 square feet of office space from Xx. Xxxxxx at a base
monthly rent of approximately $13,700.
The Company owns a retail store in Las Vegas and LVDG and a store owned
by Xxxx Xxxxxx share advertising costs in the Las Vegas market and on an equal
basis.
47
See the Company's Form 10-KSB for the year ended December 31, 1997, for
additional disclosures concerning transactions with affiliated persons.
During September 1997, SAGC agreed to sell its right to the St. Xxxxxxx
name to Boreta Enterprises, Ltd. for a $20,000 two-year promissory note since
SAGC no longer intends to engage in the business of selling golf equipment or
apparel.
See SAGC's Form 10-KSB for the year ended December 31, 1997 for
additional disclosures concerning transactions with affiliated persons.
Section 3.25 EMPLOYEE BENEFIT PLANS. The Company's employees are
included in the following plans:
1989 Stock Option Plan
1991 Stock Option Plan
Employee Retirement and Savings Program (401(k))
Supplemental Retirement Plan
1994 Stock Option Plan (SAGC)
Medical Insurance with Sierra Health
48
EXHIBIT C
PROPERTY LEASES
The Company leases approximately 15,500 square feet of warehouse space
and approximately 6,000 square feet of office space at 0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxx 00, Xxx Xxxxx, Xxxxxx, at an aggregate monthly rent of
approximately $13,700 from Xxxx Xxxxxx. The rent is adjustable annually based on
increases in the consumer price index and the lease expires January 31, 2005.
Beginning July 1, 1996, SAGC was allocated 67% of the rent and the Company was
allocated 33% of the rent. In February 1997, the Company subleased a majority of
the warehouse space and approximately one-half of the office space to the
purchaser in the asset sale.
The Company has a retail store at 0000 Xxxxxxx Xxxxxxxxx Xxxxx xx Xxx
Xxxxx, Xxxxxx. The store is located in leased space in a small shopping center
in a growing area of Las Vegas. The space covers 5,600 square feet of space, and
is leased from an unaffiliated party for $7,000 per month plus cost of living
adjustments, real estate taxes and other expenses. The lease expires in August
2000.
On June 20, 1997 SAGC entered into a lease for approximately 24 acres
of land in Las Vegas on which SAGC is building the Sports Entertainment Complex
portion of its SportPark.
49
EXHIBIT D
INTELLECTUAL PROPERTY
SAGC has filed an "intent to use" trademark application for
"All-American SportPark" and a related design and Slugger Stadium.
The Company has filed "intent to use" trademark applications with
regard to the "St. Xxxxxxx" name and related designs with respect to mens' and
womens' clothing and certain golf equipment and accessories.
The trademarks "Las Vegas Discount Golf & Tennis, Inc." and "St.
Xxxxxxx" on golf club bags, are registered on the principal register of the
United States Patent and Trademark Office as well as in Canada and in the State
of Nevada. These were owned by The Company.
The Company also has common law trademark and tradename rights in
"Saint Xxxxxxx" to the extent that it has used the xxxx as applied to goods or
as a corporate source identifier.
On August 1, 1994, the Company entered into a license agreement with
SAGC pursuant to which the Company granted a license to SAGC to use all
trademarks, tradenames and other commercial symbols that were owned by the
Company and licensed to franchisees of Saint Xxxxxxx. Included in this license
were the following:
(a) Las Vegas Discount Golf & Tennis - name (Reg. No. 1,482,753)
(b) Las Vegas Discount Golf & Tennis - logo ( Reg. No. 1,350,039)
(c) St. Xxxxxxx - name and design (Reg. No. 1,303,946) and related
applications
(d) Saint Xxxxxxx
(e) Birdie Golf
(f) Royal Xxxx
In February 1997, the rights to the trademarks "Las Vegas Discount Golf
& Tennis" and "Birdie Golf" were assigned to the purchaser in connection with
the sale of the franchise business. The purchaser of the assets granted back to
Boreta Enterprises, Ltd. a perpetual license to use the name Las Vegas Discount
Golf & Tennis for retail equipment stores in the State of Nevada, south of a
line between Pahrump, Nevada and Mesquite, Nevada, except for Xxxxxxxxx, Nevada.
Boreta Enterprises, Ltd. has agreed to allow the Company's retail store on
Rainbow Boulevard in Las Vegas to continue to use the name Las Vegas Discount
Golf & Tennis.
50
EXHIBIT E
MATERIAL CONTRACTS AND OBLIGATIONS
THE COMPANY
1. Lease Agreement with Xxxx Xxxxxx, as amended
2. Employment Agreement with Xxxx Xxxxxx, as amended
3. License Agreement with Xxxx Xxxxxx
4. License Agreement between the Company and Saint Xxxxxxx Golf
Corporation
5. Lease Agreement with A&R Management and Development Co., et al., and
Sublease to Las Vegas Discount Golf & Tennis, Inc.
6. Lease Agreement with Xxxx Xxxxxx, as amended, and Assignment to Las
Vegas Discount Golf & Tennis, Inc.
7. Agreement and Plan of Merger dated January 20, 1998 between Las Vegas
Discount Golf & Tennis, Inc. and Saint Xxxxxxx Golf Corporation
SAINT XXXXXXX GOLF CORPORATION
1. Employment Agreement with Xxxxxx X. Xxxxxx.
2. Employment Agreement with Xxxxx Xxxxxxx.
3. Lease Agreement with A&R Management and Development Co., et al., and
Sublease to Las Vegas Discount Golf & Tennis, Inc.
4. Lease Agreement with Xxxx Xxxxxx, as amended, and Assignment to Las
Vegas Discount Golf & Tennis, Inc.
5. Letter Agreement with Oracle One Partners, Inc.
6. Agreement with Major League Baseball Properties, Inc.
7. License Agreement with National Association for Stock Car Auto Racing,
Inc., dated August 1, 1995
51
8. Concept Development and Trademark Agreement with Callaway Golf Company
dated May 23, 1995
9. Investment Agreement with Three Oceans, Inc. and ancillary agreements
10. Indenture of Lease Agreement between Urban Land of Nevada and
All-American SportPark, Inc.
11. Indenture of Lease between Urban Land of Nevada and All-American Golf
Center, LLC
12. Operating Agreement for All-American Golf, LLC, a limited liability
company
13. Agreement dated September 30, 1997 with Boreta Enterprises, Ltd.
14. Sponsorship Agreement with Pepsi-Cola Company dated December 4, 1997.
15. Membership Interest Purchase Agreement dated May 5, 1998 between
Callaway Golf Company, a California corporation ("Callaway Golf"), CGV,
Inc., a California corporation ("CGV"), Saint Xxxxxxx Golf Corporation,
a Nevada corporation ("Saint Xxxxxxx"), All-American SportPark, Inc., a
Nevada corporation ("SportPark"), All-American Golf LLC, a California
limited liability company ("AAG") and Xxx Xxxxxx
16. Covenant Not to Compete dated May 5, 1998 between CGV, Xxx Xxxxxx and
Saint Xxxxxxx
17. Option Agreement dated May 5, 1998 between CGV and Saint Xxxxxxx
18. Amendment to Lease Agreement for Golf Retail Operations at Callaway
Golf Center, Las Vegas, Nevada dated May 5, 1998 between AAG and Saint
Xxxxxxx
19. Consulting Agreement dated May 5, 1998 between AAG and Saint Xxxxxxx
52
EXHIBIT F
CO-SALE AGREEMENT
This Co-Sale Agreement is made as of the 19th day of October, 1998 by and among
LAS VEGAS DISCOUNT GOLF & TENNIS INC. (the "Company"), a Colorado corporation,
XXX XXXXXX, XXXX XXXXXX and XXXX XXXXXX (collectively the "Boretas") and BORETA
ENTERPRISES LTD. (the "Family Company"; the Family Company and the Boretas are
each a "Significant Shareholder," and collectively are the "Significant
Shareholders") and ASI GROUP, L.L.C., a Nevada limited liability company
("ASI").
In consideration of the mutual covenants set forth herein, the parties agree as
follows:
1. DEFINITIONS.
(a) "Stock" shall mean shares of the Company's Common and
Preferred Stock now owned beneficially or of record or
subsequently acquired beneficially or of record directly or
indirectly by the Significant Shareholders.
(b) "Preferred Stock" shall mean the Company's or LVDG&T's
outstanding Preferred Stock of any series or designation.
(c) "Common Stock" shall mean the Company's Common Stock and
shares of Common Stock issued or issuable upon conversion of
the Company's Preferred Stock.
2. SALE BY SIGNIFICANT SHAREHOLDERS.
(a) On each occasion that any Significant Shareholder proposes to
sell or transfer to any person any shares of Stock in one or
more related transactions, such Significant Shareholder shall
promptly give written notice (the "Notice") to ASI at least
twenty (20) days prior to the closing of such sale or
transfer. The Notice shall describe in reasonable detail the
proposed sale or transfer including, without limitation, the
number of shares of Stock to be sold or transferred, the
nature of such sale or transfer, the consideration to be paid,
and the name and address of each prospective purchaser or
transferee. In the event that the sale or transfer is being
made pursuant to the provisions of Section 3(a) or 3(b)
hereof, the Notice shall state under which Section the sale or
transfer is being made.
(b) ASI shall have the right, exercisable upon written notice to
such Significant Shareholder within fifteen (15) days after
receipt of the Notice, to participate in such sale of Stock on
the same terms and conditions. To the extent ASI exercises
such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Stock that
the Significant Shareholder may sell in the transaction shall
be correspondingly reduced.
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(c) ASI may sell all or any part of that number of shares of
Common Stock equal to the product obtained by multiplying (i)
the aggregate number of shares of Stock covered by the Notice
by (ii) a fraction the a numerator of which is the number of
shares of Common Stock owned by ASI at the time of the sale or
transfer and the denominator of which is the total number of
shares of Common Stock owned by the Significant Shareholders
and ASI at the time of the sale or transfer.
(d) ASI shall effect its participation in the sale by promptly
delivering to the Significant Shareholders for transfer to the
prospective purchaser one or more certificates, properly
endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which
ASI elects to sell; or
(ii) that number of shares of Series B Convertible
Preferred Stock which is at such time convertible
into the number of shares of Common Stock which ASI
elects to sell; provided, however, that if the
prospective purchaser objects to the delivery of
Series B Convertible Preferred Stock in lieu of
Common Stock, ASI shall convert such Preferred Stock
into Common Stock and deliver Common Stock as
provided in Section 2(d)(i) above. The Company agrees
to make any such conversion concurrent with the
actual transfer of such shares to the purchaser.
(e) The Stock certificate or certificates that ASI delivers to the
Significant Shareholders pursuant to Section 2(d) shall be
transferred to the prospective purchaser in consummation of
the sale of the Common Stock pursuant to the terms and
conditions specified in the Notice, and the Significant
Shareholders shall concurrently therewith remit to ASI that
portion of the sale proceeds to which ASI is entitled by
reason of its participation in such sale. To the extent that
any prospective purchaser or purchasers prohibits such
assignment or otherwise refuses to purchase shares or other
securities from ASI, the Significant Shareholders shall not
sell to such prospective purchaser or purchasers any Stock
unless and until, simultaneously with such sale, the
Significant Shareholders shall purchase such shares or other
securities from ASI.
(f) The exercise or non-exercise of the rights of ASI hereunder to
participate in one or more sales of Stock made by the
Significant Shareholders shall to adversely affect its rights
to participate in subsequent sales of Stock subject to Section
2(a).
3. EXEMPT TRANSFERS.
Notwithstanding the foregoing, the co-sale rights of ASI shall not apply to (a)
any pledge of Stock made pursuant to a bona fide third party loan transaction
with a party not affiliated with or
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54
a stockholder of any significant shareholder that creates a mere security
interest; (b) any transfer to the ancestors, descendants or spouse or to trusts
for the benefit of such persons or a Significant Shareholder; (c) any bona fide
gift; or (d) any sale or sales of not more than 25,000 shares of Common Stock
individually or in the aggregate during the term hereof (as adjusted for stock
splits, reverse stock splits and the like effected after the date of this
Agreement); provided that (i) the transferring Shareholder shall inform ASI of
such pledge, transfer or gift prior to effecting it and (ii) the pledgee,
transferee or donee shall furnish ASI with a written agreement to be bound by
and comply with all provisions of Section 2. Such transferred Stock shall remain
"Stock: hereunder, and such pledge, transferee or donee shall be treated as a
"Shareholder" for purposes of this Agreement.
4. PROHIBITED TRANSFERS.
(a) In the event a Significant Shareholder should sell any Stock
in contravention of the co-sale rights of ASI under this
Agreement (a "Prohibited Transfer"), ASI, in addition to such
other remedies as may be available at law, in equity or
hereunder, shall have the put option provided below, and the
Significant Shareholders shall be bound by the applicable
provisions of such option.
(b) In the event of a Prohibited Transfer, ASI shall have the
right to sell to the Significant Shareholders the type and
number of shares of Common Stock equal to the number of shares
ASI would have been entitled to transfer to the purchaser had
the Prohibited Transfer under Section 2(c) hereof been
effected pursuant to and in compliance with the terms hereof.
Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be
sold to the Significant Shareholders shall be equal
to the price per share paid by the purchaser to
Significant Shareholders in this Prohibited Transfer.
Significant Shareholders shall also reimburse ASI for
any and all fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or
the attempted exercise of ASI's rights under Section
2.
(ii) Within ninety (90) days after the later of the dates
on which ASI (A) received notice of the Prohibited
Transfer or (B) otherwise became aware of the
Prohibited Transfer, ASI shall, if exercising the
option created hereby, deliver to Significant
Shareholders the certificate or certificates
representing shares to be sold, each certificate to
be properly endorsed for transfer.
