<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1996
REGISTRATION STATEMENT NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICAN PROFESSIONAL BILLIARDS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
NEVADA 88-0339674
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
AMERICAN PROFESSIONAL BILLIARDS, INC. ROBERT M. STANDER
1700 EAST DESERT INN ROAD AMERICAN PROFESSIONAL BILLIARDS, INC.
SUITE 108 1700 EAST DESERT INN ROAD
LAS VEGAS, NV 89109 SUITE 108
(702) 893-1277 LAS VEGAS, NV 89109
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS) (702) 893-1277
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR
EXECUTIVE OFFICES) SERVICE)
</TABLE>
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GEORGE S. BALIS, ESQ. GERALD L. FISHMAN, ESQ.
HERZFELD & RUBIN, P.C. FISHMAN & MERRICK, P.C.
40 WALL STREET 30 NORTH LASALLE STREET, SUITE 3800
NEW YORK, NEW YORK 10005 CHICAGO, IL 60602
(212) 344-5500 (312) 726-1224
(212) 344-3333-FACSIMILE (312) 726-2649-FACSIMILE
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the Securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SECURITY(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------------
Units, each consisting of one share of Common
Stock, 0.001 par value ("Common Stock") and
one Common Stock Purchase Warrant
("Warrant")(2)................................ 2,250,000 $5.00 $11,250,000 $ 3,879.30
- --------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon exercise of
Warrants included in the Units(2)(3).......... 2,250,000 $7.50 $16,875,000 $ 5,818.96
- --------------------------------------------------------------------------------------------------------------------
Underwriter's Unit Purchase Option.............. 100,000 $0.01 $ 1,000 $ 0.35
- --------------------------------------------------------------------------------------------------------------------
Units issued upon exercise of Underwriter's Unit
Purchase Option, each Unit consisting of one
share
of Common Stock, and one Warrant(2)........... 100,000 $6.00 $ 600,000 $ 206.90
- --------------------------------------------------------------------------------------------------------------------
Common Stock issuable upon exercise of
Warrants included in the Units, issued upon
exercise of Underwriter's Unit Purchase
Option(3)..................................... 100,000 $7.50 $ 750,000 $ 258.52
- --------------------------------------------------------------------------------------------------------------------
Total........................................... $29,476,000 $10,164.13
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculation of the Registration Fee.
(2) Amount to be Registered includes 1,100,000 Units issuable upon conversion of
Private Placement Notes and also includes 150,000 Units subject to sale upon
exercise of Underwriter's Over-Allotment Option granted to the
Representative which may be offered to cover over-allotments, if any.
(3) Pursuant to Rule 416, there are also being registered such indeterminable
number of shares of Common Stock as may be issued as a result of the
antidilution provisions of the Warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant will
file a further amendment which specifically states that this Registration
Statement will thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement becomes
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN PROFESSIONAL BILLIARDS, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2
ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside
Front Cover Page of Prospectus........... Outside front cover
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside front cover page; Outside back cover
page
3. Summary of Information and Risk Factors.... Prospectus Summary; Selected Financial
Data; Risk Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page of Prospectus;
Risk Factors; Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Private Placement Selling Stockholders
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Underwriting
9. Legal Proceedings.......................... Business
10. Directors, Executive Officers, Promoters
and Control Persons...................... Management
11. Security Ownership of Certain Beneficial
Owners and Management.................... Principal Stockholders
12. Description of Securities.................. Outside Front Cover Page of Prospectus;
Description of Securities
13. Interests of Named Experts and Counsel..... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Management
15. Organization within Last Five Years........ Prospectus Summary; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business; Certain
Transactions
16. Description of Business.................... Prospectus Summary; Business
17. Management's Discussion and Analysis or
Plan of Operation........................ Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property.................... Business
19. Certain Relationships and Related
Transactions............................. Certain Transactions; Underwriting
20. Market for Common Stock and Related
Stockholder Matters...................... Risk Factors; Shares Eligible for Future
Sale; Description of Securities
21. Executive Compensation..................... Management
22. Financial Statements....................... Financial Statements
23. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure............................... Inapplicable
</TABLE>
i
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION DATED SEPTEMBER 20, 1996
1,000,000 UNITS
AMERICAN PROFESSIONAL BILLIARDS, INC.
$5.00 PER UNIT
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE THREE YEAR REDEEMABLE COMMON STOCK PURCHASE WARRANT
------------------------
Each Unit consists of one share of common stock, $0.001 par value (the
"Common Stock"), and one three year redeemable common stock purchase warrant
(the "Warrant") of American Professional Billiards, Inc., a Nevada corporation
(the "Company"). The Common Stock and the Warrants are separately transferable,
and the Warrants are exercisable, commencing on the date of this Prospectus (the
"Effective Date"). Each Warrant entitles the registered holder thereof to
purchase one share of Common Stock at a public offering price of $7.50 per share
("Offering Price") commencing on the Effective Date until , 1999
(three (3) years after the date of this Prospectus). The Company may call the
Warrants for redemption, in whole or in part, upon a minimum of 30 days prior
written notice to holders, at a redemption price of $.10 per Warrant, provided
that the closing average bid price for the Company's Common Stock has been at
least 100% of the then effective exercise price of the Warrants on each of the
20 consecutive trading days prior to the day on which notice is given. See
"Description of Securities."
The Company intends to qualify the Common Stock and the Warrants for
quotation on the NASDAQ SmallCap Market. Prior to this offering (the
"Offering"), there has been no public market for the Company's securities and no
assurance can be given that such a market will develop or be sustained upon
completion of this Offering. The Offering Price and the exercise price and terms
of the Warrants have been determined by negotiations between the Company and
Joseph Roberts & Co., Inc. (the "Representative of the Underwriters" or
"Representative") and bear no relation to the book value or the results of
operations of the Company or any other recognized criteria of value. See "Risk
Factors" and "Underwriting."
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES AN EXTREMELY HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE
COMMON STOCK FROM THE INITIAL PUBLIC OFFERING PRICE. SEE "PROSPECTUS SUMMARY",
"RISK FACTORS" BEGINNING ON PAGE 5 AND "DILUTION."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
PRICE TO
PUBLIC
UNDERWRITING PROCEEDS TO
DISCOUNTS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------
Per Unit........................... $5.00 $0.50 $4.50
- ---------------------------------------------------------------------------------------------------------
Total(3)........................... $5,000,000 $500,000 $4,500,000
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) In addition, the Company has agreed to pay to the Representative a 3%
non-accountable expense allowance, and to grant the Representative an option
to purchase up to 100,000 Units (the "Underwriter's Unit Purchase Option")
and to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933. (See "Description of
Securities" and "Underwriting.")
(2) Before deducting expenses, including the non-accountable expense allowance
in the amount of $150,000 ($172,500 if the Underwriter's Over-Allotment
Option (as defined below) is exercised in full), estimated at $550,000 or
$572,500, respectively.
(3) The Company has granted to the Representative an option, exercisable within
30 days from the date hereof, to purchase up to 150,000 additional Units
upon the same terms and conditions as set forth above, solely to cover over-
allotments (the "Underwriter's Over-Allotment Option"), if any. If such
over-allotment option is exercised in full, the total price to public,
underwriting discounts and proceeds to Company will be $5,750,000, $575,000
and $5,175,000, respectively. See "Underwriting."
------------------------
The Units are offered by the Underwriters on a "firm commitment" basis
when, as and if delivered to and accepted by the Underwriters, subject to prior
sale, and to compliance with the Underwriting Agreement. See "Underwriting." The
Underwriters reserve the right to withdraw or cancel the Offering and to reject
any order in whole or in part. It is expected that delivery of certificates
representing the securities will be made against payment therefor at the offices
of Joseph Roberts & Co., Inc., 416 East Atlantic Blvd., Pompano Beach, FL
33060-6256 on or about , 1996.
JOSEPH ROBERTS & CO., INC.
The date of this Prospectus is , 1996.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
COMMON STOCK OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
A SIGNIFICANT NUMBER OF THE UNITS TO BE SOLD IN THIS OFFERING MAY BE SOLD
TO CUSTOMERS OF THE UNDERWRITERS. SUCH CUSTOMERS SUBSEQUENTLY MAY ENGAGE IN
TRANSACTIONS FOR THE SALE OR PURCHASE OF THE UNITS OR THE COMMON STOCK OR THE
WARRANTS CONTAINED THEREIN THROUGH OR WITH THE UNDERWRITERS. ALTHOUGH THEY HAVE
NO OBLIGATION TO DO SO, THE UNDERWRITERS FROM TIME TO TIME MAY BECOME MARKET
MAKERS AND OTHERWISE EFFECT TRANSACTIONS IN SUCH SECURITIES.
THE REPRESENTATIVE, IF IT PARTICIPATES, MAY BECOME A DOMINATING INFLUENCE
AND THEREAFTER A FACTOR OF INCREASING IMPORTANCE IN THE MARKETING OF THE UNITS
OR THE COMMON STOCK OR WARRANTS CONTAINED THEREIN. THE PRICES AND LIQUIDITY OF
THE SECURITIES MAY BE SIGNIFICANTLY AFFECTED BY THE DEGREE, IF ANY, OF THE
REPRESENTATIVE'S PARTICIPATION IN SUCH MARKET.
AS OF THE DATE OF THIS PROSPECTUS, THE COMPANY WILL BECOME SUBJECT TO THE
REPORTING REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 AND IN ACCORDANCE
THEREWITH WILL FILE REPORTS, PROXY STATEMENTS, AND OTHER INFORMATION WITH THE
SECURITIES EXCHANGE COMMISSION. THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS
WITH ANNUAL REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS, AND SUCH OTHER
PERIODIC REPORTS AS THE COMPANY MAY DETERMINE TO BE APPROPRIATE OR AS MAY BE
REQUIRED BY LAW.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety, including the Risk Factors. Summaries of documents
contained in this Prospectus are qualified in their entirety by reference to the
complete document.
THE COMPANY
American Professional Billiards, Inc. (the "Company") was organized under
the laws of the State of Nevada on May 18, 1995, to develop its proposed
business of administering, promoting and marketing amateur and professional
billiard tournaments and events and related activities worldwide. The Company is
a development stage corporation which to date has engaged primarily in the (i)
financing of its developmental activities, (ii) consummating the acquisition of
certain of the billiards related assets of World Wide Collectibles, Inc. and
(iii) negotiating and concluding the Exclusive Event Management Agreement with
the Professional Billiards Tour, Inc. See "Business." The Company's corporate
headquarters are located at 1700 East Desert Inn Road, Las Vegas, Nevada 89109,
and its telephone number is (702) 893-1277.
Unless otherwise indicated, all information in this Prospectus does not
give effect to the exercise of (a) the Underwriter's Over-Allotment Option, (b)
the Warrants offered hereby as a component of the Units, (c) the Underwriter's
Unit Purchase Option, and (d) any securities issued to the Private Placement
Selling Stockholders upon completion of this Offering. See "Business,"
"Underwriting," and "Description of Securities."
THE OFFERING
Shares of Common Stock
outstanding prior to the
Offering...................... 2,550,000
Securities Offered.............. 1,000,000 Units, each Unit consisting of one
share of Common Stock and one Warrant. Each
Warrant entitles the holder to purchase one
share of Common Stock at a price of $7.50
(150 percent of the Offering Price) per share
and is exercisable for a period of three
years commencing on the date hereof. See
"Description of Securities."
Shares of Common Stock to be
outstanding after the
Offering*..................... 4,650,000
Use of Proceeds................. The Company intends to apply the net proceeds
of this Offering for the Pro Billiards
Tour -- Event Management, Television
Production costs, Celebrity Tournaments, and
working capital and general corporate
purposes. See "Use of Proceeds."
Risk Factors.................... Investment in the securities involves an
extremely high degree of risk and should be
purchased only by investors who can afford
the loss of their entire investment. See
"Risk Factors" beginning on page 5.
Dilution........................ There will be immediate and substantial
dilution. See "Dilution."
Proposed NASDAQ SmallCap Market
Symbols....................... Common Stock:
Warrants:
- ---------------
* Includes 1,100,000 shares of Common Stock issued to Private Placement Selling
Stockholders upon completion of this Offering. See "Business -- Private
Placement" and "Private Placement Selling Stockholders." Assumes no exercise
of (a) the Underwriter's Over-Allotment Option, (b) the Warrants offered
hereby as component of the Units, (c) the Underwriter's Unit Purchase Option
or (d) any Warrants issued to the Private Placement Selling Stockholders upon
consummation of this Offering. See "Description of Securities," "Underwriting"
and "Certain Transactions." If all of the options and warrants set forth in
clauses (a), (b), (c) and (d) above were exercised to their fullest extent,
the number of shares of Common Stock to be outstanding after the Offering
would be 7,250,000.
3
<PAGE> 6
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the
financial statements appearing elsewhere in this Prospectus. Such information
should be read in conjunction with the financial statements, including the Notes
thereto and the Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this Prospectus.
STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS
PERIOD ENDED TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Revenues............................................. $ 1,370 $ 0 $ 20,948
Expenses............................................. $ 158,500 8 $ 552,840
---------- ---------- ----------
Net (loss)........................................... $ (157,130) $ (8) $ (531,892)
========== ========== ==========
Weighted Average shares of Common Stock.............. 4,750,000 4,750,000 4,750,000
Net (loss) per share................................. $ (0.03) $ (0.00) $ (0.11)
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEETS DATA AS AT:
<S> <C> <C> <C>
JUNE 30, 1996
---------------------------
DECEMBER 31, AS
1995 ACTUAL ADJUSTED(1)
------------ ----------- -----------
Total assets......................................... $ 462,028 $ 626,819 $ 4,510,819
Working capital (deficit)............................ $ (494,590) $(1,003,190) $ 3,980,810
Total liabilities.................................... $ 498,608 $ 1,195,291 $ 95,291
Stockholders' equity (deficit)....................... $ (36,580) $ (568,472) $ 4,415,528
</TABLE>
- ---------------
(1) To give effect to the receipt of the net proceeds of this Offering,
including at the time of the completion of this Offering, shares of Common
Stock issuable upon conversion of the Private Placement Notes issued
pursuant to the Company's private placement in March 1996 through May 1996.
See "Business -- Private Placement."
4
<PAGE> 7
RISK FACTORS
An investment in the securities offered hereby involves an extremely high
degree of risk and immediate substantial dilution, including, but not limited
to, the risk factors described below. Prospective investors should carefully
consider the following risk factors inherent in and affecting the business of
the Company and this Offering before making an investment decision. The purchase
of the securities offered hereby should be considered only by persons who can
afford to sustain a total loss of their investment.
1. Development Stage Company. The Company is in its development stage.
Potential investors should be aware of the difficulties normally encountered by
development stage enterprises, and that as a result of the Company's lack of
operational history, there is no possibility to evaluate whether the Company
will prove to be successful or even viable. See "Business -- Proposed Plan of
Operation."
2. Continued Losses; Going Concern Doubts. Since its inception, the
Company has experienced and continues to experience significant losses, with
loss from its activities for the period ended December 31, 1995 of $157,130, and
for the six months ended June 30, 1996 of $531,892, which casts significant
doubt upon its ability to continue as a going concern. In the event the Company
does not complete this Offering, it is likely that the Company will be required
to cease its activities. If this Offering is completed, there can be no
assurance that the Company will remain operational. See "Management's Discussion
and Analysis of Financial Condition," "Results of Operations" and
"Business -- Proposed Plan of Operation" and Note 1 to Financial Statements.
3. Limited Prior Industry Business Experience; Need for Experienced
Personnel. Although Donald E. Mackey, a director and consultant to the Company,
and the Commissioner of the Pro Billiards Tour, Inc., has extensive billiards
industry experience (see "Management"), the Company's management which operates
its day to day activities currently consisting of Robert M. Stander, Chairman
and Chief Executive Officer, and three other individuals, have limited prior
business experience in the billiards industry. Consequently, the Company will
have to retain the services of additional employees and outside consultants to
build its operations. The Company is currently seeking to hire such individuals,
including an experienced employee to serve as its chief financial officer. There
can be no assurances, however, that the Company will be able to locate such
capable, qualified management personnel, or if such personnel can be located,
that the Company will be able to attract, afford or retain such personnel. The
Company's failure to obtain or to retain such management personnel could
materially and adversely affect the business of the Company. See "Business --
Operations to Date."
4. Need for Additional Financing. The Company expects that it will
continue to incur operating losses until at least the end of 1997. No assurances
can be given that the Company will ever become profitable. Such losses have been
and will continue to be principally the result of the absence of any significant
revenues and of the various costs associated with the Company's product
development and market research activities. The Company believes, however, that
the net proceeds from this Offering will enable it to fund its operations for
twelve months following the completion of this Offering. It is likely that the
Company will be required to seek additional capital to continue its operations
beyond that time, which may result in further dilution to the purchasers of the
securities offered hereby. The Company has no commitments for any future
funding, and there can be no assurances given that the Company will be able to
obtain additional capital in the future or if available, that it can be obtained
at commercially reasonable terms. The existence of the Warrants may complicate
future capital raising activities. If the Company is unable to obtain the
necessary capital, it will be required to significantly curtail its activities
or cease operations entirely. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Use of Proceeds," and
"Business -- Proposed Plan of Operation."
5. Inability to Keep Pace with Competitor Innovation or Consumers' Changing
Preferences and Tastes. The sports and entertainment industry is subject to
rapid innovative change. There can be no assurances that the Company will be
able to keep pace with the innovative developments in the industry or to
implement such changes. Therefore, competitors may promote sports or media
products which may make the Company's proposed plan of operation obsolete. As a
result of the continual changing nature of consumer preferences and tastes, the
success of the Company is dependent upon its ability to change and adapt to such
changing tastes and preferences. Sports entertainment and media products are
often characterized by fads of limited life
5
<PAGE> 8
cycles. There can be no assurances that billiards related entertainment will not
be considered a fad and have a limited life. See "Business -- Proposed Plan of
Operation."
6. Competition. While the Company believes that there are currently no
other billiards related businesses seeking to implement a business plan similar
to that of the Company, there are a number of organizations, including, but not
limited to the American Pool-Players Association (APA), the World Pool Billiards
Association (WPA), the Professional CueSports Association (PCA), the Women's
Professional Billiards Association (WPBA), the Billiards Congress of America
(BCA), and The McDermott Tour, which have organized the billiards sport on a
professional and amateur level. At least one of these organizations has
organized an amateur tournament in a format comparable to that proposed by the
Company, which was televised by ESPN, a nationwide distributed sports TV
channel. Given the low level of organization presently existing in the billiards
sport, and considering that nearly all of the elements of the Company's proposed
plan of operation are neither protected by intellectual property rights, or
otherwise proprietary to the Company, any of the foregoing organizations could
develop a business plan similar to that of the Company. No assurances can be
given that such a potential competitor would not be able to align itself with
partners or others that are better financed and have greater resources than the
Company. The rise of any such potential competitor could have a materially
adverse impact on the Company's operation and financial condition, and might
force it to abandon or to significantly alter its proposed plan of operation. In
addition, the Company does not have any agreements with professional billiard
players, and no assurance can be given that they will ever join, or remain part
of the Professional Billiards Tour, Inc. (the "PBT"). See "Business -- Proposed
Plan of Operation," and "-- Competition."
7. Dependence on Suppliers. The Company does not currently, nor does it
plan in the future to, own or operate any manufacturing facilities. Hence, to
the extent the Company's business involves the licensing or sales of billiards
related merchandise, it will be wholly dependent on outside manufacturers for
such goods. As a development stage company, the Company has not yet entered into
any licensing contracts with manufacturers of apparel or billiards equipment.
Even if the Company should be able to contract with such manufacturers, it is
uncertain under what terms such arrangements will be available, if at all, and
if the licensing of billiards related merchandise will generate any licensing
fees. See "Business -- Operations to Date" and "-- Proposed Plan of Operation."
8. Adverse Impact of Negative Publicity. Companies operating in the
entertainment or leisure industry are extremely dependent on a positive public
relations image and sustained public interest. Adverse publicity resulting from
allegations of misconduct, scandal or other negative developments in the
billiards sport, including potential identification with the tobacco industry,
may materially and adversely affect the Company, irrespective of whether such
allegations are valid or are directed at the Company. See "Business --
Operations to Date."
9. Adverse Impact of Litigation. The Company may become subject to
litigation with investors, employees or unaffiliated parties. In addition, to
the extent the Company designs and licenses merchandise, it may become exposed
to product liability or trademark related litigation. There can be no assurances
given that the Company in the future will be able to withstand any such
liability or to purchase sufficient insurance to cover such liability. See
"Business."
10. Dependence on Professional Billiards Tour Endorsement. The Company's
ability to conduct its future business activities will be dependent to large
measure upon the continued endorsement of its operations by the PBT and on the
enforceability of certain proprietary rights acquired from World Wide
Collectibles, Inc., for which there can be no assurance. See
"Business -- Proposed Plan of Operation."
11. Reliance on Key Personnel. The Company's success will depend upon
Robert M. Stander, its Chairman and Chief Executive Officer, with whom the
Company anticipates entering into a three-year employment contract, and Donald
R. Mackey, who will serve at will as a director and a consultant. In the absence
of Messrs. Stander and Mackey, there can be no assurances that the Company will
remain operational. The Company does not maintain key man insurance, and may
never obtain any, on the lives of either Mr. Stander or Mr. Mackey. In addition,
Mr. Mackey will continue to serve as the Commissioner of the PBT, which may
result in a conflict, from time to time, with his duties as a director and
consultant of the
6
<PAGE> 9
Company. In particular, Mr. Mackey may be required to present business
opportunities to the PBT, which he might not be able to present to the Company.
Due to the highly specialized nature of its marketing concept, the Company will
be highly dependent on its ability to attract celebrities of the sports and
entertainment world as corporate spokespeople. The Company presently has no
contracts with celebrities. There can be no assurance that such personalities
will become associated with the Company or the PBT. See "Business -- Proposed
Plan of Operation" and "Management."
12. No Public Market for Securities, Possible Volatility of
Securities. Prior to this Offering, there has been no public market for the
securities of the Company, and no assurances can be given that an active public
market for the securities offered hereby will develop after the Offering, or if
one does develop, that it will be sustained. Therefore, purchasers of the
securities offered herein may be unable to resell the securities purchased
hereunder at or near their original offering prices or at any price. Even if an
active public market for the securities of the Company should develop, the
trading prices of the Common Stock and Warrants could be subject materially and
adversely to wide fluctuations in response to variations in operating results,
announcements of material business events by the Company or its competitors,
significant fluctuations in the entertainment and related industries and other
events or factors or to general stock market volatility and fluctuations in
price and volume. See "Description of Securities."
13. Shares Available for Resale. The Company presently has 2,550,000
shares of Common Stock issued and outstanding. All of these shares are
"restricted securities" as that term is defined in the Securities Act of 1933,
as amended (the "Act"), and in the future may be sold only in compliance with
Securities and Exchange Commission (the "Commission") Rule 144 promulgated under
the Act. Of those shares, 2,000,000 will become available for sale in October
1997, and 550,000 will become available for sale in May 1998. Notwithstanding
the foregoing, all of the officers, directors and five percent stockholders of
the Company and their affiliates have agreed not to sell any of their shares of
Common Stock for a period of one year after the date of this Prospectus, without
prior consent of the Representative. In general, under Rule 144, a person (or
group of persons whose shares are aggregated) who has beneficially owned
restricted shares of the Company for at least two years, including any person
who may be deemed to be an "affiliate" of the Company (as the term "affiliate"
is defined in Rule 144 of the Act), is entitled to sell in customary brokerage
transactions during the periods when certain information regarding the Company
is publicly available, within any three-month period, an amount of shares that
does not exceed the greater of (i) the average weekly trading volume in the
Company's shares during the four calendar weeks preceding such sale, or (ii) 1%
of the total shares then outstanding. A person who has not been an "affiliate"
of the Company for the three months prior to a sale and who has held restricted
shares for at least three years would be entitled to sell such shares without
restriction. Sales of the Company's Common Stock by present stockholders
pursuant to Rule 144 or otherwise may, in the future, have a depressive effect
on the price of the Common Stock. See "Description of Securities" and "Shares
Eligible for Future Sale."
14. Sales by Private Placement Selling Stockholders. The Registration
Statement, of which this Prospectus forms a part, includes shares of Common
Stock and Warrants owned by those stockholders who will receive their shares
automatically upon the consummation of the Offering contemplated hereby (the
"Private Placement Selling Stockholders"). See "Business -- Private Placement,"
and "Private Placement Selling Stockholders". Although the costs incurred with
the registration of those shares and the securities being registered for future
sale by the Private Placement Selling Stockholders, which are not subject to any
limits, are to be borne by the Company, the Private Placement Selling
Stockholders, and not the Company, will receive the proceeds from the sale of
their respective securities, thus receiving a benefit from the Company. The
securities owned by the Private Placement Selling Stockholders may be sold 180
days after the date of this Prospectus, unless the Representative permits
earlier sales. Sales of such securities or the potential of such sales may have
an adverse effect on the market prices of the securities being offered hereby,
should a public market for such securities develop, of which there can be no
assurance. See "Description of Securities" and "Underwriting."
15. Market Overhang From Warrants. Immediately after this Offering,
assuming full exercise of the Underwriter's Over-Allotment Option, and the
exercise of the Underwriter's Unit Purchase Option, the Company will have
outstanding an aggregate of 2,350,000 Warrants, including the Warrants in the
Units offered hereby and the Warrants issued in connection with the automatic
conversion of the Private Placement
7
<PAGE> 10
Notes. To the extent that such Warrants are exercised, dilution to the interests
of the Company's stockholders may occur. Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected since the holders of the outstanding Warrants can be expected to
exercise them, to the extent they are able to, at a time when the Company would,
in all likelihood, be able to obtain any needed capital on terms more favorable
to the Company than those provided in the Warrants. Furthermore, the sale of
shares of Common Stock held by or issuable to the Warrant holders, or merely the
potential of such sales, could have an adverse effect on the market price of the
Company's Common Stock. See "Description of Securities."
16. Current Prospectus and State "Blue Sky" Registration Required to
Exercise the Warrants. Purchasers of the Warrants will have the right to
exercise the Warrants to purchase shares of Common Stock only if such shares are
so registered or qualified. The Company has undertaken to maintain a
registration statement covering this Prospectus with the Commission which will
permit the purchase and sale of the Common Stock underlying the Warrants, but
there can be no assurance that the Company will be able to do so. Although the
Company intends to seek to qualify the shares of Common Stock underlying the
Warrants for sale in those states in which the Units are to be offered, no
assurance can be given that such qualification will occur. The Warrants may be
deprived of any value if a current registration statement and prospectus
covering the shares issuable upon the exercise thereof is not kept effective or
if such underlying shares are not, or cannot be, registered in the applicable
states. See "Description of Securities."
17. Potential Adverse Effect of Redemption of Warrants. The Warrants may
be redeemed by the Company, at a price of $.10 per Warrant, at any time they are
exercisable, subject to 30 days prior written notice to the holders thereof,
provided that the last sale price of the Common Stock has been at least 100% of
the effective exercise price of the Warrants on each of the 20 consecutive
trading days prior to the day on which notice is given, provided that such
Warrants are covered by a registration statement in effect at the time at which
notice of redemption is given. Notice of the redemption of the Warrants could
force the holders thereof to exercise the Warrants and pay the exercise price at
a time when it may be disadvantageous for them to do so, and to sell the
Warrants at the current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price which is likely to be substantially
less than the market value of the Warrants at the time of redemption. See
"Description of Securities -- Redeemable Warrants."
18. Broad Discretion in Allocation of Proceeds. The Company's management
will have broad discretion in the use of the proceeds of this Offering. See "Use
of Proceeds."
19. No Dividends. The Company has not paid any cash dividends on the
common stock and does not expect to pay any cash or other dividends in the
foreseeable future. See "Dividend Policy."
20. Underwriter's Possible Ability to Dominate or Influence the Market for
the Securities. The Representative may act in a brokerage capacity with respect
to the purchase or sale of the Common Stock or Warrants in the over-the-counter
market where each will trade. Unless granted an exemption by the Commission from
its Rule 10b-6 promulgated under the Securities Exchange Act of 1934 (the "1934
Act"), the Representative and any soliciting broker-dealer will be prohibited
from actively engaging in any market making activity or soliciting brokerage
activities with regard to the Company's securities during a specified period
prior to the commencement of any such solicitation and ending on the later of
the termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Representative and soliciting broker-dealers
may have to receive a fee for soliciting the exercise of the Warrants. As a
result, the Representative and soliciting broker-dealers may be unable to
continue to make a market for the Company's securities during certain periods
when the Warrants are exercisable. Such a limitation, while in effect, could
impair the liquidity and market price of these securities. See "Underwriting."
21. Immediate Substantial Dilution. The purchasers of the Units offered
hereby will incur immediate substantial dilution from their purchase price in
the adjusted pro forma net tangible book value of each share of Common Stock of
approximately $4.14 per share or approximately 83% of their initial investment
as of June 30, 1996, assuming the entire Offering Price is allocated to the
Common Stock. Accordingly, if the Company's future operations are unsuccessful,
the persons who purchased the Units offered hereby will sustain the principal
losses. The dilution, in part, is due to the fact that the Company will only
receive
8
<PAGE> 11
$3,950,000 ($4,602,500 if the Underwriter's Over-Allotment Option granted by the
Company is exercised in full) of the net proceeds of the Offering, after the
deduction of underwriting discounts and the Company's payment of the expenses of
the Offering. See "Dilution."
22. Possible Future Dilution. The Company has authorized capital stock of
20,000,000 shares of Common Stock par value $.001 per share. Inasmuch as the
Company may issue authorized but unissued shares of Common Stock without
shareholder approval, there may be further dilution of the shareholders'
interests. The Company may sell equity securities in a future public offering or
private transaction to raise additional capital, which offering or transaction
may dilute the interest of potential investors in this Offering. See
"Description of Securities."
23. Indemnification of Officers and Directors. As permitted under Nevada
law, the Company's certificate of incorporation provides for the indemnification
and elimination of the personal liability of its directors to the Company or any
of its shareholders for damages for breaches of their fiduciary duties as
directors. As a result of the inclusion of such provision, shareholders may be
unable to recover damages against directors for actions taken by them which
constitute negligence or gross negligence or that are in violation of their
fiduciary duties. See "Management."
24. Arbitrary Offering Price of Units and Exercise Price of Warrants. The
Offering Price of the Units, and the exercise price of the Warrants, have been
determined by negotiations between the Company and the Representative on an
arbitrary basis and bear no direct relationship to the assets, earnings or any
other recognized criteria of value. Factors considered in determining such
price, in addition to prevailing market conditions, included the history of and
the business prospects for the Company and an assessment of the net worth and
financial condition of the Company, as well as such other factors as were deemed
relevant, including an evaluation of management and the general economic
climate. Prior to this Offering, there has been no public market for any of the
Company's securities. See "Dilution" and "Underwriting."
25. Possible Delisting of Securities from NASDAQ System; Risks of Low
Priced Stocks. The Commission has approved rules imposing more stringent
criteria for listing of the securities on the NASDAQ SmallCap Market ("NASDAQ").
In order to continue to be listed on NASDAQ, the Company would be required to
maintain (i) total assets of at least $2,000,000, (ii) total shareholders'
equity of $1,000,000, (iii) a minimum bid price of $1.00, (iv) one market maker,
(v) 300 shareholders, (vi) at least 100,000 shares in the public float and (vii)
a minimum market value for the public float of $200,000. In the event the
Company's securities are delisted from NASDAQ, trading, if any, in the
securities would thereafter be conducted in the over-the-counter market on the
OTC Bulletin Board or the National Quotation Bureau ("Pink Sheets").
Consequently, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. The Company
has applied for a listing on NASDAQ of the securities being offered hereby.
Quotation on NASDAQ does not imply that a meaningful, sustained market for the
Company's securities will develop or if developed that it will be sustained for
any period of time. See "Description of Securities."
26. Penny Stock Regulation. Broker/dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Commission. Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on NASDAQ provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker/dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker/dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker/dealer and its salesperson in connection with the
transactions, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock the broker/dealer
must make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
9
<PAGE> 12
subject to the penny stock rules. If the Company's securities become subject to
the penny stock rules, investors in this Offering may find it more difficult to
sell their securities. See "Description of Securities."
27. Underwriter's Unit Purchase Option. The Representative will acquire,
for nominal consideration, an option (the "Underwriter's Unit Purchase Option")
to purchase up to 100,000 Units, at an exercise price of $6.00 per Unit. The
Underwriter's Unit Purchase Option is exercisable in whole or in part for a
period of four years commencing one year from the date of this Prospectus. The
Units and the underlying securities contained in the Underwriter's Unit Purchase
Option are identical to the Units and the underlying securities being offered
hereby. The Company has agreed to register the Underwriter's Unit Purchase
Option and the underlying securities at its expense, one time only, upon request
of the holders of a majority of the Underwriter's Unit Purchase Options and of
the underlying securities. In addition, the Company has agreed, for a period of
four years following the expiration of a twelve-month period after the effective
date of this Prospectus, to give advance notice to the holders of the
Underwriter's Unit Purchase Option or underlying Warrants or shares of Common
Stock of its intention to file a registration statement, and in such case the
holders of the Underwriter's Unit Purchase Option and underlying securities
shall have the right to require the Company to include the Underwriter's Unit
Purchase Option and underlying securities in such registration statement at the
Company's expense. The Underwriter's Unit Purchase Option can be expected to be
exercised at a time when the Company would, in all likelihood, be able to obtain
equity capital by the sale of securities on terms more favorable than those
provided by the Underwriter's Unit Purchase Option, whereby these obligations
could be a hindrance to any future financing. Furthermore, in the event the
Representative exercises its registration rights to effect the distribution of
the Common Stock or Warrants underlying the Underwriter's Unit Purchase Option,
the Representative and any holder of such Warrants who is a market maker in the
Company's securities, prior to such distribution, will be unable to make a
market in the Company's securities for up to a specified period prior to the
commencement of such distribution and until such distribution is completed. If
the Representative ceases making a market, the market and market prices for the
Company's securities may be adversely affected, and the holders thereof may be
unable to sell such securities. See "Description of Securities."
28. Seasonality. The Company believes that its business may be considered
seasonal with a large portion of its revenues and profits being derived during
the fall and winter months. The Company believes that outdoor amusement centers
and sports activities will take business away from the indoor billiards events
during the spring and summer months resulting in a decline in revenues. The
seasonality of its business may cause the Company severe cash flow problems from
time to time. See "Business -- Proposed Plan of Operation."
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and intends to
retain earnings, if any, for use in its activities. Payment of dividends in the
future will be wholly dependent upon the Company's earnings, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors, which has the discretion to declare dividends out of the funds
legally available therefor. It is not likely that cash dividends will be paid in
the foreseeable future or at all. Accordingly, investors needing immediate or
future income by way of dividends should not purchase the securities offered
hereby.
DILUTION
The difference between the Offering Price per share and the adjusted pro
forma net tangible book value per share after this Offering constitutes the
dilution per share of Common Stock to the new investors. The adjusted pro forma
net tangible book value per share is determined by dividing the adjusted pro
forma net tangible book value (total tangible asset less total liabilities) by
the number of outstanding shares of Common Stock.
As of June 30, 1996, the Company had total assets of $626,819 and net
tangible deficit (total assets of $626,819 less intangible assets of $531,500
and less $1,195,291 total liabilities) of $1,099,972. As of June 30,
10
<PAGE> 13
1996, the Company had 2,550,000 shares of Common Stock outstanding, or net
tangible book value (deficit) per share of ($0.43).
After giving effect to the estimated $3,950,000 net proceeds from the sale
of the Units offered hereby, (without giving effect to the Underwriter's
Over-Allotment Option) and the automatic conversion of $1,100,000 of Private
Placement Notes into Units, the adjusted pro forma net tangible book value of
the Company at June 30, 1996 would have been $3,990,028. The number of shares of
the Company's Common Stock outstanding will be increased from 2,550,000 by the
1,000,000 Units offered hereby, and upon the 1,100,000 Units issued upon the
automatic conversion of the Private Placement Notes for a total of 4,650,000
shares outstanding, or an adjusted pro forma net tangible book value per share
of $0.86. As a result, there will be an immediate substantial increase in the
adjusted pro forma net tangible book value per share of $1.29 to existing
shareholders and an immediate dilution to new investors of $4.14 per share.
"Dilution" is determined by subtracting the adjusted pro forma net tangible book
value per share after the Offering from the Offering Price to investors. The
following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Offering Price per Unit(1)................................................. $ 5.00
Adjusted pro forma net tangible book value (deficit) per share as at June
30, 1996................................................................. $(0.43)
Increase in net tangible book value per share attributable to public
investors................................................................ 1.29
Adjusted pro forma net tangible book value per share after the Offering.... 0.86
------
Dilution per share to public investors(2).................................. 4.14
======
</TABLE>
- ---------------
(1) Offering Price before deduction of Underwriters' discounts and before
deduction of estimated expenses of the Offering. This table assumes that the
entire $5.00 Offering Price of the Unit is attributable to the one share of
Common Stock included in the Unit.
(2) The dilution per share of Common Stock expressed as a percentage of the
Offering Price is 83%. Assumes no exercise of the Warrants (including the
Warrants issued as a component of the Units to Private Placement Selling
Stockholders) or the Underwriter's Unit Purchase Option.
The exercise of the Underwriter's Over-Allotment Option to its fullest
extent would increase the number of shares of Common Stock outstanding by
150,000 to 4,800,000, would increase the Company's net tangible assets by
$652,500 to $4,642,528 and would increase the Company's adjusted pro forma net
tangible book value per share by $0.11 to $0.97, which would reduce the dilution
per share to public investors by $0.11 to $4.03 (2.6%).
The following table summarizes on an unaudited pro forma basis as of June
30, 1996, the number and percentage of shares of Common Stock purchased from the
Company, the amount and percentage of consideration and the average
consideration per share given by existing shareholders and by public investors
pursuant to this Offering. See "Business" and "Certain Transactions."
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION PAID AVERAGE
------------------- -------------------- CONSIDERATION
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders...................... 2,550,000 54.8% $ 120,550 1.9% $0.05
Private Placement Selling Stockholders..... 1,100,000 23.7% 1,100,000 17.7% $1.00
Public Investors........................... 1,000,000 21.5% 5,000,000 80.4% $5.00
------- ------ ------- ------ -------
4,650,000 100.0% $6,220,550 100.0%
======= ====== ======= ======
</TABLE>
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the securities offered
hereby after deducting underwriting discounts and estimated expenses of this
Offering of $1,050,000 is $3,950,000 ($4,602,500 if the Underwriter's
Over-Allotment Option is exercised in full). The Company expects to use the
proceeds of this Offering substantially as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE
APPLICATION OF PROCEEDS DOLLAR AMOUNT OF NET PROCEEDS
- -------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Pro Billiards Tour -- Event Management........................ $ 1,500,000 38.0%
Television Production Costs................................... $ 750,000 19.0%
WTB Celebrity Tournaments..................................... $ 300,000 7.6%
Repayment of Demand Promissory Notes(1)....................... $ 297,500 7.5%
Working Capital and Other General Corporate Purposes.......... $ 1,102,500 27.9%
------------- ---------------
Total............................................... $ 3,950,000 100.0%
=========== ===========
</TABLE>
- ---------------
(1) See "Description of Securities -- Promissory Notes."
The amounts set forth above are the Company's best estimates based upon its
present plans and certain assumptions regarding general economic and industry
conditions and the Company's anticipated future revenue and expenditures, and
merely indicate the proposed use of proceeds. Actual expenditures may vary
substantially from these estimates depending upon many factors, such as the
fiscal health of the Company, economic conditions, the success, if any, of the
Company's business and operations and the availability of other financing
arrangements, such as lines of credit and loans. Accordingly, stockholders of
the Company must rely upon the judgment and discretion of management with regard
to the allocation and use of the net proceeds of this Offering.
To the extent that the Underwriter's Over-Allotment Option or the Warrants
are exercised, any proceeds received from such exercise will be used for working
capital and general corporate purposes of the Company.
Pending use of the proceeds from this Offering as set forth above, the
Company may invest all or a portion of such proceeds in short-term bank
certificates of deposit, U.S. Government obligations, money market investments
and short-term investment grade securities. The Company does not intend to
register under the Investment Company Act of 1940 and, therefore, will be
limited to the types of investments which may temporarily be made with the
proceeds of this Offering. Interest earned on these investments will be used to
augment working capital.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth the notes payable and capitalization of the
Company as of June 30, 1996, and on a pro forma basis as adjusted to give effect
to the sale of the Units offered herein and the anticipated application of the
estimated net proceeds of such sale:
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED (1)
---------- ---------------------
<S> <C> <C>
Notes Payable.............................................. $1,100,000 $ 0
=========== =========
Stockholders' Equity (Deficit):
Common Stock, par value $0.001; 20,000,000 shares
authorized; 2,550,000 shares issued and outstanding
actual; 4,650,000 shares issued and outstanding pro
forma as adjusted..................................... $ 2,550 $ 4,650
Additional paid-in capital............................... $ 118,000 $ 5,165,900
Deficit accumulated during the development stage......... $ (689,022) $ (755,022)
Total Stockholders' equity (deficit)....................... $ (568,472) $ 4,415,528
----------- ---------
Total Capitalization....................................... $ (568,472) $ 4,415,528
=========== =========
</TABLE>
- ---------------
(1) Assumes the issuance of 1,100,000 shares of common stock upon the conversion
of $1,100,000 Private Placement Notes. See "Business -- Private Placement"
and "Underwriting -- Private Placement." Includes the sale of 1,000,000
shares of Common Stock as part of the 1,000,000 Units offered herein and the
application of the estimated net offering proceeds as set forth in "Use of
Proceeds." Does not include securities issuable upon the exercise (i) of the
Underwriter's Over-Allotment Option, (ii) the Warrants or (iii) the
Underwriter's Unit Purchase Option. Following June 30, 1996 and through
September 30, 1996, the Company issued and sold an aggregate of $297,500
principal amount of unsecured demand promissory notes to four individuals,
bearing interest at eight percent per annum. These notes will be repaid from
the proceeds of this Offering. See "Use of Proceeds" and "Description of
Securities -- Promissory Notes".
13
<PAGE> 16
SELECTED FINANCIAL DATA
The selected financial data presented below was derived from the financial
statements included elsewhere in this Prospectus. This selected financial data
should be read in conjunction with the financial statements of the Company and
the notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere in this Prospectus.
STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
PERIOD ENDED INCEPTION TO ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues............................. $ 1,370 $ 0 $ 20,948
Expenses............................. $ 158,500 $ 8 $ 552,840
---------- ---------- ----------
Net (loss)........................... $ (157,130) $ (8) $ (531,892)
========== ========== ==========
Weighted Average shares of Common
Stock.............................. 4,750,000 4,750,000 4,750,000
Net (loss) per share................. $ (0.03) $ (0.00) $ (0.11)
---------- ---------- ----------
</TABLE>
BALANCE SHEETS DATA AS AT:
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
DECEMBER 31, AS
1995 ACTUAL ADJUSTED(1)
------------ ------------- -----------
<S> <C> <C> <C>
Total assets......................... $ 462,028 $ 626,819 $ 4,510,819
Working capital (deficit)............ $ (494,590) $ (1,003,190) $ 3,980,810
Total liabilities.................... $ 498,608 $ 1,195,291 $ 95,291
Stockholders' equity (deficit)....... $ (36,580) $ (568,472) $ 4,415,528
</TABLE>
- ---------------
(1) To give effect to the receipt of the net proceeds of this Offering,
including at the time of the completion of this Offering, shares of Common
Stock issuable upon conversion of the Private Placement Notes issued in the
Company's private placement in March 1996 through May 1996. See
"Business -- Operations to Date" and "Business -- Private Placement."
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
Prospectus.
PLAN OF OPERATION
The Company is a development stage company. Since its inception in May
1995, the Company's efforts have been principally devoted to raising capital.
From its inception through June 30, 1996, the Company has sustained cumulative
losses of $689,022. These losses have resulted from expenditures in connection
with product development, market research, and the acquisition of certain
assets, and general and administrative activities, including legal and
professional activities.
The Company expects to continue to incur substantial costs in the future
due to ongoing product development, the organization of an event management
organization and market research activities. The Company also expects that
general and administrative costs necessary to support its product and event
development activities, market research and development and the expansion of its
workforce in connection with the creation of a marketing and event management
organization, will increase in the future. Accordingly, the Company expects to
incur increasing losses for the foreseeable future. There can be no assurance
that the Company will be able to cease experiencing losses.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its activities to date through loans and a private
placement of convertible debt securities. As of June 30, 1996, the Company had a
working capital deficit of $1,003,190.
In May 1996, the Company completed a private placement which consisted of
$1,100,000 principal amount of Private Placement Notes bearing interest at an
annual rate of ten percent (the "Private Placement"). See "Business -- Private
Placement." The net proceeds of the Private Placement, which were approximately
$1,012,000 (net of $88,000 in commissions), have been utilized by the Company
for working capital purposes. See "Capitalization."
During the twelve month period following the Offering, the Company intends
to pay approximately $350,000 in compensation to its current or future executive
officers. See "Management -- Employment Agreements."
ACCOUNTANTS' GOING CONCERN REPORT
The report of the independent auditors on the Company's financial
statements as of December 31, 1995 and June 30, 1996 contains an explanatory
paragraph regarding the Company's development stage status and recurring losses
from operations, which raise substantial doubts about the ability of the Company
to continue as a going concern.
The Company has had no significant revenue and has incurred an accumulated
deficit through June 30, 1996 of $689,022. However, the Company believes that
upon the completion of the Offering and the receipt of the proceeds therefrom,
it will have the necessary liquidity and capital resources to sustain planned
operations for the twelve month period following the Offering. In the event that
the Company's internal estimates relating to its planned expenditures prove
materially inaccurate, the Company may be required to reallocate funds among its
planned activities or curtail certain planned expenditures. In any event, the
Company anticipates that it will require substantial additional financing after
such time. There can be no assurance as to the availability or terms of any
required additional financing, when and if needed. In the event that the Company
fails to raise any funds it requires, it may be necessary for the Company to
significantly curtail its activities or cease operations entirely. See "Use of
Proceeds", "Business -- Proposed Plan of Operation" and "Risk Factors."
15
<PAGE> 18
At June 30, 1996, the Company had net operating loss carryforwards ("NOLs")
for federal income tax purposes of approximately $145,000. In addition, the
Company has approximately $420,000 of capitalized start-up costs, which will be
amortized to expense for income tax purposes over 5 years. The net operating
loss carryforwards expire in 2010 and 2011. The Company's ability to use its
NOLs to offset future income may be subject to restrictions under the Internal
Revenue Code of 1986, as amended (the "Code"). These restrictions could limit
the Company's future use of its NOLs if there are certain stock ownership
changes described in the Code, which may include the changes of ownership
related to the Offering. See Note 6 of Notes to Financial Statements.
SEASONALITY
The Company believes that its business may be considered seasonal with a
large portion of its revenues and profits being derived during the fall and
winter months. The Company believes that outdoor amusement centers and sports
activities will take business away from the indoor billiards events during the
spring and summer months, resulting in a decline in revenues. The seasonality of
its business may cause the Company severe cash flow problems from time to time.
See "Business -- Proposed Plan of Operation."
16
<PAGE> 19
BUSINESS
GENERAL BACKGROUND
American Professional Billiards, Inc. (the "Company") was organized under
the laws of the State of Nevada on May 18, 1995, in order to develop its
proposed business of administering, promoting and marketing amateur and
professional billiard tournaments and events and related activities worldwide.
The Company is a development stage corporation which to date has engaged
primarily in the (i) financing of its developmental activities, (ii)
consummating the acquisition of certain of the billiards related assets of World
Wide Collectibles, Inc. ("WWC") and (iii) negotiating and concluding the
Exclusive Event Management Agreement with the Professional Billiards Tour, Inc.
(the "PBT"). WWC and the PBT are not affiliated with the Company, although the
Company, WWC and PBT have certain common officers and directors.
WWC is a Nevada corporation. At the time the Company acquired certain of
the billiards related assets of WWC, WWC was engaged in the collectibles
industry, primarily relating to billiards and the authentication process
regarding billiards and other collectibles. In October 1995, WWC acquired World
Team Billiards, Inc. ("WTB"). The acquisition by the Company of certain WWC
intangible assets was consummated in October 1995. Certain of the billiards
related intangibles that the Company has acquired from WWC were included in the
assets acquired by WWC from WTB. John P. O'Meara, director, secretary and
treasurer of the Company, is also a director of WWC. In addition, Donald E.
Mackey, director of and consultant to the Company, and Commissioner of the PBT,
was also a director and shareholder of WTB. Furthermore, Nicky D. Varner, a
director of the Company, was also a director and shareholder of WTB. No
operations of WWC were acquired by the Company in this transaction. See "Certain
Transactions".
PBT is a non-profit Delaware corporation, which organizes and promotes
men's professional billiards tournaments both nationwide and worldwide. The PBT
sanctions the players who may participate in the official prize money events of
the PBT. Pursuant to the exclusive Management Agreement between the Company and
the PBT, the Company and the PBT have articulated certain rights and obligations
that each shall have in the operation, promotion, marketing and conduct of the
PBT sanctioned events. Messrs. Mackey and Varner are directors of the PBT. See
"Certain Transactions".
OPERATIONS TO DATE
On October 3, 1995, the Company acquired certain intangible assets of WWC,
a significant shareholder of the Company. The assets acquired by the Company
include the sanctions (the "Sanctions") from the PBT described below, the name
"World Team Billiards" and certain other related assets. The purchase price for
such assets was $340,000 secured by a promissory note (the "WWC Note") and two
million shares of Common Stock of the Company. The WWC Note was paid from part
of the proceeds of the Private Placement.
The Sanctions which the Company acquired from WWC entitle the Company to
use exclusively the PBT logo in all advertising, marketing materials, TV
commercials and all official apparel and equipment. The Sanctions also grant the
Company the exclusive right to promote and market the WTB professional team
format, and any professional team tournament which uses the WTB professional
team format. The WTB professional team format incorporates professional team
competition and utilizes a set period of time within which any competition must
take place, a set period of time in which each shot must be taken, a set line-up
of players, participation by a minimum of two players per team up to a maximum
of 5 players per team, and other elements and variations of the rules of play
for 9-Ball competition. The Sanctions also provide that any national billiards
league using players drawn from the PBT will use the WTB team format. See
"Business -- Proposed Plan of Operation".
17
<PAGE> 20
On June 3, 1996, the Company entered into an Exclusive Event Management
Agreement (the "Management Agreement") with the PBT which the Company believes
to be the governing body of men's professional billiards. Under the terms of the
Management Agreement, the Company is required to promote, market and sponsor
between twelve and fifteen billiards tournaments through January 1997, for the
1996 tournament schedule. As part of its responsibilities, the Company is
required to prepare media kits, player photographs and updated biographies,
organize television coverage, and provide overall supervision and coordination
of the various sponsored tournaments and events. In addition, the Company is
required to provide prize money for tournament contestants, event staff and
promotional and related activities. Under the Management Agreement, the PBT is
required to provide first class professional players, the related rules of entry
and other requirements of a tournament such as referees, timekeepers and
statisticians, and the Company is required to bear such costs. The PBT will also
have influence on the pricing of the tickets and arrangements for tour sponsors.
The Company believes that, as a result of the Management Agreement, the PBT will
be able to engage top ranking professional billiards players of national acclaim
in sufficient numbers to field the billiards tournaments provided for in the
Management Agreement.
All revenues derived from ticket sales, sponsorship, television rights,
fees and commercial sales and certain other revenues from the tournaments and
events will be applied first to reimburse the Company for the actual amounts
invested (the "Invested Amount") by it to produce, market, promote and televise
a particular event. If the revenues exceed the invested amount, the Company will
also be entitled to receive an amount equal to one hundred (100%) percent (the
"Second Return") of the Invested Amount in respect of such tournament or event
after it recoups the Invested Amount. After the Company recoups the Invested
Amount and the Second Return, all remaining revenues derived from such
tournament or event will be distributed between the Company and the PBT on a
50-50 basis. The term of the Management Agreement is five (5) years and the
Company has the first right of refusal to extend the contract for an additional
five (5) years. There can be no assurances that the Company will be successful
in promoting and marketing any of these anticipated tournaments or events, and
even if successful in promoting and marketing any or all of such tournaments or
events, that it will receive any revenues or revenues in excess of the expense
it incurred in promoting or sponsoring such tournament or event.
The Company and the PBT have jointly operated and promoted several PBT
sanctioned tournaments, pursuant to the Management Agreement, including the
"Sands Regency XXIII" held from June 4, through June 9, 1996 at the Sands
Regency Hotel and Resort in Reno, Nevada with guaranteed total prize money of
$50,000; "The California Clash" held from June 25 through June 30, 1996 at the
Town & Country Inn in San Diego, California, with guaranteed total prize money
of $50,000; the "World 8-Ball Championship" held from August 4 through August
10, 1996 at the Riviera Hotel and Casino in Las Vegas, Nevada, with guaranteed
prize money of $100,000; and the "Gran Prix de Puerto Rico", held from August 28
through September 2, 1996 at the El Conquistador Resort in Fajardo, Puerto Rico,
with guaranteed total prize money of $100,000. These tournaments were part of
the PBT's 1996 Camel Pro Billiards Series, pursuant to which Camel has
established a total prize of $250,000 to be divided among the top 16 PBT players
for the year ending 1996 based upon each such player's ranking for such year.
R.J. Reynolds & Co., through its Camel Brand, is the title sponsor of the PBT
1996 Camel Pro Billiards Series.
18
<PAGE> 21
The following sets forth the remaining schedule for the PBT 1996 Camel Pro
Billiards Series:
<TABLE>
<S> <C> <C>
PRIZE
DATE EVENT MONEY
September 17-22 FLORIDA FLARE UP III $100,000
Convention Center, Fort Lauderdale, FL
October 8-13 1996 CAMEL WORLD 9-BALL CHAMPIONSHIP $150,000
Adams Mark Charlotte, Charlotte, NC
October 15-20 SOUTHERN 9-BALL CHAMPIONSHIP $100,000
Superdome, New Orleans, LA
October 22-27 THE PLAYERS TRADITION $100,000
Nashville Convention Center, Nashville,
TN
November 5-10 THE WESTERN OPEN $100,000
Holiday Inn, Denver, CO
November 13-17 ATLANTA PRO 9-BALL CLASSIC $100,000
Crowne Plaza Revinia, Atlanta, GA
December 4-8 THE NORTHERN PRO 9-BALL OPEN $100,000
Seasons Resort, Great Gorge, NJ
December 10-15 1996 PRO TOUR CHAMPIONSHIP $150,000
Convention Center, Providence, RI
January 7-12, 1997 COMMERCE CASINO LEGENDS OF 9-BALL $100,000
Commerce Casino, Los Angeles, CA
</TABLE>
The PBT has entered into an agreement with AMF to supply the tables and
lighting for these PBT events.
The PBT has procured for the PBT 1996 Camel Pro Billiards Series a contract
with the Prime Cable Network (the "Camel/Prime Contract") to broadcast a minimum
of twenty-eight hours (two hours per event) of television coverage of the final
match of fourteen PBT sanctioned tournaments commencing with the above mentioned
"World 8-Ball Championships" at the Riviera Hotel and Casino in Las Vegas,
Nevada. Pursuant to the Camel/Prime Contract, the PBT has obtained the right to
sell for its account eight minutes of commercial time for each hour of cable
broadcast time. The Company and the PBT will share any revenues derived from
such sales of commercial time pursuant to the Management Agreement. The Company
assisted the PBT in obtaining the Camel/Prime Contract. The Company anticipates
that the first cablecast of a PBT Tournament pursuant to the Camel/Prime
Contract will take place in November, 1996.
PRIVATE PLACEMENT
In May, 1996, the Company completed the Private Placement of $1,100,000
principal amount of non-negotiable ten percent convertible subordinated Notes
(the "Private Placement Notes"). Unless earlier converted into equity
securities, the principal of the Private Placement Notes, together with the
accrued and unpaid interest thereon, will be due and payable at the close of
business December 31, 1996. The Private Placement Notes will be automatically
converted into Units as defined herein upon the occurrence of either of the
following events: (i) the completion of a public offering of the Company's
common stock (including this Offering) or (ii) the Company acquiring, merging or
entering into any other combination with a publicly held Company which results
in the Company being deemed a public company under the federal securities laws.
The Private Placement Notes will convert into Units at the rate of one (1) unit
for each dollar ($1.00) of principal amount of Private Placement Notes. The
proceeds of the Private Placement were used to pay the WWC Note and for general
working capital purposes. See "Private Placement Selling Stockholders."
19
<PAGE> 22
PROPOSED PLAN OF OPERATION
Formation of National Billiards League. The Company's management intends
to conduct other billiards activities in addition to performing its obligations
under the Management Agreement. The Company's management anticipates
establishing a nationwide program of amateur billiards competitions set in local
billiards centers, wherein the Company anticipates that it will be able to
charge certain fees for team and individual memberships. In addition, the
Company's management anticipates establishing a professional billiards league
(the "U.S. Billiards League") with team competition, using the WTB format for
team play, on a nationwide and worldwide basis, similar in concept, but smaller
in scale, to the National Football League, National Hockey League and Major
League Baseball.
The Company is proposing that team league play for the U.S. Billiards
League be established in major metropolitan areas, such as New York City, Los
Angeles, San Francisco, Atlanta, Orlando, Philadelphia, Boston and Chicago. The
cities of Miami and Denver are also being considered by the Company for U.S.
Billiards League teams. The U.S. Billiards League team format is expected to use
the WTB format for league play. The Sanctions for such format have been granted
on an exclusive basis to the Company. See "Business -- Operations to Date." The
WTB format was developed by Mr. Mackey, formerly president of World Team
Billiards, Inc., the Commissioner of the PBT, and director and consultant to the
Company. Mr. Mackey is also the second largest shareholder of the Company. See
"Principal Shareholders." Several key players on the PBT 1996 Camels Pro
Billiards Tour, such as Nicky Varner, Johnny Archer, Kim Davenport, Jim Rempe
and Buddy Hall, are also shareholders of the Company. It is expected that the
billiards players for the U.S. Billiards League will be drawn from the players
on the PBT 1996 Camels Pro Billiards Tour based on a lottery related to each
player's ranking on such Tour. In order for a billiards player to participate in
the U.S. Billiards League, if he were not part of the PBT 1996 Camels Pro
Billiards Tour, it is anticipated, that such player will have to be approved by
both the PBT and the Company.
Television Programming. The Company's management also anticipates
producing and distributing billiards event programming for domestic and foreign
television, and merchandising and licensing billiards related apparel and
equipment, primarily related to team competition.
There can be no assurance that the Company will be able to implement any or
all of the foregoing, including its plan for the U.S. Billiards League, or if
implemented, that it will be successful.
Billiards Entertainment Centers. The Company's management anticipates
creating a concept for billiards entertainment centers (the "Centers") which it
currently anticipates will consist of a billiards room with restaurant and bar
facilities in sophisticated styling. Such Centers will be based on a club-like
structure and operate as a home for local amateur billiards leagues and as
retail outlets for billiards related merchandise licensed by the Company, as
well as points of sale for tickets for various events sponsored by the PBT. The
Company may choose to own and operate such Centers directly or to franchise
them. Accordingly, the Company expects to be able to derive revenues from such
Centers in the form of membership fees, franchise fees, licensing fees, and
ticket sales.
The Company believes that the proceeds of this Offering should enable it to
fund its operations under the Management Agreement for a twelve month period
following the Offering, and fund the development of or determine the feasibility
of the Centers and National Billiards League. The Company believes, however,
that it will require future financing, in connection with the full
implementation of its plan for the Centers and the National Billiards League. In
the event additional financing is required, there can be no assurances the
Company will be able to do so. Any future financing may result in further
dilution to the purchasers of Units in this Offering.
Even if such financing should be available on acceptable terms, there can
be no assurance that the Company will in fact be able to implement its plan of
operation. The Company's failure to do so would materially and adversely affect
its business or financial condition, such that it could be required to curtail
or cease its operations.
20
<PAGE> 23
MARKETING
The Company expects to rely on a variety of marketing techniques: it
expects to contact local chambers of commerce, government and private entities,
such as, hotels and other entertainment or billiards related businesses with
respect to participation in promoting and sponsoring events; it expects to use
logos and other identified trademarks; and it will seek to present endorsements
by nationally recognized sporting figures.
TOUR PARTICIPANTS
The operation of the PBT sanctioned events is contingent upon the ability
of the Company to engage a sufficient number of top ranking professional
billiards players for the tournaments and other events scheduled. Although the
Company believes that through its underwriting of the expenses and the prize
monies for certain PBT tournaments, as provided in the Management Agreement, it
is creating strong incentives for the permanent establishment of a group of
professional billiards players, there can be no assurances given that such
players will become available and, if available, will continue to be available
in such numbers as required to form and maintain a professional, competitive
sport. At present, the Company does not have any agreements with professional
billiard players, and no assurance can be given that they will ever join, or
remain part of the PBT.
SUPPLIERS
For the creation of the Centers, the Company depends on the availability of
suitable properties at competitive terms, and its ability to attract franchisees
to operate such Centers, should the Company decide to franchise such Centers.