(iii) Significant Shareholders shall, upon receipt of the
certificate or certificates for the shares to be sold
by ASI, pursuant to this Section 4(b), pay the
aggregate purchase price therefor and the
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amount of reimbursable fees and expenses, as
specified in Section 5(b)(i), in cash or by other
means acceptable to ASI.
(iv) Notwithstanding the foregoing, any attempt by a
Significant Shareholder to transfer Stock in
violation of Section 2 hereof shall be void and the
Company agrees it will not effect such a transfer nor
will it treat any alleged transferee as the holder of
such shares without the written consent of ASI.
5. LEGEND.
(a) Each certificate representing shares of Stock now or hereafter
owned by the Significant Shareholder or issue to any person in
connection with a transfer pursuant to Sections(a) and 3(b)
hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE
AGREEMENT AMONG THE INITIAL HOLDER OF THE SECURITIES,
THE COMPANY AND CERTAIN STOCKHOLDER(S) OF THE
COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY."
(b) Each Significant Shareholder agrees that the Company may
instruct its transfer agent to impose transfer restrictions on
the shares represented by certificates bearing the legend
referred to in Section 5(a) above to enforce the provisions of
this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Nevada.
6.2 AMENDMENT. Any provision may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of the party or
parties affected thereby. Any amendment or waiver effected in accordance with
clauses (a), (b) and (c) of this Section shall be binding upon ASI, its
successors and assigns, the Company and Significant Shareholders in question.
6.3 ASSIGNMENT OF RIGHTS. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
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56
6.4 TERM. This Agreement shall terminate on the fifth anniversary
hereof.
6.5 OWNERSHIP. Each Significant Shareholder represents and warrants
that it/he is the sole legal and beneficial owner of the shares of stock subject
to this Agreement and that no other person has any interest (other than a
community property interest) in such shares.
6.6 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five (5) days after deposit in the United States mail,
by registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth on the signature page hereof or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties hereto.
6.7 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.8 ATTORNEY FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
The foregoing agreement is hereby executed as of the date first above written.
SAINT XXXXXXX GOLF ASI GROUP, L.L.C., a Nevada
CORPORATION, a Nevada corporation ASI limited liability company
By ______________________________ By ______________________________
Name: Name:
Title: Title:
LAS VEGAS DISCOUNT GOLF
& TENNIS INC.,
a Nevada corporation
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By ______________________________
Name:
Title:
------------------------------
Xxxx Xxxxxx
------------------------------
Xxx Xxxxxx
------------------------------
Xxxx Xxxxxx
BORETA ENTERPRISES LTD.
By________________________________
Name:
Title:
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58
CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions if I and/or my spouse agree to sell
all or part of the shares of the company held of record by either or both of us,
including my community property interest in such shares, if any, co-sale rights
(as described in the Agreement) must be granted to ASI by the seller. I hereby
agree that those shares and my interest in them, if any, are subject to the
provisions of the Agreement and that I will take no action at any time to hinder
operations of, or violate, the Agreement.
--------------------------------
(Signature)
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59
CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions if I and/or my spouse agree to sell
all or part of the shares of the company held of record by either or both of us,
including my community property interest in such shares, if any, co-sale rights
(as described in the Agreement) must be granted to ASI by the seller. I hereby
agree that those shares and my interest in them, if any, are subject to the
provisions of the Agreement and that I will take no action at any time to hinder
operations of, or violate, the Agreement.
--------------------------------
(Signature)
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CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know its
contents. I am aware that by its provisions if I and/or my spouse agree to sell
all or part of the shares of the company held of record by either or both of us,
including my community property interest in such shares, if any, co-sale rights
(as described in the Agreement) must be granted to ASI by the seller. I hereby
agree that those shares and my interest in them, if any, are subject to the
provisions of the Agreement and that I will take no action at any time to hinder
operations of, or violate, the Agreement.
--------------------------------
(Signature)
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ANNEX A
OPTION AGREEMENT
OPTION AGREEMENT, effective as of October 19, 1998, by and between LAS
VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation with offices at 0000
Xxxxx Xxxxxx Xxxx Xxxxxxxxx, Xxxxx 00, Xxx Xxxxx, Xxxxxx 00000 ("LVDGT"), and
ASI GROUP, L.L.C., a Nevada limited liability company, c/o Agassi Enterprises,
Inc., 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000 ("ASIG"):
W I T N E S S E T H :
WHEREAS, ASIG and LVDGT are entering into an investment agreement (the
"Investment Agreement") simultaneously herewith which Investment Agreement
provides for the purchase by ASIG of certain capital stock of LVDGT. All terms
used but not defined herein shall have the meanings ascribed to them in the
Investment Agreement.
WHEREAS, to induce ASIG to enter into the Investment Agreement, ASIG is
hereby granted options to purchase Shares (as defined herein) on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, ASIG and LVDGT hereby agree as
follows:
SECTION 1. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms shall
have the respective meanings indicated below.
"ACT" shall mean the Securities Act of 1933, as it may be amended.
"ADDITIONAL SHARES" shall mean all Shares (including treasury Shares)
issued or sold (or, deemed to be issued) by LVDGT after the date hereof, whether
or not subsequently reacquired or retired by LVDGT.
"AFFILIATE" shall mean any Person which, directly or indirectly,
controls, is controlled by or is under common control with the relevant Person
and, if such Person is an individual, any member of the immediate family
(including parents, spouse and children) of such individual and any trust whose
principal beneficiary is such individual, or one or more members of such
immediate family or any Person who is controlled by any such member or trust.
For the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean a member
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of the board of directors, a partner or an officer of such Person, or any other
Person having, directly or indirectly, the power to direct or cause the
direction of the management and policies of such Person, through the ownership
(of record, as trustee, by voting agreement or by proxy) of voting securities or
similar equity interests, by contract or otherwise. Any Person owning or
controlling directly or indirectly 10% or more of the voting securities or
similar equity interests of another Person shall be deemed to be an Affiliate of
such person.
"BUSINESS DAY" shall mean any other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of New York are
authorized by law or other governmental action to be closed. Any reference to
"days" (unless Business Days are specified) shall mean calendar days.
"CONVERTIBLE SECURITIES" shall mean any evidence of indebtedness,
shares of stock (other than Shares) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares.
"CURRENT MARKET PRICE" shall mean on any date specified herein, the
average daily Market Price during the period of the most recent 20 days, ending
on such date, on which the national securities exchanges were open for trading,
except that if no Shares are then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Current Market
Price shall be the Market Price on such date.
"EMPLOYEE OPTIONS" shall mean options (other than the Option) to
subscribe for, purchase or otherwise acquire Additional Shares at an exercise
price equal to no less than the Current Market Price on the date of issuance of
such options, which options are issued to bona-fide employees of or consultants
to LVDGT (other than members of the Boreta family) pursuant to a stock option
plan adopted by the Board of Directors of LVDGT.
"EMPLOYEE SHARES" shall mean Additional Shares issued upon exercise of
an Employee Option.
"MARKET PRICE" shall mean on any date specified herein, the amount per
share of the Shares, equal to (a) the last sale price of such Shares, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Shares is then listed or admitted to trading, or (b) if such Shares are not then
listed or admitted to trading on any national securities exchange but it
designated as a national market system security by the NASD, the last trading
price of the Shares on such date, or (c) if there shall have been not trading on
such date or if the Shares are not so designated, the average of the closing bid
and asked prices of the Shares on such date as shown by the NASD automated
quotation system, or (d) if such Shares are not then listed or admitted to
trading on any national exchange or quoted in the over-the-counter market, the
higher of (x) the book value thereof as determined by any firm of independent
public accountants of recognized standing selected by the Board of Directors of
LVDGT as of the last day of any month ending with 60 days preceding the date as
of which the determination is to be made or (y) the fair value thereof
determined in good faith by the Board of
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Directors of LVDGT as of a date which is within 180 days of the date as of which
the determination is to be made.
"NASD" shall mean The National Association of Securities Dealers, Inc.
"OPTION" shall mean the right of ASIG to purchase, at ASIG's election,
in accordance with the terms of this Agreement, a number of Shares up to the
Option Number, upon payment of the aggregate Option Price for the number of
Shares so purchased, subject to adjustment as provided herein.
"OPTION NUMBER" shall mean 347,975 Shares, as such number may be
adjusted as provided herein.
"OPTION PRICE" shall be, on a per Share basis, $1.8392. The Option
Price shall be adjusted and readjusted from time to time as provided herein and,
as so adjusted or readjusted, shall remain in effect until a further adjustment
or readjustment thereof is required hereby. In the event of a Shares dividend,
Shares split, or combination of Shares which results in a proportionate increase
or decrease in the number of Shares, the Option Price then in effect shall be
decreased (in the case of a proportionate increase in Shares outstanding) or
increased (in the case of a proportionate decrease in Shares outstanding) in the
same proportion. In the event of a recapitalization, reorganization,
consolidation, merger or similar transaction where Shares are changed into or
exchanged for a different number of Shares or different capital stock or other
securities, the Option Price then in effect shall apply to so much of the
different shares of capital stock or other securities as are received with
respect to each Share so changed or exchanged. ASIG shall be given prompt
written notice of any such event, which notice shall include in reasonable
detail the calculation of any adjustments to the Option Price.
"OTHER OPTIONS" shall mean rights or options (other than the Option) to
subscribe for, purchase or otherwise acquire either Additional Shares or
Convertible Securities.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"SHARES" shall mean the shares of the common stock of LVDGT, no par
value, outstanding at any time.
SECTION 2. OPTIONS.
2.1 GRANT OF OPTION. LVDGT hereby grants to ASIG the Option, which is
immediately exercisable. The Option may be exercised in full or in any number of
partial exercises at any time or times at or prior to the tenth anniversary
hereof.
2.2 EXERCISE OF OPTION. An Option may be exercised in whole or in part
by ASIG by serving written notice (the "Option Notice") upon LVDGT specifying
the number of Shares then
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to be purchased. An Option shall be exercisable at a purchase price equal to the
product of the number of Shares to be purchased multiplied by the Option Price
then in effect. The closing for each such purchase shall be held at the offices
of LVDGT on a day not later than 30 Business Days after the date of the Option
Notice. At the closing, LVDGT shall deliver to ASIG, against payment of the
purchase price specified in this Section 2.2, certificates for the Shares
purchased, free and clear of all pledges, options, claims, liens, security
interests and encumbrances of any kind, other than the requirements of federal
and state securities laws respecting limitations on the subsequent transfer
thereof, which certificates shall be duly endorsed in blank or with appropriate
duly executed blank stock transfer powers attached, with signatures guaranteed
by a commercial bank or trust company or a member firm of a national securities
exchange and with all requisite stock transfer tax stamps attached or provided
for.
SECTION 3. ADJUSTMENT OF SHARES ISSUABLE UPON EXERCISE.
3.1 GENERAL; OPTION PRICE. The number of Shares which ASIG shall be
entitled to receive upon each exercise of the Option shall be determined by
multiplying the number of Shares which would otherwise (but for the provisions
of this Section) be issuable upon such exercise, as designated by ASIG, by the
fraction of which (a) the numerator is the Option Price in effect on the date
hereof and (b) the denominator is the Option Price in effect on the date of such
exercise.
3.2 ADJUSTMENT OF OPTION PRICE.
3.2.1 ISSUANCE OF ADDITIONAL SHARES. In case LVDGT at any time
or from time to time after the date hereof shall issue or sell Additional Shares
(including Additional Shares deemed to be issued pursuant hereto) without
consideration or for a consideration per Share less than the greater of the
Current Market Price and the Option Price in effect immediately prior to such
issue or sale, then, and in each such case, subject to Section 3.7, such Option
Price shall be reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such Option
Price by a fraction
(a) the numerator of which shall be (i) the number of
Shares outstanding immediately prior to such issue or
sale plus (ii) the number of Shares which the
aggregate consideration received by LVDGT for the
total number of such Additional Shares so issued or
sold would purchase at the greater of such Current
Market Price and such Option Price, and
(b) the denominator of which shall be the number of
Shares outstanding immediately after such issue or
sale,
PROVIDED that, for the purposes of this subsection, (x) immediately after any
Additional Shares are deemed to have been issued pursuant to Section 3.3 or 3.4,
such Additional Shares shall be deemed to be outstanding and (y) treasury shares
shall not be deemed to be outstanding.
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3.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case LVDGT
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Other Options by way of dividend or spin-off, reclassification, recapitalization
or similar corporate rearrangement) on the Shares, other than (a) a dividend
payable in Additional Shares or (b) a regular periodic cash dividend at a rate
not in excess of 110% of the rate of the last regular periodic cash dividend
theretofore paid, then, and in each such case, subject to Section 3.7, the
Option Price in effect immediately prior to the close of business on the record
date fixed for the determination of holders of any class of securities entitled
to receive such dividend or distribution shall be reduced, effective as of the
close of business on such record date, to a price (calculated to the nearest
.001 of a cent) determined by multiplying such Option Price by a fraction
(x) the numerator of which shall be the Current Market
Price in effect on such record date or, in the Shares
trade on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as
determined in good faith by the Board of Directors of
LVDGT) applicable to one Share, and
(y) the denominator of which shall be such Current Market
Price,
PROVIDED that, in the event that the amount of such dividend as so determined is
equal to or greater than 50% of such Current Market Price or in the event that
such fraction is less than 1/2, in lieu of the foregoing adjustment, adequate
provision shall be made so that ASIG shall receive a pro rata share of such
dividend based upon the maximum number of shares at the time issuable to ASIG
(determined without regard to whether the Option is exercisable at such time).