For its licensing operation, the Company will depend on its success in the
locating of and contracting with manufacturers of goods such as sportswear and
billiards equipment at competitive prices. As the Company has yet to implement
its business plan with respect to creation of the Centers, it is not possible
for the Company to predict whether it will be able to locate the required
suppliers at competitive prices and terms, failing which would have a materially
adverse effect on the Company's operations.
COMPETITION
While the Company believes that there are currently no other billiards
related businesses seeking to implement a business plan similar to that of the
Company, there are a number of organizations, including, but not limited to the
American Pool-Players Association (APA), the World Pool Billiards Association
(WPA), the Professional CueSports Association (PCA) the Women's Professional
Billiards Association (WPBA), the Billiards Congress of America (BCA), and The
McDermott Tour, which have organized the billiards sport on a professional and
amateur level. At least one of these organizations has organized an amateur
tournament in a format comparable to that proposed by the Company, which was
televised by ESPN, a nationwide distributed sports TV channel. Given the low
level of organization presently existing in the billiards sport, and considering
that nearly all of the elements of the Company's proposed plan of operation are
neither protected by intellectual property rights, or otherwise proprietary to
the Company, any of the foregoing organizations could develop a business plan
similar to that of the Company. No assurances can be given that such a potential
competitor would not be able to align itself with partners or others that are
better financed and have greater resources than the Company. The rise of any
such potential competitor could have a materially adverse impact on the
Company's operation and financial condition, and might force it to abandon or to
significantly alter its proposed plan of operation.
As the Company intends to operate in a variety of billiards related
activities, it will be exposed to all of the risk factors existing in its
various areas of operation, which may have a cumulative material and adverse
impact on the overall viability of the Company. To the extent the Company
intends to operate in the area of licensing apparel and billiards related
equipment, it will be subject to all of the risks affecting the retail and
sporting goods industry. Such risks are in general: the unpredictability of
continued acceptance for the merchandise licensed by the Company, the level of
consumer confidence in general to expend monies on essential items, the
availability of suppliers of raw materials at competitive prices and the
Company's ability to build and to sustain a distribution network. To the extent
the Company intends to market billiards events through media outlets, it is
subject to all of the risks of the entertainment industry, which are compounded
by
21
<PAGE> 24
the fact that in its efforts to place such events with the media, the Company
will have to compete with virtually all sports franchises most of which are
better established and better financed than the Company, and which represent
sports which are more popular and better known to the general public than
billiards. The same holds true for Company's plan to create billiards related
organizations and franchises, on the professional level as well as on the
amateur level. No assurances can be given that billiards will ever become
sufficiently popular to attract players and sponsors in such numbers that any
form of commercial exploitation will be successful. Without a significant
increase in the media appeal of billiards, all other ventures of the Company,
such as licensing of billiards related merchandise or the commercialization of
billiards related events through the media, would likely fail. See
"Business -- Proposed Plan of Operation."
SEASONALITY
The Company believes that its business may be considered seasonal with a
large portion of its revenues and profits being derived during the fall and
winter months. The Company believes that outdoor amusement centers and sports
activities will take business away from the indoor billiards events during the
spring and summer months resulting in a decline in revenues.
INSURANCE
The Company maintains a general business and liability insurance for an
aggregate amount of $200,000. The term of the current policy will expire on
October 16, 1996. While the Company believes that, at present, its insurance
coverage is adequate, any future expansion of its business may require the
Company to seek additional insurance, which may not be available at commercially
reasonable terms.
GOVERNMENT REGULATIONS
Billiards related events may be subject to regulation by the states in
which the events are held. Also, to the extent the Company develops and markets
a franchise for its Billiards Entertainment Centers, it will be subject to
federal and state regulations governing franchises.
EMPLOYEES
At the present time, there are four full time employees of the Company,
including the Chairman and Chief Executive Officer, Robert M. Stander. The
Company intends to enter into an employment agreement with Robert M. Stander
upon completion of the Offering. The Company relies on the services, from time
to time, of various consultants, including Donald E. Mackey. None of the
Company's employees are union members. Upon completion of the Offering, the
Company intends to recruit a qualified individual to serve as chief financial
officer of the Company.
PROPERTIES
The Company's headquarters are located at 1700 East Desert Inn Road, Suite
108, Las Vegas, Nevada 89109, where it subleases 2,000 square feet of office
space from World Wide Collectibles, Inc., a significant shareholder of the
Company. The Company intends to relocate its office in Las Vegas on or before
November 30, 1996, on which date its sublease terminates.
LITIGATION
The Company is not involved in any material legal proceedings.
22
<PAGE> 25
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of all directors and
executive officers of the Company and their positions in the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert M. Stander..................... 60 Chief Executive Officer, Chairman of
the Board and Director
John P. O'Meara....................... 57 Secretary, Treasurer and Director
Donald E. Mackey...................... 48 Director
Nicky D. Varner....................... 48 Director
Jerry M. Syrop........................ 49 Director
</TABLE>
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
Officers serve at the discretion of the Board of Directors.
ROBERT M. STANDER is one of the founders of the Company and is the Chairman
of the Board and Chief Executive Officer of the Company. Prior to his becoming
affiliated with the Company, Mr. Stander worked from September 1990 until
January 1995 exclusively as a consultant for WSR, Inc., a Nevada corporation,
owned by William Si Redd, the founder of International Gaming Corporation.
Mr. Stander's duties from 1985 to 1990 included serving as President of the
Oasis Resort Hotel & Casino in Mesquite, Nevada which required an unrestricted
gaming license from the State of Nevada. He also supervised the purchase of
1,200 acres in Mesquite for Mr. Redd which today comprises the master planned
community known as Mesquite Vistas which includes two Arnold Palmer designed
golf courses.
From 1979 to 1985, Mr. Stander was Executive Vice President and Chief
Operating Officer of Grand Auto, Inc., a company operating more than 100
specialty retail stores serving the automotive after-market industry. Grand
Auto, Inc. is headquartered in Oakland, CA.
DONALD E. MACKEY has been a member of the Company's Board of Directors and
a consultant to the Company since its inception. From 1992 through the present
time, he has been the Commissioner of the PBT. From 1989 to 1992, Mr. Mackey was
the Chief Executive Officer of WTB headquartered in Spring Hill, Florida. In
these capacities, Mr. Mackey has been responsible for (i) developing, promoting,
organizing and conducting a substantial number of billiards tournaments, both
nationwide and worldwide, and (ii) developing and producing programming of such
events for broadcast on ESPN and the Prime Cable Network.
NICKY D. VARNER is a member of the Company's Board of Directors and has
been a professional billiards player in excess of ten years. Mr. Varner had been
a director of WTB and is a director of the PBT.
JOHN P. O'MEARA is a director, secretary and treasurer of the Company.
Since 1992, Mr. O'Meara has been the president and a director of Kerry
Contractors, Inc., a general contracting and construction management company
located in Los Angeles, CA. Prior to joining Kerry Contractors, Inc., Mr.
O'Meara was Vice President of JOM Enterprises, Inc., a construction management
company headquartered in Los Angeles, CA. In addition, since 1991, Mr. O'Meara
has been providing consulting, marketing and technical services to WTB and the
PBT through Orion Associates, Inc., a Nevada company controlled by Mr. O'Meara.
Mr. O'Meara is a director and the treasurer of WWC.
JERRY M. SYROP, C.P.A., a graduate of the Baruch School of Business and
Public Administration in New York City, has been a director since April 1996.
Since May 1993, Mr. Syrop has been a principal of Gerstenfeld & Syrop P.A.,
Coral Springs, Florida. From 1986 to May 1993, Mr. Syrop practiced accounting in
New York and Coral Springs, Florida. Mr. Syrop is the brother of Randy Syrop, a
principal of the Representative.
23
<PAGE> 26
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer for services rendered in all capacities
to the Company for that fiscal year. No executive earned in excess of $100,000
for the 1995 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
RESTRICTED SECURITIES
NAME AND OTHER STOCK UNDERLYING ALL
PRINCIPAL ANNUAL AWARD(S) OPTIONAL/ LTIP OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) ($) SARS(#) PAYOUTS COMPENSATION($)
- ------------- ---- --------- -------- ------------------ ---------- ---------- ------- ---------------
Robert M.
Stander...... 1995 -- -- $ 25,000(1) -- -- -- --
Chairman 1996 $24,000(2) -- -- -- -- -- --
and Chief
Executive
Officer
</TABLE>
- ---------------
(1) Consulting fees. See "Certain Transactions".
(2) Received during time period from January 1, 1996 through June 30, 1996. It
is anticipated that Mr. Stander will receive $125,000 for the balance of
1996.
The Company intends to enter into an employment agreement with Mr. Stander
to be effective on completion of this Offering. The proposed employment
agreement is expected to provide for a three-year term and will include annual
compensation for Mr. Stander of approximately $140,000, plus certain benefits
including health and life insurance. Mr. Stander and other members of
management, if any, may receive annual bonuses, provided such payment is
warranted by the performance of the Company.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and its By-Laws contain
provisions for indemnification of officers, directors, employees and agents of
the Company. The Company's By-Laws require the Company to indemnify such persons
to the full extent permitted by the Nevada General Corporation Law (Nev. Rev.
Stat. Ann. sec.78.751 (1995). Each person will be indemnified in any proceeding
if he acted in good faith and in a manner which he reasonably believed to be in,
or not opposed to the best interests of the Company. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement.
The Company's By-Laws also provide that the Board of Directors may cause
the Company to purchase and maintain insurance on behalf of any present or past
director or officer insuring against any liability asserted against such person
incurred in the capacity of director or officer or arising out of such status,
whether or not the Company would have the power to indemnify such person.
The Company may seek to obtain directors' and officers' liability insurance
upon completion of this Offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceedings) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of
24
<PAGE> 27
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such court.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors does not currently have any separate compensation,
audit or nominating committees. However, the Board of Directors may establish
audit, compensation or nominating committees after the completion of this
Offering. The Company currently intends to identify and thereafter to appoint
two independent directors to the Board within 90 days following the Effective
Date although no assurances of this can be given.
DIRECTORS' COMPENSATION
Non-employee directors of the Company will be reimbursed for their expenses
incurred and may receive compensation for each meeting of the Board of Directors
attended and for each telephone meeting of the Board of Directors in which he or
she participates.
CERTAIN TRANSACTIONS
On May 25, 1995, the Company authorized the issuance to Robert M. Stander,
Donald E. Mackey, and Orion Associates, Inc., 225,000, 125,000 and 100,000
shares, respectively, for a price of $.001 per share. The purchase price for
such shares was paid in cash. Mr. Stander is Chairman of the Board and Chief
Executive Officer of the Company; Mr. Mackey is a director of and consultant to
the Company; and John P. O'Meara, the sole shareholder of Orion Associates,
Inc., is the secretary/treasurer and a director of the Company.
In October 1995, the Company acquired certain of the billiards related
assets of WWC for a purchase price of $340,000 secured by the WWC Note and two
million shares of Common Stock of the Company. Mr. O'Meara, the
secretary/treasurer and a director of the Company, is also treasurer and a
director of WWC.
WWC received 2,000,000 shares of Common Stock of the Company as partial
consideration in connection with the acquisition of certain billiards related
assets by the Company from WWC in October, 1995. See "Business -- Operations to
Date". Of those 2,000,000 shares of Common Stock, 425,000 shares were
transferred by WWC to certain shareholders of WTB in connection with the
acquisition of WTB by WWC.
As a shareholder of WTB, Mr. Mackey received 168,750 shares of Common Stock
of the Company as his allocable portion of such 425,000 shares.
On June 3, 1996 the Company entered into the Management Agreement (see
"Business -- Operations to Date") with the PBT. Mr. Mackey, a director of and
consultant to the Company, is the Commissioner of the PBT.
As of June 30, 1996, the Company advanced $90,000 to the PBT. The
promissory notes evidencing such advance are unsecured, bear interest at eight
percent with interest payments due monthly. The notes and accrued interest are
due on various dates through November 1, 1996. The PBT is not current in the
payment of principal and interest on these notes and the Company cannot be
certain the PBT will generate sufficient revenues to pay the amounts due.
Accordingly, collection of these notes cannot be assured. The Company believes
the PBT is seeking financing to enable it to satisfy the notes.
As of December 31, 1995, WWC advanced $91,050 to the Company to fund
operations, and of that amount, $81,046 has been repaid.
Messrs. Stander, Mackey and Orion Associates, Inc. and certain other
employees of the Company received consulting fees and commissions with respect
to the private placement. These payments for commissions and consulting fees
amounted to an aggregate of $52,000 through December 31, 1995, and $126,200
through June 30, 1996.
25
<PAGE> 28
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of June 30, 1996 and as adjusted to reflect the
sale of the Common Stock offered hereby, of each person known by the Company to
be the beneficial owner of more than five percent of the outstanding Common
Stock, of each director of the Company, and of all officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
SHARES % BEFORE % AFTER
BENEFICIALLY THIS THIS
NAMES AND ADDRESSES OF BENEFICIAL OWNERS OWNED OFFERING OFFERING(6)
- ---------------------------------------- ------------ -------- -----------
<S> <C> <C> <C>
World Wide Collectibles, Inc.(1) ........................... 1,575,000 61.76 33.16
1700 East Desert Inn Road
Las Vegas, NV 89109
Robert M. Stander(5)........................................ 225,000 8.82 4.74
1700 East Desert Inn Road
Las Vegas, NV 89109
Donald E. Mackey(2)(5)...................................... 293,750 11.52 6.18
1700 East Desert Inn Road
Las Vegas, NV 89109
Orion Associates, Inc.(3)................................... 100,000 3.92 2.11
1700 East Desert Inn Road
Las Vegas, NV 89109
Officers and Directors as a Group (three (3) persons)(4).... 618,750 24.26 13.03
</TABLE>
- ---------------
(1) WWC received 2,000,000 shares of Common Stock of the Company as partial
consideration in connection with the acquisition of certain billiards
related assets by the Company from WWC in October, 1995. See
"Business -- Operations to Date" and "Certain Transactions". Of those
2,000,000 shares of Common Stock, 425,000 shares were transferred by WWC to
certain shareholders of WTB in connection with the acquisition of WTB by
WWC.
(2) Includes 168,750 shares of Common Stock of the Company Mr. Mackey received
as a stockholder of WTB as his allocable portion of the 425,000 shares of
Common Stock of the Company the shareholders of WTB received from WWC.
(3) All of the issued and outstanding shares of Orion Associates, Inc. are
beneficially owned by John P. O'Meara, secretary/treasurer and director of
the Company.
(4) Includes the shares beneficially owned by Orion Associates, Inc.
(5) Messrs. Stander and Mackey each may be deemed a parent and promoter of the
Company.
(6) Includes 1,100,000 shares of Common Stock issued to Private Placement
Selling Stockholders upon completion of this Offering. See
"Business -- Private Placement" and "Private Placement Selling
Stockholders." Assumes no exercise of (a) the Underwriter's Over-Allotment
Option, (b) the Warrants offered hereby as component of the Units, (c) the
Underwriter's Unit Purchase Option or (d) any warrants issued to the Private
Placement Selling Stockholders upon consummation of this Offering. See
"Description of Securities," "Underwriting" and "Certain Transactions." If
all of the options and warrants set forth in clauses (a), (b), (c) and (d)
above were exercised to their fullest extent, the number of shares of Common
Stock to be outstanding after this Offering would be 7,250,000.
26
<PAGE> 29
PRIVATE PLACEMENT SELLING STOCKHOLDERS
The following table sets forth information with respect to the Private
Placement Selling Stockholders, who will own an aggregate of 1,100,000 shares of
Common Stock and 1,100,000 Warrants issuable upon conversion of the Private
Placement Notes, all of which are being registered in the Registration Statement
of which this Prospectus forms a part. Such securities may be sold by such
stockholders, from time to time, commencing 180 days after the date of this
Prospectus, unless the Representative consents in writing to earlier sales of
such securities. The Company will not receive any proceeds from the sale of
these securities. The cost of qualifying these shares under federal and state
securities laws, together with other costs in connection with their offering,
will be paid by the Company. See "Description of Securities -- Promissory Notes
and "Underwriting -- Private Placement."
<TABLE>
<CAPTION>
NAME SHARES OF COMMON STOCK WARRANTS
- ---- ---------------------- ---------
<S> <C> <C>
Marlborough Corporation..................................... 150,000 150,000
Merton Trustees, Ltd........................................ 80,000 80,000
Herod Investments, Ltd...................................... 100,000 100,000
Societe Financiere de Lac S.A............................... 70,000 70,000
BCM Money Purchase Pension Plan............................. 20,000 20,000
David Grasso, Jr. and Deborah A. Grasso..................... 20,000 20,000
Rudolph Baboun.............................................. 125,000 120,000
Vincent L. Celentano & Alice J. Celentano................... 105,000 105,000
Laura Fiero................................................. 25,000 25,000
Greentree Securities, L.P................................... 25,000 25,000
Esther Friedberg............................................ 20,000 20,000
Salem Management............................................ 250,000 250,000
Nancy A. Wright............................................. 50,000 50,000
Patricia M. Maietta......................................... 50,000 50,000
Polydius Partners........................................... 10,000 10,000
--------- ---------
Total............................................. 1,100,000 1,100,000
========= =========
</TABLE>
27
<PAGE> 30
DESCRIPTION OF SECURITIES
The total authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $0.001 par value per share. The following description of
the capital stock is complete in all material and relevant terms and is
qualified in all respects by reference to the Certificate of Incorporation and
By-Laws of the Company, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part. Prior to the
commencement of this Offering, there were 2,550,000 shares of Common Stock
issued and outstanding.
COMMON STOCK
The holders of Common Stock elect all directors by a majority vote and are
entitled to one vote for each share held of record. All shares of Common Stock
participate equally in dividends, when, as and if declared by the Board of
Directors and in net assets on liquidation. All shares of Common Stock presently
outstanding are, and the shares of Common Stock offered hereby and purchasable
upon the exercise of the Warrants, when issued will be duly authorized, validly
issued, fully paid and nonassessable by the Company. The shares of Common Stock
have no preference, conversion, exchange, preemptive or cumulative voting
rights.
REDEEMABLE WARRANTS
The Warrants will be issued in registered form pursuant to an agreement,
dated the date of this Prospectus (the "Warrant Agreement"), between the Company
and American Stock Transfer, Inc. (the "Warrant Agent"). The following
discussion of certain terms and provisions of the Warrants is qualified in its
entirety by reference to the detailed provisions of the Warrant Agreement, the
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
One Warrant represents the right of the registered holder to purchase one
share of Common Stock at an exercise price of $7.50 (150% of the Offering Price)
per share, subject to adjustment (the "Purchase Price") from the Effective Date
of this Offering until 5:00 p.m. New York time on , 1999 (three
years after the Effective Date) (the "Expiration Date"). The Company has the
right to reduce the Purchase Price, extend the Expiration Date or increase the
number of shares of Common Stock issuable upon the exercise of the Warrants. The
Warrants will be entitled to the benefit of adjustments in the Purchase Price
and in the number of shares of Common Stock or other securities deliverable upon
the exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.
At any time commencing on the date of this Prospectus and prior to the
close of business on the Expiration Date (on which date the Warrants become
wholly void and of no value), the Warrants, unless previously redeemed, may be
exercised at the office of the Warrant Agent. No holder, as such, of Warrants
shall be entitled to vote or receive dividends or be deemed the holder of shares
of Common Stock for any purpose whatsoever until such Warrants have been duly
exercised and the Purchase Price has been paid in full.
Under the provisions of the Warrant Agreement, the Company has the right,
at any time, to redeem the Warrants, in whole or in part, at a price of $0.10
each, by written notice mailed 30 days prior to the redemption date to each
Warrant holder at his address as it appears on the books of the Warrant Agent;
provided however that the Company may redeem the Warrants only if and when the
Company has an effective Registration Statement covering the shares of Common
Stock underlying the Warrants in place. Such notice shall only be given
following any period of 20 consecutive trading days during which the last sales
price for the shares of Common Stock is at least 100% of the then effective
exercise price of the Warrants to be redeemed. If the Warrants are called for
redemption, they must be exercised prior to the close of business on the date of
any such redemption or the right to purchase the applicable share of Common
Stock is forfeited.
The Company is required, when necessary, to file a post-effective amendment
or a new Registration Statement with the Commission with respect to the
securities underlying the Warrants and to deliver a prospectus with respect to
such securities to all Warrant holders.
28
<PAGE> 31
The Warrants will be exercisable only when there is a current effective
Registration Statement covering the shares of Common Stock underlying the
Warrants. If the Company does not or is unable to maintain a current effective
Registration Statement, the Warrant holders will be unable to exercise the
Warrants and the Warrants may become valueless. Because the Warrants may be
transferred, it is possible that the Warrants may be acquired by persons
residing in states where the Company has not registered, or is exempt from
registration, such that the shares of Common Stock underlying the Warrants may
not be sold or transferred upon exercise of the Warrants. Warrant holders
residing in those states would have no choice but to attempt to sell their
Warrants or let them expire unexercised.
Holders of the Warrants will be able to sell the Warrants if a market
exists rather than exercise them. However, there can be no assurance that a
market will develop, or if developed, will continue as to such Warrants.
Each Warrant will be exercisable by surrendering the Warrant certificate,
with the formal subscription form on the reverse side of the Warrant certificate
properly completed and executed, together with payment of the exercise price to
the Warrant Agent. Prior to their expiration or redemption by the Company, the
Warrants will be exercisable in whole or, from time to time, in part. If less
than all of the Warrants evidenced by a Warrant certificate are exercised, a new
Warrant certificate will be issued for the remaining number of Warrants.
PROMISSORY NOTES
As of June 30, 1996 the Company had outstanding $1,100,000 principal amount
of non-negotiable ten percent convertible subordinated notes, due December 31,
1996 (the "Private Placement Notes"). The Private Placement Notes are
subordinate to all bank debt currently outstanding as well as any additional
amounts that may be incurred by the Company during the term of the Private
Placement Notes. Unless earlier converted into equity securities as described
below, the principal of the Private Placement Notes, together with accrued
unpaid interest at the rate of ten percent per annum from the date of issuance,
will be due and payable on the close of business on December 31, 1996 (the
"Maturity Date"). However, no interest shall be payable in the event of
automatic or optional conversion.
The Private Placement Notes will be automatically converted into Units upon
the completion of this Offering, provided that such completion occurs on or
before the Maturity Date, and, if not automatically converted, will be converted
into Units at the option of the holder at any time through the Maturity Date.
The Private Placement Notes are convertible into Units consisting of one share
of Common Stock and one Warrant at the rate of one Unit for each dollar ($1.00)
of principal amount of the Private Placement Notes. See "Private Placement
Selling Stockholders" and "Underwriting -- Private Placement."
For the period from June through September 1996, the Company borrowed
$297,500 from certain individuals, pursuant to unsecured demand promissory notes
bearing eight percent interest per annum. These notes will be repaid out of the
proceeds of this Offering. See "Use of Proceeds".
TRANSFER AND WARRANT AGENT
The Company's transfer and warrant agent is American Stock Transfer, Inc.,
40 Wall Street, New York, NY 10005.
REPORTS TO SHAREHOLDERS
The Company intends to furnish its shareholders with annual reports
containing audited financial statements, and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
4,650,000 shares of Common Stock, assuming the Underwriter's Over-Allotment
Option, the Underwriter's Unit Purchase Option and the
29
<PAGE> 32
Warrants are not exercised. Of those shares, 2,100,000 shares of Common Stock
will be freely tradable without restriction or further registration under the
Act.
Holders of the Warrants included in the Units offered hereby to the public
will be entitled to purchase an aggregate of 1,000,000 additional shares of
Common Stock upon exercise of the Warrants at any time during the three-year
period following the date of this Prospectus, provided that the Company
satisfies certain securities registration qualification requirements with
respect to the securities underlying the Warrants. Any and all shares of Common
Stock purchased upon exercise of the Warrants will be freely tradable, provided
such registration requirements are met.
In addition, the Private Placement Selling Stockholders are entitled to
purchase an aggregate of 1,100,000 shares of Common Stock upon exercise of the
Warrants included in the Units received by the Private Placement Selling
Stockholders as a result of the automatic conversion of the Private Placement
Notes upon consummation of this Offering. The shares of Common Stock obtained by
the Private Placement Selling Stockholders upon exercise of the Warrants will
also be freely tradable, provided the securities registration requirements are
met.
All of the 2,550,000 shares of Common Stock currently outstanding are
"restricted securities" within the meaning of Rule 144 under the Act and, in
general, if held for at least two years, will be eligible for sale, in the
public market in reliance upon and subject to the limitations of Rule 144.
Accordingly, of those shares, 200,000 will become available for sale in October
1997, and 550,000 will become available for sale in May 1998. In addition to any
restrictions on transfer imposed by the Act, all of the officers, directors and
five percent stockholders of the Company and their affiliates have agreed not to
sell any of their shares of Common Stock for a period of one year after the date
of this Prospectus, without prior consent of the Representative.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Act, is entitled to
sell, within any three month period, a number of shares beneficially owned for
at least two years that does not exceed the greater of (i) one percent of the
number of then outstanding shares of Common Stock, or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice and the availability of current public information about
the Company. Furthermore, a person who is not deemed to have been an affiliate
of the Company during the ninety days preceding a sale by such person and who
has beneficially owned such shares for at least three years is entitled to sell
such shares without regard to the volume, manner of sale or notice requirements.
Prior to this Offering, there has been no public market for the Company's
securities. Following this Offering, the Company cannot predict the effect, if
any, that market sales of the Common Stock, or the availability of such shares
for sale, will have on the market price prevailing from time to time.
Nevertheless, sales by the existing stockholders of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices for the Common Stock. In addition, the availability for sale of
substantial amounts of Common Stock acquired through the exercise of the selling
securityholders' Warrants, the Warrants included in the Units or the Unit
Purchase Option could adversely affect prevailing market prices for the
Company's activities.
30
<PAGE> 33
UNDERWRITING
Joseph Roberts & Co., Inc. (the "Representative") as Representative of the
several underwriters (the "Underwriters") has agreed, subject to the terms of an
underwriting agreement dated the date of this Prospectus (the "Underwriting
Agreement"), to purchase from the Company on a firm commitment basis an
aggregate of 1,000,000 Units, consisting of 1,000,000 shares of Common Stock and
1,000,000 Warrants, offered hereby, in the respective amounts set forth opposite
their names below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF UNITS
----------- ---------------
<S> <C>
Joseph Roberts & Co., Inc.............................................
Total............................................................ 1,000,000
---------
</TABLE>
The Underwriters are obligated to take and pay for all of the Units offered
hereby if any are taken.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Units directly to the public at the offering
price set forth on the cover page of this Prospectus and to certain dealers (who
may include the Underwriters) at such price less a concession not in excess of
$ per Unit. The Underwriters may allow, and such dealers may reallow, a
concession to certain other dealers (who may include the Underwriters) not in
excess of $ per Unit. After the initial offering to the public, the
Offering Price and other selling terms may be changed by the Representative.
The Representative has advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority as to such sale.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company also
has agreed to pay to the Representative an expense allowance on a
non-accountable basis equal to three percent of the selling price of each Unit
derived from the sale by the Underwriter (including the sale of any Units
subject to the Underwriter's Over-Allotment Option), $15,000 of which has been
paid to date. The Company also has agreed to pay all filing fees in connection
with qualifying the Units offered hereby for sale under the laws of such states
as the Representative may designate and filing this Offering with the National
Association of Securities Dealers, Inc., ("NASD").
The Company has granted to the Representative an option, exercisable during
the 30-day period after the Effective Date, to purchase from the Company at the
Offering Price, less underwriting discounts, up to 150,000 additional Units for
the sole purpose of covering over-allotments, if any.
In connection with this Offering, the Company has agreed to sell to the
Representative or its designees, upon the completion of the sale of the Units,
at a price of one cent ($.01) per option (the "Option Price"), options (the
"Underwriter's Unit Purchase Option") entitling the Underwriter to purchase one
Unit upon the terms described below for each ten Units purchased by it in the
Offering (excluding the sale of Units under the Underwriter's Over-Allotment
Option). The Underwriter's Unit Purchase Option shall be non-transferable for a
period of one year after the effective date of the Offering (the "Effective
Date") except to partners or officers of the Representative or to those of the
other members of the Underwriting Group. The Underwriter's Unit Purchase Option
which shall expire five years from the Effective Date, shall not be exercisable
during the first twelve months after the Effective Date (the "Option Exercise
Term"), and shall provide a right to purchase one Unit for each Underwriter's
Unit Purchase Option exercisable at a price of $6.00 per Unit (120% of the
Offering Price of each Unit) on the Effective Date (the "Option Exercise
Price"), payable in cash or by "cashless exercise," as described in the
Underwriting Agreement. As used herein, "cashless exercise" occurs when the
Representative exercises its Underwriter's Unit Purchase Option and pays not
with cash or other consideration but by surrendering the applicable number of
common stock purchase warrants for the underlying common stock. No other form of
consideration is involved. The Underwriter's Unit Purchase Option shall be
exercisable at any time and from time to time, in whole or in part, during the
Option Exercise Term. The Underwriter's Unit Purchase Option contains
anti-dilution provisions providing for adjustment of
31
<PAGE> 34
these exercise prices or the number of shares upon the occurrence of certain
events, including the issuance of shares of Common Stock at a price per share
less than the exercise price or the market price of the Common Stock, or in the
event of any recapitalization, reclassification, stock dividend, stock split,
stock combination, or similar transaction. The Underwriter's Unit Purchase
Option grants to the holders thereof certain piggyback and demand registration
rights as described below. Unless granted an exemption by the Commission from
Rule 10b-6 under the Exchange Act, the Representative will be prohibited from
engaging in any market making activities or solicited brokerage activities with
regard to the securities until the later of the termination of such solicitation
activity or the termination by waiver or otherwise of any right the
Representative may have to receive a fee for the exercise of the Underwriter's
Unit Purchase Option following such solicitation.
With regard to the demand registration rights, the Company has agreed that
upon the expiration of a twelve month period after the Effective Date, and at
any time during a period of four years thereafter, no more than once, to
register all or a portion of the Underwriter's Unit Purchase Option or the Units
issuable upon the exercise of the Underwriter's Unit Purchase Option and the
underlying securities, at the Company's sole cost and expense including Blue Sky
fees for counsel and Blue Sky filing fees to qualify the Underwriter's Unit
Purchase Option and underlying securities for sale in up to three jurisdictions
requested by the Representative, at a time determined by the Representative.
With regard to the piggyback Registration rights, the Company agrees that
during the four year period described above, that if the Company shall seek to
register an offering of its securities, each holder of the Underwriter's Unit
Purchase Option shall be notified and shall be entitled to elect to have
included in such proposed registration, without cost or expense, any or all of
his, hers, or its Underwriter's Unit Purchase Option or underlying securities.
In the event of such a proposed registration, the Company shall furnish the
holders of the Underwriter's Unit Purchase Option with no less than forty days
written notice prior to the proposed filing of a registration statement. Such
notice shall continue to be given by the Company to such holders for each
proposed registration by the Company until such time as all of the Underwriter's
Unit Purchase Option or underlying securities have been registered, or until the
four year period described above has elapsed. Such holders shall exercise these
piggyback rights by giving written notice within twenty days of the receipt of
the Company's notice of intention to file a registration statement.
Pursuant to the Underwriting Agreement, all of the officers, directors, and
five percent stockholders of the Company and their affiliates have agreed not to
sell any of their shares of Common Stock for a period of one year after the
Effective Date without the prior written consent of the Representative.
The Company has granted to the Representative, for a period of five years
from the Effective Date, at the Representative's election, the right to have its
representative attend all of the meetings of the Company's Board of Directors.
Prior to this Offering there has been no public market for the Company's
securities. Accordingly, the Offering Price of the Units offered hereby and the
exercise price and other terms of the Warrants were determined by negotiation
between the Company and the Representative. Factors considered in determining
such prices and terms, in addition to prevailing market conditions, included the
history of and the prospects for the industry in which the Company competes, an
assessment of the Company's management, the prospects of the Company, its
capital structure, and such other factors as were deemed relevant.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and the Underwriter's Unit Purchase Option and does not purport to be
complete, though all material and relevant terms have been disclosed. Reference
is made to a copy of the Underwriting Agreement and the Underwriter's Unit
Purchase Option, which are on file as exhibits to the Registration Statement of
which this Prospectus forms a part.
On October 6, 1994, the NASD District No. 8 Business Conduct Committee
issued a complaint against the Representative and two of its principals alleging
that they sold unregistered securities of two issuers without making certain
disclosures concerning one of them and failing to comply with a technical
agreement with the NASD. On December 9, 1994, the Representative and the
principals filed an answer denying all of the allegations and requesting a
formal hearing to prove that no violations occurred. On October 17, 1995, a
second complaint was issued alleging continuing failure to comply with the
restrictive agreement with the
32
<PAGE> 35
NASD. Also, on May 18, 1995, a complaint was issued against the Representative
and certain of its principals and current or former employees alleging improper
sales practices and failure to supervise personnel.
Without admitting or denying the truth of the allegations, the
Representative and its principals have settled all these matters with the NASD.
Pursuant to a Decision and Order of Acceptance of Offer of Settlement, dated
December 31, 1995, the Representative and its principals consented to the entry
of findings of certain violations and the imposition of the following sanctions:
(i) the censure and $50,000 fine of the Representative and a principal; (ii) a
one-year prohibition against the Representative participation in the purchase
and sale of restricted or control securities under Rule 144 of the Act; (iii)
the suspension of a principal for a total of 135 days; and (iv) the suspension
of a second principal for 30 days and a fine of $25,000.
PRIVATE PLACEMENT
From March 1996 through May 1996 the Representative acted as a placement
agent for the Company's Private Placement. The Representative has been paid a
commission of $88,000 for acting as placement agent. The Company is required,
when necessary, to file a post-effective amendment or new registration statement
with the Commission with respect to the sale of shares of Company's securities
issued upon conversion of the Private Placement Notes. While such securities
have been registered in the Registration Statement, of which this Prospectus
forms a part, the holders of such securities have agreed with the
Representative, that for 180 days following the date of this Prospectus, they
will not offer or sell such securities without the prior permission of the
Representative. See "Private Placement Selling Stockholders".
INDEMNIFICATION
The Company has agreed to indemnify and hold harmless the Representative
and each of the other Underwriters and each director, officer, employee and
agent of the Underwriters and each person, if any, who controls the
Representative and each of the other Underwriters within the meaning of Section
15 of the Act, from and against any and all losses, claims, demands, liabilities
and expenses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or in this
Prospectus or in any amendment to either of them or in any Blue Sky application
or amendment thereto, or the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the statements
therein not misleading, except if such losses, claims, demands, liabilities and
expenses result from the use of written information furnished to the Company by
the Underwriters for use in the preparation of the Registration Statement or
Prospectus or in any amendment to either of them or in any Blue Sky Application
or amendment thereto.
The Underwriters have severally agreed to indemnify and hold harmless the
Company and each director, officer, employee and agent of the Company and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act, from and against any and all losses, claims, demands, liabilities and
expenses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or in this
Prospectus or in any amendment to either of them or in any Blue Sky application
or amendment thereto, or the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent such losses, claims, demands,
liabilities and expenses result from the use of written information furnished to
the Company by the Underwriters for use in the preparation of the Registration
Statement or Prospectus or in any amendment to either of them or in any Blue Sky
application or amendment thereto. In addition, Nevada law provides for the
indemnification by the Company of corporate officers and directors, and the
Company's Articles of Incorporation and By-Laws provide for such indemnification
to the fullest extent available under Nevada law.
Insofar as indemnification for liabilities under the Act may be permitted
to directors, officers and controlling persons of the Representative or of the
other Underwriters pursuant to the foregoing provisions, or otherwise, each of
the other Underwriters have been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable.
33
<PAGE> 36
EXPERTS
The December 31, 1995 and June 30, 1996 financial statements included in
this Prospectus have been audited by McGladrey & Pullen, LLP Independent
Certified Public Accountants, to the extent and for the periods set forth in
their report appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
Certain legal matters, including the legality of the issuance of the
securities offered hereby, are being passed upon for the Company by Herzfeld &
Rubin, P.C., 40 Wall Street, New York, New York 10005. Fishman & Merrick, P.C.,
30 North LaSalle Street, Chicago, Illinois 60602, has acted as counsel to the
Representative in connection with this Offering.
ADDITIONAL INFORMATION
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any and all of the documents
described herein. Written or telephone requests should be directed to: Robert M.
Stander, Chairman of the Board, American Professional Billiards, Inc., 1700 East
Desert Inn Road, Suite 108, Las Vegas, NV 89109, (702) 893-1277.
The Company has filed with the Commission a registration statement under
the Securities Act on Form SB-2 (the "Registration Statement") with respect to
the securities offered hereby. No distribution of the securities will be made
until the Registration Statement, as it may be amended, has been declared
effective. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. For further information with respect to the Company and the
securities offered hereby, reference is hereby made to the Registration
Statement and the exhibits thereto. All of these documents may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10007. Copies may be obtained at the prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington, D.C.
34
<PAGE> 37
INDEX
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT........................................................... F-2
FINANCIAL STATEMENTS
Balance Sheets....................................................................... F-3
Statements of Operations............................................................. F-4
Statements of Stockholders' Deficit.................................................. F-5
Statements of Cash Flows............................................................. F-6
Notes to financial statements........................................................ F-7
</TABLE>
F-1
<PAGE> 38
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
American Professional Billiards, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of American Professional
Billiards, Inc., a development stage company, as of December 31, 1995 and June
30, 1996, and the related statements of operations, stockholders' deficit, and
cash flows for the periods from May 18, 1995, (date of inception) to December
31, 1995 and June 30, 1996 and the six months ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Professional
Billiards, Inc. as of December 31, 1995 and June 30, 1996, and the results of
its operations and its cash flows for the periods from May 18, 1995, (date of
inception) to December 31, 1995 and June 30, 1996, and the six months ended June
30, 1996 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will conduct operations as a going concern. As discussed in Note 1 to
the financial statements, the Company has not yet substantially commenced the
operations for which it was organized and needs substantial capital to begin to
implement its business plan. This lack of sufficient capital has contributed to
losses since inception and its total liabilities exceeding its total assets.
This lack of capital and lack of operations raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ McGladrey & Pullen, LLP
Las Vegas, Nevada
August 13, 1996
F-2
<PAGE> 39
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
ASSETS
Current Assets
Cash........................................................... $ 68 $ 47,308
Receivables:
Accounts.................................................... -- 18,536
Notes, less provision for doubtful note of $90,000 (Note
2)......................................................... -- --
Accrued interest............................................ -- 2,407
Other current assets (Note 3).................................. 3,950 123,850
--------- -----------
TOTAL CURRENT ASSETS................................... 4,018 192,101
--------- -----------
Property and Equipment, net (Note 4)............................. 9,510 9,218
--------- -----------
Sanction and tradename, at cost, less accumulated amortization
June 30, 1996 $34,500, December 31, 1995 $11,500, (Note 7)..... 448,500 425,500
--------- -----------
TOTAL ASSETS........................................... $ 462,028 $ 626,819
========= ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable (Note 10)..................................... $ 60,834 $ 59,138
Related party advances (Note 10)............................... 91,050 10,554
Notes payable (Note 5)......................................... 340,000 1,100,000
Accrued expenses............................................... 6,724 25,599
--------- -----------
TOTAL CURRENT LIABILITIES.............................. 498,608 1,195,291
--------- -----------
Commitments and Contingencies (Notes 1, 2 and 9)
Stockholders' Deficit
Common stock, par value $.001 per share; authorized 20,000,000
shares:
Issued and outstanding 2,550,000 shares..................... -- 2,550
Issuable 2,550,000 shares (Note 8).......................... 2,550 --
Additional paid-in capital..................................... 118,000 118,000
Deficit accumulated during the development stage............... (157,130) (689,022)
--------- -----------
TOTAL STOCKHOLDERS' DEFICIT............................ (36,580) (568,472)
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT............ $ 462,028 $ 626,819
========= ===========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 40
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
MAY 18, 1995 MAY 18, 1995 MAY 18, 1995,
(DATE OF (DATE OF SIX MONTHS (DATE OF
INCEPTION) TO INCEPTION) TO ENDED INCEPTION) TO
DECEMBER 31, 1995 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1996
----------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Event management revenues......... $ -- $ -- $ 18,536 $ 18,536
Interest.......................... -- -- 2,412 2,412
Other............................. 1,370 -- -- 1,370
---------- ---------- ---------- ---------
TOTAL REVENUES............ 1,370 -- 20,948 22,318
Expenses:
Event management.................. -- -- 125,150 125,150
General and administrative........ 151,776 8 416,002 567,778
Loss on disposition of
equipment...................... -- -- 647 647
Interest.......................... 6,724 -- 11,041 17,765
---------- ---------- ---------- ---------
TOTAL EXPENSES............ 158,500 8 552,840 711,340
---------- ---------- ---------- ---------
NET LOSS.................. $ (157,130) $ (8) $ (531,892) $ (689,002)
========== ========== ========== =========
Weighted Average Common Shares
Outstanding....................... 4,750,000 4,750,000 4,750,000
========== ========== ==========
Net loss per common share........... $ (0.03) $ (0.00) (0.11)
========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 41
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------
DEFICIT
ISSUED AND SHARES ACCUMULATED
OUTSTANDING ISSUABLE (NOTE 8) ADDITIONAL DURING THE
------------------ -------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
--------- ------ ---------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 18, 1995 (Date of
Inception).................... -- $ -- -- $ -- $ -- $ -- $ --
Shares issuable to founders,
May 25, 1995 (Note 8)....... -- -- 550,000 550 -- -- 550
Shares issuable under asset
purchase agreement, October
3, 1995 (Notes 7 and 8)..... -- -- 2,000,000 2,000 118,000 -- 120,000
Net loss for the period from
May 18, 1995 (date of
inception) to December 31,
1995........................ -- -- -- -- -- (157,130) (157,130)
--------- ------ ---------- ------ ---------- ----------- -----------
Balance, December 31, 1995...... -- -- 2,550,000 2,550 118,000 (157,130) (36,580)
Issuance of shares (Note 8)... 2,550,000 2,550 (2,550,000) (2,550) -- -- --
Net loss for six months ended
June 30, 1996............... -- -- -- -- -- (531,892) (531,892)
--------- ------ ---------- ------ ---------- ----------- -----------
Balance, June 30, 1996.......... 2,550,000 $2,550 -- $ -- $118,000 $(689,022) $(568,472)
========= ====== ========== ====== ========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 42
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
PERIOD FROM MAY 18, 1995 SIX MONTHS MAY 18, 1995
MAY 18, 1995 (DATE OF ENDED (DATE OF
(DATE OF INCEPTION) INCEPTION) JUNE 30, INCEPTION)
TO DECEMBER 31, 1995 TO JUNE 30, 1995 1996 TO JUNE 30, 1996
-------------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash Flows from Operating Activities
Cash paid to suppliers and employees....... $ (80,873) $ (8) $ (452,419) $ (533,292)
--------- ------ ---------- ----------
Cash Flows from Investing Activities
Purchase of property and equipment......... (10,209) -- (2,295) (12,504)
Disbursement on note receivable............ -- -- (90,000) (90,000)
--------- ------ ---------- ----------
Net cash used in investing
activities....................... (10,209) -- (92,295) (102,504)
--------- ------ ---------- ----------
Cash Flows from Financing Activities
Proceeds from initial capital
contribution............................ 100 100 -- 100
Proceeds from issuance of common stock..... -- -- 450 450
Increase (decrease) in related party
advances................................ 91,050 -- (80,496) 10,554
Proceeds from short-term borrowings........ -- -- 1,100,000 1,100,000
Payment on note payable.................... -- -- (340,000) (340,000)
Disbursement of debt issuance costs........ -- -- (88,000) (88,000)
--------- ------ ---------- ----------
Net cash provided by financing
activities....................... 91,150 100 591,954 683,104
--------- ------ ---------- ----------
Net increase in cash............... 68 92 47,240 47,308
Cash, beginning.............................. -- -- 68 --
--------- ------ ---------- ----------
Cash, ending................................. $ 68 $ 92 $ 47,308 $ 47,308
========= ====== ========== ==========
Reconciliation of Net Loss to Net Cash Used
in Operating Activities:
Net loss................................... (157,130) (8) (531,892) (689,022)
Depreciation............................... 699 -- 1,940 2,639
Amortization............................... 11,500 -- 45,000 56,500
Provision for doubtful note receivable..... -- -- 90,000 90,000
Loss on disposition of equipment........... -- -- 647 647
Changes in assets and liabilities:
Increase in accounts receivable......... -- -- (18,536) (18,536)
Increase in accrued interest
receivable............................ -- -- (2,407) (2,407)
Increase in other current assets........ (3,500) -- (54,350) (57,850)
Increase (decrease) in accounts
payable............................... 60,834 -- (1,696) 59,138
Increase in accrued expenses............ 6,724 -- 18,875 25,599
--------- ------ ---------- ----------
Net cash used in operating
activities....................... $ (80,873) $ (8) $ (452,419) $ (533,292)
========= ====== ========== ==========
Supplemental Disclosures of Noncash Investing
and Financing Activities
Common stock issuable (Note 8)............. $ 550 $ 550 $ -- $ 550
Common stock issuable under asset purchase
agreement (Notes 7
and 8).................................. 120,000 -- -- 120,000
Issuance of note payable under asset
purchase agreement (Note 7)............. 340,000 -- -- 340,000
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 43
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
American Professional Billiards, Inc. (the "Company") is a development
stage company founded on May 18, 1995 to develop, administer and market
regional, national and international amateur and professional billiard
tournaments and events, develop a national billiards league, operate billiard
entertainment centers and merchandise billiard related products at the retail
level. Approximately 62% of the Company is beneficially owned by WWC (see Note
7). The Company has begun its efforts to sponsor and manage events on the
Professional Billiards Tour. However, as of June 30, 1996 no significant
revenues have been generated. No substantial efforts have begun regarding the
other business plans for which the Company was founded.
The Company has incurred significant losses since its inception. At June
30, 1996 the Company does not have in place sufficient debt or equity financing
arrangements to fund future event management of the Professional Billiards Tour
nor to implement its future business development plans. The Company estimates
that it needs substantial additional debt or equity financing to initiate its
future business development plans, and to fund anticipated losses in managing
events of the Professional Billiards Tour until such events become profitable
which it presently plans to obtain from the proceeds of an initial public
offering (IPO) of equity securities. In addition, the Company anticipates the
proceeds of the planned IPO will be sufficient to fund the initial development
or determine the feasibility of a national billiards league and the billiards
entertainment center concepts. However, the Company estimates the implementation
of a national billiards league and billiards entertainment center concepts will
require substantial additional debt or equity financing. The Company's plans
with regard to obtaining this additional capital include additional equity
offerings or seeking debt financing.
There is no assurance that the Company will be able to generate sufficient
revenue through the operation of its event management of the Professional
Billiards Tour to provide sufficient working capital to satisfy future
liabilities and operating expenses, even before implementation of its further
business development plans. The Company's ability to commence operations as a
going concern is dependent upon obtaining sufficient additional financing to
allow it to implement its business plan. The Company's ability to sustain
operations as a going concern depends on its ability to attain profitable
operations from its event management activities. Management expects to complete
the IPO and use the proceeds for working capital and to implement its business
plan. In the event the Company does not complete the planned IPO and it is
unable to secure alternative sources of capital, it is likely the Company will
be required to cease operations.
A summary of the Company's significant accounting policies follows:
Cash
The Company maintains cash in bank deposit accounts which at times may
exceed federally insured limits. The Company has not experienced any losses in
such accounts.
Debt issuance costs
Debt issuance costs are amortized over the term of the corresponding debt.
Deferred offering costs
Deferred offering costs consist of professional fees incurred for the
completion of a future public offering of the Company's common stock. The
professional fees will be offset by future proceeds of a public offering or
expensed if the offering does not occur.
F-7
<PAGE> 44
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Property and equipment
Property and equipment are recorded at cost. Depreciation is computed by
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Computer equipment and software....................................... 3 - 5
Furniture and fixtures................................................ 5
</TABLE>
Revenue recognition
Revenues from event management is expected to consist primarily of ticket
sales, sponsorships, television rights fees, and commercial sales, and will be
recognized upon completion of event management obligations required for each
tournament or event.
Amortization of intangibles
The cost of the sanction and trade name is being amortized by the
straight-line method over a period of ten years, which is the anticipated life
of certain business arrangements the Company has regarding the sanction and the
trade name.
It is reasonably possible that the estimate of the remaining estimated
economic life will be reduced significantly in the near term due to going
concern considerations. As a result, the carrying amount of the intangibles may
be reduced materially in the near term. The Company periodically reviews the
value assigned to the intangibles to determine whether any events have occurred
which would lead the Company to believe that the future cash flows expected from
the business activities supported by the intangibles would have declined below
the net reported value of the intangibles, and whether such potential
impairments are other than temporary. Based on such a review, management
believes that the intangibles in the accompanying balance sheets are not
impaired.
Advertising costs
The Company follows the policy of charging the production costs of
advertising to expense the first time the advertising takes place.
Deferred taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating losses and
tax credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets relate primarily to capitalized start-up costs and net operating loss
carryforwards. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Net loss per common share
Net loss per common share is computed on the weighted average number of
common shares outstanding during each period. The Company has common stock
equivalents consisting of common stock warrants
and convertible debt, as disclosed in Note 5. These common stock equivalents
have been
F-8
<PAGE> 45
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
included in the weighted average number of shares as if they had been exercised
or converted at May 18, 1995 (date of inception).
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, notes receivable, accounts payable, notes payable and accrued
expenses approximate fair value because of their short maturity.
NOTE 2. NOTES RECEIVABLE AND EVENT MANAGEMENT AGREEMENT
The Professional Billiards Tour (PBT) organizes and sanctions official
professional billiard player tournaments and other billiard related events. The
Company is related to the PBT in that the Commissioner and director of the PBT
is also a shareholder and member of the Board of Directors of the Company.
Certain other directors of the PBT are members of the Company Board of Directors
or professional billiard players competing in Company managed events.
During the period ended June 30, 1996, the Company advanced $90,000 to the
PBT. The notes are unsecured, bear interest at eight percent and interest
payments are due monthly. The notes and accrued interest are due various dates
through November 1, 1996. The PBT is not current on principal and interest
payments and the Company cannot be certain the PBT will generate sufficient
revenues to pay the amounts due on these notes when due, therefore, the ultimate
collection of these notes can not be assured. The Company believes that the PBT
is seeking financing to enable it to satisfy the notes. However, due to the
uncertainty of ultimate collection, the Company has provided an allowance equal
to the balance of the notes.
In June 1996, the Company entered into an exclusive event management
agreement with the PBT to provide management and organizational services in
connection with official professional billiard player tournaments and other
billiard related events. The agreement has a five year term with a five year
renewal option by the Company. The agreement includes a commitment from the PBT
to schedule at least twelve tournaments or events each year at over the life of
the agreement. Under the terms of the agreement the Company is required to fund
all the expenditures of the tournament or event, including: purse monies, site
procurement, and the implementation of a nationwide marketing and advertising
concept. Purse monies committed for that portion of the 1996 Tour remaining
after June 30, 1996 total $1,400,000. In return the Company will receive up to
200% of such expenses out of revenues from ticket, sponsorship, television fees,
commercial sales, and certain other revenues as reimbursement of expenses
invested for each event. If event revenues exceed 200% of expenses, the Company
and PBT will split any excess revenues equally.
F-9
<PAGE> 46
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Debt issuance costs, net of accumulated amortization June
30, 1996 $22,000......................................... $ -- $ 66,000
Deferred offering costs for the proposed IPO............... -- 40,000
Other, principally prepaid event costs..................... 3,950 17,850
------ --------
$3,950 $123,850
====== ========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ --------
<S> <C> <C>
Computer equipment and software............................. $ 9,344 $ 10,272
Furniture and fixtures...................................... 865 1,400
------- -------
10,209 11,672
Less accumulated depreciation and amortization.............. 699 2,454
------- -------
$ 9,510 $ 9,218
======= =======
</TABLE>
NOTE 5. NOTES PAYABLE AND STOCK WARRANTS
During the period ended June 30, 1996, the Company issued, unsecured,
convertible notes payable of $1,100,000 in a private placement. The notes
payable bear interest at ten percent, payable at maturity, and are subordinated
to any bank debt incurred by the Company during the term of the notes payable.
The notes payable are convertible into units at a conversion rate of $1 per
unit. A unit consists of one share of the Company's common stock and one
redeemable common stock purchase warrant. The notes payable are automatically
converted upon the completion of a public offering of the Company's securities.
If the Company does not complete an offering of its securities, the noteholders
have the option to convert their notes at any time through their maturity date
of December 31, 1996. These common stock purchase warrants entitle the holder to
purchase one share of common stock for a period of three years commencing with
the date of a public offering registration statement is declared effective by
the Securities and Exchange Commission at a price equal to 150% of the initial
public offering price. The Company has the option, during the exercise period,
to redeem the warrants at a price of $.10 per warrant, subject to certain
conditions.
In connection with the purchase of certain billiard related assets (Note
7), the Company had a promissory note payable of $340,000 at December 31, 1995.
The note payable was due on demand bearing interest at eight percent. The note
payable was paid in full during May 1996 and all accrued interest, totaling
$18,208, was waived by the note holder.
F-10
<PAGE> 47
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. INCOME TAXES
Deferred tax assets and liabilities are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ---------
<S> <C> <C>
Capitalized start up costs.................................. $ 47,000 $ 140,000
Net operating loss carryforwards............................ 2,000 49,000
-------- ---------
49,000 189,000
Less valuation allowance.................................... (49,000) (189,000)
-------- ---------
$ -- $ --
======== =========
</TABLE>
Due to the inherent uncertainty in forecasts of future events and operating
results, the Company has provided for a valuation allowance in an amount equal
to net deferred tax assets resulting in no net deferred tax assets at December
31, 1995 and June 30, 1995 and 1996.
No income tax benefit has been recorded in the statement of operations due
to the valuation allowances on the deferred tax assets. The net change in the
valuation allowance from 1995 to 1996 is due primarily to the period ended June
30, 1996 net operating loss and the capitalization of start up costs deductible
in future periods.
The Company has federal net operating loss carryforwards of approximately
$145,000 which are available to offset future taxable earnings of the Company
and expire in 2010 and 2011. The annual usage of these NOL's may be limited
based on certain significant shifts in ownership. The planned IPO may trigger
such a limitation. The Company has not evaluated the likelihood or impact, if
any, of such a limitation, if triggered.
NOTE 7. ASSET PURCHASE
In October 1995, the Company purchased certain intangible assets from World
Wide Collectibles, Inc. (WWC), a company which developed and sold various
consumer collectibles. WWC and the Company were related when this transaction
was consummated in that the secretary/treasurer and a director of the Company
was also the treasurer and a director of WWC. The intangible assets purchased
included: a sanction from the PBT for the exclusive right to organize and stage
all PBT tournaments and other events and exclusive rights in the use of the name
"World Team Billiards." The purchase price of $460,000 was comprised of a
$340,000 demand note payable and the agreement to issue 2,000,000 shares of the
Company's common stock, valued at $120,000. The Company valued the transaction
at the amount of the monetary consideration (the $340,000 note) plus the
estimated fair value of the shares issued ($.06 per share), since it believes
that the value of the shares issued are more reliably determinable than the fair
value of the assets obtained.
NOTE 8. STOCK ISSUANCES
The Company was incorporated on May 18, 1995. On May 25, 1995, the Board of
Directors authorized issuance to the initial founders of the Company 550,000
shares of common stock at $.001 per share.
On October 3, 1995, the Company agreed to issue 2,000,000 shares of common
stock in partial payment of its purchase of certain intangibles from WWC (see
Note 7).
In May 1996, the Company issued the 550,000 initial founder shares and the
2,000,000 WWC shares, as agreed and authorized.
F-11
<PAGE> 48
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. COMMITMENTS
Lease
The Company subleases office space under a lease expiring November 30, 1996
from World Wide Collectibles Inc., a significant shareholder of the Company. The
lease provides that the lessee pay all insurance and maintenance plus an annual
rental of $27,600. The minimum rental commitment at June 30, 1996 under this
lease is $11,500 through November 1996.
The total rental expense included in the statements of operations for the
periods ended December 31, 1995, and June 30, 1995 and 1996, and period from
inception to June 30, 1996 is $14,600, $0, $15,068 and $29,668, respectively.
Employment agreement
The Company intends to enter into an employment agreement with an
officer/shareholder upon completion of an initial public offering. The proposed
agreement is expected to include a three year term, minimum annual compensation
levels, bonus provisions, and certain other benefits.
NOTE 10. RELATED PARTY TRANSACTIONS
During the periods ended December 31, 1995 and June 30, 1995 and 1996 and
period from inception to June 30, 1996 the Company paid consulting fees and
commissions on private placement of $52,000, $0, $126,200 and $178,200,
respectively to certain officers and shareholders of the Company.
Included in accounts payable at December 31, 1995 and June 30, 1996 were
$34,000 and $5,000, respectively, for these consulting services.
During the period ended December 31, 1995 a major shareholder advanced
$91,050 to the Company to fund operations, and of that amount $81,046 was repaid
during the period ended June 30, 1996.
NOTE 11. SUBSEQUENT EVENT
On August 7, 1996, the Company issued notes payable totalling $297,500 in
exchange for cash. The proceeds are intended to fund ongoing operations. The
notes payable bear interest at 8% per annum, are unsecured, and are due on
demand. One holder of these notes payable is also a holder of the Company's
convertible notes payable (See Note 5).
F-12
<PAGE> 49
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE UNITS CONSISTING OF SHARES OF COMMON STOCK AND WARRANTS OFFERED HEREBY
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Dividend Policy....................... 10
Dilution.............................. 10
Use of Proceeds....................... 12
Capitalization........................ 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 17
Management............................ 23
Certain Transactions.................. 25
Principal Shareholders................ 26
Private Placement Selling
Stockholders........................ 27
Description of Securities............. 28
Underwriting.......................... 31
Experts............................... 34
Legal Matters......................... 34
Additional Information................ 34
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,000,000 UNITS
AMERICAN PROFESSIONAL
BILLIARDS, INC.
EACH UNIT CONSISTING OF ONE SHARE OF
COMMON STOCK AND ONE THREE YEAR
REDEEMABLE COMMON STOCK PURCHASE
WARRANT
--------------------
PROSPECTUS
--------------------
JOSEPH ROBERTS & CO., INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATIONS OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and its By-Laws contain
provisions for indemnification of officers, directors, employees and agents of
the Company. The Company's By-Laws require the Company to indemnify such persons
to the full extent permitted by Nevada law. Each person will be indemnified in
any proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to the best interests of the Company.
Indemnification would cover expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement.
The Company's By-Laws also provide that the Board of Directors may cause
the Company to purchase and maintain insurance on behalf of any present or past
director or officer insuring against any liability asserted against such person
incurred in the capacity of director or officer or arising out of such status,
whether or not the Company would have the power to indemnify such persons.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities offered herein, other than
underwriting discounts and the non-accountable expense allowable payable to the
Underwriter:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee..................... $ 10,164.13
N.A.S.D. filing fee..................................................... 3,448.00
Printing and engraving fees............................................. 125,000.00
Accounting fees and expenses............................................ 75,000.00
Legal fees and expenses................................................. 125,000.00
Blue Sky fees and expenses (including fees of counsel).................. 45,000.00
NASDAQ Fees............................................................. 10,000.00
Miscellaneous expenses.................................................. 6,387.87
-----------
Total*.................................................................. $400,000.00
==========
</TABLE>
- ---------------
* All amounts except the Securities and Exchange Commission registration fee and
N.A.S.D. filing fee are estimates.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In connection with its acquisition on October 3, 1995, of certain assets of
World Wide Collectibles, Inc., the Company issued as partial consideration
2,000,000 shares of common stock to World Wide Collectibles Inc.
On May 25, 1995, the Company authorized the issuance to Robert M. Stander,
Donald E. Mackey, and Orion Associates, Inc., 225,000, 125,000 and 100,000
shares for a price of $.001 per share, respectively. The purchase price for such
shares was paid in cash. Mr. Stander is Chairman of the Board and Chief
Executive Officer of the Company; Mr. Mackey is a director of and consultant to
the Company; and Mr. O'Meara, the sole shareholder of Orion Associates, Inc., is
the secretary/treasurer and a director of the Company.
From March, 1996 through May, 1996, the Company issued in a private
placement $1,100,000 of principal amount of non-negotiable ten percent
convertible subordinated Notes to fifteen purchasers. Unless earlier converted
into equity securities, the principal of these Notes, together with the accrued
and unpaid interest thereon, will be due and payable at the close of business
December 31, 1996. These Notes will be automatically converted into units each
consisting of one share of common stock and one redeemable common stock purchase
warrant (the "Units") upon the occurrence of either of the following events: (i)
the
II-1
<PAGE> 51
completion of a public offering of the Company's common stock or (ii) the
Company acquiring, merging or entering into any other combination with a
publicly held Company which results in the Company being deemed a public company
under the federal securities laws. These Notes will convert into Units at the
rate of one unit for each dollar ($1.00) of principal amount of Notes. The
proceeds of this private placement were used to pay part of the costs for the
Company's acquisition of certain assets of World Wide Certificates, Inc. and for
general working capital purposes.
Following June 30, 1996 and through December 30, 1996, the Company issued
and sold an aggregate of $297,500 principal amount of unsecured demand
promissory notes to four individuals, bearing interest at eight percent per
annum. These notes will be repaid out of the proceeds of this Offering. See "Use
of Proceeds" and "Description of Securities -- Promissory Notes".