3.3 TREATMENT OF OTHER OPTIONS AND CONVERTIBLE SECURITIES. In case
LVDGT at any time or from time to time after the date hereof shall issue, sell,
grant or assume, or shall fix a record date for the determination of holders of
any class of securities entitled to received, any Other Options or Convertible
Securities, then, and in each such case, the maximum number of Additional Shares
(as set forth in the instrument relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Other Options or, in the case of Convertible
Securities and Other Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares issued as of the
time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date (or, if
the Shares trade on an ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), PROVIDED that such Additional Shares shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 3.5) of such Shares would be less than the greater of the
Current Market Price and the Option Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, in the Shares trade on an
ex-dividend basis, on the date prior to the commencement of ex-
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dividend trading), as the case may be, and PROVIDED, FURTHER, that in any such
case in which Additional Shares are deemed to be issued
(a) no further adjustment of the Option Price shall be
made upon the subsequent issue or sale of Convertible
Securities or Shares upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities, except in the case of any
such Other Options or Convertible Securities which
contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof,
of the number of Additional Shares issuable upon the
exercise of such Other Options or the conversion or
exchange of such Convertible Securities by reason of
(x) a change of control of LVDGT, (y) the acquisition
by any Person or group of Persons of any specified
number of percentage of the voting securities of
LVDGT or (z) any similar event or occurrence, each
such case to be deemed hereunder to involve a
separate issuance of Additional Shares, Other Options
or Convertible Securities, as the case may be;
(b) if such Other Options or Convertible Securities by
their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to LVDGT, or decrease in the number of
Additional Shares issuable, upon the exercise,
conversion or exchange thereof (by change of rate or
otherwise), the Option Price computed upon the
original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior
to the commencement of ex-dividend trading, as the
case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease
insofar as it affects such Options, or the rights of
conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by LVDGT and
cancellation or retirement) of any such Other Options
which shall not have been exercised or the expiration
of any rights of conversion or exchange under any
such Convertible Securities which (or purchase by
LVDGT and cancellation or retirement of any such
Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised,
the Option Price computed upon the original issue,
sale, grant or assumption thereof (or upon the
occurrence of the records date, or date prior to the
commencement of ex-dividend trading, as the case may
be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such
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expiration (or such cancellation or retirement, as
the case may be), be recomputed as if:
(i) in the case of Other Options for Shares or
Convertible Securities, the only Additional
Shares issued or sold were the Additional
Shares, if any, actually issued or sold upon
the exercise of such Other Options or the
conversion or exchange of such Convertible
Securities and the consideration received
therefor was the consideration actually
received by LVDGT for the issue, sale, grant
or assumption of all such Other Options,
whether or not exercised, plus the
consideration actually received by LVDGT
upon such exercise, or the issue or sale of
all such Convertible Securities which were
actually converted or exchanged, plus the
additional consideration, if any, actually
received by LVDGT upon such conversion or
exchange (less the consideration, if any,
actually paid by LVDGT to purchase all such
Other Options), and
(ii) in the case of Other Options for Convertible
Securities, only the Convertible Securities,
if any, actually issued or sold upon the
exercise of such Other Options were issued
at the time of the issue, sale, grant or
assumption of such Other Options, and the
consideration received by LVDGT for the
Additional Shares deemed to have then been
issued was the consideration actually
received by LVDGT for the issue, sale, grant
or assumption of all such Other Options,
whether or not exercised, plus the
consideration deemed to have been received
by LVDGT (pursuant to Section 3.5) upon the
issue or sale of such Convertible Securities
with respect to which such Other Options
were actually exercised (less the
consideration, if any, actually paid by
LVDGT to purchase all such Other Options);
(d) no readjustment pursuant to subdivision (b) or (c)
above shall have the effect of increasing the Option
Price by an amount in excess of the amount of the
adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Other
Options or Convertible Securities; and
(e) in the case of any such Other Options which expire by
their terms not more than 30 days after the date of
issue, sale, grant or assumption thereof, no
adjustment of the Option Price shall be made until
the expiration or exercise of all such Other Options,
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whereupon such adjustment shall be made in the manner
provided in subdivision (c) above.
3.4 TREATMENT OF SHARE DIVIDENDS, SHARE SPLITS, ETC. In case LVDGT at
any time or from time to time after the date hereof shall declare or pay any
dividend on the Shares payable in Shares, or shall effect a subdivision of the
outstanding Shares into a greater number of Shares (by reclassification or
otherwise than by payment of a dividend in Shares), then, and in each such case,
Additional Shares shall be deemed to have been issued (a) in the case of any
such dividend, immediately after the close of business on the record date for
the determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5 COMPUTATION OF CONSIDERATION. For the purposes of this
Section,
(a) the consideration for the issue or sale of any
Additional Shares shall, irrespective of the
accounting treatment of such consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by LVDGT,
without deducting any expenses paid or
incurred by LVDGT or any commissions or
compensations paid or concessions or
discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the
time of such issue or sale, as determined in
good faith by the Board of Directors of
LVDGT, and
(iii) in case Additional Shares are issued or sold
together with other stock or securities or
other assets of LVDGT for a consideration
which covers both, be the portion of such
consideration so received, computed as
provided in clauses (i) and (ii) above,
allocable to such Additional Shares, all as
determined in good faith by the Board of
Directors of LVDGT;
(b) Additional Shares deemed to have been issued pursuant
to Section 3.3, relating to Other Options and
Convertible Securities, shall be deemed to have been
issued for a consideration per share determined by
dividing
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(i) the total amount, if any, received and
receivable by LVDGT as consideration for the
issue, sale, grant or assumption of the
Other Options or Convertible Securities in
question, plus the minimum aggregate amount
of additional consideration (as set forth in
the instruments relating thereto, without
regard to any provision contained therein
for a subsequent adjustment of such
consideration to protect against dilution)
payable to LVDGT upon the exercise in full
of such Other Options or the conversion or
exchange of such Convertible Securities or,
in the case of Other Options for Convertible
Securities, the exercise of such Other
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of Shares (as set forth
in the instruments relating thereto, without
regard to any provision contained therein
for a subsequent adjustment of such number
to protect against dilution) issuable upon
the exercise of such Other Options or the
conversion or exchange of such Convertible
Securities; and
(c) Additional Shares deemed to have been issued pursuant
to Section 3.4, relating to stock dividends, stock
splits, etc., shall be deemed to have been issue for
no consideration.
3.6 ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding Shares
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of Shares, the Option Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
3.7 MINIMUM ADJUSTMENT OF OPTION PRICE. If the amount of any adjustment
of the Option Price required pursuant to this Section would be less than one
percent (1%) of the Option Price in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one percent (1%) of such
Option Price.
3.8 EMPLOYEE OPTIONS; EMPLOYEE SHARES. Notwithstanding anything to the
contrary contained herein, no adjustment to the Option Price shall be required
to be made hereunder with respect to the grant or exercise of Employee Options
or the issuance of Employee Shares.
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4. CONSOLIDATION, MERGER, ETC.
4.1 ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case LVDGT after the date hereof (a) shall consolidate
with or merge into any other Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into LVDGT and LVDGT shall be the continuing
or surviving Person but, in connection with such consolidation or merger, the
Shares shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other property, or (c) shall transfer all or
substantially all of its properties or assets to any other Person, or (d) shall
effect a capital reorganization or reclassification of the Shares (other than a
capital reorganization or reclassification resulting in the issue of Additional
Shares for which adjustment in the Option Price is provided herein), then, and
in the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Option, ASIG,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Option Price in effect at the
time of such consummation for all Shares issuable upon such exercise immediately
prior to such consummation), in lieu of the Shares issuable upon such exercise
prior to such consummation, the highest amount of securities, cash or other
property to which such holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the rights represented by
this Option immediately prior thereto (determined without regard to whether the
Option is exercisable at such time).
4.2 ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained in
this Option to the contrary, LVDGT will not effect any of the transactions
described in subdivision (a) through (d) of Section 4.1 unless, prior to the
consummation thereof, each Person (other than LVDGT) which may be required to
deliver any stock, securities, cash or property upon the exercise of this Option
as provided herein shall assume, by written instrument delivered to, and
reasonably satisfactory to, the holder of this Option, (a) the obligations of
LVDGT under this Option (and if LVDGT shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release
LVDGT from, any continuing obligations of LVDGT under this Option), and (b) the
obligation to deliver to such holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 4, such
holder may be entitled to receive, and such Person shall have similarly
delivered to such holder an opinion of counsel for such Person, which counsel
shall be reasonably satisfactory to such holder, stating that this Option shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this Section 4) shall be applicable
to the stock, securities, cash or property which such Person may be required to
deliver upon any exercise of this Option or the exercise of any rights pursuant
hereto.
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SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LVDGT.
LVDGT jointly and severally represents, warrants and covenants to ASIG
as follows:
(a) ORGANIZATION AND QUALIFICATION. LVDGT is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Colorado.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. LVDGT has the requisite
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate actions and no
other proceedings on the part of LVDGT or its respective
stockholders are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by LVDGT, and (assuming
this Agreement is the valid and binding obligation of ASIG)
constitutes a valid and binding agreement of LVDGT,
enforceable against LVDGT in accordance with its terms, except
that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) NO VIOLATION. The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby and thereby will not (i) constitute a
breach or violation of or default under the Certificate of
Incorporation or the By-laws of LVDGT or (ii) violate,
conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under,
or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or
assets of LVDGT under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or
obligation to which LVDGT is a party or to which LVDGT or any
of its properties or assets may be subject, other than, in the
case of clause (ii), such events that would not, either
individually or in the aggregate, prevent or delay the
consummation of the transactions contemplated hereby. The (i)
execution, delivery and performance of this Agreement by LVDGT
will not require the consent or approval of any other party,
and (ii) the execution, delivery and performance by LVDGT
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of this Agreement and the consummation of the transactions
contemplated hereby will not constitute a breach or violation
of or default under any law, rule or regulation or any
judgment, decree, order, governmental permit or license to
which LVDGT is subject. To the knowledge of LVDGT, no
challenges to the validity or effectiveness of this Agreement,
or any other agreement or instrument necessary to consummate
the transactions contemplated hereby, have been made by any
governmental authority or other person.
(d) OWNERSHIP OF SHARES. Upon payment of the Option Price, ASIG
will acquire, good and valid title to the Shares received,
free and clear of any lien, charge, encumbrance, security
interest, claim or right of others of whatever nature other
than the requirements of the federal and state securities laws
respecting limitations on the subsequent transfer thereof, and
shall be free or preemptive rights.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASIG.
ASIG hereby represents, warrants and covenants:
(a) That ASIG, either individually or together with ASIG's
advisers, has knowledge and experience in financial and
business matters; is familiar with all of the financial and
other features of LVDGT; is capable of evaluating the merits
and risks of an investment in LVDGT; and is able to bear the
economic risk of an investment in the Option and, upon
exercise of the Option, the Shares.
(b) That AEI's acquisition of the Option and in the event of the
exercise thereof, the Shares is based upon and will be based
upon ASIG's independent evaluation of the long-term prospects
of LVDGT, and that ASIG has been furnished with such financial
and other information as it has requested concerning LVDGT.
(c) That ASIG is acquiring the Option and will acquire the Shares
which may be transferred to ASIG upon the exercise of the
Option for ASIG's own account, for investment purposes only,
and not with a view to the resale, transfer or other
disposition thereof.
(d) That ASIG will not offer, sell, hypothecate, transfer or
otherwise dispose of the Option or any of the Shares, as the
case may be, unless:
(i) A registration statement covering such of the Shares
which are to be so transferred has been filed with
the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Act"),
and such sale, transfer or other disposition is
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accompanied by a prospectus relating to a
registration statement which is in effect under the
Act covering such of the Shares which are to be sold,
transferred or otherwise disposed of and meeting the
requirements of Section 10 of the Act; or
(ii) Counsel satisfactory to LVDGT renders an opinion in
writing and addressed to LVDGT, reasonably
satisfactory in form and substance to LVDGT, that in
the opinion of such counsel, registration under the
Act or the Exchange Act is not required in order to
effect such proposed transaction
SECTION 7. RESERVATION OF SHARES, ETC.
LVDGT will at all times reserve and keep available, solely for issuance
and delivery upon exercise of the Option the number of Shares from time to time
issuable upon full exercise of the Option. All Shares issuable upon exercise of
the Option at any time shall be duly authorized and, when issued upon such
exercise, shall be validly issued and fully paid and nonassessable with no
liability on the part of ASIG.
SECTION 8. NO DILUTION OR IMPAIRMENT.
LVDGT will not by amendment of its organizational documents or through
any consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Option, but will
at all times in good faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Option against dilution or other
impairment. Without limiting the generality of the foregoing, LVDGT (a) will not
permit the par value of any Shares receivable upon the exercise of this Option
to exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that LVDGT may validly and
legally issue fully paid and non-assessable Shares on the exercise of the Option
from time to time, (c) will not take any action which results in any adjustment
of the Option Price if the total number of Shares issuable after the action upon
full exercise of the Option would exceed the total number of Shares then
authorized by LVDGT's certificate of incorporation and available for the purpose
of issue upon such exercise, and (d) will not issue any capital stock of any
class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value or a sum determined by reference to a formula based on a published
index of interest rates, an interest rate publicly announced by a financial
institution or a similar indicator of interest rates in respect of participation
in dividends and to a fixed sum or percentage of par value in any such
distribution of assets. In case any event shall occur as to which any of the
provisions of this Option are not strictly applicable but the failure to make
any adjustment would not fairly protect the purchase rights represented by this
Option in accordance with the essential intent and principles contained herein,
then, in each such case, LVDGT shall, at its sole cost and expense, appoint a
firm of independent certified public accountants of
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recognized national standing (which may be the regular auditors of LVDGT), which
shall give their opinion upon the adjustment, if any, on a basis consistent with
the essential intent and principles established herein, necessary to preserve,
without dilution, the purchase rights represented by this Option. Upon receipt
of such opinion, LVDGT will promptly mail a copy thereof to the holder of this
Option and shall make the adjustments described therein.
SECTION 9. REGISTRATION.