All of the securities described above were issued without registration
under the Securities Act of 1933, as amended (the "Act"), inasmuch as they were
deemed not subject to registration pursuant to Sections 4(2) or 4(6) of the Act
or the rules and regulations promulgated thereunder as securities sold in
transactions not involving any public offering.
ITEM 27. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Selective Dealer's Agreement
1.3 Form of Agreement among Underwriters
3.1 Certificate of Incorporation of the Company
3.2 By-Laws of the Company
*4.1 Specimen of Common Stock certificate
4.2 Form of Warrant Agreement including specimen Warrant certificate
4.3 Form of Private Placement Memorandum dated March 1, 1996
4.4 Form of Subscription Agreement and Promissory Note executed by any persons
having interest in the Private Placement.
4.5 Form of Underwriter's Unit Purchase Option
*5 Opinion of Herzfeld & Rubin, P.C.
10.1 Asset Purchase Agreement, dated October 3, 1995, by and between the Company and
World Wide Collectibles Inc.
10.2 Sanction granted by Professional Billiards Tour, Inc. to World Team Billiards,
Inc.
10.3 Event Management Agreement, dated June 3, 1996 between the Company and the
Professional Billiards Tour, Inc.
*10.4 Form of Employment Agreement between the Company and Robert M. Stander.
*10.5 PBT 1996 Camel Agreement
*10.6 Agreement with Prime Network
*10.7 Form of Lock-up Agreement
23 Consent of the Accountants, see page II-5.
24 Power of Attorney, see page II-4.
</TABLE>
- ---------------
* To be filed by Amendment.
II-2
<PAGE> 52
ITEM 29. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in this Registration Statement; and
(iii) To include any additional or changed material information on
the plan of distribution.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file a post-effective amendment to remove from registration any
of the securities which remain unsold at the end of the offering.
The Registrant will provide to the Representative at the closing specified
in the Underwriting Agreement certificates in such denominations and registered
in such names as required by the Representative to permit prompt delivery to
each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that it is the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
For determining any liability under the Act, the Registrant will treat the
information, omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(H) under
the Act (sec.sec.230.424(b)(1), (4) or 230.497(h)) as part of this Registration
Statement as of the time the Commission declared it effective.
For determining any liability under the Act, the Registrant will treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement for the securities offered in the Registration Statement,
and that offering of the securities as that time as the initial bona fide
offering of those securities.
II-3
<PAGE> 53
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Las Vegas, State of Nevada on September 19, 1996.
AMERICAN PROFESSIONAL BILLIARDS, INC.
By: /s/ ROBERT M. STANDER
------------------------------------
Robert M. Stander
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Robert M. Stander, his true and
lawful attorney-in-fact, with full power of substitution and resubstitution for
him and on his behalf, and in his name, place and stead, in any and all
capacities to execute and sign any and all amendments or post-effective
amendments to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or his substitute, may lawfully do or cause to be done by
virtue hereof and the Registrant hereby confers like authority on its behalf.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------ -------------------
<C> <S> <C>
/s/ ROBERT M. STANDER Chairman of the Board, September 19, 1996
- --------------------------------------------- Chief Executive Officer
Robert M. Stander and Director
/s/ JOHN P. O'MEARA Secretary, Treasurer, September 19, 1996
- --------------------------------------------- Director
John P. O'Meara
/s/ DONALD E. MACKEY Director September 19, 1996
- ---------------------------------------------
Donald E. Mackey
/s/ NICKY D. VARNER Director September 19, 1996
- ---------------------------------------------
Nicky D. Varner
/s/ JERRY M. SYROP Director September 19, 1996
- ---------------------------------------------
Jerry M. Syrop
</TABLE>
II-4
<PAGE> 54
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American Professional Billiards, Inc.
Las Vegas, Nevada
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report dated August 13, 1996 relating to the financial statements of American
Professional Billiards, Inc., and to the reference to our Firm under the caption
"Experts" in the Prospectus.
/s/ McGladrey & Pullen, LLP
Las Vegas, Nevada
September 19, 1996
II-5
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
- ------- -------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement............................................
1.2 Form of Selective Dealer's Agreement......................................
1.3 Form of Agreement among Underwriters......................................
3.1 Certificate of Incorporation of the Company...............................
3.2 By-Laws of the Company....................................................
*4.1 Specimen of Common Stock certificate......................................
4.2 Form of Warrant Agreement including specimen Warrant certificate..........
4.3 Form of Private Placement Memorandum dated March 1, 1996..................
4.4 Form of Subscription Agreement and Promissory Note executed by any persons
having interest in the Private Placement..................................
4.5 Form of Underwriter's Unit Purchase Option................................
*5 Opinion of Herzfeld & Rubin, P.C. ........................................
10.1 Asset Purchase Agreement, dated October 3, 1995, by and between the
Company and World Wide Collectibles Inc. .................................
10.2 Sanction granted by Professional Billiards Tour, Inc. to World Team
Billiards, Inc. ..........................................................
10.3 Event Management Agreement, dated June 3, 1996 between the Company and the
Professional Billiards Tour, Inc. ........................................
*10.4 Form of Employment Agreement between the Company and Robert M. Stander....
*10.5 PBT 1996 Camel Agreement..................................................
*10.6 Agreement with Prime Network..............................................
*10.7 Form of Lock-up Agreement.................................................
23 Consent of the Accountants, see page II-5.................................
24 Power of Attorney, see page II-4..........................................
</TABLE>
- ---------------
* To be filed by Amendment.
<PAGE> 1
EXHIBIT 1.1
*****************************************************************
UNDERWRITING AGREEMENT
BETWEEN
JOSEPH ROBERTS & CO., INC.
AND
AMERICAN PROFESSIONAL BILLIARDS, INC.
*****************************************************************
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 Description of Securities.................................................................
1.01 Offering..................................................................................
1.02 Shares....................................................................................
1.03 Common Stock Purchase Warrants............................................................
1.04 Units.....................................................................................
1.05 Underwriter's Purchase Option.............................................................
SECTION 2 Representations and Warranties of the Company.............................................
2.01 Registration Statement on Form SB-2 and Related Prospectus................................
2.02 Accuracy of Registration Statement and Related Prospectus.................................
2.03 Financial Statements......................................................................
2.04 Independent Public Accountants............................................................
2.05 No Material Adverse Change................................................................
2.06 No Defaults...............................................................................
2.07 Incorporation and Standing................................................................
2.08 Legality of Outstanding Common Stock......................................................
2.09 Legality of Securities....................................................................
2.10 Prior Sales...............................................................................
2.11 Litigation................................................................................
2.12 Underwriter's Purchase Option.............................................................
2.13 Finder....................................................................................
2.14 Exhibits..................................................................................
2.15 Tax Returns...............................................................................
2.16 Property..................................................................................
2.17 Use of Proceeds...........................................................................
2.18 Authority.................................................................................
2.19 Subsidiaries..............................................................................
2.20 Availability of Information Concerning the Company........................................
2.21 Suspension Orders.........................................................................
2.22 Transfer Agent and Warrant Agent..........................................................
SECTION 3 Issue, Sale and Delivery of the Units ....................................................
3.01.01 Appointment of Underwriters...............................................................
3.01.02 Default by a Member.......................................................................
3.01.03 Public Offering Price.....................................................................
3.01.04 Principal Terms of Underwriter's Purchase Option..........................................
3.01.05 Inspection of Certificates................................................................
3.01.06 Closing...................................................................................
3.02 Underwriter's Expense Allowance...........................................................
3.03 Mutual Warranty...........................................................................
3.04 Re-offers by Selected Dealers.............................................................
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4 Registration Statement and Prospectus.....................................................
4.01 Underwriter's Copies......................................................................
4.02 Copies of Preliminary Prospectus and Prospectus...........................................
4.03 Post-Effective Amendments.................................................................
4.04 Use of Prospectus.........................................................................
SECTION 5 Covenants of the Company..................................................................
5.01 Filing of Amendments......................................................................
5.02 Declaration of Effectiveness..............................................................
5.03 Amendments at the Request of the Representative...........................................
5.04 Blue Sky..................................................................................
5.05 Further Reports...........................................................................
5.06 Reports to Representative.................................................................
5.07 Expenses of Offering......................................................................
5.08 Stockholder Reports.......................................................................
5.09 Use of Proceeds...........................................................................
5.10 Transfer Sheets...........................................................................
5.11 Information About the Company.............................................................
5.12 Due Diligence Investigation...............................................................
5.13 Transfer Agent and Warrant Agent..........................................................
5.14 Conditions Precedent......................................................................
5.15 1934 Act Registration.....................................................................
5.16 No Material Change........................................................................
5.17 Bound Volumes.............................................................................
5.18 Investment Banking Agreements.............................................................
5.19 Employment Agreements.....................................................................
5.20 Restriction on Sale of Securities.........................................................
5.21 Additional Financing......................................................................
5.22 Warrant Solicitation Period...............................................................
SECTION 6 Indemnification...........................................................................
6.01 Indemnification by Company................................................................
6.02 Indemnification by Underwriters...........................................................
6.03 This Section Not Exclusive................................................................
6.04 Survival..................................................................................
SECTION 7 Effectiveness of Agreement................................................................
SECTION 8 Conditions to the Underwriter's Obligations...............................................
8.01 Effective Date............................................................................
8.02 Accuracy of Registration Statement........................................................
8.03 Casualty..................................................................................
8.04 Litigation................................................................................
8.05 No Material Change........................................................................
8.06 Review by Underwriter's Counsel...........................................................
8.07 Opinion of Counsel........................................................................
8.08 Accountant's Letter.......................................................................
8.09 Officer's Certificate.....................................................................
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.10 Tender of Securities......................................................................
8.11 Blue-Sky Qualification....................................................................
8.12 Approval of Representative's Counsel......................................................
8.13 Officer's Certificate as a Company Representative.........................................
8.14 NASDAQ Listing............................................................................
8.15 Fiscal 1993 Earnings......................................................................
SECTION 9 Termination...............................................................................
9.01 Termination by Representative.............................................................
9.02 Termination by Representative -- "Market Out".............................................
9.03 Survival of Obligations After Termination.................................................
9.04 Suspension Proceedings....................................................................
SECTION 10 Representative's Representations and Warranties...........................................
10.01 Registration as Broker-Dealer.............................................................
10.02 No Pending Proceedings....................................................................
SECTION 11 Notices...................................................................................
SECTION 12 Registration of Underwriter's Units
12.01 Direct Registration During Underwriter Option Period......................................
12.02 Piggyback During Underwriter Option Period................................................
SECTION 13 Miscellaneous.............................................................................
13.01 Sole Benefit..............................................................................
13.02 Survival..................................................................................
13.03 Governing Law.............................................................................
13.04 Underwriter's Information.................................................................
13.05 Waiver....................................................................................
13.06 Counterparts..............................................................................
</TABLE>
EXHIBITS
Underwriter's Warrant ........................................................
iii
<PAGE> 5
UNDERWRITING AGREEMENT
Joseph Roberts & Co., Inc.
416 East Atlantic Boulevard
Pompano Beach, Florida 33060
Ladies and Gentlemen:
American Professional Billiards, Inc., a Nevada corporation (the
"Company"), hereby confirms its agreement with Joseph Roberts & Co., Inc. (the
"Representative"), as representative, and a member of the several underwriters,
if any, named in Schedule I attached (hereinafter the "Underwriting Group", and
if there is no Schedule I attached, all references in this Agreement to the
Underwriting Group shall be deemed to refer only to Representative), as follows:
SECTION 1
Description of Securities
1.01 Offering. The Company represents, covenants, warrants and
agrees that its authorized, issued and outstanding capitalization, when the
offering of the Units (hereinafter defined) contemplated hereby is permitted to
commence and at the Closing Date (hereinafter defined), will be as set forth in
the Registration Statement related to the Prospectus (as such terms are
hereinafter defined or described). The Company proposes to issue, offer and sell
to the Underwriting Group an aggregate of 1,000,000 Units as defined below, to
be resold to the public at a public offering price of $6.00 per Unit and on the
terms hereinafter set forth. The Underwriting Group shall also have an
over-allotment option to purchase up to an additional 150,000 Units as provided
in Section 3.01.01 hereof.
1.02 Shares. As used herein, the shares of the Company's common
stock, $_____ par value may be referred to as the "Stock" or "Common Stock", and
the shares of the Company's Common Stock to be registered in the Registration
Statement as part of the Units, including those which comprise a portion of the
over-allotment option described above may be referred to as the "Shares".
1.03 Common Stock Purchase Warrants. As used herein, the Common
Stock Purchase Warrants, which sometimes may be referred to as the "Unit
Warrants"), shall be those Warrants which are the subject of a Warrant Agreement
by and between the Company and _________________________________ as Warrant
Agent under which each Warrant shall entitle the holder thereof for a period of
five years to purchase one share of Common Stock at an exercise price of $_____
per share and which Warrant shall be redeemable in certain events all as in said
Warrant Agreement set forth.
1.04 Units. As used herein, each of the Units shall be comprised
of one Share and one Warrant. The Company and the Representative hereby agree
that the public offering price of each Unit hereunder shall be $6.00.
<PAGE> 6
1.05 Underwriter's Purchase Option. As partial consideration for
the services of the Underwriter hereunder, the Company will authorize, issue,
sell and deliver to the Representative underwriter, and not as representative,
on the Closing Date for a total purchase price of $1,000.00, a Purchase Option
(the "Underwriter's Purchase Option") to purchase the number of Units issuable
upon exercise of the Underwriter's Purchase Option (the "Underwriter's Units"),
set forth at Section 3.01.04 of this Agreement.
SECTION 2
Representations and Warranties of the Company
In order to induce the Underwriter to enter into this Agreement,
the Company hereby represents and warrants to, and agrees with, the Underwriter
as follows:
2.01 Registration Statement on Form SB-2 and Related Prospectus.
A Registration Statement on Form SB-2 (Commission File No. ___________ ) and a
Prospectus on the form specified by Form SB-2 with respect to the Shares, copies
of which have been delivered heretofore by the Company to the Representative,
have been prepared carefully by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "1933 Act") and the rules and
regulations including, but not limited to, Regulations C and S-B (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
promulgated thereunder; and the Registration Statement and related Prospectus
together with all exhibits and other documents required by the Rules and
Regulations will be filed by the Company promptly with the Commission under the
1933 Act and the Company will use its best efforts to cause and assist the
Commission in declaring the same effective as promptly as possible. The Company
may file one or more amendments to the Registration Statement and related
Prospectus with the Commission on or prior to the Effective Date defined below
and copies of each such amendment will be delivered to the Underwriter for its
approval prior to such filing.
As used in this Agreement, the terms "Registration Statement on
Form SB-2" and "Registration Statement" refer to and mean the Registration
Statement on Form SB-2 prepared by the Company in connection with the Units and
any and all amendments thereto including, but not limited to, exhibits and
financial statements and, in the event of any amendment after the Effective
Date, the term "Registration Statement on Form SB-2" or "Registration Statement"
is inclusive of all such amendments. The term "Prospectus" refers to and means
the Prospectus, including the Preliminary Prospectus (hereinafter defined)
prepared by the Company in the form specified by Form SB-2 and all amendments
thereto, and, in the event of any amendment or supplement to such Prospectus
after the Effective Date, the term "Prospectus" shall refer to and mean such
Prospectus inclusive of such amendments or supplements; and the term
"Preliminary Prospectus" means any prospectus included in the Registration
Statement before the Effective Date.
2.02 Accuracy of Registration Statement and Related Prospectus.
The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with respect to the Units, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
1933 Act and the applicable Rules and Regulations and has not included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading. On the Effective Date
and on the Closing Date, the Registration Statement and Prospectus will comply
in all respects with the requirements of the 1933 Act and the Rules and
Regulations for the purpose of the proposed offering of the Units; and all
statements of material fact contained in the Registration Statement and
Prospectus will be true and correct and neither the Registration Statement nor
the Prospectus will include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading;
provided however, the Company does not make any representations or warranties as
to the information contained in or omitted from the Registration
2
<PAGE> 7
Statement or Prospectus in reliance upon written information furnished on behalf
of the Representative specifically for use therein.
2.03 Financial Statements. The audited and other financial
statements of the Company, together with related schedules and notes as set
forth in the Registration Statement and Prospectus, will present correctly and
truly the financial position and results of operations of the Company for the
respective periods to which they apply. Such statements have been prepared in
accordance with generally accepted accounting principles and the applicable
Rules and Regulations of the Commission relating to financial statements. All
financial statements as are filed with the Registration Statement and Prospectus
will reflect all liabilities of the Company, contingent or otherwise, and will
include adequate reserves for all federal and state liabilities incurred to
their respective dates and the Company will have no material liabilities,
contingent or otherwise, obligations or claims against it except as set forth
therein.
2.04 Independent Public Accountants. ________________________,
who have certified or shall certify certain of the financial statements filed or
to be filed with the Commission as part of the Registration Statement and
Prospectus and, as experts, have reviewed certain other information of a
financial or accounting nature contained in the Registration Statement and
Prospectus, are independent certified public accountants as required by the 1933
Act.
2.05 No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement and Prospectus, subsequent to the
dates as of which information is given therein and through the Closing Date:
(1) there shall not have been any material adverse change in
the condition, financial or otherwise, or in the results of
operations of the Company or in its business taken as a whole;
(2) there shall not have been any material transaction
entered into by the Company other than transactions in the
ordinary course of business;
(3) the Company shall not have incurred any material
obligations, contingent or otherwise, which are not disclosed in
the Registration Statement and Prospectus;
(4) there shall not have been any change in the capital
stock or rights, options or warrants with respect thereto or
long-term debt (except current payments) of the Company; and
(5) the Company shall not have paid or declared any
dividends or other distributions on its Common Stock.
2.06 No Defaults. Other than as disclosed in the Registration
Statement or Prospectus, the Company is not in default in the performance of any
obligation, agreement or condition contained in any debenture, note or other
evidence of indebtedness or any indenture or loan agreement of the Company or in
any agreement to which the Company is a party. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
compliance with the terms of this Agreement will not conflict with or result in
a breach of any of the terms, conditions or provisions of, or constitute a
default under, the certificate of incorporation, as amended, or bylaws, as
amended, of the Company, any note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by which it or any of
its property is bound, or any existing law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign, having jurisdiction
over the
3
<PAGE> 8
Company or its property. The consent, approval, authorization or order of any
court or government instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the 1993 Act or under the Blue Sky or securities laws of any
state or jurisdiction.
2.07 Incorporation and Standing. The Company is, and at the
Closing Date will be, duly incorporated and validly existing in good standing as
corporations under the laws of their respective jurisdictions of incorporation,
and the Company has and will have an authorized and outstanding capital stock as
set forth in the Registration Statement and Prospectus, and with full power and
authority (corporate and other) to own its property and conduct its business,
present and proposed, as described in the Registration Statement and Prospectus;
the Company has full power and authority to enter into this Agreement; the
Company owns, free and clear of any lien, charge or encumbrance, all of the
unissued capital stock as set forth in the Registration Statement and
Prospectus; and the Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which it owns or leases real property or
transacts business requiring such qualification.
2.08 Legality of Outstanding Common Stock. The Company has an
authorized capitalization of 20,000,000 shares of Common Stock, of which no more
than ________________ shares will be issued and outstanding prior to the
offering of the Units, and no shares of which will be held in the treasury of
the Company at the Effective Date and on the Closing Date. The outstanding
Common Stock of the Company has been duly and validly authorized and issued, is
fully paid and nonassessable and conforms to all statements with regard thereto
contained in the Registration Statement and Prospectus. No offers or sales of
the Common Stock or other securities have been made by the Company in violation
of the 1933 Act. On the Effective Date and through and including the Closing
Date, there will be no outstanding options, warrants or other rights (however
characterized or described) to purchase any shares of the Common Stock, or any
preferred stock, except as follows: (i) Common Stock Purchase Warrants to
purchase 1,150,000 shares of Common Stock at $____ per share; (ii)1,150,000
shares of Common Stock reserved for issuance upon exercise of the Common Stock
Purchase Warrants; and (iii) up to 100,000 shares of Common Stock reserved for
issuance under the Underwriter's Purchase Option and up to 100,000 shares of
Common Stock reserved for issuance upon the exercise of the Common Stock
Purchase Warrants included in the Underwriter's Purchase Option.
2.09 Legality of Securities. The Units, Shares, Common Stock
Purchase Warrants, Underwriter's Purchase Option, and the Underwriter's Units
have been duly and validly authorized and, when issued and delivered against
payment therefor as provided in this Agreement, will be validly issued, fully
paid and nonassessable. All necessary reservations of shares of Common Stock
have been duly adopted, and said securities, upon issuance, will not be subject
to any preemptive right of any stockholders of the Company and no preemptive
rights will exist with respect to any securities of the Company through the
Closing Date or until the expiration of the Underwriter Purchase Option Period
(hereinafter defined). The Underwriter's Purchase Option, when sold and
delivered, will constitute a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. A sufficient
number of shares of the Common Stock and Common Stock Purchase Warrants have
been reserved for issuance as Underwriter's Units upon exercise thereof. All of
the above-mentioned securities shall conform to all statements with regard
thereto in the Registration Statement and Prospectus.
2.10 Prior Sales. No shares of the Common Stock or other
securities of the Company have been sold by the Company, or by or on behalf of
or for the benefit of any officer, director, predecessor, affiliate, promoter,
associate, principal security holder, underwriter or other controlling person of
the Company since the date of inception and prior to the Effective Date, except
as set forth in the Registration Statement.
4
<PAGE> 9
2.11 Litigation. Except as set forth in the Registration
Statement and Prospectus, there is and at the Closing Date there will be no
litigation, cause of action, suit or proceeding before any court or governmental
agency, authority, or body pending or to the knowledge of the Company
threatened, which might result in judgments against the Company not adequately
covered by insurance or which collectively might result in any material adverse
change in the condition (financial or otherwise), the business or the prospects
of the Company, or would materially affect the properties or assets of the
Company.
2.12 Underwriter's Purchase Option. Upon delivery and receipt of
payment for the Underwriter's Purchase Option to be sold by the Company as set
forth in Section 3.01.04 of the Agreement, the Representative and its designees
will receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of the Underwriter's Purchase Option,
full legal right, power and authority required by law to issue, sell, transfer
and deliver the Underwriter's Purchase Option in the manner provided hereunder.
2.13 Finder. The Company represents that no finder's fee has been
or will be paid in connection herewith. It is understood that should a claim for
finder's fee in connection with the sale of the Shares be made, the Company and
the Representative each will indemnify the other party with respect to any such
claim.
2.14 Exhibits. There are no contracts, instruments or other
documents which are required by the 1933 Act or by the Rules and Regulations to
be filed as exhibits to the Registration Statement which have not been so filed;
and each contract or other instrument (however characterized or described) to
which the Company is a party and to which reference is made in the Registration
Statement or Prospectus has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and the Company knows of no present situation or
condition or fact which would prevent compliance by the parties with the terms
of such contracts or instruments as amended to date. Except for amendments or
modifications of such contracts or instruments in the ordinary course of
business, the Company has no intention of exercising any right which would cause
it to cancel any of its obligations under any of such contracts or instruments,
and has no knowledge that any other party to any of such contracts or
instruments has any intention either to exercise any right to cancel any of its
obligations under any of such contracts or instruments or not to render full
performance thereunder.
2.15 Tax Returns. The Company has filed all federal, foreign,
state and local tax returns which are required to be filed, and has paid all
taxes shown on such returns and on all assessments received by it to the extent
such taxes have become due. The Internal Revenue Service ("IRS") is not auditing
any return that has been filed (nor does the Company have any knowledge that the
IRS is questioning any filed return or threatening to audit any return). All
taxes with respect to which the Company is obligated have been paid or adequate
accruals have been set up to cover any taxes which remain unpaid.
2.16 Property. Except as otherwise set forth in, or contemplated
by, the Registration Statement and Prospectus: (i) the Company has good title,
free and clear of all liens, encumbrances and defects, except liens for current
taxes not due and payable, to all real and personal property and assets
described in the Registration Statement and Prospectus as being owned by the
Company, subject only to such exceptions as are not material and do not affect
adversely the present or prospective business of the Company; (ii) the
properties, including equipment, referred to in the Registration Statement and
Prospectus as being held under lease or option by the Company, are held under
valid, subsisting and enforceable leases or option with only such exceptions
which collectively are not material and do not affect adversely the present or
prospective business of the Company.
5
<PAGE> 10
2.17 Use of Proceeds. The Company shall apply the proceeds from
the sale of the Shares solely and exclusively to the purposes set forth in the
Registration Statement and Prospectus.
2.18 Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid and binding obligation of the Company and is enforceable
against it in accordance with its terms.
2.19 Subsidiaries. The Company has no subsidiaries.
2.20 Availability of Information Concerning the Company. All
documents and other information relating to the Company's affairs shall be made
available upon request to the Representative and its counsel at the
Representative's office or at the office of its counsel and copies of any such
documents shall be furnished upon request to the Representative or its counsel.
Prior to the Effective Date, the contents of all such documents and other
information shall be subject to the approval of the Representative and if not so
approved, the Representative may choose not to proceed with the offering.
Included within the documents to be made available are the Company's articles of
incorporation, as amended, and related charter documents, bylaws and amendments
thereto, minutes of all meetings and other actions taken by the Company's
incorporators, directors and shareholders, all financial statements, correct
copies of any material contracts, licenses, leases or agreements to which the
Company is a part or by which it or its property is bound, including contracts
for the sale of products or services in the normal course of business and
including any employee (including officers and/or directors) incentive plans
(including royalty plans) and any other type of fringe benefit plan, of whatever
nature, and copies of all patents, patent applications, trademarks and trademark
applications in which the Company may have an interest. It is understood that
the officers and directors of the Company will each complete, sign and return to
the Representative one of the representation sheets which will be given to the
Company or counsel for the Company.
2.21 Suspension Orders. The Company shall advise the
Representative immediately and confirm in writing the receipt of any threat of,
or the initiation of any steps or proceedings which would impair or prevent the
right to offer any of the securities, or the issuance by the Commission or other
regulatory authority of any "Suspension Order" or other prohibition preventing
or impairing the proposed transactions.
2.22 Transfer Agent and Warrant Agent. The Company has appointed
_________ _________________________, as its transfer agent (the "Transfer
Agent") for the Units, Common Stock and Common Stock Purchase Warrants, and as
Warrant Agent under the Warrant Agreement will use its best efforts to retain
such company as the Transfer Agent and Warrant Agent for so long as any shares
of the Common Stock or Common Stock Purchase Warrants, as the case may be,
remain outstanding.
SECTION 3
Issue, Sale and Delivery of the Units
3.01.01 Appointment of Underwriters. The Company hereby agrees to
sell to members of the Underwriting Group named in Schedule I attached hereto
(individually referred to as "Member" and collectively referred to as "Members")
(for all of whom the Representative is acting), severally and not jointly, and
each Member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
Units set forth opposite their respective names in Schedule I attached hereto at
a purchase price of $5.40 per Unit. The Company hereby grants to the
Underwriting Group an over-allotment option for a period
6
<PAGE> 11
of thirty days after the Effective Date to purchase at a purchase price of $5.40
per Unit up to 150,000 additional Units, each such Unit to be identical in all
respects to Units as described in Section 1.04 hereof, in order to cover
over-allotments. The additional Units shall be purchased for the account of each
member of the Underwriting Group as nearly as practicable in the proportion that
the number of Units set opposite the name of each Underwriter in Schedule I
attached hereto bears to the 1,000,000 Units purchased. The obligations of the
Representative hereunder are subject to, among other things: (1) receipt of
written advice from the Commission that the offering of the Units may be
commenced under the Registration Statement and Prospectus; (2) receipt of
written advice from the National Association of Securities Dealers, Inc.
("NASD"), pursuant to Section 44 of Article III of the NASD's Rules of Fair
Practice, approving the fairness and reasonableness of the underwriting
arrangements in connection with the sale of the Units; (3) qualification of the
sale of the Units under applicable state laws and the absence of any prohibitory
action by any governmental body, agency or official; and (4) the terms and
conditions contained in this Agreement and in the Registration Statement and
Prospectus covering the sale of the Units to which this Agreement relates.
3.01.02 Default by a Member. If for any reason one or more
Members of the Underwriting Group shall fail or refuse (otherwise than for a
reason sufficient to justify the termination of this Agreement under the
provisions of Section 9 hereof) to purchase and pay for the number of Units
agreed to be purchased by such Member, the Company shall immediately give notice
thereof to the Representative, and the non-defaulting Members shall have the
right within twenty-four hours after receipt by the Representative of such
notice, to purchase or procure one or more other Members to purchase, in such
proportions as may be agreed upon among the Representative and such purchasing
Member or Members and upon the terms herein set forth, the Units which such
defaulting Member or Members agreed to purchase. If the non-defaulting Members
fail so to make such arrangements with respect to all such Units, the number of
Units which each non-defaulting Member is otherwise obligated to purchase under
the Agreement shall be automatically increased pro rata to absorb the remaining
Units which the defaulting Member or Members agreed to purchase; provided,
however, that the non-defaulting Members shall not be obligated to purchase the
Units which the defaulting Member or Members agreed to purchase if the aggregate
number of such Units exceeds ten percent of the total number of Units which all
Members agreed to purchase hereunder. If the total number of Units which the
defaulting Member or Members agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within twenty-four hours next succeeding the twenty-four hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to the Representative for the purchase of such Units on the terms
herein set forth. In any such case, either the Representative or the Company
shall have the right to postpone the Closing determined as provided in Section
3.01.06 hereof for not more than seven business days after the date originally
fixed as the Closing pursuant to said Section in order that any necessary
changes in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Members nor the Company
shall make arrangements within the twenty-four hour periods stated above for the
purchase of all the Units which the defaulting Member or Members agreed to
purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company to any non-defaulting
Member and without any liability on the part of any non-defaulting Member to the
Company.
Nothing contained in this Section 3.01.02 shall relieve any
defaulting Member of its liability, if any, to the Company or to the remaining
Members of the Underwriting Group for damages occasioned by its default
hereunder.
3.01.03 Public Offering Price. After the Commission notifies the
Company that the Registration Statement has become effective, the Members of the
Underwriting Group propose to offer the Units to the public at a public offering
price of $6.00 per Unit as set forth in the Prospectus. The Members of the
Underwriting
7
<PAGE> 12
Group may allow such concessions and discounts upon sales to selected dealers as
may be determined from time to time by the Representative. Payment for the Units
(including Units in the over-allotment option) agreed to be purchased shall be
made to the Company or its order by certified or official bank check or checks,
in the amount of the purchase price by or on behalf of the Representative at the
offices of the Representative in Chicago, Illinois, upon delivery to the
Representative of certificates for the component securities of the Units in
definitive form in such numbers and registered in such names as the
Representative requests in writing at least three full business days prior to
such delivery.