9.1 ISSUANCE OF SHARES. If any Shares required to be reserved for
purposes of exercise of this Option require registration with or approval of any
governmental authority under any federal or state law (other than the Act)
before such Shares may be issued upon exercise, LVDGT will, at its expense and
as expeditiously as possible, cause such Shares to be duly registered or
approved, as the case may be. At any such time as Shares are listed on any
national securities exchange, LVDGT will, at its expense, obtain promptly and
maintain the approval for listing on each such exchange, upon official notice of
issuance, the Shares issuable upon exercise of the then outstanding portion of
the Option and maintain the listing of such Shares after their issuance; and
LVDGT will also list on such national securities exchange, will register under
the Securities Exchange Act of 1934 and will maintain such listing of, any other
securities that at any time are issuable upon exercise of the Option, if and at
the time that any securities of the same class shall be listed on such national
securities exchange by LVDGT.
9.2 REGISTRABLE SECURITIES. The Shares issued upon exercise of the
Option shall be considered "Registrable Securities" pursuant to and under the
Investment Agreement and the holders of such Shares shall have all the rights
and privileges of holders of Registrable Securities as set forth in the
Investment Agreement, which is incorporated herein by reference.
SECTION 10. SPECIFIC PERFORMANCE; REMEDIES.
The parties acknowledge and agree that irreparable damage will result
to ASIG in the event that this Agreement is not specifically enforced.
Therefore, the rights to, or obligations of, purchase and sale of the Shares
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement or available at law or in
equity shall, however, be cumulative and not exclusive and shall be in addition
to any other remedies which either party may have under this Agreement or
otherwise.
SECTION 11. SEVERABILITY.
If any provisions of this Agreement shall, for any reason, be adjudged
by any court of competent jurisdiction to be invalid or unenforceable, such
judgment shall not affect, impair or invalidate the remainder of this Agreement
but shall be confined in its operation to the provision of this Agreement
directly involved in the controversy in which such judgment shall have been
rendered.
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SECTION 12. NOTICES.
All notices, requests, demands and other communications hereunder must
be in writing and shall be deemed to have been duly given if mailed by first
class, registered mail, return receipt required, postage and registry fees
prepaid, and addressed as follows:
If to LVDGT: 0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx
Xxxxx 00
Xxx Xxxxx, Xxxxxx 00000
If to ASIG: c/o Agassi Enterprises, Inc.
0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
with a copy to: International Merchandising Corporation
IMG Center, Suite 100
0000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxx
Either party by notice in writing mailed to the other party may change the name
and address to which notices, requests, demands and other communications shall
be mailed.
SECTION 13. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to any conflict of law
principles that might require the application of the laws of another
jurisdiction.
SECTION 14. ARBITRATION.
The parties agree to submit to arbitration any dispute related to this
Agreement and agree that the arbitration process shall be the exclusive means
for resolving disputes which the parties cannot resolve. Any arbitration
hereunder shall be conducted under the Dispute Resolution Rules of the American
Arbitration Association ("AAA") as modified herein. Arbitration proceedings
shall take place in Las Vegas, Nevada, before a single arbitrator who shall be a
lawyer. All arbitration proceedings shall be confidential. Neither party shall
disclose any information about the evidence produced by the other party in the
arbitration proceedings, except in the course of judicial, regulatory, or
arbitration proceeding, or as may be demanded by government authority. Before
making any disclosure permitted by the preceding sentence, a party shall give
the other party reasonable advance written notice of the intended disclosure and
an opportunity to prevent disclosure. Each party shall have the right to take
the deposition of one individual and any expert witness designated by the other
party. Additional discovery may be had only where the arbitrator so orders, upon
a showing of substantial need. Only evidence that is directly relevant to the
issues may be obtained in discovery. Each party bears the burden of
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persuasion of any claim or counterclaim raised by that party. The arbitration
provisions of this Agreement shall not prevent any party from obtaining
injunctive relief from a court of competent jurisdiction to enforce the
obligations for which such party may obtain provisional relief pending a
decision on the merits by the arbitrator. Each of the parties hereby consents to
the jurisdiction of Nevada courts for such purpose. The arbitrator shall have
authority to award any remedy or relief that a court of the State of Nevada
could grant in conformity to applicable law, except that the arbitrator shall
have no authority to award attorneys' fees or punitive damages. Any arbitration
award shall be accompanied by a written statement containing a summary of the
issues in controversy, a description of the award, and an explanation of the
reasons for the award. The arbitrator's award shall be final and judgment may be
entered upon such award by any court.
SECTION 15. AMENDMENTS, ETC.
This Agreement may not be modified or amended, and no provision hereof
may be waived, except by an instrument in writing signed by the parties hereto.
SECTION 16. SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, and permitted
assigns and transferees. No party hereto may assign their rights and obligations
hereunder without the prior written consent of the other party hereto; except
that ASIG may, after providing LVDGT with written notice, transfer and assign
its rights under this Agreement to any member of ASIG, any other entity wholly
owned by any such member or to one or more trusts for such member's estate
planning purposes.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. ASI GROUP, L.L.C.
By ______________________________ By ______________________________
Name: Name:
Title: Title:
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Annex 3.28
----------
INVESTMENT AGREEMENT
--------------------
This Investment Agreement is made as of October _____, 1998, between
SAINT XXXXXXX GOLF CORPORATION, a Nevada corporation (the "Company"), whose
address is 0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx, Xxxxx 0, Xxx Xxxxx, Xxxxxx 00000,
and LAS VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation (the
"Purchaser"), whose address is 0000 Xxxxx Xxxxxx Xxxx Xxxxxxxxx, Xxxxx 0, Xxx
Xxxxx, Xxxxxx 00000.
SECTION 1
AUTHORIZATION AND SALE OF SERIES B PREFERRED
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
Two Hundred Fifty Thousand (250,000) shares (the "Shares") of its Series B
Convertible Preferred Stock ("Series B Preferred"), having the rights,
privileges and preferences as set forth in the Certificate of Designation (the
"Certificate") in the form attached to this Agreement as Exhibit A. The Shares
of Common Stock into which the Shares will be convertible are referred to herein
as the "Conversion Stock."
1.2 SALE OF SERIES B PREFERRED. Subject to the terms and conditions
hereof, and in reliance upon the representations, warranties and agreements of
the parties contained herein, the Company will issue and sell to the Purchaser,
and the Purchaser will buy from the Company, Two Hundred Fifty Thousand
(250,000) shares of Series B Preferred at a purchase price of Ten Dollars
($10.00) per share, for an aggregate purchase price of Two Million Five Hundred
Thousand Dollars ($2,500,000.00). The parties hereto understand that the number
of shares of Series B Preferred to be purchased hereunder may be reduced, and
the aggregate purchase price reduced accordingly, to the extent Three Oceans,
Inc. ("Three Oceans") exercises its rights of first refusal pursuant to that
certain Investment Agreement between Three Oceans and the Company (the "Sanyo
Agreement").
1.3 SUMMARY OF TERMS OF SERIES B PREFERRED. The following summary of
the Series B Preferred is provided for information purposes only and is subject
to the description set forth in Exhibit A:
Each share of Series B Preferred is convertible, at the option of the
Purchaser, into one share of the Company's Common Stock, subject to the
Anti-Dilution Provisions set forth herein. In the event of liquidation or
dissolution of the Company, each share of Series B Preferred will have a $10.00
liquidation preference to be paid pari passu on a prorata basis with liquidation
preference of the Series A Convertible Preferred Stock of the Company (the
"Series A Preferred") and over all other shareholders. After the distribution
described above has been paid, the remaining assets of the Company available for
distribution to shareholders shall be distributed among the holders of Series B
Preferred, the Series A Preferred (together with the Series B Preferred and any
other series of preferred stock of the Company which may hereafter be issued,
the "Preferred") and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series B Preferred
and Series A
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Preferred). In addition, holders of Series B Preferred shall be entitled to
receive dividends at a rate equal to the rate per share payable to Common Stock
or Series A Preferred holders, assuming conversion of Series B Preferred and
Series A Preferred, payable out of funds legally available therefor. Such
dividends shall be payable only when, as, and if declared payable to holders of
Common Stock or Series A Preferred by the board of directors of the Company and
shall be non-cumulative. In the event the Company shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by the
Company or other persons, assets (excluding cash dividends) or options or rights
to purchase any such securities or evidences of indebtedness, then, in each such
case the holders of the Series B Preferred shall be entitled to a proportionate
share of any such distribution as though the holders of the Series B Preferred
were the holders of the number of shares of Common Stock of the Company into
which their respective shares of Series B Preferred are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Company entitled to receive such distribution. Each share of Series B Preferred
will have one vote and will vote along with the holders of the Common Stock and
the Series A Preferred except as otherwise specified herein. The Series B
Preferred can be redeemed by the Company if there is an effective registration
statement filed with the Securities and Exchange Commission covering the
issuance of the Common Stock upon conversion of the Series B Preferred and the
following two conditions are satisfied: (a) the Company earns $1,000,000 of
pre-tax income for a fiscal year according to the year-end audited financial
statements; and (b) the closing bid price of the Company's Common Stock is a
least $15.00 for 20 consecutive trading days. If the Company notifies the
Purchaser of its intent to redeem the Series B Preferred, the Purchaser will
have at least 30 days to elect to convert its Series B Preferred or accept the
redemption price of $12.50 per Share. The Series B Preferred shall be pari passu
with the Series A Preferred and the Company shall not authorize or issue any
class or series of securities having rights or preferences senior to or pari
passu with those of Series B Preferred without a vote of the holders of a
majority of the Series B Preferred outstanding, voting separately as a class.
1.4 ADJUSTMENT OF PRICE AND/OR TERMS. If at any time and each time
within three (3) years after the Closing (as defined in Section 2.1 below), the
Company offers to sell or grants, sells or issues shares of its capital stock to
any persons or entity other than the Purchaser at a lower price per share than
the purchase price paid by the Purchaser for the Shares and/or on more favorable
terms and conditions than those afforded to the Purchaser in connection with the
purchase of the shares of Series B Preferred (taking into account any equitable
adjustment in accordance with the Anti-Dilution Provisions), the Company agrees
to retroactively apply such lower price and/or more favorable terms and
conditions to the Shares purchased by the Purchaser or to the Conversion Stock
acquired by the Purchaser. At the Purchaser's request, the Company shall either
(a) issue the Purchaser additional shares of Series B Preferred in the amount
equal to (i) the amount of any such overpayment by the Purchaser divided by (ii)
such lower price charged by the Company to any person or entities or (b) deliver
to the Purchaser the amount of any such overpayment in cash.
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SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Series B
Preferred hereunder shall be held at the offices of the Company sixteen days
from the execution hereof (the "Closing"), or at such other time and place upon
which the Company and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates, registered in the Purchaser's name representing
Two Hundred Fifty Thousand (250,000) Shares against payment of the purchase
price therefor, by check payable to the Company or wire transfer per the
Company's instructions. The total purchase price shall be paid by the Purchaser
to the Company in one installment without interest thereon.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B (which Schedule makes specific reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty to which such exception
shall apply), the Company represents and warrants to the Purchaser as follows:
3.1 DEFINITION OF MATERIAL. For purposes of this Section 3, material
shall mean anything having a value or effect of more than $50,000.
3.2 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Nevada and is in good standing under such laws. The Company
has requisite corporate power and authority to own and operate its properties
and assets, and to carry on its business as presently conducted and as proposed
to be conducted. The Company is not presently qualified to do business as a
foreign corporation in any jurisdiction, and the failure to be qualified will
not have a material adverse affect on the Company's business as now conducted or
as now proposed to be conducted. The Company has furnished the Purchaser with
copies of its Articles of Incorporation (the "Articles") and By-Laws, as
amended. Said copies are true, correct and complete and contain all amendments
through the Closing Date.
3.3 CORPORATE POWER. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, at the Closing will
have all requisite legal and corporate power and authority to sell and issue the
Shares hereunder, to issue the Conversion Stock upon conversion of the Shares,
and to carry out and perform its obligations under the terms of this Agreement.
3.4 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
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3.5 CAPITALIZATION. The authorized capital stock of the Company
consists, or upon the filing of the Certificate will consist, of 10,000,000
shares of Common Stock, of which 3,000,000 shares are issued and outstanding,
and 5,000,000 shares of Preferred Stock, of which (a) 500,000 shares have been
designated "Series A Preferred" and are issued and outstanding and (b) 250,000
shares have been designated "Series B Preferred," of which none is issued and
outstanding prior to the Closing. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The Company
has reserved shares of Series B Preferred for issuance hereunder, 250,000 shares
of Common Stock upon conversion of the Series B Preferred, 500,000 shares of
Common Stock upon conversion of Series A Preferred, 500,000 shares for issuance
upon exercise of outstanding Class A Warrants (exercise price of $6.50), 100,000
shares of Common Stock for issuance upon exercise of outstanding Underwriter's
Warrants (exercise price of $5.40), 250,000 shares of Common Stock for issuance
upon exercise of the option under the Sanyo Agreement and 50,000 shares of
Common Stock for issuance upon exercise of the Underwriter's Class A Warrants
(exercise price of $7.80). Options to purchase 657,000 shares of Common Stock
are issued and outstanding under the Company's employee stock option plan. All
outstanding securities of the Company were issued in compliance with applicable
federal and state securities laws. The Series B Preferred shall have the rights,
preferences, privileges and restrictions set forth in the Certificate. Except as
set forth above, there are no options, warrants or other rights to purchase any
of the Company's capital stock. Except as set forth in any agreement entered
into with the Purchaser, the Company is not a party or subject to any agreement
or understanding, and there is no agreement or understanding between any persons
that affects or related to the voting or giving of written consents with respect
to any security or the voting by a director of the Company.
3.6 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the authorization,
sale, issuance and delivery of the Shares and the Conversion Stock and the
performance of all of the Company's obligations hereunder has been taken or will
be taken prior to the Closing. This Agreement, when executed and delivered by
the Company, shall constitute a valid and legally binding obligation of the
Company, enforceable in accordance with its respective terms. The Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable and will have the rights, preferences and
privileges described in the Certificate; the Conversion Stock has been duly and
validly reserved and, when issued in compliance with the provisions of this
Agreement and the Certificate, will be validly issued, fully paid and
nonassessable; and the Shares and Conversion Stock will be free of any liens or
encumbrances, other than any liens or encumbrances created by or imposed upon
the holders hereof through no action of the Company; provided, however, that the
shares of the Conversion Stock will be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein. Except as set forth in
the Sanyo Agreement, the Shares are not subject to any preemptive rights or
rights of first refusal.
3.7 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser
its audited balance sheet and statements of operations and cash flow was of and
for the period ended December 31, 1997, and its combined unaudited balance sheet
and statements of operations and cash flows as of and for the period ended June
30, 1998 (collectively the "Financial
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Statements"). The Financial Statements are complete and correct in all material
respects and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated,
except that the unaudited financial statements do not contain footnotes. The
Financial Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the period, indicated
therein. The financial statements for the year ended December 31, 1997, were
audited by Xxxxxx Xxxxxxxx LLP.
3.8 ABSENCE OF CHANGES. Since June 30, 1998: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no materially adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company other than
changes in the ordinary course of business, none of which, individually or in
the aggregate, has been materially adverse, (c) there has been no damage to,
destruction of or loss of physical property (whether or not covered by
insurance) materially and adversely affecting the business or operations of the
Company, (d) the Company has not declared or paid any dividend or made any
distribution on its stock, or redeemed, purchased or otherwise acquired any of
its stock, (e) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there has
been no resignation or termination of employment of any key officer, consultant
or employee of the Company, and the Company does not know of the impending
resignation or termination of employment of any such officer, consultant or
employee that if consummated would have a material adverse effect on its
business, (g) there has been no labor dispute involving the Company or its
employees and none is pending or, to the best of the Company's knowledge,
threatened, (h) there has not been any change, except in the ordinary course of
business, in the contingent obligations of the Company, by way of guaranty,
endorsement, indemnity, warranty or otherwise, (i) there have not been any loans
made by the Company to any of its employees, officers or directors other than
travel advances and office advances made in the ordinary course of business and
(j) to the best of the Company's knowledge, there has been no other event or
condition of any character pertaining to and materially and adversely affecting
the assets or business of the Company.
3.9 MATERIAL LIABILITIES. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate) except
(a) the liabilities and obligations set forth in the Financial Statements, (b)
liabilities and obligations which have been incurred subsequent to June 30,
1998, in the ordinary course of business which have not been in the aggregate
materially adverse, (c) liabilities and obligations under lease for its
principal offices and for equipment, and (d) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, and has good title to all of
its leasehold interests in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the lien of current taxes not yet due
and payable. Each of the Company's assets is in good repair and good, marketable
and operating condition and is suitable for the purposes for which it presently
is being used and is intended to be used by the Company and is adequate and
suitable to meet all present and reasonably anticipated future requirements of
the Company. The Company's assets conform to
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all applicable laws, ordinances, codes, rules and regulations, and the Company
has not received any notice to the contrary. The Company does not own, of record
or beneficially, any real property. Exhibit C sets forth a list and description
of all property leased or subleased to or by the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS; NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Articles or By-Laws, or, in any
material respect, of any term or provision of any mortgage, indebtedness,
indenture, contract, security agreement, agreement, instrument, judgment or
decree, and, to the best of its knowledge, is not in violation of any order,
statute, rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the
Series B Preferred and the Conversion Stock has not resulted and will not result
in any violation of, or conflict with, or constitute a default (or an event that
might, with the passage of time or the giving of notice or either of them,
constitute a default) under any of the terms of, result in the termination of,
result in the loss of any right under, or give to any other person the right to
cause such a termination of or loss under, and will be in compliance with, the
Company's Articles, By-Laws and all of its agreements, permits and licenses or
any provision of federal, state, local or foreign statute rule ordinance or
regulation applicable to the Company or result in the creation of, any mortgage,
pledge, lien, encumbrance or charge upon any of the capital stock, properties or
assets of the Company or the creation, maturation or acceleration of any
liability or obligation of the Company (or give to any other person the right to
cause such a creation, maturation or acceleration); and there is no such
violation or default which adversely affects the business of the Company or any
of its properties or assets.
3.12 INTANGIBLE ASSETS.
(a) The Company (i) owns or has the right to use, free
and clear of all liens, claims and restrictions, all
Intellectual Property (as hereinafter defined) used
in the conduct of its business as now conducted or as
proposed to be conducted without infringing upon or
otherwise acting adversely to the right or claimed
right of any person under or with respect to any of
the foregoing, and (ii) is not obligated or under any
liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner of, license
of, or other claimant to, any patent, trademark,
trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the
conduct of its business or otherwise. "Intellectual
Property" means (a) all inventions (whether
patentable or unpatentable) and whether or not
reduced to practice, all improvements thereto, and
all patents, patent applications and patent
disclosures, together with all reissuance,
continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all
translations, adaptations, derivations and
combinations thereof and including all
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goodwill associated therewith, and all applications,
registrations and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all
applications, registrations and renewals in
connection therewith, (d) all mask works and all
applications, registrations and renewals in
connection therewith, (e) all trade secrets and
confidential business information (including ideas,
research and development, know-how, formulas,
compositions, manufacturing and producing processes
and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing
and cost information, and business and marketing
plans and proposals), (f) all computer software and
information systems, programs, (including data and
related documentation), whether owned or leased by
the Company, (g) all other proprietary rights and (h)
all copies and tangible embodiments thereof (in
whatever form or medium). The Company has taken all
necessary action to maintain and protect each item of
Intellectual Property that it owns or uses and has
never granted any sublicense or similar right to any
third party with respect to such Intellectual
Property.
(b) The Company owns and has the unrestricted right to
use all Intellectual Property required for or
incidental to the development, construction and
operation of the SportPark segment of its business,
free and clear of any rights, liens or claims of
others, including without limitation, former
employers of all current and former employees,
consultants, officers, directors and shareholders of
the Company.
(c) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties,
and none of the stockholders and directors and
officers (and employees with responsibility for
Intellectual Property matters) of the Company has
ever received any charge, complaint, claim, demand or
notice alleging any such interference, infringement,
misappropriation or violation (including any claim
that the Company must license or refrain from using
any Intellectual Property rights of any third party).
No third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with
any Intellectual Property rights of the Company.
(d) Exhibit D identifies each patent or registration
which has been issued to the Company with respect to
any of its Intellectual Property, each pending patent
application or application for registration which the
Company has made with respect to any of its
Intellectual Property, and each license, agreement or
other permission which the Company has granted to any
third party with respect to any of its Intellectual
Property. The Company has
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delivered to the Purchaser correct and complete
copies of all such patents, registrations,
applications, licenses, agreements and permissions
(as amended to date). Exhibit D also identifies each
trade name or unregistered trademark used by the
Company in connection with any of its businesses.
With respect to each item of Intellectual Property
required to be identified in Exhibit D: (i) the
Company possesses all right, title and interest in
and to the item, free and clear of any Liens, license
or other restriction, (ii) the item is not subject to
any outstanding injunction, judgment, order, decree,
ruling or charge, (iii) no action, suit proceeding
hearing, investigation, charge, complaint, claim or
demand is pending or, to the knowledge of each of the
shareholders and the directors and officers (and
employees with responsibility for Intellectual
Property matters) of the Company, is threatened which
challenges the legality, validity, enforceability,
use or ownership of the item and (iv) the Company has
never agreed to indemnify any person for or against
any interference, infringement, misappropriation, or
other conflict with respect to the item.
3.13 LITIGATION, ETC. There is no suit, action, hearing, investigation,
claim or litigation, or legal, administrative, arbitration or other proceeding
pending or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company, its business or any of its property or assets,
before any court, arbitrator, or federal, state, municipal or other governmental
board, department, agency or instrumentality, and there is no basis for any such
action. There is no judgment, decree, injunction, ruling, award, charge, order
or writ of any court, governmental department, commission, agency,
instrumentality, arbitration or other person outstanding against, binding upon
or involving the Company, its business, any directors or officers of the
Company. None of the matters set forth on Exhibit B could result in any material
adverse effect. The Company owns policies of casualty, liability or other forms
of insurance which provide coverages in amount and scope sufficient to cover
every claim, action, cause of action, suit, proceeding, litigation, arbitration
or investigation arising out of, related to, or in connection with those matters
listed on the schedule of exception. Neither the Company nor any of its
directors, officers or employees is currently charged with, or is currently
under investigation with respect to, any violation of any provision of any
foreign, federal, state or local law or administrative regulation in respect of
the business of the Company. The Company is not in default with respect to any
judgment, decree, injunction, ruling, award, order or writ of any foreign,
federal, state, municipal agency or other governmental department, board,
commission, bureau, agency or instrumentality.
3.14 EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company. There are no
controversies pending nor, to the best knowledge of the Company any basis of any
such controversies, between the Company and any of its employees. To the
knowledge of the Company, and the directors and officers (and employees with
responsibility for
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employment matters) of the Company, no executive, key employee, or group of
employees has any plans to terminate employment with the Company. The Company is
not bound by any collective bargaining agreement, nor has the Company
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Company has not committed any unfair labor
practice. None of the shareholders or the directors or officers (or employees
with responsibility for employment matters) of the Company has any knowledge of
any organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of the Company.
3.15 EMPLOYEE AGREEMENTS. There are no pension, profit-sharing, bonus,
group insurance, death benefit, vacation pay, severance pay, sick leave, holiday
pay, welfare, or any other employee benefit or "fringe benefit" plans or
arrangements relating to the current or former employees or consultants of the
Company. In addition, there are no employment, deferred compensation, collective
bargaining, retainer, savings, consulting, non-competition, retirement or
incentive agreements, contracts, plans or arrangements relating to, with or for
the benefit of any officers or employees of the Company or other persons.
3.16 CERTAIN TRANSACTIONS. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever; none of said officers,
directors or shareholders, or any members of their immediate families, are
indebted to the Company or have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company, except that officers, directors and/or shareholders of the
Company may own less than 1% of the stock of publicly-traded companies which may
compete with the Company. No officer, director or shareholder, or any member of
their immediate families, is, directly or indirectly, interested in any contract
with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.17 MATERIAL CONTRACTS AND OBLIGATIONS. Attached hereto as Exhibit E
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by the Company; or which involve transactions or
proposed transactions between the Company and its officers, directors,
affiliates or any affiliate thereof. Copies of certain of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by the Purchaser and its counsel. All of
such agreements and contracts are valid, binding and in full force and effect in
all respects, assuming due execution by the other parties to such agreements and
contracts. To the best knowledge of the Company, the Company and each other
party to each such agreement and contract has performed all obligations required
to be performed by it thereunder and is not in breach or default, and is not
alleged to be in breach or default, in any respect thereunder, and no event has
occurred and no condition or state of facts exists (or would exist upon the
giving of notice or the lapse of time or any of them) that would become or cause
a breach, default or event of default thereunder, would give to any person the
right to cause such a termination or would cause an acceleration of any
obligation thereunder.
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3.18 REGISTRATION RIGHTS. Except as set forth in this Agreement or as
set forth in the Sanyo Agreement, the Company is not under any contractual
obligation to register (as defined in Section 8.1 below) any of its presently
outstanding securities or any of its securities which may hereafter be issued.
3.19 GOVERNMENTAL CONSENT, ETC. No consent, approval, order or
authorization of (of designation, declaration or filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Series B Preferred and the Conversion Stock, or the consummation of any other
transaction contemplated hereby, except (a) filing of the Certificate in the
office of the Secretary of the State of Nevada, and (b) qualification (or taking
such action as may be necessary to secure an exemption from qualification, if
available) or the offer and sale of the Series B Preferred and the Conversion
Stock under applicable estate securities laws, which filings and qualifications,
if required, will be accomplished in a timely manner.
3.20 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Series
B Preferred to be issued in conformity with the terms of this Agreement, and the
issuance of the Conversion Stock upon conversion of the Series B Preferred,
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act of 1933, as amended (the "Securities Act").
3.21 BROKERS OR FINDERS. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.22 TAX MATTERS. The Company (a) has timely filed all tax returns that
are required to have been filed by it with all appropriate federal, state,
county and local governmental agencies (and all such returns fairly reflect the
Company's operations for tax purposes), (b) has timely paid all taxes owed by it
for which it is obligated to withhold from amounts owing to any employee
(including without limitation social security taxes), creditor or third party
(other than taxes the validity of which are being contested in good faith by
appropriate proceedings), and (c) has not waived any statute of limitations with
respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency. The assessment of any additional taxes for a period
for which returns have been filed is not expected to exceed the recorded
liability therefor, and there are no material unresolved questions or claims
concerning the Company's tax liability. The Company's tax returns have not been
reviewed or audited by any federal, state, local or county taxing authority.
There is no pending dispute with any taxing authority relating to any of said
returns which, if determined adversely to the Company, would result in the
assertion by any taxing authority of any valid deficiency in any material amount
for taxes.
3.23 INSURANCE. With respect to each insurance policy maintained by the
Company: (a) the policy is legal, valid, binding, enforceable and in full force
and effect, (b) the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
consummation of the transactions contemplated hereby, (c) neither the Company
nor any other party to the policy is in breach of default (including with
respect to the payment of premiums or the giving of notices) and (d) no party to
the policy has repudiated any provision
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thereof. The Company has been covered since its formation by insurance in type,
scope and amount that (x) meet the minimum requirements of any contract, lease
or agreement to which the Company is a party and (y) is customary and reasonable
for the business in which it has engaged during such period including, without
limitation, fire, casualty, liability and key-man life (on the lives of Xxx and
Xxxx Xxxxxx) insurance polices. The Company has not failed to give any notice or
present any claim under any insurance policy in a due and timely fashion.