3.01.04 Principal Terms of Underwriter's Purchase Option. Upon
payment for the Units, at the Closing the Company shall sell and deliver to the
Representative and/or its designees, the Underwriter's Purchase Option to
purchase 100,000 Units, for a total purchase price of $1000.00. The
Underwriter's Purchase Option shall be in the form attached as Exhibit A hereto
and shall be in form and content acceptable to counsel for the Representative;
and shall evidence the right of the Representative to purchase up to 100,000
Units (the "Underwriter's Units") and shall be exercisable commencing one year
after the Effective Date and for a period of four years thereafter (such four
year period shall be known as the "Underwriter Option Period") and shall contain
antidilution and adjustment provisions acceptable to the Representative. The
Underwriter's Purchase Option shall be exercisable at an exercise price of $7.20
per Unit (120% of the public offering price). At the end of five years following
the Effective Date, the Underwriter's Purchase Option shall expire. The Company
will not be obligated to sell and deliver the Underwriter's Purchase Option, and
the Representative will not be obligated to purchase and pay for the
Underwriter's Purchase Option, except upon payment for the Units. The
Underwriter's Purchase Option to be acquired by the Representative and/or its
designees shall be restricted from sale, transfer, exercise, assignment or
hypothecation for twelve months from the Effective Date of the Registration
Statement contemplated hereby, except to officers of the Representative, any
other Underwriter and to members of the selling group and their officers or
partners. Such designation will only be made prior to the Effective Date if the
Representative determines that such designation would not violate Article III
Section 44 of the NASD Rules of Fair Practice relating to the review of
corporate financing arrangements. The Representative has disclosed to the
Company, and the Company has agreed, that the Representative may transfer, after
twelve months from the date of the Underwriter's Purchase Option, a portion or
all of the Underwriter's Purchase Option to certain persons, including, but not
limited to, the Representative's officers, directors, shareholders, employees,
or registered representatives. The Representative and the Company agree that
such transfers will only be made if they do not violate the registration
provisions of the Act. The Underwriter's Purchase Option and Underwriter's Units
shall be registered by the Company in the Registration Statement.
Subject to the availability of audited financial statements which
comply with Regulation S-X under the 1933 Act, the Company shall, upon at least
thirty days prior written request by the holders of at least fifty percent of
the Underwriter's Purchase Option, the Underwriter's Units or the shares of
Common Stock issuable upon exercise of the Underwriter's Units, made at any time
within the Underwriter Option Period, one time only, cause the Underwriter's
Units and the underlying securities to be the subject of a Post-Effective
Amendment, Registration Statement or Regulation A Offering, as may be
appropriate, under the 1933 Act so as to enable the Representative and its
assigns to offer publicly the Underwriter's Units or underlying securities. All
costs incurred in connection with the preparation of such registration shall be
paid by the Company; provided that fees of counsel and sales commissions for the
Representative and such holders shall be borne by the Representative. The
Company must file a Registration Statement and will not have a choice between
filing a Registration Statement or a Notification on Form 1-A if the
Underwriter's Units cannot be sold under Regulation A. The Company agrees to use
its best efforts to cause such filing to become effective and to remain current
for six months.
8
<PAGE> 13
If at any time, or from time to time during the period covered by
the Underwriter's Purchase Option, the Company shall register any primary or
secondary offering of any equity security issued or to be issued by it pursuant
to a Registration Statement under the 1933 Act, the Company shall notify the
Representative of such offering in writing not less than thirty days prior to
filing such Registration Statement with the Commission, and the Representative
and its assigns shall have the right to register all, but not less than twenty
percent of the Underwriter's Units or underlying securities therewith by
notifying the Company in writing within fifteen days of receipt of the Company's
notice, requesting registration of such Underwriter's Units and setting forth
the intended method of distribution and such other date or information as the
Company or its counsel shall reasonably require. Such registration shall be
without cost to the Representative (or its assigns) except for its counsel fees
and sales commissions incurred if the shares of the Underwriter's Units are
sold. In the event such offering is underwritten by a broker/dealer other than
the Representative, then the Representative's rights to register its
Underwriter's Units in such Registration Statement shall be subject to the
approval of such Representative, and the Company agrees to use its reasonable
efforts to obtain such approval. The foregoing provisions of this paragraph are
not applicable to a Registration Statement filed with the Commission on Forms
S-4 or S-8 or any other inappropriate forms.
In addition to the rights above provided, the Company will
cooperate with the then holders of the Underwriter's Purchase Option and the
Underwriter's Units in preparing and signing any Registration Statement or
Notification, in addition to the Registration Statements and Notifications
discussed above, required in order to sell or transfer the Underwriter's Units
and will supply all information required therefor, but such additional
Registration Statement and Notification shall be at the then holder's cost and
expense and subject to reasonable delay (no longer than 120 days) by the Company
if it would adversely impact the Company in its capital raising or otherwise.
3.01.05 Inspection of Certificates. For the purpose of expediting
the checking and packaging of the certificates for the securities comprising the
Units and the Underwriter's Purchase Option, the Company agrees to make the
certificates available for inspection by the Representative at the main office
of the Representative in Pompano Beach, Florida, at least one full business day
prior to the proposed delivery date.
3.01.06 Closing. The delivery of certificates for the Units and
payment therefor and the delivery of and payment for all other documents
hereunder is herein called the "Closing" and the time and place of the Closing
is herein called the "Closing Date" and shall take place at the office of the
Underwriter in Pompano Beach, Florida, or at such other location as may be
specified by the Representative, at 10:00 a.m. on the fifth business day
following the Effective Date; provided, however, that such date may be extended
for not more than an additional seven business days by mutual agreement of the
Company and the Representative. Should the Representative elect to exercise any
part of the over-allotment option pursuant to Section 3.01.01 hereinabove, the
time and date of delivery and payment for said over-allotment Units shall be a
mutually agreed, but not later than the thirtieth calendar day after the
Effective Date. Said date is hereinafter referred to as the "Over-allotment
Closing Date".
3.02 Underwriter's Expense Allowance. It is understood that the
Company shall reimburse the Underwriter for its expense on a non-accountable
basis in the amount of three percent of the gross proceeds from the sale of the
Units (i.e., $.18 per Unit), including proceeds from the sale of the Units
included in the over-allotment option. In no event shall this expense allowance
be refundable or accountable, except as provided in the next paragraph.
The Company and the Representative mutually acknowledge that the
Company has paid the Representative $___________ towards the Representative's
non-accountable expense allowance, and the
9
<PAGE> 14
Representative hereby acknowledges receipt thereof. At the Closing, the Company
shall pay to the Representative the unpaid balance of such non-accountable
expense allowance to defray the expenses incurred by the Underwriter in
connection with the offering. Notwithstanding the foregoing, if the Registration
Statement does not become effective, or the offering is never commenced after it
becomes effective, through no fault of the Company, the sum of $15,000 shall be
applied to the payment of consulting fees due under Section 5.18(a) hereof and
the balance of the advance paid to the Representative under this paragraph to
the extent not actually expended as out-of-pocket expenses on an accountable
basis by the Representative on items related to the sale of the Units shall be
refunded promptly by the Representative to the Company. The Representative's
expenses shall include, but are not to be limited to, the fees of underwriters'
counsel, travel expenses, postage expenses, duplication expenses, long distance
telephone expenses and other expenses incurred by the Representative in
connection with the proposed sale of the Units.
3.03 Mutual Warranty. The parties represent and warrant that as
of the date hereof and as of the Closing Date, the representations and
warranties herein contained and the statements contained in all certificates
delivered by any party to another pursuant to this Agreement shall in all
respects be true and correct.
3.04 Re-offers by Selected Dealers. On each sale by any member of
the Underwriting Group of any of the Units through Selected Dealers, the
purchasing Member shall require the Selected Dealer purchasing any such Units to
agree to re-offer the same on the terms and conditions of the offering set forth
in the Registration Statement and Prospectus.
SECTION 4
Registration Statement and Prospectus
4.01 Underwriter's Copies. The Company shall deliver to the
Representative, without charge, two signed copies of the Registration Statement
including all financial statements and exhibits and amendments or supplements
thereto as filed with the Commission, and shall deliver without charge to the
Representative an additional seven conformed copies of the Registration
Statement and any amendments or supplements thereto, including such financial
statements and exhibits. The signed copies of the Registration Statement so
furnished to the Representative shall include signed copies of any and all
consents and certificates of the independent public accountants certifying to
the financial statements included in the Registration Statement and Prospectus
and signed copies of any and all consents and certificates of any other person
whose profession gives authority to statements made by him and who is named in
the Registration Statement or Prospectus as having prepared, certified or
reviewed any part thereof.
4.02 Copies of Preliminary Prospectus and Prospectus. Prior to
the Effective Date, the Company shall procure at its expense and shall deliver
to Members of the Underwriting Group and to other broker/dealers, as many
printed copies of each Preliminary Prospectus filed with the Commission bearing
in red ink the statement required by Rule 481(b)(2) of Regulation C under the
1933 Act as may be required by the Representative. The Company consents to the
use of the same by Members of the Underwriting Group and by dealers prior to the
Effective Date. In addition, on and after the Effective Date, the Company shall
procure at its expense as many printed copies of the Prospectus delivered to
such addresses as the Representative may direct for the purposes contemplated by
this Agreement and shall deliver such printed copies of the Prospectus within
one business day after the Effective Date.
4.03 Post-Effective Amendments. If, during such period of time as
in the opinion of the Representative or its counsel a Prospectus relating to the
sale of the Units contemplated hereby is required to be
10
<PAGE> 15
delivered under the 1933 Act, any event occurs or any event known to the Company
relating to or affecting the Company shall occur as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time after the Effective Date to
amend or supplement the Prospectus to comply with the 1933 Act, the Company
shall forthwith notify the Representative thereof and shall prepare and file
with the Commission such further amendment to the Registration Statement or
supplemental or amended Prospectus as may be required and shall furnish and
deliver to the Representative and to others whose names and addresses are
designated by the Representative, all at the cost of the Company, a reasonable
number of copies of the amended or supplemented Prospectus which, as so amended
or supplemented, will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the Prospectus not
misleading in the light of the circumstances existing when it is delivered to a
purchaser or prospective purchaser and which will comply in all respects with
the 1993 Act; and in the event the Representative shall be required to deliver a
Prospectus ninety days or more after the Effective Date, upon request of the
Representative, the Company shall prepare promptly such Prospectus as may be
necessary to permit compliance with the requirements of Section 10 of the 1993
Act.
4.04 Use of Prospectus. The Company authorizes the Members of the
Underwriting Group in connection with the distribution of the Shares, and all
dealers to whom any of the Units may be sold to or through the Members of the
Underwriting Group, to use the Prospectus as from time to time amended or
supplemented in connection with the offering and sale of the Shares and in
accordance with the applicable provisions of the 1933 Act, the applicable Rules
and Regulations and the applicable state Blue Sky or securities laws.
SECTION 5
Covenants of the Company
The Company covenants and agrees with the Representative and
other Members of the Underwriting Group that:
5.01 Filing of Amendments. After the date hereof, the Company
will not at any time, whether before or after the Effective Date, file any
amendment or supplement to the Registration Statement or Prospectus unless a
copy of such amendment or supplement the Representative shall previously have
been furnished a reasonable time prior to the proposed filing thereof, and as to
which the Representative or its counsel shall not have reasonably objected in
writing on the ground that it is not in compliance with the 1933 Act or the
Rules and Regulations. The Company agrees to supply the Underwriters' counsel
with the contents of any oral comments and copies of all comments,
correspondence and orders received from the Commission in connection with the
filing of any Registration Statement or amendment or supplement thereto.
5.02 Declaration of Effectiveness. The Company shall use its best
efforts to cause the Registration Statement and any post-effective amendment
subsequently filed to become effective as promptly as practicable but shall not
obtain an Effective Date or allow the Registration Statement to become effective
without the approval of the Representative. The Company will promptly advise the
Representative, and will confirm such advice in writing:
(1) when the Registration Statement shall have become
effective and when any amendment thereto shall have become
effective and when any amendment of or supplement to the
Prospectus shall have been filed with the Commission;
11
<PAGE> 16
(2) when the Commission shall make a request or suggestion
for any amendment to the Registration Statement or the Prospectus
or for additional information and the nature and substance
thereof;
(3) of the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement
pursuant to Section 8 of the 1933 Act or of the initiation of any
proceeding for that purpose;
(4) of the happening of any event which, in the judgment of
the Company, makes any material statement in the Registration
Statement or Prospectus untrue or which requires the making of
any change in the Registration Statement or Prospectus in order
to make the statements therein not misleading; and
(5) of the refusal to qualify or the suspension of the
qualification of the Units for offering or sale in any
jurisdiction or of the institution of any proceeding for any of
such purposes.
The Company shall use every reasonable effort to prevent the issuance of any
such order or of any order preventing or suspending such use, to prevent any
such refusal to qualify or any such suspension and to obtain as soon as possible
a lifting of any such order, the reversal of any such refusal and the
termination of any such suspension.
5.03 Amendments at the Request of the Representative. The Company
shall prepare and file promptly with the Commission, upon the request of the
Representative, such amendments or supplements to the Registration Statement and
Prospectus in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Representative may be necessary or advisable in connection with
the sale of the Units, and will use its best efforts to cause the same to become
effective as promptly as possible.
5.04 Blue Sky. The Company shall, at its sole cost and expense
and when and as requested by the Representative, apply for and qualify the sale
of the Units and underlying securities in up to ______ states in which the
Representative reasonably expects the offering to qualify. The Company may
instruct its counsel to make all of the appropriate filings, and the Company
agrees to pay attorneys' fees incurred in connection therewith. The maximum
number of Units to be offered in the entire offering shall be registered in each
state (or if sales will be permitted by exemption rather than registration, the
exemption shall be obtained for such maximum number of Shares), unless the
Representative agrees otherwise in writing. The Company will advance all filing
fees for all state filings. The Company will continue such qualifications in
effect so long as required for the purposes of the sale of the Units. Copies of
the applications for the registration of securities filed with the various
states shall be supplied to the Company's and Underwriters' counsel, and copies
of all comments and orders received from the various states shall be supplied to
Company's and Underwriters' counsel.
No less than one week prior to the expected Effective Date of the
Registration Statement, and immediately prior to the release of the "red
herring" Preliminary Prospectus, counsel who prepared the Blue Sky filings shall
prepare and deliver to both parties and other counsel, a Preliminary Blue Sky
Memorandum including among other things, all states wherein the proposed sale of
the Units has been qualified or registered for sale and the number of Units
registered in any such state, and all states where an exemption from
qualification or registration is available, and the basis thereof. Immediately
prior to the Effective Date of the Registration Statement, counsel who prepared
the Blue Sky filings shall prepare and deliver to both parties and other counsel
a final Blue Sky Memorandum, including among other things, all states wherein
the offering may be sold to the
12
<PAGE> 17
public and all states where an exemption from qualification or registration is
available, the basis thereof, and the number of Units which may be sold in each
such state.
5.05 Further Reports. The Company, at its own expense, shall
prepare and give and shall continue to give such financial statements and other
information to the Commission and the proper public bodies of the states in
which the Shares may be qualified as may be required from time to time by the
Commission and such proper public bodies and will furnish the Representative
with copies thereof promptly upon the filing thereof with the Commission or such
proper public bodies.
5.06 Reports to Representative. During the period of five years
from the Closing Date, the Company shall deliver to the Representative copies of
each annual report of the Company, and also shall deliver to the Representative:
(1) within ninety days (or such later period for filing of
the Company's Annual Report on Form 10-K or Form 10-KSB as may be
permitted under Rule 12b-25) after the close of each fiscal year
of the Company, a financial report of the Company all such
reports to include a balance sheets as of the end of the
preceding fiscal year, an income statement, a statement of
changes in financial condition and an analysis of surplus
covering such fiscal year, all to be in reasonable detail and
certified by independent public accountants who may, however, be
the regularly employed independent public accountant of the
Company;
(2) within forty-five (45) days (or such later period for
filing of the Company's 10-Q or Form 10-QSB as may be permitted
under Rule 12b-25) after the end of each quarterly fiscal period
of the Company, other than last quarterly fiscal period in any
fiscal year, copies of the income statement and statement of
changes in financial condition for that period and the balance
sheet as of the end of that period of the Company, all subject to
year-end adjustment, certified by the principal financial or
accounting officer of the Company;
(3) copies of all other statements, documents or other
information which the Company shall mail or otherwise make
available to any class of its security holders or shall file with
the Commission pursuant to the 1933 Act, the Securities Exchange
Act of 1934 (the "1934 Act") or otherwise;
(4) copies of all news, press or public information releases
when made; and
(5) upon request in writing from the Representative, furnish
to said Representative such other information as reasonably may
be requested with reference to the property, business and affairs
of the Company.
If the Company shall fail to furnish to the Representative
financial statements as provided in subparagraphs (1) and (2) above within the
times specified, and the Company has not received an extension of such time for
filing or is not in the immediate process of preparing such filing, the
Representative shall have the right to have such financial statements prepared
by independent public accountants of its own choosing and the Company shall
furnish such independent public accountants such data and assistance and access
to such records as they may reasonably require to enable them to prepare such
statements and shall pay their reasonable fees and expenses in preparing the
same.
13
<PAGE> 18
5.07 Expenses of Offering. The Company shall pay, whether or not
the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the authorization, issuance and delivery of the Units, Underwriter's
Purchase Option and underlying securities, any original issue taxes in
connection therewith, all transfer taxes, if any, incident to the initial sale
of the Units, the Underwriter's Purchase Option and Underwriter's Units, if such
sales are consummated, the initial fees and expenses of the Transfer Agent and
Warrant Agent, if any, the fees and expenses of the Company's counsel and
accountants, the costs and expenses incident to the preparation, printing and
filing under the 1933 Act and with the NASD of the Registration Statement and
Prospectus and any amendments or supplements thereto, the cost of preparing and
filing all exhibits to the Registration Statement, this Agreement, the Blue Sky
Memorandums and the Questionnaires to officers and directors of the Company for
the obtaining of information for the Registration Statement and Preliminary and
final Prospectus, the cost of printing and furnishing to the Representative
copies of the Registration Statements and copies of the Preliminary and final
Prospectus as herein provided, and the cost of qualifying the Units under the
state securities or Blue Sky laws as provided in Section 5.04 herein, including
filing fees. In addition to the above, the Company shall also pay all expenses,
up to a maximum of $10,000 for due diligence meetings. For a period of
twenty-four months following the Effective Date, the Company will also be
responsible for payment of all expenses associated with due diligence meetings
in locations designated by the Representative, in addition to payments for
reasonable expenses for visits to or on behalf of the Company by representatives
of the Representative. These expenses shall be paid promptly by the Company upon
receipt of a billing from the Representative.
5.08 Stockholder Reports. The Company shall, as promptly as
possible after each annual fiscal period, render and distribute reports to its
stockholders which will include audited statements of its operations and changes
of financial position during such period and its balance sheet as of the end of
such period.
5.09 Use of Proceeds. The Company will apply the net proceeds
from the sale of the Units solely and exclusively in the manner set forth in the
Registration Statement and Prospectus.
5.10 Transfer Sheets. The Company shall issue at the closing
irrevocable instructions to the Transfer Agent to provide the Representative for
its confidential use and at the Company's expense, reasonable access to its
daily transfer sheets and, annually upon request of the Representative to the
Warrant Agent and Transfer Agent therefor (but more frequently in the event of
an investigation requiring the same or inquiry therefor by the Commission or
other government body or agency or by the NASD), with lists of shareholders of
the Company, all for a period of five years from the Closing Date.
5.11 Information About the Company. The Company shall deliver to
the Representative the documents described in Section 2.20. In addition, at
Closing, the Company shall deliver to the Representative or its counsel,
certificates of good standing in each state where the Company does business,
certificates as to tax status, incumbency or any other certificate or document
which the Representative may reasonably require prior to Closing.
5.12 Due Diligence Investigation. Prior to the Closing Date, the
Company shall cooperate with the Representative in such investigation as it may
make or cause to be made of all the properties, business and operations of the
Company in connection with the sale of the Units, and the Company shall make its
officers and directors available to the Representative for interrogation,
without cost or expense, in connection therewith and the Company shall make
available such information in its possession as the Underwriter may be
reasonably request.
14
<PAGE> 19
5.13 Transfer Agent and Warrant Agent. The Company has appointed
the Transfer Agent and Warrant Agent designated in Section 2.22 hereof. The
Company shall not change or terminate such appointment without first obtaining
the written consent of the Representative, which consent shall not be
unreasonably withheld.
5.14 Conditions Precedent. The Company shall use due diligence to
comply or cause to be complied with all conditions precedent to the several
obligations of the Representative specified in this Agreement.
5.15 1934 Act Registration. Concurrently with the Effective Date,
the Company will file to register its Common Stock and Common Stock Purchase
Warrants under the 1934 Act and the Company shall maintain such registration in
effect. In addition, any amendments or supplements as may be made by the Company
or required by the Commission to the Registration Statement on Form 10, or Form
8-A, or other appropriate filing, will be furnished to the Representative after
the filing thereof with the Commission. The Company shall thereafter comply with
all periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 1934 Act, so long as the Company is legally required
to do so, and furnish the Representative promptly with copies of all materials
filed with the Commission pursuant to the 1934 Act or otherwise furnished to
shareholders of the Company. In addition, the Company agrees to maintain its
qualification with respect to its Common Stock for listing on the National
Association of Securities Dealers Automated Quotation system ("NASDAQ"). Prior
to the Effective Date, the Company shall file for listing and qualification for
listing in a recognized manual and when received, shall maintain such listing
and qualification.
5.16 No Material Change. The Company shall not, except with
approval of the Representative, until (1) the completion of the Closing
hereunder, (2) the termination of this Agreement, or (3) the expiration of
ninety days after the Effective Date, whichever occurs later:
(a) undertake or authorize any change in its capital
structure or authorize or issue or permit any public offering of
any additional shares of its capital stock, except as herein
provided;
(b) authorize, create, issue or sell any funded obligations,
notes or other evidences of indebtedness, except in the ordinary
course of business and maturing not more than twelve months from
the date thereof; or
(c) consolidate, merge or form a joint venture with or into
or acquire any other enterprise (whether in the form of a
corporation or otherwise) or create any mortgage or lien upon any
of its properties or assets other than in the ordinary course of
business.
5.17 Bound Volumes. The Company shall supply to the
Representative and the Underwriters' counsel, at the Company's cost, four bound
volumes each of all of the Closing materials within a reasonable time after the
Closing Date, not to exceed two months.
5.18 Investment Banking Agreements.
(a) Prior to the execution of this Agreement, the Company
has retained the Representative as a consultant and the Company
hereby acknowledges that the Representative has provided such
consulting services related to corporate finance and other
financial services upon its request, which services are unrelated
to the offer and sale of the Units. If the Closing provided for
in this Agreement occurs and the transactions herein contemplated
are consummated, no consulting fees under
15
<PAGE> 20
this consultancy are due. If, however, no Closing hereunder
occurs, whether by reason of the provisions of Section 9.01 or
9.02 hereof or any other breach by the Company, the
Representative's obligation to provide consulting services to the
Company shall terminate and the Company shall pay to the
Representative a nonrefundable fee of $15,000 and shall be paid
to the Representative as provided in Section 3.02.
(b) If the Closing provided for in this Agreement occurs and
the transactions herein contemplated are consummated, it is
agreed and understood that the Company, by the provisions of this
Section 5.18(a), hereby retains the Representative as a
consultant to provide services to the Company, for which the
Representative shall receive an investment banking fee of
$_________ per month for two years after the Closing Date. The
services of the Representative shall include, but shall not be
limited to, advising the Company in connection with possible
acquisitions, shareholder relations including the preparation of
annual reports, long term financial planning, corporate
reorganizations, expansion and capital structure and other
financial assistance.
5.19 Employment Agreements. Prior to the Effective Date, the
Company will enter into and deliver to the Representative employment agreements
with its Chairman and Chief Executive Officer, which employment agreements will
be subject to the Representative's approval and will specifically include three
year terms, non-competition covenants for two years following termination of
association and confidentiality provisions satisfactory to the Representative.
The Company will obtain key-man life insurance policies on the lives of such
person and in the amount of $500,000 each, to be effective no later than the
Effective Date.
5.20 Restriction on Sale of Securities. Prior to the declaration
of the effectiveness of the Registration Statement, the Company will obtain from
________________ and _______________ and deliver to the Representative,
agreements from said persons concerning restrictions on futures sales of
securities owned by them immediately prior to the declaration of effectiveness
of the Registration Statement by the Commission. All of said agreements shall
include that during the eighteen month period following the Effective Date, the
Representative shall be given the first right of refusal to sell any and all
shares of stock of the Company owned by each of them which they may wish to sell
pursuant to Commission Rule 144. In addition, such securities may not be
publicly sold during the eighteen month period following the Effective Date
without the prior written consent of the Representative, which shall not be
unreasonably withheld. Provided, however, that such securities may be sold
during that time period provided that such sale or disposition is a privately
negotiated transaction, that the purchaser agrees in writing with the
Representative to the transferor's written agreement with the Representative and
the disposition is otherwise in accordance with applicable securities laws. In
addition, the agreements shall provide that at the Closing, said security
holders shall surrender their certificates so that restrictive legends can be
placed on the securities.
5.21 Additional Financing. If, during a period of five years from
the Effective Date, (1) the Representative introduces, negotiates or arranges
for a non-public equity financing for the Company, and such financing is
accepted and consummated, or (2) the Representative arranges for non-public debt
financing and such debt financing is accepted and consummated within such five
year period, the Company will pay a fee to the Representative for its services
which shall be agreed upon between the Company and the Representative. If the
Representative arranges for the purchase or sale of assets, or a merger,
acquisition or joint venture for the Company, and such transaction is accepted
and consummated during such five year period, the Company will pay a fee to the
Representative for its services calculated as follows:
(a) five percent of the value of the transaction to the
Company up to and including $2,000,000;
16
<PAGE> 21
(b) four percent of the value of the transaction to the
Company greater than $2,000,000 and up to and including
$3,000,000;
(c) three percent of the value of the transaction to the
Company greater than $3,000,000 and up to and including
$4,000,000;
(d) two percent of the value of the transaction to the
Company in excess of $4,000,000 and up to and including
$5,000,000; and
(e) one percent over $5,000,000.
5.22 Warrant Solicitation Period. For services rendered in
soliciting the exercise of the Common Stock Purchase Warrants issued as a
component of the Units, the Company will pay to the Representative in its
individual capacity and not as representative of the several Underwriters, a
commission equal to_____% of the exercise price of all such Common Stock
Purchase Warrants exercised and with respect to which the Representative
solicited such exercise. The foregoing shall be subject to the requirements of
NASD Notice to Members 81-38.
SECTION 6
Indemnification
6.01 Indemnification by Company. The Company shall indemnify,
defend and hold the Representative and the other Members of the Underwriting
Group (for the purposes of this Section 6, collectively the "Underwriters") and
each officer, director, employee, agent and surety of the Underwriters, and each
person, if any, who controls each of the Underwriters within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities and expenses (including reasonable legal or
other expenses incurred by the Underwriters and such persons in connection with
defending or investigating any such claim or liabilities whether or not
resulting in any liability to the Underwriters or such persons) which the
Underwriters or such persons may incur under the 1933 Act or any statute or at
common law or otherwise, but only to the extent that such losses, claims,
demands, liabilities and expenses shall arise out of or be based upon a
violation or alleged violation of the federal and state securities laws or
regulations, including any untrue statement or of alleged untrue statement of a
material fact contained in the Registration Statement or Prospectus or in any
amendment to either of them, or in any application or other papers (hereinafter
collectively, the "Blue Sky Applications") executed by the Underwriters with the
written approval of the Company for filing in any state in order to qualify the
Units and Underwriter's Purchase Option (and underlying securities) under the
securities laws thereof, or shall arise out of or be based upon any omission or
alleged omission to state therein a material fact required to be stated in the
Registration Statement or Prospectus, in any amendment to either of them or in
any Blue Sky Application or amendment thereto or necessary to make the
statements in any thereof not misleading; provided, however, that this indemnity
agreement shall not apply to any such losses, claims, demands, liabilities or
expenses arising out of or based upon any violation of any federal or state
securities law or regulation by the Underwriters, or arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus or in any amendment to
either of them or in any Blue Sky Application or amendment thereto, or arising
out of or based upon the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the statements
therein not misleading, which untrue statement or omission was made in reliance
upon information furnished in writing to the Company by the Underwriters
expressly for use in the Registration Statement or Prospectus or in
17
<PAGE> 22
any amendment to either of them, or was made by the Underwriters in a Blue Sky
Application or amendment thereto not in reliance upon information furnished by
the Company.
6.01.01 The indemnity agreement by the Company in favor of the
Underwriters set forth in this Section 6.01 shall neither be deemed nor
construed to protect the Underwriters against any liability it or they may have
to the Company or its security holders to which the Underwriters would otherwise
be subject by reason of willful misfeasance, nonfeasance, bad faith or gross
negligence in the performance of its or their duties or by reason of its
reckless disregard of its or their obligations and duties under this Agreement.
6.01.02 The Underwriters shall give the Company an opportunity to
participate in the defense or preparation of the defense of any action brought
against the Underwriters or any controlling person of the Underwriters or any
other person indemnified under this Section 6.01 to enforce any such loss,
claim, demand, liability or expense, and the Company shall have the right to so
participate in (and, to the extent that it shall wish, to direct) the defense
thereof at the Company's own expense, but such defense shall be conducted by
counsel of recognized standing and reasonably satisfactory to the Underwriters
or such controlling person or persons, defendant or defendants in such
litigation. The agreement of the Company under the indemnity set forth in this
Section 6.01 is expressly conditioned upon notice of such action having been
sent by the Underwriters or controlling person, as the case may be, to the
Company by letter, as provided in Section 11 hereof, within twenty days after
the commencement of such action against the Underwriters, controlling person(s)
or other defendants, such notice being accompanied either by copies of papers
served or filed in connection with such action or by a statement of the nature
of the action to the extent known to such Underwriters, controlling person(s) or
other defendants. Failure to notify the Company as herein provided of the
commencement of any such action shall relieve the Company of its liability under
this indemnity, but failure to notify the Company as herein provided shall not
relieve the Company from any liability which it may have to the Underwriters,
any controlling person thereof or others otherwise than on account of the
indemnity agreement contained in this Subsection 6.01.
6.02 Indemnification by Underwriters. The Underwriters severally
agree to indemnify and hold harmless the Company and each director, officer,
employee and agent of the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, from and against any
and all losses, claims, demands, liabilities and expenses arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or Prospectus or in any amendment to
either of them or in any Blue Sky Application or amendment thereto, or the
omission or alleged omission to state therein any material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent such losses, claims, demands, liabilities and expenses result
from the use of written information furnished to the Company by the Underwriters
for use in the preparation of the Registration Statement or Prospectus or in any
amendment to either of them or in any Blue Sky Application or amendment thereto.