3.24 ENVIRONMENTAL AND SAFETY REGULATIONS. The Company is not in
violation of any environmental laws or regulations, including without limitation
any and all applicable federal, state and local laws, regulations and ordinances
relating to air and water pollution and handling and disposal of chemical and
hazardous materials (hereinafter the "Environmental Laws"). The Company
possesses all of the authorizations, permits and approvals required to be
obtained by applicable Environmental Laws; neither the Company nor any
stockholder has received any notice from any governmental authority or has
knowledge of any governmental inquiry or investigation or any other claim, suit
or proceeding against or involving the Company with respect to any actual or
alleged violation of any applicable Environmental Law and all hazardous waste
and chemical waste materials have been disposed of in accordance with all
applicable Environmental Laws. There have been no spills, dumping, discharge or
clean-up of hazardous waste or chemical materials in violation of any
Environmental Laws on or at any premises owned or any premises occupied by the
Company.
3.25 EMPLOYEE BENEFIT PLANS.
(a) The Company has never maintained or contributed to, and
does not maintain or contribute to any Employee Benefit
Plan as defined in the Employee Retirement Income
Security Act of 1974, as amended. The Company has not
incurred any liability under ERISA (including any
withdrawal liability) or under the Internal Revenue Code
of 1986, as amended Code (the "Code"), with respect to
any Employee Benefit Plan.
(b) The Company does not contribute to, nor has ever had
contributed to and has never been required to contribute
to any multi-employer plan or has any liability
(including withdrawal liability) under any
multi-employer plan.
(c) The Company does not maintain or contribute to, nor has
it ever maintained or contributed to, nor has it ever
been required to contribute to any Employee Welfare
Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code
Section 4980B).
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3.26 MINUTE BOOKS. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately.
3.27 LEGAL COMPLIANCE. The Company has complied with all applicable
laws, statutes, and ordinances (including without limitation all rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and
charges thereunder) of federal, state, local and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced against
it alleging any failure to so comply. The Company has all permits, certificates,
licenses, approvals and other authorizations required in connection with the
operation of its business, all of which are valid and effective. No notice has
been issued and no investigation or review is pending or threatened by any
governmental entity with respect to (a) any alleged violation by the Company of
any law, statute or ordinance, rule, regulation, code, plan, injunction,
judgment, order, decree, ruling, charge, policy or guideline of any federal,
state, local or foreign governmental entity(or agency thereof), or (b) any
alleged failure to have all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of the business of the
Company.
3.28 DISCLOSURE. This Agreement with the Exhibits hereto and all
information provided by the Company to the Purchaser do not contain any untrue
statement of a fact or omit to state a fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with
respect to the purchase of the Shares as follows:
4.1 EXPERIENCE. It has experience in evaluating and investing in
private placement transactions of securities in companies so that it is capable
of evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Shares and the Conversion Stock for
investment for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof. It understands
that the Shares and the Conversion Stock have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Purchaser's representations as expressed herein.
4.3 RULE 144. It acknowledges that the Shares and the Conversion Stock
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. It is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public
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market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "brokers transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three month period not exceeding
specified limitations.
4.4 ACCESS TO DATA. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and has
had the opportunity to review the Company's facilities. It has also had an
opportunity to ask questions of officers of the Company, which questions were
answered to its satisfaction. It understands that such discussions, as well as
any written information issued by the Company, were intended to describe certain
aspects of the Company's business and prospects but were not a thorough or
exhaustive description. However, no investigation by, or furnishing of
information to, the Purchaser shall affect or modify the representations,
warranties and agreements of the Company set forth herein or the right of the
Purchaser to rely exclusively thereon and to seek and obtain all damages and
other remedies available to the Purchaser in connection with the breach of any
of the representations, warranties and covenants contained herein.
4.5 AUTHORIZATION. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms subject to (a) the laws of
bankruptcy and the laws affecting creditor's rights generally and (b) the
availability of equitable remedies.
4.6 BROKERS OR FINDERS. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the Purchaser,
any liability for brokerage or finder's fees or agents' commissions or any
similar charges in connection with this Agreement.
4.7 REQUIRED SEC FILINGS. The Purchaser acknowledges that within 10
days after the Closing, it will be required to file an amended Schedule 13D or
Schedule 13G, as appropriate, and a Form 4 with the Securities and Exchange
Commission.
SECTION 5
THE PURCHASER'S CONDITIONS TO CLOSING
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the below-listed conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto. If at the Closing Date any of the conditions specified in this
Agreement shall not have been fulfilled, the Purchaser shall, at the Purchaser's
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other rights Investor may have by reason of such
nonfulfillment.
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true, complete and
correct when made, and shall be true, complete and correct on the Closing Date.
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5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 GOOD STANDING CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of good standing of the Company under the laws of the
State of Nevada.
5.5 CERTIFICATE OF AMENDMENT. The Certificate shall have been filed
with the Secretary of State of the State of Nevada.
5.6 LEGAL MATTERS. All matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been reasonably
approved by counsel to the Purchaser.
5.7 CO-SALE AGREEMENT. The Purchaser and each of Messrs. Xxxx Xxxxxx,
Xxx Xxxxxx or Xxxx Xxxxxx or Xxxxxx Enterprises Ltd. or any of their respective
affiliates shall each have entered into a Co-Sale Agreement which shall have a
term of two years in the form attached hereto as Exhibit F.
5.8 RIGHT OF FIRST REFUSAL. The Company shall have complied with all
provisions of the Sanyo Agreement as such provisions relate to, or are applied
to, this Agreement or consummation of the transactions contemplated hereby.
5.9 OPINION OF THE COMPANY'S COUNSEL. The Purchaser shall have received
from Krys, Boyle, Xxxxxxxx & Xxxxxx, P.C., counsel to the Company, an opinion
dated the Closing Date, in form and substance satisfactory to the Purchaser, to
the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Nevada, and the Company has the requisite corporate
power and authority to own it properties and to conduct
its business.
(b) The Company is not presently required to be qualified to
do business as a foreign corporation in any state or
jurisdiction of the United States.
(c) The Company has the requisite corporate power and
authority to execute, deliver and perform this Agreement.
The Agreement has been duly and validly authorized by the
Company, duly executed and delivered by an authorized
officer of the Company and constitutes legal, valid and
binding obligations of the Company,
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subject to bankruptcy and other laws of general
application affecting the rights and remedies of creditors
and except insofar as the enforceability of the
indemnification provisions of Section 8.11 of the
Agreement may be limited by applicable laws and except
that no opinion need be given as to the availability of
equitable remedies.
(d) The capitalization of the Company is as follows:
(i) PREFERRED STOCK. 5,000,000 shares of Stock, of
which (A) 500,000 shares have been designated
Series A Preferred Stock and are issued and
outstanding and (B) 250,000 shares have been
designated as Series B Preferred and purchased
pursuant to this Agreement. Such shares of Series
B Preferred Stock have been duly authorized,
issued and delivered, are validly outstanding,
fully paid and nonassessable, and have been
approved by all requisite shareholder action. The
respective rights, privileges and preferences of
the Preferred Series B are as stated in the
Certificate attached as Exhibit A to the
Agreement. The Conversion Stock has been duly and
validly reserved for issuance and, when issued in
accordance with the Certificate, will be validly
issued, fully paid and nonassessable.
(ii) COMMON STOCK. 10,000,000 shares of Common Stock,
of which 3,000,000 shares have been duly
authorized, issued and delivered and are validly
outstanding, fully paid and nonassessable and
were issued in compliance with all applicable
federal and state securities laws.
(iii) Except for (A) the conversion privileges of the
Series A Preferred Stock, (B) the conversion
privileges of the Series B Preferred, (C) the
rights of first refusal contained in Section 9
hereof, (D) the rights of first refusal contained
in the Sanyo Agreement, (E) 250,000 shares of
Common Stock reserved for issuance upon the
exercise of the stock option granted in the Sanyo
Agreement, (F) 500,000 shares of Common Stock
reserved for issuance upon exercise of
outstanding Class A Warrants, (G) 150,000 shares
of Common Stock reserved for issuance upon
exercise of outstanding Underwriter's Warrants
and (H) 657,000 shares of Common Stock reserved
for issuance to employees and consultants upon
exercise of outstanding stock options, there are
no preemptive rights or, to the best of counsel's
knowledge, options, warrants, conversion
privileges or
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other rights (or agreements of any such rights)
outstanding to purchase or otherwise obtain any
of the Company's securities.
(e) The certificates representing shares of the Preferred
Stock and shares of Common Stock are in due and proper
form and have been duly and validly executed by the
officers of the Company named thereon.
(f) The execution, delivery, performance and compliance with
the terms of this Agreement do not violate any provision
of any federal, state or local law, rule or regulation or
of any judgment, writ, decree or order binding upon the
Company or any provision of the Company's amended Articles
or By-Laws.
(g) All consents, approvals, orders or authorizations of, and
all qualifications, registrations, designations,
declarations or filings with, any federal or state
governmental authority on the part of the Company required
in connection with the consummation of the transactions
contemplated by this Agreement have been obtained and are
effective as of the Closing, and such counsel is not aware
of any proceedings, or threat thereof, which question the
validity thereof.
(h) Based in part upon the representations of the Purchaser in
this Agreement, the offer and sale of the Series B
Preferred pursuant to the terms of this Agreement are
exempt from the registration requirements of Section 5 of
the Securities Act by virtue of Section 4(2) thereof, and
from the qualification requirements of the securities laws
of the State of Nevada, or all requisite permits,
qualifications and orders have been obtained.
(i) Except as set forth on the Schedule of Exceptions attached
to the Agreement as Exhibit B, such counsel is not aware
of any action, proceeding or investigation pending against
the Company or any of its officers, directors or
employees, or that any of the foregoing has received any
threat thereof, which questions the validity of the
Agreement or the right of the Company or its officers,
directors and employees to enter into such agreement or
which might result, either individually or in the
aggregate, in any adverse change in the assets, condition,
affairs or prospects of the Company, nor is such counsel
aware of any litigation pending, against the Company or
any of its officers, directors or employees' or that any
of the foregoing has received any threat thereof, by
reason of the proposed activities of the Company, the past
employment relationships of its officers, directors or
employees, or negotiations by the Company
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or any of its officers or directors with possible
investors in the Company.
(j) The Company is not in violation of any provisions of its
Articles or Bylaws, and neither of such documents is in
violation of any provision of the Corporation Law of the
State of Nevada.
5.10 NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the business or any of the assets, results of
operations, liabilities, prospects or conditions, financial or otherwise, of the
Company.
SECTION 6
THE COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 LEGAL MATTERS. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any of the shares
of Series B Preferred or shares of Conversion Stock:
(a) As soon as practicable after the end of each fiscal year,
and in any event within 90 days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if
any, as of the end of such fiscal year, and consolidated
statements of operations and consolidated statements of
cash flows of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally
accepted accounting principles and setting forth in each
case in comparative form similar information of the
previous fiscal year, all in reasonable detail and audited
by independent public accountants of national standing
selected by the Company.
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(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year
of the Company and in any event within 45 days thereafter,
a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations and
consolidated statements of cash flows of the Company and
its subsidiaries, if any, for such period and for the
current fiscal year to date, prepared in accordance with
generally accepted accounting principles (other than for
accompanying notes), all in reasonable detail and signed,
subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting
officer of the Company.
(c) Within 15 days after the end of each fiscal month,
unaudited consolidated balance sheets of the Company as of
the end of such month, unaudited consolidated statements
of operations including income statements, and unaudited
consolidated rolling cash flow projections for each month
and for the current fiscal year to date. Such financial
statements shall be prepared in accordance with generally
accepted accounting principles consistently applied (other
than accompanying notes), all in reasonable detail subject
to year-end audit adjustments.
(d) Promptly after each meeting or the execution of an action
by written consent, copies of the minutes of proceedings
or actions by written consent of the Company's Board of
Directors and shareholders.
(e) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries, if
any, as the Purchaser may from time to time reasonably
request.
(f) For so long as the Purchaser is eligible to receive
reports under this Section 7.1, it shall also have the
right, at its expense, to visit and inspect any of the
properties of the Company or any of its subsidiaries, to
examine its books of account and records, and to discuss
their affairs, finances and accounts with their officers,
all at such reasonable times as often as may be reasonably
requested, provided, however, that the Company shall not
be obligated to provide any information, other than to the
representatives of the Purchaser on the Board of
Directors, that it reasonably considers to be a trade
secret or to contain confidential information.
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by the
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided,
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however, that the Purchaser may assign such rights to a parent, subsidiary or
affiliate of the Purchaser upon notice to the Company thereof.
7.3 USE OF PROCEEDS. The Company shall completely segregate the
proceeds from the sale of the Shares from all other funds of the Company. These
funds shall be strictly and exclusively used for activities directly related to
the SportPark segment of the Company's business and shall not be used for the
Company's franchise business or for any other purposes. The Company shall
maintain a separate accounting for the use of these proceeds and provide a copy
of such accounting to the Purchaser upon request.
7.4 RULE 144 REPORTING. With a view to making available to the
Purchaser the benefits of certain rules and regulations of the Securities and
Exchange Commission which may permit the sale of the Conversion Stock to the
public without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the
Securities Act, at all times;
(b) Use its best efforts to file with the Securities and
Exchange Commission in a timely manner all reports and
other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) So long as the Purchaser owns any Restricted Securities
(as defined in Section 8.1 hereof) furnish to the
Purchaser forthwith upon request a written statement by
the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or
quarterly report of the Company filed with the Securities
and Exchange Commission, and such other reports and
documents of the Company and other information in the
possession of or reasonably obtained by the Company as the
Purchaser may reasonably request in availing itself of any
due or regulation of the Securities and Exchange
Commission allowing the Purchaser to sell any such
securities without registration.
7.5 PROTECTIVE PROVISIONS. For so long as the Purchaser or its
assignees is a holder of any shares of the Series B Preferred or Conversion
Stock, the Company shall not without the Purchaser's prior written consent:
(a) change any of the terms of Series B Preferred as stated in
the Certificate or any amendment, addition, change,
modification or deletion of any portion of the By-Laws or
Articles of the Company;
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(b) authorize or issue (i) any class or series of securities
having rights senior to or pari passu with those of the
Series B Preferred or (ii) any rights to purchase or any
securities or instruments convertible or exchangeable into
any such securities;
(c) sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or effect any merger,
consolidation, reorganization or amalgamation of the
Company, with another corporation;
(d) adopt a statutory plan of share exchange;
(e) redeem or repurchase (or enter into any agreement to
become so obligated) any shares of Common Stock or Series
B Preferred (other than pursuant to employee stock vesting
or employee stock repurchase agreements or pursuant to the
Certificate);
(f) enter into any transaction with or increase the
compensation paid or issue any securities of the Company,
rights or options to purchase any securities of the
Company or any instrument convertible or exchangeable or
payable or satisfied with any securities of the Company or
any other compensation derived from or based on the
profits or securities of the Company to any of Messrs.
Xxxx Xxxxxx, Xxx Xxxxxx or Xxxx Xxxxxx or Xxxxxx
Enterprises Ltd. or any of their respective affiliates;
(g) subject to the Sanyo Agreement and to the Agreement, dated
as of July 29, 1996, by and between Three Oceans and the
Company regarding the granting of certain rights to Three
Oceans by the Company, including the right to participate
in the ownership, development, management, and/or
operation of a SportPark in Asia, Anaheim, California or
Las Vegas, Nevada, the right to invest in or finance
certain transactions, the right to supply certain products
to the Company and certain signage rights, purchase, sell
or lease any material parcel of real property for any
SportPark, any single sport interactive entertainment or
training complex ("Single Sport Complex") or similar
facility or enter into any single transaction or series of
related transactions in excess of $100,000 with respect to
or relating to or in connection with any Single Sport
Complex or similar facility without first providing the
Purchaser an opportunity to approve the transactions(s)
and to review and provide comments on the relevant
documents prior to closing the transaction;
(h) dissolve or liquidate the Company and/or its assets or
close the business of the Company; or
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(i) file a petition to appoint a receiver for the Company or
file a voluntary petition for bankruptcy, insolvency or to
make any assignment for the benefit of creditors of the
Company.
7.6 PRINCIPAL BUSINESS. The Company shall ensure that all its principal
shareholders officers and directors (a) direct or refer all opportunities
relating to, similar to or of the same nature as the Company's Sports Park
business exclusively to the Company, (b) not realize any profit or gain with
respect to such opportunities to the detriment or in lieu of the Company and (c)
not otherwise misappropriate any corporate opportunity.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS; INDEMNIFICATION
8.1 CERTAIN DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"CONVERSION STOCK" means the Common Stock issued or issuable pursuant
to conversion of the Shares.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 as
amended or any similar federal statute and the rules and regulations of the
Commissions thereunder all as the same shall be in effect at the time.
"HOLDER" shall mean the Purchaser and any person holding Registrable
Securities or shares to whom the rights under this Section 8 have been
transferred in accordance with Section 8.2 hereof.
"REGISTRABLE SECURITIES" means (i) the Conversion Stock, and (ii) any
Common Stock of the Company issued or issuable in respect of the Conversion
Stock or other securities issued or issuable pursuant to the conversion of the
shares upon any Recapitalization or any Common Stock otherwise issued or
issuable with respect to the Shares provided however that shares of Common Stock
or other securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or (B)
sold or are available for sale in the opinion of counsel to the Company in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are or may be removed upon the
consummation of such sale.
The term "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
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"REGISTRATION EXPENSES" shall mean all expenses, except Selling
Expenses as defined below, incurred by the Company in complying with Sections
8.5, 8.6 and 8.7, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 8.3 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the notes and regulations of the Commission
thereunder all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the holders.
8.2 RESTRICTION ON TRANSFERABILITY. The Shares and the Conversion Stock
shall not be sold, assigned, transferred or pledged except upon satisfaction of
the conditions specified in this Section 8, which conditions are intended to
ensure compliance with the provisions of the Securities Act. The Purchaser will
cause any proposed assignee, transferee, or pledge of the shares of Conversion
Stock held by the Purchaser to agree to take and hold such securities subject to
the provisions and conditions of this Section 8.
8.3 RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
(ii) the Conversion Stock and (iii) any other securities issued in respect of
the Shares or the Conversion Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar events, shall (unless
otherwise permitted by the provisions of Section 8.4 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF
THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
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The Purchaser consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Shares or the Conversion
Stock in order to implement the restrictions on transfer established in this
Section 8.
8.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution of Restricted Securities by the
Purchaser to a parent, subsidiary or affiliate of the Purchaser), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities Transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the appropriate restrictive legend set forth in Section 8.3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such holder and the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
8.5 REQUEST FOR REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive
from the Purchaser at any time a written request that the
Company effect any registration with respect to all or a
part of the Registrable Securities, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration (including, without
limitation, filing post-effective amendments,
appropriate qualifications under applicable blue
sky or other state securities laws, and
appropriate compliance with the Securities Act)
and as would permit or facilitate the sale and
distribution of all or such portion of such
Registrable Securities as are specified in such
request, together with all or such portion of the
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Registrable Securities of any Holder or holders
joining in such request as are specified in a
written request received by the Company within
twenty (20) days after such written notice from
the Company is mailed or delivered.
The Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to
this Section 8.5:
(A) After the Company has initiated one such
registration pursuant to this Section
8.5(a);
(B) During the period starting with the date
sixty (60) days prior to the Company's
good faith estimate of the date of
filing of, and ending on a date one
hundred twenty (120) days after the
effective date of, a Company-initiated
registration; provided that the Company
is actively employing in good faith all
reasonable efforts to cause such
registration statement to become
effective;
(b) Subject to the foregoing clauses (A) and (B), the Company
shall file a registration statement covering the
Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or
requests of the Purchaser.
The registration statement filed pursuant to the request
of the Purchaser may include other securities of the
Company, with respect to which registration rights have
been granted, and may include securities of the Company
being sold for the account of the Company.
(c) UNDERWRITING. The right of any Holder to registration
pursuant to Section 8.5 shall be conditioned upon such
holder's participation in such underwriting and the
inclusion of such holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a
majority in interest of the Purchaser and such holder with
respect to such participation and inclusion) to the extent
provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities
he or she holds.
8.6 THE COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to
time the Company shall determine to register of its
securities, either for its own account or the account of a
Holder or Holders, other than a registration relating
solely to employee benefit plans or a post
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effective amendment to the registration statement for the
Company's initial public offering, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under the sky laws or other
compliance), and in any underwriting involved
therein, all the Registrable Securities specified
in a written request or requests, made within 20
days after receipt of such written notice from
the Company, by any Holder.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving
an underwriting, the Company shall so advise the Holders
as a part of the written notice given pursuant to Section
8.6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.6 shall be
conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with
the Company and any other shareholders distributing their
securities through such underwriting) enter into an
underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 8.6,
if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the
Registrable Securities to be included in such
registration. The Company shall so advise all Holders and
the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be
allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable
Securities held by such holders at the time of filing the
registration statement. To facilitate the allocation of
shares in accordance with the above provisions, the
Company may round the number of shares allocated to any
Holder or other shareholder to the nearest 100 shares. If
any Holder or other shareholder disapproves of the terms
of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public
distribution prior to 90 days after the effective date of
the registration statement relating thereto, or such other
shorter period
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of time as the underwriters may require. The Company may
include shares of Common Stock held by shareholders other
than Holders in a registration statement pursuant to this
Section 8.6, so long as the amount of Registrable
Securities otherwise includable in such registration
statement would not thereby be diminished.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration
initiated by it under this Section 8.6 prior to the
effectiveness of such registration whether or not any
Holder has elected to include securities in such
registration.
8.7 REGISTRATION ON FORM S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use
of Form S-3, in addition to the rights contained in the
foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in
writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or
Holders).
(b) If a request complying with the requirements of Section
8.7(a) hereof is delivered to the Company, the provisions
of Section 8.5(a)(i) and (ii) and Section 8.5(b) hereof
shall apply to such registration. If the registration is
for an underwritten offering, the provisions of Section
8.5(c) hereof shall apply to such registration.
8.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with the registration pursuant to Section 8.5, 8.6 and 8.7 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the basis
of the number of shares registered.
8.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 8,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best
efforts to cause such registration statement to become and
remain effective for at least one hundred twenty (120)
days, and prepare and file with the Commission such
amendments to such registration statement and
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supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective
for at least one hundred twenty (120) days, provided that
no such registration shall constitute a shelf registration
under Rule 415 promulgated by the Commission under the
Securities Act;
(b) Enter into a written underwriting agreement in customary
form and substance reasonably satisfactory to the Company,
the Holders and the managing underwriting or underwriters
of the public offering of such securities, if the offering
is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered
such reasonable number of copies of the registration
statement, preliminary prospectus' final prospects and
such other documents as such underwriters may reasonably
request in order to facilitate the public offering of such
securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such
participating Holders may reasonably request within ten
(10) days prior to the original filing of such
registration statement, except that the Company shall not
for any purpose be required to execute a general consent
to service of process or to qualify to do business a
foreign corporation in any jurisdiction where it is not so
qualified;
(e) Notify the Holders (of if they have appointed an
attorney-in-fact, such attorney-in-fact) participating in
such registration, promptly after it shall receive notice
thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming
a part of such registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact promptly of
any request by the Commission for the amending or
supplementing of such registration statement or prospectus
or for additional information;
(g) Prepare and file with the Commission promptly upon the
request of such registration statement or prospectus
which, in the reasonable opinion of counsel for such
Holders, is required under the Securities Act or the rules
and regulations thereunder in connection with the
distribution of the Registration Securities by such
Holders;
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(h) Prepare and promptly file with the Commission, and
promptly notify such Holders or their attorney-in-fact of
the filing of, such amendment or supplement to such
registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time
when a prospectus relating to such securities is required
to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein not
misleading in light of the circumstances in which they
were made;
(i) In case any of such Holders or any underwriter for any
such Holders is required to deliver a prospectus at a time
when the prospectus then in effect may no longer be used
under the Securities Act, prepare promptly upon request
such amendment or amendments to such registration
statement and such prospectus as may be necessary to
permit compliance with the requirements of the Securities
Act;
(j) Advise such Holders or their attorney-in-fact, promptly
after it shall receive notice or obtain knowledge thereof,
of the issuance of any stop order by the Commission
suspending the effectiveness of such registration
statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best
efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued;
and
(k) At the request of any such holder, furnish on the
effective date of the registration statement and, if such
registration includes an underwritten public offering, at
the closing provided for in the underwriting agreement,
(i) an opinion, dated each such date, of the counsel
representing the Company for the purpose of such
registration, addressed to the underwriters, if any, and
to the Holder or Holders making such request, covering
such matters with respect to the registration statement,
the prospectus and each amendment or supplement thereto,
proceedings under state and federal securities laws other
matters relating to the Company, the securities being
registered and the offer and sale of such securities as
are customarily the subject of opinions of issuer's
counsel provided to underwriters in underwritten public
offerings, and (ii) to the extent the Company's accounting
firm, is willing to do so, a letter dated each such date,
from the independent public accountants of the Company,
addressed to the underwriters, if any, and to the Holder
or Holders making such request, stating that they
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are independent public accountants within the meaning of
the Securities Act and that in the opinion of such
accountants the financial statements and other financial
data of the Company included in the registration statement
or the prospectus or any amendment or supplement thereto
comply in all material respects with the applicable
accounting requirements of the Securities Act, and
additionally covering such other financial matter,
including information as to the period ending not more
than five (5) business days prior to the data of such
letter with respect to the registration statement and
prospectus, as the underwriters or such requesting Holder
or Holders may reasonably request.
8.10 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 8.
8.11 INDEMNIFICATION.
(a) The Company will defend, indemnify and hold the
Purchaser, each Holder, each of its officers, directors
and partners, and each person controlling the Purchaser
and each such Holder within the meaning of Section 15 of
the Securities Act, and each underwriter, if any, and
each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including without
limitation, any of the foregoing incurred in settlement
of any litigation, commenced or threatened, arising out
of or based on (i) any breaches of the representations,
warrants or covenants contained herein, or (ii) any
untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement,
prospectus, offering circular or other document or any
amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on
any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary
to make the statements therein, light of the
circumstances in which they were made, not misleading, or
any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such
registration, qualification or compliance, and the
Company will reimburse Purchaser, and each such holder,
each of its officers and directors, and each person
controlling such holder, each such underwriter and each
person who controls any such underwriter, for any legal
and any other
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expenses reasonably incurred in connection with
investigating, preparing or defending any such claim,
loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed
by such Holder, controlling person or underwriter and
stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such
registration, qualification or compliance is being
effected, indemnify the Company each to its directors and
officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each
person who controls the Company or such Holder, each of
its officers and directors and each person controlling
such Holder within the meaning of Section 15 of the
Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact
contained in any such registration statement prospectus'
offering circular or other document, or any omission (or
alleged omission) to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is
made in such registration statement prospectus, offering
circular or other document in reliance upon and in
conformity with written information furnished to the
Company by an instrument duly executed by such Holder and
stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of each
Holder under this subsection (b) shall be limited to an
amount equal to the initial public offering price of the
shares sold by such Holder, unless such liability arises
out of or is based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this Section
8.11 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to
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which indemnity may be sought, and shall, when
applicable, permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense at
such party's expense, and provided further that the
failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 8 unless the
failure to give such notice is materially prejudicial to
an Indemnifying Party's ability to defend such action and
provided further, that the Indemnifying Party shall not
assume the defense for matter as to which there is a
conflict of interest or separate and different defenses.