6.02.01 The Company shall give the Underwriters an opportunity to
participate in the defense or preparation of the defense of any action brought
against the Company to enforce any such loss, claim, demand, liability or
expense, and the Company shall have the right to so participate in (and, to the
extent that they shall wish, to direct) the defense of such action at the
Underwriters' own expense, but such defense shall be conducted by counsel of
recognized standing and satisfactory to the Company or such controlling person
or persons, defendant or defendants in such litigation. The Underwriters'
liability under the indemnity set forth in this Section 6.02 is expressly
conditioned upon notice of any such action having been sent by the Company to
the Underwriters by letter, as provided in Section 11 hereof, within twenty days
after the commencement of such action against the Company, such notice being
accompanied either by copies of papers served or filed in connection with such
action or a statement of the nature of the action to the extent known to the
Company. Failure to notify the Underwriters as herein provided of the
commencement of any such action shall relieve the
18
<PAGE> 23
Underwriters of its liability under this indemnity, but failure to notify the
Underwriters as herein provided shall not relieve the Underwriters from any
liability which it or they may have to the Company or the stockholders thereof
otherwise than on account of the indemnity agreement contained in this Section
6.02.
6.03 This Section Not Exclusive. The provisions of this Section
shall not in any way prejudice any right which the Underwriters may have against
the Company or which the Company may have against the Underwriters under any
statute, other than the 1933 Act, at common law or otherwise.
6.04 Survival. The indemnity agreements contained in this Section
shall survive the Closing or other termination of this Agreement and shall inure
to the benefit of the Company and the Underwriters and the successors of any of
them and shall be valid regardless of any investigation made by or on behalf of
the Underwriters or the Company.
SECTION 7
Effectiveness of Agreement
This Agreement shall become effective (1) at 10:00 a.m., Pompano
Beach, Florida time, on the first full business day after the effective date of
the Registration Statement, or (2) upon release by the Representative of the
Units for offering after the Effective Date, whichever shall first occur. The
time of the release by the Representative of the Units for offering, for the
purposes of this Section 7, shall mean the time of the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Units, or the time of the first mailing
of copies of the Prospectus relating to the Units which are subsequently
delivered, whichever shall first occur. The Representative agrees to notify the
Company immediately after the Representative shall have taken any action, by
release or otherwise, whereby this Agreement shall have become effective. This
Agreement shall, nevertheless, become effective at such time earlier than the
time specified above, after the effective date, as the Representative may
determine by notice to the Company.
SECTION 8
Conditions to the Underwriters' Obligations
The Underwriters' obligation to purchase the Units and to make
payment to the Company hereunder on the Closing Date and on the Over-allotment
Closing Date shall be subject to the accuracy, as of the Closing Date and on the
Over-allotment Closing Date, of the representations and warranties on the part
of the Company herein contained, to the performance by the Company of all its
agreements herein contained, to the fulfillment of or compliance by the Company
with all covenants and conditions hereof, and to the following additional
conditions specified in the subsections of this Section 8.
8.01 Effective Date. The effective date of the Registration
Statement (the "Effective Date") shall occur on or prior to 12:00 noon, Pompano
Beach, Florida time, on _______________, 1996, or such later date as the
Representative may agree to in writing. On or prior to the Closing Date, no
order suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the 1933 Act or otherwise shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the Commission to be
pending; any request for additional information on the part of the Commission or
the NASD shall have been complied with to the satisfaction on the part of the
Commission or the NASD, as the case may be; and neither the Registration
Statement, the Prospectus nor any amendment thereto shall have been filed to
which counsel to the Underwriter reasonably shall have objected in writing.
19
<PAGE> 24
8.02 Accuracy of Registration Statement. The Representative shall
not have disclosed in writing to the Company that the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel to the Representative, is
material or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
8.03 Casualty. Between the date hereof and the Closing Date and
Over-allotment Closing Date, the Company shall not have sustained any loss on
account of fire, explosion, flood, accident, calamity, rebellion, civil
uprising, act of a foreign state, or any other cause of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance.
8.04 Litigation. Except as set forth in the Registration
Statement, between the date hereof and the Closing Date and Over-allotment
Closing Date, there shall be no litigation instituted or threatened against the
Company, and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other government body, domestic or foreign, wherein an
unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, permits, operations or financial condition or
income of the Company.
8.05 No Material Change. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period subsequent
to the Effective Date and prior to the Closing Date and Over-allotment Closing
Date: (1) the Company shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the Effective Date, and (2)
except in the ordinary course of its business, the Company shall not have
incurred any liabilities or obligations (direct or contingent) or disposed of
any of its assets or entered into any material transaction or suffered or
experienced any materially adverse change in its condition, financial or
otherwise. At the Closing Date or Over-allotment Closing Date, the capital stock
and surplus accounts of the Company shall be substantially the same as at the
Effective Date, without considering the proceeds from the sale of Units, other
than as may be set forth in the Registration Statement and Prospectus.
8.06 Review by Underwriter's Counsel. The authorizations of the
Shares and the Common Stock Purchase Warrants and the Underwriter's Purchase
Option and underlying securities, the Registration Statement, the Prospectus and
all corporate proceedings and other legal matters incident thereto and to this
Agreement shall be reasonably satisfactory in all respects to the Representative
and its counsel, and the Company shall have furnished the Representative and
such counsel such documents as they may have requested to enable them to
evaluate the matters referred to in this Section.
8.07 Opinion of Counsel. The Company shall have furnished to the
Underwriting Group the opinion, dated the Closing Date and Over-allotment
Closing Date, addressed to the Representative, of __________________________,
and/or such other counsel as may be acceptable to the Representative, to the
effect that, based upon a review by them of the Registration Statement,
Prospectus, and Company's articles of incorporation, by-laws, and relevant
corporate proceedings, an examination of such statutes and such other
investigation by such counsel as they deem necessary to express such opinion:
(1) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of its state
of incorporation (specifying the same and attaching a certificate
of good standing), with full corporate power and authority to own
and operate its properties and to carry on its business as set
forth in the Registration Statement and Prospectus.
20
<PAGE> 25
(2) The Company is duly qualified and registered to transact
the business in which it is engaged and is qualified and in good
standing in each and every foreign or domestic jurisdiction in
which its ownership of property or its conduct of business
requires such qualification or registration and if it so fails to
so qualify, such failure would not have a material adverse effect
upon the business of the Company.
(3) The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and
Prospectus; the Units and the Underwriter's Purchase Option
conform to the statements concerning them in the Registration
Statement and Prospectus; the outstanding Common Stock of the
Company has been duly and validly issued and is fully paid and
nonassessable and no Common Stock is subject to any preemptive
rights; cumulative voting is not permitted by the holders of any
of the Company's securities; the Shares, Common Stock Purchase
Warrants, and the shares of Common Stock issuable upon exercise
of the Common Stock Purchase Warrants and Underwriter's Units,
have been duly and validly authorized and, upon issuance thereof
and payment therefor in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, free and
clear of all liens, encumbrances, equities and claims whatsoever,
and will not be subject to any preemptive rights.
(4) The Underwriter's Purchase Option has been duly and
validly authorized and issued and is a valid and binding
instrument enforceable against the Company in accordance with its
terms.
(5) A sufficient number of shares of Common Stock and Common
Stock Purchase Warrants have been duly reserved for issuance as
Underwriter's Units upon exercise of the Underwriter's Purchase
Option.
(6) The holders of the issued and outstanding shares of
Common Stock and Series A Preferred Stock are, and the holders of
the Units, Underwriter's Units and Underwriter's Purchase Option
(when such securities have been issued and fully paid for in
accordance with the provisions of the Registration Statement)
will be entitled to the rights and preferences set forth in the
certificates representing the same.
(7) No consents, approvals, authorizations or orders of
agencies, officers or other regulatory authorities are necessary
for the valid authorization, issue or sale of the Units,
Underwriter's Units or Underwriter's Purchase Option hereunder,
except as required under the 1933 Act or state Blue Sky or other
securities laws.
(8) The issuance and sale of the Units, Underwriter's Units
and Underwriter's Purchase Option and the consummation of the
transactions herein contemplated and compliance with the terms of
this Agreement will not conflict with or result in a breach of
any of the terms, conditions, or provisions of, or constitute a
default under, the Articles of Incorporation, as amended, or
By-laws of the Company, as amended, or any note, indenture,
mortgage, deed of trust or other agreement or instrument (however
characterized or described) known to such counsel to which the
Company is a party or by which the Company or any of its property
is bound or any existing laws, order, rule, regulation, writ,
injunction or decree known to such counsel of any government,
governmental instrumentality, agency, body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the
Company or its property.
21
<PAGE> 26
(9) The Registration Statement and Prospectus have become
effective under the 1933 Act and, to the best of the knowledge of
such counsel, no order suspending the effectiveness of the
Registration Statement pursuant to Section 8 of the 1933 Act or
otherwise has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated by the
Commission under the 1933 Act or otherwise, and the Registration
Statement and Prospectus and each amendment and supplement
thereto comply as to form in all material respects with the
requirements of the 1933 Act and the Rules and Regulations
thereunder (except that no opinion needs to be expressed as to
financial statements and financial data contained in the
Registration Statement or Prospectus) and such counsel has no
reason to believe that either the Registration Statement or the
Prospectus or any such amendment or supplement contained any
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; and such counsel is familiar
with all contracts, instruments or other documents referred to in
the Registration Statement and Prospectus and such contracts,
instruments or other documents are sufficiently summarized or
disclosed therein or filed as exhibits thereto as required, and
such counsel does not know of any other contracts, instruments or
other documents required to be summarized or disclosed or filed,
and such counsel does not know of any legal or governmental
proceedings pending or threatened or to which the Company is
subject of such a character as is required to be disclosed in the
Registration Statement or the Prospectus which are not disclosed
and properly described therein.
(10) The Company owns or holds by valid lease the real and
personal properties as shown in the Registration Statement and
Prospectus and, to the extent such properties are owned by the
Company, they are owned free and clear of all liens, encumbrances
and equities or record except for those expressly referred to in
the Registration Statement and Prospectus and except for those as
do not in the opinion of counsel adversely affect materially the
value of such assets and except for the lien of current taxes not
then due.
(11) This Agreement has been duly authorized and executed by
the Company and is a valid and binding agreement of the Company.
(12) The Company has no Subsidiaries.
(13) Each of the following agreements is valid, and the
legal and binding obligation of the party or parties executing
such agreement, and is enforceable in accordance with its
respective terms:
(a) Each "Lock-Up" Agreement regarding the agreement
not to sell securities of the Company for a specified
period; and
(b) Voting Agreement between _______________ and
______________.
In rendering such opinion counsel may rely upon an examination of
originals or copies, certified or otherwise authenticated to their satisfaction,
of such corporation records, documents, agreements, letters or other instruments
of the Company; they shall have made such investigations of law, and have
discussed with representatives of the Company such questions of fact, as they
have deemed proper and necessary as the basis for the opinions expressed.
Further, in rendering such opinion, as to matters of law of jurisdictions other
than the United States, such counsel may rely upon the opinion of foreign
counsel reasonably satisfactory to Representative, provided that such opinion of
foreign counsel be attached to such counsel's opinion and that such opinion of
foreign counsel also be addressed to the Representative. Counsel's opinion as to
the validity and enforceability of any and all contracts and agreements
referenced herein may exclude any opinion as to the
22
<PAGE> 27
validity or enforceability of any indemnification or contribution provisions
thereof, or as the validity or enforceability of any such contract or agreement
may be limited by bankruptcy or other laws relating to or affecting creditors'
rights generally and by equitable principles.
8.08 Accountant's Letter. On the Closing Date and Over-allotment
Closing Date, the Underwriter shall have received from ________________________,
an opinion letter dated the Closing date and Over-allotment Closing Date,
stating that:
(1) They are independent public accountants within the
meaning of the 1933 Act and the Rules and Regulations, and the
response to Item 5.09 of Regulation S-B as reflected by the
Registration Statement is correct insofar as it relates to them;
(2) In their opinion, the financial statements and
supporting schedules of the Company examined by them at all dates
and for all periods referred to in their opinion letter and
included in the Registration Statement and Prospectus comply as
to form in all material aspects with the applicable requirements
of the 1933 Act and the published Rules and Regulations with
respect to registration statements on Form SB-2;
(3) On the basis of certain indicated procedures deemed
acceptable by the Representative (but not necessarily an
examination in accordance with generally accepted accounting
principles), including an examination of the Company's underlying
financial books and records, debt instruments (if any) of the
Company described in the Prospectus, a reading of the latest
available interim unaudited financial statements of the Company,
whether or not appearing in the Prospectus, inquiries to the
officers of the Company and other persons responsible for the
Company's financial and accounting matters, and a reading of the
minute books of the Company, nothing has come to their attention
which would cause them to believe that during the period from the
date of the last audited financial statement, to a specified date
not more than five (5) days prior to the date of such opinion
letter:
(a) there has been any material change in the financial
position of the Company not contemplated by and disclosed in
the Prospectus;
(b) there has been any material change in the capital
stock or surplus accounts of the Company or any payment or
declaration of any dividend or other distribution in respect
thereof or exchange therefor or in the debt of the Company
from that shown in its audited balance sheet, in the
Registration Statement and Prospectus, other than as set
forth or contemplated by the Registration Statement and
Prospectus;
(c) there have been any material decreases in working
capital or net worth as compared with amounts shown in the
last audited balance sheet included in the Prospectus; and
(d) there were any material decreases, as compared with
amounts shown in the last audited balance sheet, in the cash
balance, except in all instances for changes disclosed in or
contemplated by the Registration Statements and Prospectus;
and
(4) On the basis of their examinations referred to in their
opinion letter, report and consent included in the Registration
Statement and Prospectus and the indicated procedures and
discussions referred to in clause (3) above, nothing has come to
their attention which, in their judgment,
23
<PAGE> 28
would cause them to believe or indicate that (a) the financial
statements and schedules set forth in the Registration Statement
and Prospectus do not present fairly the financial position and
results of operations of the Company, for the period indicated,
in conformity with generally accepted accounting principles
applied on a consistent basis, and are not in all material
respects a fair presentation of the information purported to be
shown, and (b) the dollar amounts, percentages and other
financial information set forth in the Registration Statement and
Prospectus under the captions "Prospectus Summary", "Risk
Factors", "Summary Financial Information", "Dilution,"
"Capitalization" and "Management's Discussion and Analysis" are
not in agreement with the Company's general ledger, financial
records or computations made by the Company therefrom.
8.09 Officer's Certificate. The Company shall have furnished to
the Representative a certificate of the President of the Company, and attested
by its Secretary, dated the Closing Date and Over- allotment Closing Date, to
the effect that:
(1) There is no litigation, arbitration or any form of
regulatory proceeding instituted or threatened against the
Company of a character required to be disclosed in the
Registration Statement and Prospectus which is not disclosed; and
there is no material contract required to be filed as an exhibit
to the Registration Statement which has not been so filed.
(2) The representations and warranties of the Company in
this Agreement are true and correct at and as of the date of the
certificate; the Company has complied with all of its agreements
herein contained; no stop order suspending the effectiveness of
the Registration Statement pursuant to Section 8 of the 1933 Act
or otherwise has been issued at or before the date of the
certificate and, to the best of their knowledge, no such
proceeding has been threatened by the Commission; and that any
request for additional information on the part of the Commission
or NASD (to be included in the Registration Statement or the
Prospectus or any amendment or supplement thereto or otherwise)
has been complied with to the reasonable satisfaction of counsel
for the Representative and no amendment or supplement to the
Registration Statement or Prospectus has been filed to which
counsel for the Representative has reasonably objected after
adequate notice.
(3) There has been no material adverse change in the general
affairs of the Company, financial or otherwise, except as
disclosed or indicated in the Registration Statement and
Prospectus.
(4) Since the Effective Date, there has not been any
material transaction entered into by the Company other than in
the ordinary course of business.
(5) There are no material direct or indirect contingent
liabilities or obligations of the Company not disclosed in the
Registration Statement and Prospectus.
(6) Since the Effective Date, the Company has not sustained
any loss on account of fire, flood, accident or other calamity of
such character as to interfere materially with the continuous
operation of the Company's business or which materially adversely
affects the financial position or business of the Company
regardless of whether or not such loss shall have been insured.
(7) The Company is not delinquent in the filing of any
federal, state or municipal returns or in paying any federal,
local, state or municipal taxes including without limitation all
federal, state and local fuel taxes required to be reported and
paid; to the best of their knowledge (after diligent
investigation in connection therewith) there is no proposed
redetermination or reassessment of such taxes
24
<PAGE> 29
adverse to the Company, and the Company has paid or provided for,
by adequate reserves, all known tax liabilities.
(8) This Agreement, the consummation of the transactions
herein contemplated and the fulfillment of the terms hereof will
not result in a breach by the Company of any term of, or
constitute a default under, any indenture, mortgage, lease, deed
of trust, bank loan or credit agreement or any other agreement or
undertaking (however characterized or described) of the Company,
including by way of specification but not by way of limitation,
any agreement or instrument to which the Company is now a party
or pursuant to which it has acquired any right or obligation by
succession or otherwise, and that any existing agreement
materially affecting the Company has been delivered to the
Representative or its counsel.
(9) They have carefully examined the Registration Statement
and Prospectus and, in their opinion, (a) as of the Effective
Date, the statements contained in the Registration Statement and
Prospectus are true and correct and the Registration Statement
and Prospectus do not omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading (such opinion need not be expressed, however, as
to any material contained in the Registration Statement and
Prospectus furnished by the Underwriting Group); and (b) since
the Effective Date, no event has occurred which should have been
set forth in a supplement to or amendment of the Registration
Statement or Prospectus which has not been set forth in such
supplement or amendment.
(10) At and as of the Effective Date and the date of the
certificate, there are no agreements, understandings or
negotiations in force and effect, in process or contemplated by
them or of which they are aware to the best of their individual
and collective knowledge which, is in force and effect or in
process or so contemplated would be required to be disclosed.
(11) The officers and directors of the Company have not
taken and will not take, directly or indirectly, any action
designed to, or which might reasonably be expected to, cause or
result in the stabilization or manipulation of the price of the
Company's Common Stock to facilitate the sale and resale of the
Shares.
8.10 Tender of Securities. All the Units being offered by the
Company and the Underwriter's Purchase Option shall be tendered for delivery in
accordance with the terms and provisions of this Agreement.
8.11 Blue-Sky Qualification. The Units shall be qualified in such
states as determined under paragraph 5.04 above and each qualification shall be
in effect and not subject to any stop order or other proceeding on the Closing
Date.
8.12 Approval of Representative's Counsel. All opinions, letters,
certificates and documents mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld.
8.13 Officer's Certificate as a Company Representative. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.
25
<PAGE> 30
8.14 NASDAQ Listing. The Company's Shares and Warrants must be
qualified for listing on NASDAQ on the Effective Date of the Registration
Statement.
8.15 Fiscal 1995 Earnings. For fiscal 1995, the Company will have
earned, after tax, approximately $______________ profit.
SECTION 9
Termination
9.01 Termination by Representative. This Agreement may be
terminated by the Representative by notice to the Company in the event the
Company shall have failed or been unable to comply with any of the terms,
conditions, representations, warranties, covenants or other provisions of this
Agreement on the part of the Company to be performed, complied with or fulfilled
within the respective times herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by
Representative in writing.
9.02 Termination by Representative - "Market Out". This Agreement
may be terminated by Representative by notice to the Company at anytime if, in
the sole judgment of the Representative, payment for and delivery of the Units
is rendered impracticable or inadvisable because of: (a) material adverse
changes in the Company's business, business prospects, management, earnings,
properties or conditions, financial or otherwise; (b) any action, suit or
proceedings, threatened or pending, at law or equity against the Company, or by
any federal, state or other commissions, board or agency wherein any unfavorable
result or decision could materially adversely affect the business, business
prospects, properties, financial condition, income or earnings of the Company;
(c) additional material governmental restrictions not in force and effect on the
date hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on a registered
securities exchange, or trading in securities generally on any such exchange
shall have been suspended, or a general moratorium shall have been established
by federal or state authorities; (d) substantial and material changes in the
condition of the market beyond normal fluctuations are such that it would be
undesirable, impracticable or inadvisable in the judgment of the Representative
to proceed with this Agreement or with the offering; (e) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of the Representative,
the effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale of
and payment for the Units; (f) any suspension of trading in the common stock of
the Company in the over-the-counter market or the interruption or termination of
quotations of the common stock of the Company on the NASDAQ System; or (g) the
Representative is not assured that the Units or the components thereof will be
listed for trading on the NASDAQ as required under this Agreement.
9.03 Survival of Obligations After Termination. Any termination
of this Agreement shall be without liability of any nature whatsoever
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of either party hereto, except that the Company shall
remain obligated to pay the costs and expenses provided to be paid by it
specified in Sections 3.02, 5.07, and 5.18(a) (subject to the limitations in
those Sections which entitle the Representative to return or be paid only the
accountable out of pocket expenses described therein); and the Company and the
Underwriters shall be obligated to pay, respectively, all losses, claims,
demands, liabilities and expenses under Section 6.01 in the case of the Company
and Section 6.02 in the case of the Underwriters.
26
<PAGE> 31
9.04 Suspension Proceedings. It is understood that the Company
and the Representative will each advise the other party immediately and confirm
in writing the receipt of any threat of or the initiation of any steps or
procedures which would impair or prevent the right to offer any of the Company's
Shares or the issuance of any "suspension orders" or other prohibitions
preventing or impairing the proposed offering by the Commission or other
regulatory authority.
SECTION 10
Representative's Representations and Warranties
10.01 Registration as Broker/Dealer. The Representative is
registered as a Broker/Dealer with the Commission and is registered as a
Broker/Dealer in the State of Florida and is a member in good standing of the
NASD.
10.02 No Pending Proceedings. Except as otherwise disclosed in
the Registration Statement, there is not now pending or threatened against such
Underwriter any material action or proceeding of which such Underwriter has been
advised, either in any court of competent jurisdiction, before the Commission or
before any state securities commission concerning such Underwriter's activities
as a broker or dealer, nor has such Underwriter been named as a "cause" in any
such action or proceeding.
SECTION 11
Notices
All notices, demands or requests required or authorized hereunder
shall only be deemed given sufficiently if in writing and hand delivered by
messenger or courier service or sent by registered mail or certified mail,
return receipt requested and postage prepaid, in the case of the Underwriter:
Joseph Roberts & Co., Inc.
416 East Atlantic Boulevard
Pompano Beach, Florida 33060
Attention: Chairman
Phone: 800-723-0800
Fax: 954-753-7780
and, in the case of the Company:
American Professional Billiards, Inc.
1700 East Desert Inn Road
Suite 108
Las Vegas, Nevada 89109
Phone: ______________
Fax: ______________
Any such notice shall be deemed effectively given on the earlier
of the date of actual receipt or the second business day after deposit of the
notice with the United States Postal Service.
27
<PAGE> 32
SECTION 12
Registration of Underwriter's Units
12.01 Direct Registration During Underwriter Option Period.
Subject to the availability of audited financial statements which would comply
with the requirements of Regulation S-B or S-X under the Act, the Company shall,
upon request by the holder(s) of at least fifty percent (50%) of the total
Underwriter's Purchase Option and the Underwriter Units, or both, during the
Underwriter Option Period, one time only, cause the Underwriter's Units or the
underlying securities or both to be the subject of a post effective amendment or
an offering covered by a registration statement or a Regulation A filing,
whichever is appropriate, under the 1933 Act so as to enable the Underwriter to
offer publicly the Underwriter Units or the underlying securities. The Company
must file a registration statement and will not have a choice between filing a
registration statement or an offering statement pursuant to Regulation A if all
Underwriter Units or the underlying securities which have been requested to be
registered cannot be sold under Registration A because of the limited exemption
available thereunder. The Company agrees to use its best efforts to cause any
such filing to become effective and to remain current for six (6) months. All
expenses incurred in connection with such registration or qualification, as the
case may be, including but not limited to legal, accounting and printing fees
will be borne by the Company, provided that fees of counsel and sales
commissions for the Representative shall be borne by the Representative.
12.02 Piggyback During Underwriter Option Period. If at any time,
or from time to time prior to the expiration of the Underwriter Option Period,
the Company shall register any primary or secondary offering of any debt or
equity security issued or to be issued by it pursuant to a Registration
Statement under the 1933 Act, the Company shall notify the Representative of
such offering in writing not less than thirty (30) days prior to filing such
Registration Statement with the Commission, and the Representative (or its
assigns) shall have the right to register any or all of the Underwriter Units
and the underlying securities therewith by notifying the Company in writing
within twenty (20) days of receipt of the Company's notice, requesting
registration of such Underwriter Units and the underlying securities, and
setting forth the intended method of distribution and such other data or
information as the Company or its counsel shall reasonably require. This
paragraph is not applicable to a registration statement filed with the
Commission on Forms S-4 or S-8 or any other inappropriate forms. Such
registration shall be without cost to the Representative except for its counsel
fees and its sales commissions incurred if the Underwriter Units are sold. In
the event such offering is underwritten by a broker-dealer other than the
Representative, then the Representative's right to register the Underwriter
Units in such Registration Statement shall be subject to the approval of such
underwriter, and the Company agrees to use its reasonable efforts to obtain such
approval.
In addition to the rights above provided, the Company will
cooperate with the then holders of the Underwriter's Purchase Option and
Underwriter Units issued upon the exercise of the Underwriter's Purchase Option
in preparing and signing any Registration Statement or Notification in addition
to the Registration Statements and Notifications discussed above, required in
order to sell or transfer the shares of Common Stock issued upon the exercise of
the Underwriter's Purchase Option and its components and will supply all
information required therefor, but such additional Registration Statement and
Notifications shall be at the then holder's cost and expense and subject to
reasonable delay (no longer than one hundred twenty (120) days) by the Company
if it would adversely impact the Company in its capital raising plans or
otherwise.
28
<PAGE> 33
SECTION 13
Miscellaneous
13.01 Sole Benefit. This Agreement is made solely for the benefit
of the Company, the Representative, other Members of the Underwriting Group,
their respective officers and directors and any controlling person thereof
within the meaning of Section 15 of the 1933 Act and their respective successors
and assigns; and no other person shall acquire or have any right under or by
virtue of this Agreement. The terms "successors" or "successors and assigns"
shall not under any circumstance include any purchaser, as such purchaser, of
the Units from any person or of any of the Underwriter Purchase Option or shares
of the Underwriter Units from any person unless otherwise expressly provided
herein. This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes all prior agreements and
understandings, including but not limited to the Letter of Intent dated February
1, 1996.
13.02 Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers or directors and of the Representative as set froth in or made
pursuant to this Agreement, and the indemnity agreements of the Company and the
Underwriters contained in Section 6 hereof shall survive and remain in full
force and effect regardless of: (a) any investigation or inspection made by or
on behalf of the Company or the Underwriters or any such officer or director of
either of them or any controlling person (within the meaning of Section 15 of
the 1933 Act) of the Company or of the Underwriters; (b) delivery of or payment
for the Units; and (c) the Closing Date.
13.03 Governing Law. This Agreement and all instruments, if any,
delivered in connection herewith or pursuant hereto shall be governed by and
construed in accordance with the substantive laws of the State of Florida.
13.04 Underwriter's Information. The statements solely with
respect to the Representative's history and its proposed function in respect of
the sale of the Units on the inside and outside of both the front and back cover
pages of the Prospectus and under the caption "Underwriting" in the Prospectus
constitute the written information furnished by or on behalf of the
Representative specified in Section 2.02 hereof, in Section 6.01 hereof and
Section 6.02 hereof.
13.05 Waiver. All the rights and remedies of either party under
this Agreement are cumulative and are not exclusive of any other rights and
remedies provided by law. Unless expressly stated to the contrary elsewhere
herein, no delay or failure on the part of either party in the exercise of any
right or remedy arising from a breach of this Agreement or any agreement or
instrument executed in connection with this Agreement shall operate as a waiver
of any subsequent right or remedy arising from a subsequent breach of this
Agreement or any agreement or instrument executed in connection with this
Agreement. The consent of any party where required hereunder to any act in
occurrence shall not be deemed to be a consent to any other act or occurrence.
29
<PAGE> 34
13.06 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose
wherein this letter and your acceptance shall become and evidence a binding
contract between us.
Very truly yours,
- ----------------------------------------
By:_____________________________________
ACCEPTED and CONFIRMED as of the
____ day of _____________, 199__.
Joseph Roberts & Co., Inc.
By:___________________________________
___________________________, Chairman
30
<PAGE> 35
-----------------------------------------
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to
in the above Agreement and the number of Shares to be purchased by each
Underwriter.
Name Number of Shares
- ------------------------------ -----------------
- ------------------------------ -----------------
- ------------------------------ -----------------
Total _________________
31
<PAGE> 1
EXHIBIT 1.2
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO OFFER TO
BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE
RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY SUCH
OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND,
AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE DATE.
1,000,000 UNITS
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A Nevada Corporation)
($6.00 per Unit)
SELECTED DEALERS AGREEMENT
_____________, 1996
Dear Ladies and Gentlemen:
1. Joseph Roberts & Co., Inc., named as the Representative of the
underwriters in the enclosed Preliminary Prospectus (the "Representative"), or
if there are no other underwriters, then Representative shall mean Underwriter,
proposes to offer on a firm commitment basis, subject to the terms and
conditions and execution of the Underwriting Agreement, 1,000,000 Units (the
"Units") of AMERICAN PROFESSIONAL BILLIARDS, INC. (the "Company"). The Units are
more particularly described in the enclosed Preliminary Prospectus, additional
copies of which as well as the Prospectus (after effective date) will be
supplied in reasonable quantities upon request.
2. The Representative is soliciting offers to buy upon the terms
and conditions hereof for a part of the Units from Selected Dealers, who are to
act as principal, including you, who are (i) registered with the Securities and
Exchange Commission (the "Commission") as broker/dealers under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and members in good standing
with the National Association of Securities Dealers, Inc. (the "NASD"), or (ii)
dealers or institutions with their principal place of business located outside
the United States, its territories and possessions and not registered under the
1934 Act who agree to make no sales within the United States, its territories
and possessions or to persons who are nationals thereof or residents therein
and, in making sales, to comply with the NASD's interpretation with respect to
free-riding and withholding. Units are to be offered to the public at a price of
$6.00 per Unit. Selected Dealers will be allowed a concession of not less than
10% of the offering price. You will be notified of the precise amount of such
concession prior to the effective date of the Registration Statement. The offer
is solicited subject to the issuance and delivery of the Units and their
acceptance by the Representative, to the approval of legal matters by counsel
and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part
without obligation or commitment of any kind by you any time prior to acceptance
and no offer may be accepted by us and
<PAGE> 2
no sale can be made until after the registration statement covering the Units
has become effective with the Commission. Subject to the foregoing, upon
execution by you of the Offer to Purchase below and the return of same to us,
you shall be deemed to have offered to purchase the number of Units set forth in
your offer on the basis set forth in paragraph 2 above. Any oral notice by us of
acceptance of your offer shall be immediately followed by written or telegraphic
confirmation preceded or accompanied by a copy of the Prospectus. If a
contractual commitment arises hereunder, all the terms of this Selected Dealers
Agreement shall be applicable. We may also make available to you an allotment to
purchase Units, but such allotment shall be subject to modification or
termination upon notice from us any time prior to an exchange of confirmations
reflecting completed transactions. All references hereafter in this Agreement to
the purchase and sale of the Units assume and are applicable only if contractual
commitments to purchase are completed in accordance with the foregoing.