No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
8.12 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted the Purchasers under Sections 8.5, 8.6 and 8.7
may be assigned to a transferee or assignee in connection with any transferor
assignment of Registrable Securities by the Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities laws
and (ii) such assignee or transferee acquires at least 10,000 of the Shares and
/or Conversion Stock (appropriately adjusted for Recapitalization).
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to any parent, subsidiary or affiliate of the
Purchaser, without compliance with item (ii) above, provided, written notice
thereof is promptly given to the Company.
8.13 STANDOFF AGREEMENT. Each Holder agrees, so long as such Holder
holds at least five percent (5%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, it will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, a the
case may be, for such period of time (not to exceed one hundred and twenty (120)
days) from the effective date of such registration as may be requested by the
underwriters; provided that the officers and directors of the Company who own
stock of the Company also agree to such restrictions.
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SECTION 9
THE PURCHASER'S RIGHT OF FIRST REFUSAL
9.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to the Purchaser
the right of first refusal to purchase its pro rata share of all or any part of
any New Securities (as defined in this Section 9.1) which the Company may, from
time to time, propose to sell and issue. The Purchaser's pro rata share, for
purposes of this right of first refusal, is the ratio that the sum of the number
of shares of Common Stock issuable upon conversion of the shares held by the
Purchaser and the number of shares of Conversion Stock then held by the
Purchaser bears to the sum of the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon conversion of
the then outstanding Preferred Stock convertible into Common Stock.
(a) Except as set forth below, "New Securities" shall mean
any shares of capital stock of the Company including
Common Stock and Preferred Stock, whether now authorized
or not, and rights, options or warrants to purchase said
shares of Common Stock or Preferred Stock, and securities
of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred
Stock. Notwithstanding the foregoing, "New Securities"
does not include (i) the Shares and the Conversion Stock,
(ii) securities offered to the public generally pursuant
to a registration statement or pursuant to Regulation A
under the Securities Act, (iii) securities issued in the
acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or
other reorganization whereby the Company or its
shareholders own not less than fifty-one percent (51%) of
the voting power of the surviving or successor
corporation, (iv) shares of the Company's Common Stock or
related options exercisable for such Common Stock issued
to employees, officers and directors of the Company
pursuant to any arrangement approved by the Board of
Directors of the Company, (v) stock issued pursuant to
any rights or agreements, including without limitation
convertible securities, options, warrants, provided that
the rights of first refusal established by this Section
9.1 apply with respect to the initial sale or grant by
the Company of such rights or agreements, and (vi) stock
issued in connection with any stock split, stock dividend
or recapitalization by the Company.
(b) In the event the Company proposes to undertake an
issuance of New Securities, it shall give the Purchaser
written notice of its intention, describing the type of
New Securities, and the price and terms upon which the
Company proposes to issue the same. The Purchaser shall
have fifteen (15) days from the date of receipt of any
such notice to agree to purchase up to the Purchaser's
respective pro rata share of such New Securities for the
price and
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upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of
New Securities to be purchased.
(c) In the event the Purchaser fails to exercise such right
of first refusal within said fifteen (15) day period, the
Company shall have ninety (90) days thereafter to sell or
enter into an agreement (pursuant to which the sale of
New Securities covered thereby shall be closed, if at
all, within sixty (60) days from the date of said
agreement) to sell the New Securities not elected to be
purchased by the Purchaser at the price and upon the
terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or
entered into an agreement to sell the New Securities
within said ninety (90) day period (or sold and issued
New Securities in accordance with the foregoing within
sixty (60) days from the date of said agreement), the
Company shall not thereafter issue or sell any of such
New Securities, without first offering such securities in
the manner provided above.
(d) The right of first refusal hereunder is not assignable
except to a parent, subsidiary or affiliate of the
Purchaser, without the prior written consent of the
Company, which consent will not be unreasonably withheld.
SECTION 10
INDEMNIFICATION
10.01 SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall be made under this Section 10. The
representations and warranties set forth herein are cumulative, and any
limitation or qualification set forth in any one representation and warranty
therein shall not limit or qualify any other representation and warranty
therein.
10.02 INDEMNIFICATION BY THE COMPANY. Notwithstanding any term in this
Agreement to the contrary, the Company, shall indemnify, defend, save and hold
the Purchaser and its officers, directors, employees, agents and Affiliates
(excluding Xxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and the Company; collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not the
underlying demands, claims, allegations, etc., of third parties are meritorious;
collectively, "Purchaser Damages") asserted against, imposed upon, resulting to,
required to be paid by or incurred by any Purchaser Indemnitees, directly or
indirectly, in connection with, arising out of, which could result in, or which
would not have occurred but for, (a) a breach of
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any representation or warranty made by the Company in this Agreement, in any
certificate or document furnished pursuant hereto by the Company or any other
agreement to which the Company is or is to become a party, or (b) a breach or
nonfulfillment of any covenant or agreement made by the Company in or pursuant
to this Agreement or in any other agreement to which the Company is or is to
become a party.
10.03 INDEMNIFICATION BY THE PURCHASER. The Purchaser shall indemnify,
defend, save and hold the Company and its officers, directors, employees, agents
and Affiliates (excluding Xxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx and the
Purchaser; collectively, "Company Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not the
underlying demands, claims, allegations, etc., of third parties are meritorious
(collectively, "Company Damages") asserted against, imposed upon, resulting to,
required to be paid by or incurred by any Company Indemnitees, directly or
indirectly, in connection with, arising out of, which would result in, or which
would not have occurred but for, (a) a breach of any representation or warranty
made by the Purchaser in this Agreement or in any certificate or document
furnished pursuant hereto by buyer or any other agreement to which the Purchaser
is a party and (b) a breach of nonfulfillment of any covenant of agreement made
by the Purchaser in or pursuant to this Agreement and in any other agreement to
which the Purchaser is a party.
10.04 NOTICE OF CLAIMS. If any Purchaser Indemnitee or Company
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred or
will suffer or incur any Purchaser Damages or Company Damages, as the case may
be ("Damages"), for which it is entitled to indemnification under this Section
10, such Indemnified Party shall so notify the party or parties from whom
indemnification is being claimed (the "Indemnifying Party") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
Section 10 or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
10.05 THIRD PARTY CLAIMS. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same, provided that the Indemnified Party shall give the Indemnifying Party
advance notice of any proposed compromise or settlement. The Indemnified Party
shall permit the Indemnifying Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnifying Party, provided that
the fees and expense of such counsel shall be borne by the Indemnifying Party.
If the Indemnified Party permits the Indemnifying Party to undertake, conduct
and control the conduct and settlement of such action or suit, (a) the
Indemnifying Party shall not thereby permit to exist any encumbrance upon any
asset of the Indemnified Party; (b) the Indemnifying Party shall not consent to
any settlement that does not include as an unconditional term thereof the giving
of a complete release
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from liability with respect to such action or suit to the Indemnified Party; (c)
the Indemnifying Party shall permit the Indemnified Party to participate in such
conduct or settlement through counsel chosen by the Indemnified Party; and (d)
the Indemnifying Party shall agree promptly to reimburse the Indemnified Party
for the full amount of any Damages including fees and expenses of counsel for
the Indemnified Party incurred after giving the foregoing notice to the
Indemnifying Party and prior to the assumption of the conduct and control of
such action or suit by the Indemnifying Party.
10.6 GOOD FAITH EFFORTS TO SETTLE DISPUTES. The Purchaser and the
Company agree that, prior to commencing any litigation against the other
concerning any matter with respect to which such party intends to claim a right
of indemnification in such proceeding, the respective chief executive officers
(or officers holding such authority) of such parties shall meet in a timely
manner and attempt in good faith to negotiate a settlement of such dispute
during which time such officers shall disclose to the others all relevant
information relating to such dispute. In the event that the parties are unable
to amicably resolve the matter or matters in dispute, the parties shall submit
all matters still in dispute to arbitration in accordance with the arbitration
rules of the American Arbitration Association. The Purchaser shall select an
arbitrator and the Company shall select an arbitrator and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators shall
be final and binding on the parties. Such matter shall be submitted to
arbitration within thirty (30) days from the date that either the Company or the
Purchaser declares that any matter in dispute cannot be amicable resolved. All
costs and expenses of arbitration shall be paid equally by the Purchaser on one
hand and the Company on the other. Any cash or other monetary award shall be
paid within thirty (30) days of the arbitrators final decision. Arbitration
shall be held in Las Vegas, Nevada.
SECTION 11
MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Nevada.
11.2 EVENTS OF DEFAULT AND REMEDIES. (a) For purpose of this Agreement,
the term "Event of Default" shall mean the occurrence or happening of any breach
or violation of or default in the observation or performance of any term,
agreement, covenant, representation, warranty, condition or stipulation
contained or referred to in this Agreement by any party to this Agreement.
(b) (i) Upon the occurrence of an Event of Default, the
non-defaulting party shall have all rights and
remedies afforded by law or equity, including the
remedy of specific performance, it being recognized
that the Series B Preferred and Conversion Stock and
the rights and benefits to be derived therefrom are
unique and special. Any party awarded a money
judgment against the other shall be entitled to
recover in addition thereto interest thereon at the
rate of twelve percent (12%) per annum.
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(ii) Each right, power and remedy provided for in this
Agreement, or now or hereafter existing at law or in
equity shall be cumulative and may be exercised
successively or concurrently and shall be in addition
to every other such right, power or remedy. The
exercise or beginning of the exercise by either party
of any one or more of such rights, powers or remedies
shall not preclude the simultaneous or later exercise
of all such other rights, powers or remedies. No
failure or delay on the party of any party to
exercise any such right, power or remedy shall
operate as a waiver thereof. No waiver by a party
will be effective unless and until it is in writing
and signed by an authorized representative of such
party.
(c) Each party will pay to the other, in addition to all other sums due
all costs and expenses (including, without limitation, attorneys' fees,
brokerage fees and accountants' fees) reasonably incurred by or on behalf of a
party in exercising and protecting their rights and remedies hereunder,
enforcing the obligations of the other party hereunder and defending any
unsuccessful counterclaim, cross-claim or other claim asserted by the other
party.
11.3 SET OFF. In addition to, and not in lieu of, any and all other
remedies which the Purchaser otherwise may have at law or in equity, or pursuant
to this Agreement, the Purchaser shall have the right to set off, counterclaim
and recoup any loss against any amounts to be paid to the Company under this
Agreement.
11.4 NONEXCLUSIVITY. The foregoing set off right and the
indemnification provision set forth in Section 8 are in addition to, and not in
lieu or derogation of, any statutory, equitable or common law remedy the
Purchaser may have arising out of or as a result of this Agreement or for breach
of representations, warranties or covenants herein. Neither the exercise of nor
the failure to exercise the set off right set forth in Section 10.3 shall
constitute an election of remedies.
11.5 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby.
11.6 ANTI-DILUTION PROVISIONS. The "Anti-Dilution Provisions" shall
provide that in the event that any of the securities referenced herein as
presently constituted, shall be changed into or exchanged for a different number
or kind of securities or interests of the Company or of another entity (whether
by reason of merger, consolidation, recapitalization, reclassification,
split-up, combination of shares, sale of assets or otherwise), or if the number
of such securities shall be increased through the payment of a dividend, or if
the Company makes any other distribution of securities or other property
including cash in respect of such securities, then there shall be substituted
for and added to such securities, as the case may be, theretofore subject or
which may become subject to the terms of this Agreement, the number and kind of
securities, interests or property into which each outstanding security shall be
so changed, or for which each such security shall be exchanged, or to which each
such security shall be entitled, as the case may be, and the purchase price per
security appropriately adjusted.
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11.7 ASSIGNMENT; SUCCESSORS AND ASSIGNS. The rights and obligations of
the Company and the rights of the Purchaser to purchase the Shares shall not be
assignable without the written consent of the other; provided, however, the
Purchaser may assign its rights and obligations under this Agreement to a
parent, subsidiary or affiliate of the Purchaser upon notice to the Company
thereof. Except as otherwise provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
11.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
endorsement of any such amendment, waiver, discharge or termination is sought.
11.9 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by confirmed facsimile to the correct
facsimile number or otherwise delivered by hand or by messenger, addressed (a)
if to the Purchaser, at its address set forth on the cover page of this
Agreement, or at such other address as the Purchaser shall have furnished to the
Company in writing, or (b) if to any other holder of any Shares or Conversion
Stock, at such address as such holder shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Shares or Conversion Stock who
has so furnished an address to the Company, or (c) if to the Company, one copy
shall be sent to its address set forth on the cover page of this Agreement and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
11.10 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares or Conversion Shares upon any breach or default of the Company
under this Agreement, shall impair any such right, power or remedy of such
holder nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Except as provided in Section 11.8 hereof, any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach of
default under this Agreement or any waiver on the part of any holder of any
provisions
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or conditions of this Agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
11.11 EXPENSES. Except as otherwise provided herein, the Company and
the Purchaser shall each bear their own expenses incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.
11.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.13 CONFIDENTIALITY. Neither party shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party. This
provision shall not apply, however, to any announcement or written statement
which in the opinion of counsel to such party is required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange.
11.14 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11.15 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
"PURCHASER" "COMPANY"
LAS VEGAS DISCOUNT GOLF & TENNIS, INC., SAINT XXXXXXX GOLF CORPORATION, a
a Colorado corporation Nevada corporation
By By
----------------------------------- -------------------------------
Name: Name: Xxxxxx X. Xxxxxx
Title: Title: President
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