4. You agree that in reoffering the Units, if your offer is
accepted after the effective date, you will make a bona fide public distribution
of same. You will advise us upon request of the Units purchased by you remaining
unsold, and we shall have the right to repurchase such Units upon demand at the
public offering price less the concession as set forth in paragraph 2 above. Any
of the Units purchased by you pursuant to this Agreement are to be reoffered by
you to the public at the public offering price, subject to the terms hereof and
shall not be offered or sold by you below the public offering price before the
termination of this Agreement.
5. Payment for Units which you purchase hereunder shall be made
by you on such date as we may determine by certified or bank cashier's check
payable in Chicago Clearinghouse funds to the Representative. Certificates for
the securities shall be delivered as soon as practicable at the offices of
Joseph Roberts & Co., Inc., 416 East Atlantic Boulevard, Pompano Beach, Florida
33060. Unless specifically authorized by us, payment by you may not be deferred
until delivery of certificates to you.
6. A registration statement covering the offering has been filed
with the Securities and Exchange Commission in respect to the Units. You will be
promptly advised when the registration statement becomes effective. Each
Selected Dealer in selling the Units pursuant hereto agrees (which agreement
shall also be for the benefit of the Company) that it will comply with the
applicable requirements of the Securities Act of 1933 and of the 1934 Act and
any applicable rules and regulations issued under said Acts. No person is
authorized by the Company or by the Representative to give any information or to
make any representations other than those contained in the Prospectus in
connection with the sale of the Units. Nothing contained herein shall render the
Selected Dealers a member of the Underwriting Group or partners with the
Representative or with one another.
7. You will be informed by us as to the states in which we have
been advised by counsel the Units have been qualified for sale or are exempt
under the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Units in any state.
2
<PAGE> 3
8. The Representative shall have full authority to take such
action as it may deem advisable in respect of all matters pertaining to the
offering or arising thereunder. The Representative shall not be under any
liability to you, except such as may be incurred under the Securities Act of
1933 and the rules and regulations thereunder, except for lack of good faith and
except for obligations assumed by us in this Agreement, and no obligation on our
part shall be implied or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set
forth until Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Units; such contractual commitment can only be made in
accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and registered as a
broker/dealer or are not eligible for membership under Section I of the By-Laws
of the Association who agree to make no sales within the United States, its
territories or possession or to persons who are nationals thereof or residents
therein and, in making sales, to comply with the NASD's interpretation with
respect to free-riding and withholding. Your attention is called to the
following: (a) Article III, Sections 1, 8, 24, 25, 26 and 36 of the Rules of
Fair Practice of NASD and the interpretations of said Sections promulgated by
the Board of Governors of such Association including the interpretation with
respect to "Free-Riding and Withholding"; (b) Section 10(b) of the 1934 Act and
Rules 10b-6 and 10b-10 of the general rules and regulations promulgated under
said Act; (c) Securities Act Release #3907; (d) Securities Act Release #4150;
and (e) Securities Act Release #4968 requiring the distribution of a Preliminary
Prospectus to all persons reasonably expected to be purchasers of Units from you
at least 48 hours prior to the time you expect to mail confirmations and you
have informed us by telegram of compliance with this provision not later than
2:00 p.m. Pompano Beach time, on the day prior to the anticipated effective date
of the Registration Statement. You, if a member of the Association, by signing
this Agreement, acknowledge that you are familiar with the cited law, rules and
releases, and agree that you will not directly and/or indirectly violate any
provisions of applicable law in connection with your participation in the
distribution of the Units.
11. In addition to compliance with the provisions of paragraph 10
hereof, you will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase Units (or shares
of common stock or warrants comprising the Units) in the open market or
otherwise make a market in such securities or otherwise attempt to induce others
to purchase such securities in the open market. Nothing contained in this
paragraph 11 shall, however, preclude you from acting as agent in the execution
of unsolicited orders of customers in transactions effectuated for them through
a market maker.
12. You understand that the Representative may in connection with
the offering engage in stabilizing transactions. If the Representative contracts
for or purchases in the open market in connection with such stabilization any
Units sold to you hereunder and not effectively placed by you,
3
<PAGE> 4
the Representative may withhold the Selected Dealer's concession originally
allowed you on the Units so purchased, and you agree to such withholding.
13. By submitting an Offer to Purchase you confirm that your net
capital is such that you may, in accordance with Rule 15c3-1 adopted under the
1934 Act, agree to purchase the number of Units you may become obligated to
purchase under the provisions of this Agreement.
14. All communications from you should be directed to us at the
office of the Representative, Joseph Roberts & Co., Inc., 416 East Atlantic
Boulevard, Pompano Beach, Florida 33060. All communications from us to you shall
be directed to the address to which this letter is mailed.
Very truly yours,
JOSEPH ROBERTS & CO., INC.
By:______________________________
4
<PAGE> 1
EXHIBIT 1.3
AMERICAN PROFESSIONAL BILLIARDS, INC.
1,000,000 UNITS
AGREEMENT AMONG UNDERWRITERS
JOSEPH ROBERTS & CO., INC. ______________, 1996
416 East Atlantic Boulevard
Pompano Beach, Florida 33060
(As Representatives of the Underwriters named
in Schedule I to the Underwriting Agreement)
Ladies and Gentlemen:
We wish to confirm as follows the agreement among you, the
undersigned and the other Underwriters named in Schedule I to the Underwriting
Agreement, as it is to be executed (all such parties being herein called "the
Underwriters"), with respect to the purchase by the Underwriters severally from
American Professional Billiards, Inc. ("the Company") of the respective numbers
of Units (hereinafter "the Units") set forth in Schedule I to the Underwriting
Agreement. The number of Units to be purchased by each Underwriter from the
Company shall be determined in accordance with the Underwriting Agreement. It is
understood that changes may be made in those who are to be Underwriters and in
the respective numbers of Units to be purchased by them, but that the number of
Units to be purchased by us as set forth in the Underwriting Agreement will not
be changed without our consent except as provided herein and in the Underwriting
Agreement. The obligations of the Underwriters to purchase the number of Units
set opposite their respective names in Schedule I to the Underwriting Agreement,
as they may be increased by the Underwriting Agreement, are herein called their
"underwriting obligations." The number of Units set opposite our name in said
Schedule I, as such number may be increased under the Underwriting Agreement,
are herein called "our Units." For purposes of this Agreement the following
definitions shall be applicable:
(a) "Manager's Concession" shall be the
compensation to you for acting as Manager as provided in
paragraph 1 hereof of not less than __ percent (__%) of the
underwriting discount. The Manager's Concession shall include
the right to all the Purchase Option Units to be issued
pursuant to the Underwriting Agreement in addition to the
other items specified in Sections 3 and 5 of the Underwriting
Agreement.
(b) "Underwriting Group Concession" shall mean
compensation to members of the Underwriting Group for assuming
the underwriting risk and shall be not less than _____ percent
(__%) of the underwriting discount on the Units for which each
Underwriter is obligated hereunder.
(c) "Dealer's Concession" shall mean
compensation to Dealers who are members of the Selling Group
and shall, as to Dealers who have
<PAGE> 2
executed an agreement with you, be not less than __ percent
(__%) of the underwriting discount.
(d) "Dealer's Reallowance Concession" shall mean
the compensation allowed Dealers by Underwriters other than
the Manager and shall be one-half of the Dealer's Concession.
(e) It is contemplated that the underwriting
discount will be ten percent (10%) of the offering price. You
in your absolute discretion shall determine, within the
foregoing limitations, the precise allocation of the
underwriting discount.
1. AUTHORITY AND COMPENSATION OF REPRESENTATIVE. We hereby
authorize you as our Representative and on our behalf, (a) to enter into an
agreement with the Company substantially in the form attached hereto as Exhibit
A ("the Underwriting Agreement"), but with such changes therein as in your
judgment are not materially adverse to the Underwriters, (b) to exercise all the
authority and discretion vested in the Underwriters and in you by the provisions
of the Underwriting Agreement, and (c) to take all such action as you in your
discretion may deem necessary or advisable in order to carry out the provisions
of the Underwriting Agreement and this Agreement and the sale and distribution
of the Units, provided that the time within which the Registration Statement is
required to become effective pursuant to the Underwriting Agreement will not be
extended more than 48 hours without the approval of a majority in interest of
the Underwriters (including yourselves).
As our share of the compensation for your services hereunder,
we will pay you, and we authorize you to charge to our account, a sum equal to
the Manager's Concession.
2. PUBLIC OFFERING. A public offering of the Units is to be
made, as herein provided, as soon after the Registration Statement relating
thereto shall become effective as in your judgment is advisable. The Units shall
be initially offered to the public at the public offering price of $8.00 per
Unit as determined by you and the Company. You will advise us by telegraph or
telephone when the Units shall be released for offering and shall advise us at
or prior to that time of the allocation of the underwriting discount. We
authorize you as Representative of the Underwriters, after the initial public
offering, to vary the public offering price, in your sole discretion, by reason
of changes in general market conditions or otherwise. The public offering price
of the Units at the time in effect is herein called the "Offering Price."
We hereby agree to deliver all preliminary and final
prospectuses required for compliance with the provisions of Rule 15c2-8 under
the Securities Exchange Act of 1934 and Section 5(b) of the Securities Act of
1933. You have heretofore delivered to us such preliminary prospectuses as have
been requested by us, receipt of which is hereby acknowledged, and will deliver
such final Prospectuses as will be requested by us.
3. OFFERING TO DEALERS AND GROUP SALES. We authorize you to
reserve for offering and sale, and on our behalf to sell, to institutions or
other retail purchasers (such sales being herein called
2
<PAGE> 3
"Group Sales") and to dealers selected by you (such dealers being herein called
"Dealers") all or any part of our Units as you may determine. Such sales of
Units, if any, shall be made (i) in the case of Group Sales, at the Offering
Price, and (ii) in the case of sales to Dealers, at the Offering Price less the
Dealer's Concession.
Any Group Sales shall be as nearly as practicable in
proportion to the underwriting obligations of the respective Underwriters. Any
sales to Dealers made for our account shall be as nearly as practicable in the
ratio that the Units reserved for our account for offering to Dealers bears to
the aggregate of all Units of all Underwriters including you so reserved. The
over-allotment option provided for in Sections 1.01 and 3.01.01 of the
Underwriting Agreement to the extent exercised shall be exercised by you as
Representative of the Underwriters, and shall be exercised only for the purpose
of making Group Sales or sales to Dealers by you. Such sales for our account of
the over-allotment option shall as nearly as practicable be in proportion to the
underwriting obligations of the respective Underwriters. On any Group Sales or
sales to Dealers, including those pertaining to the over-allotment option, made
by you on our behalf we shall be entitled to receive only the Underwriter's
Concession.
You agree to notify us promptly on the date of the public
offering as to the number of Units, if any, which we may retain for direct sale.
Prior to the termination of this Agreement, you may reserve for offering and
sale as hereinbefore provided any Units remaining unsold theretofore retained by
us and we may, with your consent, retain any Units remaining unsold theretofore
reserved by you.
Sales to Dealers shall be made under a Selected Dealers
Agreement, attached hereto as Exhibit B and by this reference incorporated
herein. We authorize you to determine the form and manner of any communications
with Dealers, and to make such changes in the Selected Dealers Agreement as you
may deem appropriate. In the event that there shall be any such agreements with
Dealers, you are authorized to act as managers thereunder and we agree, in such
event, to be governed by the terms and conditions of such agreements. Each
Underwriter agrees that it will not offer any of the Units for sale at a price
below the Offering Price or allow any concession therefrom except as herein
otherwise provided. We as to our Units may enter into agreements with dealers,
but any Reallowance Concession shall not exceed half of the Dealer's Concession.
It is understood that any person to whom an offer may be made
as hereinbefore provided shall be a member of the National Association of
Securities Dealers, Inc. ("NASD"), or dealers or institutions with their
principal place of business located outside the United States, its territories
or possessions and not registered under the Securities Exchange Act of 1934 who
agree to make no sales within the United States, its territories or possessions
or to persons who are nationals thereof or residents therein and, in making
sales, to comply with the NASD's interpretations with respect to free-riding and
withholding.
We authorize you to determine the form and manner of any
public advertisement of the Units.
Nothing in this Agreement contained shall be deemed to
restrict our right, subject to the provisions of this Section 3, to offer our
Units prior to the effective date of the Registration Statement, provided that
any such offer shall be made in compliance with any applicable requirements of
the
3
<PAGE> 4
Securities Act of 1933 and the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission thereunder and of any
applicable state securities laws.
4. REPURCHASES IN THE OPEN MARKET. Any Units sold by us
(otherwise than through you) which shall be contracted for or purchased in the
open market by you on behalf of any Underwriter or Underwriters shall be
repurchased by us on demand at a price equal to the cost of such purchase plus
commissions and taxes on redelivery. Any securities delivered on such repurchase
need not be the identical securities originally sold by us. In lieu of delivery
of such securities to us, you may (i) sell such securities in any manner for our
account and charge us with the amount of any loss or expense or credit us with
the amount of any profit, less any expense, resulting from such sale, or (ii)
charge our account with an amount not in excess of the concession to Dealers on
such securities.
5. DELIVERY AND PAYMENT. We agree to deliver to you at or
before 4:00 p.m. Central Time, on the Closing Date referred to in the
Underwriting Agreement, at your office, cash or a certified or bank cashier's
check payable to the order of Joseph Roberts & Co., Inc. for the offering price
of the Units less Dealer's Concession of the Units which we retained for direct
sale by us, the proceeds of which check shall be delivered by you, in the manner
provided in the Underwriting Agreement, to or for the account of the Company
against delivery of certificates for such Units to you for our account. You are
authorized to accept such delivery and to give receipts therefor. You may
advance funds for Units which have been sold or reserved for sale to retail
purchasers or Dealers for our account. If we fail (whether or not such failure
shall constitute a default hereunder) to deliver to you, or you fail to receive,
our check and/or payment for sales made by you for our account for the Units
which we have agreed to purchase, you, individually and not as Representative of
the Underwriters, are authorized (but shall not be obligated) to make payment,
in the manner provided in the Underwriting Agreement, to or for the account of
the Company for such Units for our account, but any such payment by you shall
not relieve us of any of our obligations under the Underwriting Agreement or
under this Agreement and we agree to repay you on demand the amount so advanced
for our account.
We also agree on demand to take up and pay for or to deliver
to you funds sufficient to pay for at cost any Units purchased by you for our
account pursuant to the provisions of Section 9 hereof, and to deliver to you on
demand any Units sold or over-allocated by you for our account pursuant to any
provision of this Agreement.
We authorize you to deliver our Units, pursuant to the
provisions of Section 9 hereof, against sales made by you for our account
pursuant to any provision of this Agreement.
Upon receipt by you of payment for the Units, sold by us
and/or through you for our account, you will remit to us promptly an amount
equal to the Underwriter's Concession on such Units, which has not been retained
by us. You agree to cause to be delivered to us, as soon as practicable after
the Closing Date referred to in the Underwriting Agreement, such part of our
Units purchased on such Closing Date as shall not have been sold or reserved for
sale by you for our account.
In case any Units reserved for sale in Group Sales or to
Dealers shall not be purchased and paid for in due course as contemplated
hereby, we agree to accept delivery when tendered by you of any
4
<PAGE> 5
Units so reserved for our account and not so purchased and pay you the offering
price less the Dealer's and Underwriter's Concessions.
6. AUTHORITY TO BORROW. We authorize you to advance your funds
for our account (charging current interest rates) and to arrange loans for our
account for the purpose of carrying out this Agreement, and in connection
therewith to execute and deliver any notes or other instruments and to hold or
pledge as security therefor all or any part of our Units purchased hereunder for
our account. Any lending bank is hereby authorized to accept your instructions
as Representative in all matters relating to such loans. Any part of our Units
held by you may be delivered to us for carrying purposes and, if so delivered,
will be redelivered to you upon demand.
7. ALLOCATION OF EXPENSE AND LIABILITY. We authorize you to
charge our account with and we agree to pay (a) all transfer taxes on sales made
by you for our account, except as herein otherwise provided, and (b) our
proportionate share (based on our underwriting obligations) of all expenses in
excess of those reimbursed by the Company incurred by you in connection with the
purchase, carrying and distribution, or proposed purchase and distribution, of
the Units and all other expenses arising under the terms of the Underwriting
Agreement or this Agreement. Your determination of all such expenses and your
allocation thereof shall be final and conclusive. Funds for our account at any
time in your hand as our Representative may be held in your general funds
without accountability for interest. As soon as practicable after the
termination of this Agreement, the net credit or debit balance in our account,
after proper charge and credit for all interim payments and receipts, shall be
paid to or paid by us, provided that you in your discretion may reserve from
distribution an amount to cover possible additional expenses chargeable to the
several Underwriters. Notwithstanding any settlement, we will remain liable for
any taxes on transfers for our account and for our proportionate share (based on
our underwriting obligation) of all expenses and liabilities that may be
incurred for the accounts of the underwriters.
8. LIABILITY FOR FUTURE CLAIMS. Neither any statement by you,
as Representative of the Underwriters, of any credit or debit balance in our
account nor any reservation from distribution to cover possible additional
expenses relating to the Units shall constitute any representation by you as to
the existence or non-existence of possible unforeseen expenses or liabilities of
or charges against the several Underwriters. Notwithstanding the distribution of
any net credit balance to us or the termination of this Agreement or both, we
shall be and remain liable for, and will pay on demand, (a) our proportionate
share (based on our underwriting obligations) of all expenses and liabilities
which may be incurred by or for the accounts of the Underwriters, including any
liability which may be incurred by or for the accounts of the Underwriters,
including any liability which may be incurred by the Underwriters or any of them
based on the claim that the Underwriters constitute an association,
unincorporated business, partnership or any separate entity, and (b) any
transfer taxes paid after such settlement on account of any sale or transfer for
our account.
9. STABILIZATION AND OVER-ALLOTMENT. We authorize you, until
the termination of this Agreement, (a) to make purchases and sales of the Units
of the Company, in the open market or otherwise, for long or short account, and
on such terms and at such prices as you in your discretion may deem desirable,
(b) in arranging for sales of Units, to over-allot, and (c) either before or
after the
5
<PAGE> 6
termination of this Agreement, to cover any short position or liquidate any long
position incurred pursuant to this Section 9; subject, however, to the
applicable rules and regulations of the Securities and Exchange Commission under
the Securities Exchange Act of 1934. All such purchases, sales and
over-allotments shall be made for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations; provided that our net position resulting from such purchases and
sales and over-allotments shall not at any time exceed, for either long or short
account, 15% of the number of Units agreed to be purchased by us. We agree to
take up at cost on demand any Units purchased for our account pursuant to this
Section 9, and to deliver on demand any of such Units so sold or over-allotted
for our account pursuant to this Section 9.
If you engage in any stabilizing transactions as
Representative of the Underwriters, you shall notify us of that fact. Each of us
agrees to file with you, within two business days following the date of
termination of such transactions, triplicate originals of a report "not as
manager" on Form X-17A-1 in accordance with the requirements of Rule 17a-2(e)
under the Securities Exchange Act of 1934. You shall, as such Representative,
file such reports with, and make the requisite reports on such transactions as
required by, the Securities and Exchange Commission in accordance with Rule
17a-2 under the Securities Exchange Act of 1934.
We agree to advise you, from time to time upon request until
the settlement of accounts hereunder, of the number of Units at the time
retained by us unsold, and we will upon request sell to you for the accounts of
one or more of the several Underwriters such number of our unsold Units as you
may designate, at the Offering Price less such amount, not in excess of the
concession to Dealers, as you may determine.
10. OPEN MARKET TRANSACTIONS. We agree that except with your
consent and except as herein provided upon advice from you we will not make
purchases or sales on the open market or otherwise or attempt to induce others
to make purchases or sales, either before or after the purchase of the Units,
and prior to the completion (as defined in Rule 10b-6 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of our
participation in the distribution, we will otherwise comply with Rule 10b-6.
Nothing in this Section 10 contained shall prohibit us from acting as broker or
agent in the execution of unsolicited orders of customers for the purchase or
sale of any securities of the Company.
11. BLUE SKY. Prior to the initial offering by the
Underwriters, you will inform us as to the states under the respective
securities or Blue Sky laws of which it is believed that the Units have been
qualified or are exempt from such qualification for sale, but you do not assume
any responsibility or obligation as to the accuracy of such information or as to
the right of any Underwriter or Dealer to sell the Units in any jurisdiction. We
authorize you, if you deem it inadvisable in arranging sales of Units of our
account hereunder to sell any of our Units to any particular Dealer or other
buyer because of the securities or Blue Sky laws of any jurisdiction, to sell
our Units to one or more other Underwriters at the Offering Price less, in the
case of a sale to a Dealer, such amount, not in excess of the concession to
Dealers thereon, as you may determine. The transfer tax on any such sales among
Underwriters shall be treated as an expense and charged to the respective
accounts of the several Underwriters in proportion to their respective
underwriting obligations.
6
<PAGE> 7
12. DEFAULT BY UNDERWRITERS. Default by one or more
Underwriters in respect of their obligations under the Underwriting Agreement
shall not release us from any of our obligations. In case of such default by one
or more Underwriters, you are authorized to increase, pro rata with the other
non-defaulting Underwriters, the number of Units which we shall be obligated to
purchase from the Company, provided that the aggregate amount of all such
increases for all non-defaulting Underwriters shall not exceed 10% of the Units,
and, if the aggregate number of the Units not taken up by such defaulting
Underwriters exceeds such 10%, you are further authorized, but shall not be
obligated, to arrange for the purchase by other persons, who may include
yourselves, of all or a portion of the Units not taken up by such Underwriters.
In the event any such increases or arrangements are made, the respective number
of Units to be purchased by the non-defaulting Underwriters and by any such
other person or persons shall be taken as the basis for the underwriting
obligations under this Agreement, but this shall not in any way affect the
liability of any defaulting Underwriters to the other Underwriters for damages
resulting from such default.
In the event of default by one or more Underwriters in respect
of their obligations under this Agreement to take up and pay for any Units
purchased by you for their respective accounts pursuant to Section 9 hereof, or
to deliver any such Units for their respective accounts pursuant to any
provisions of this Agreement, and to the extent that arrangements shall not have
been made by you for other persons to assume the obligations of such defaulting
Underwriter or Underwriters, each non-defaulting Underwriter shall assume its
proportionate share of the aforesaid obligations of each such defaulting
Underwriter without relieving any such defaulting Underwriter of its liability
therefor.
13. TERMINATION. Unless earlier terminated by you, the
provisions of Sections 2, 3, 4, 6, 9 and 10 of this Agreement shall, except as
otherwise provided therein, terminate 45 full business days after the effective
date of the Registration Statement herein referred to, but may be extended by
you for an additional period or periods not exceeding 30 full business days in
the aggregate. You may, however, terminate this Agreement or any provisions
hereof at any time by written or telegraphic notice to us.
14. GENERAL POSITION OF THE REPRESENTATIVE. In taking action
under this Agreement, you shall act only as agent of the several Underwriters.
Your authority as Representative of the several Underwriters shall include the
taking of such action as you may deem advisable in respect of all matters
pertaining to any and all offers and sales of the Units, including the right to
make any modifications which you consider necessary or desirable in the
arrangements with Dealers or others. You shall be under no liability for or in
respect of the value of the Units or the validity or the form thereof, the
Registration Statement, the Prospectus, the Underwriting Agreement or other
instruments executed by the Company or others; or for or in respect of the
issuance, transfer or delivery of any of the Units or for the performance by the
Company or others of any agreement on its or their part; nor shall you as such
Representative or otherwise be liable under any of the provisions hereof or for
any matters connected herewith, except for want of good faith, and except for
any liability arising under the Securities Act of 1933; and no obligation not
expressly assumed by you as such Representative herein shall be implied from
this Agreement. In representing the Underwriters hereunder, you shall act as the
Representative of each of them respectively. Nothing herein contained shall
constitute the several Underwriters partners with you or with each other, or
render any Underwriter liable for the commitments of any other Underwriter,
except as otherwise provided in Section 12 hereof. The commitments and
7
<PAGE> 8
liabilities of each of the several Underwriters are several in accordance with
their respective underwriting obligations and are not joint.
15. ACKNOWLEDGMENT OF REGISTRATION STATEMENT, ETC. We hereby
confirm that we have examined the Registration Statement (including all
amendments thereto) relating to the Units as heretofore filed with the
Securities and Exchange Commission, that we are familiar with the amendments to
the Registration Statement and the final form of Prospectus proposed to be
filed, that we are willing to be named as an Underwriter therein and to accept
the responsibilities of an Underwriter thereunder, and that we are willing to
proceed as therein contemplated. We further confirm that the statements made
under the heading "Underwriting" in such proposed final form of Prospectus are
correct and we authorize you so to advise the Company on our behalf. We
understand that the aforementioned documents are subject to further change and
that we will be supplied with copies of any amendment or amendments to the
Registration Statement and of any amended Prospectus promptly, if and when
received by you, but the making of such changes and amendments shall not release
us or affect our obligations hereunder or under the Underwriting Agreement.
16. INDEMNIFICATION. Each Underwriter, including you, agrees
to indemnify and hold harmless each other Underwriter and each person who
controls any other Underwriter within the meaning of Section 15 of the
Securities Act of 1933, as amended, to the extent of their several commitments
under the Underwriting Agreement and upon the terms that such Underwriter agrees
to indemnify and hold harmless the Company as set forth in Section 6 of the
Underwriting Agreement. The agreement contained in this Section 16 shall survive
any termination of this Agreement Among Underwriters.
17. CAPITAL REQUIREMENTS. We confirm that our ratio of
aggregate indebtedness to net capital is such that we may, in accordance with
and pursuant to Rule 15c3-1, promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, agree to purchase the
number of Units we may be obligated to purchase under any provision of the
Underwriting Agreement or this Agreement.
18. UNDERTAKING TO MAIL PROSPECTUSES. We represent to you that
we have taken all action on our part required to have been taken to satisfy the
policy set forth in release No. 4968 of the Securities and Exchange Commission
under the Securities Exchange Act of 1933, including the distribution in the
manner and at or prior to the time set forth in such release, of copies of the
Preliminary Prospectus relating to the Stock (or, if you have so requested,
copies of any revised Preliminary Prospectus) to all persons to whom we expect
to mail confirmation of sale.
As contemplated by rule 15c2-8 under the Securities Exchange
Act of 1934, you agree to mail a copy of the Prospectus mentioned in the
Underwriting Agreement to any person making a written request therefor during
the period referred to in said rule, the mailing to be made to the address given
in the request. We confirm that we have delivered all Preliminary Prospectuses
and revised Preliminary Prospectuses, if any, required to be delivered under the
provisions of rule 15c2-8 and agree to deliver all Prospectuses required to be
delivered thereunder. We acknowledge that the copies of the Preliminary
Prospectus furnished to us have been distributed to dealers who have been
notified of the foregoing
8
<PAGE> 9
requirements pertaining to the delivery of Preliminary Prospectuses and
Prospectuses. You have heretofore delivered to us such number of copies of
Preliminary Prospectuses as have been reasonably requested by us, receipt of
which is hereby acknowledged, and will deliver such number of copies of
Prospectuses as will be reasonably requested by us.
19. MISCELLANEOUS. Any notice hereunder from us to you shall
be deemed to have been duly given if sent by registered mail, telegram or
teletype, to us at our address as set forth in the Underwriting Agreement, or to
you at 416 East Atlantic Boulevard, Pompano Beach, Florida 33060.
You hereby confirm that you are registered as broker-dealers
with the United States Securities and Exchange Commission and that you are
members of the National Association of Securities Dealers, Inc., as we confirm
that we are either a member of such Association or a foreign broker-dealer not
eligible for membership under Section I of the By-Laws of the Association who
agree to make no sales within the United States, its territories or possessions
or to persons who are national thereof or residents therein and, in making
sales, to comply with the requirements of the Association's Interpretation with
Respect to Free Riding and Withholding.
This instrument may be signed by the Underwriters in various
counterparts which together shall constitute one and the same agreement among
all the Underwriters and shall become effective at such time as all the
Underwriters shall have signed such counterparts and you shall have confirmed
all such counterparts. Your signature to such confirmation may be facsimile.
Please confirm that the foregoing correctly states the
understanding between us by signing and returning to us a counterpart hereof.
Very truly yours,
--------------------------------
By: ________________________________
Authorized Officer or Partner
Confirmed as of the date first above written.
JOSEPH ROBERTS & CO., INC.
AS REPRESENTATIVE
By: ____________________________
9
<PAGE> 1
EXHIBIT 3.1
SECRETARY OF STATE
[SEAL]
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that AMERICAN PROFESSIONAL BILLIARDS, INC. did on the EIGHTEENTH
day of MAY, 1995 file in this office the original Articles of Incorporation;
that said Articles are now on file and of record in the office of the Secretary
of State of the State of Nevada, and further, that said Articles contain all
the provisions required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed the Great Seal of State, at my office, in Carson
City, Nevada, this EIGHTEENTH day of MAY, 1995.
[SEAL]
/s/ DEAN HELLER
---------------------------------
Secretary of State
By: /s/ SIGNATURE ILLEGIBLE
-------------------------------
Certification Clerk
<PAGE> 2
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
AMERICAN PROFESSIONAL BILLIARDS, INC.
______
I, the person hereinafter named as incorporator, for the purpose of
associating to establish a corporation, under the provisions and subject to the
requirements of Title 7, Chapter 78 of Nevada Revised Statutes, and the acts
amendatory thereof, and hereinafter sometimes referred to as the General
Corporation Law of the State of Nevada, do hereby adopt and make the following
Articles of Incorporation:
FIRST: The name of the corporation (hereinafter called the
corporation) is American Professional Billiards, Inc.
SECOND: The name of the corporation's resident agent in the State of
Nevada is The Prentice-Hall Corporation System, Nevada, Inc., and the street
address of the said resident agent where process may be served on the
corporation is 502 East John Street, Carson City 89706. The mailing address and
the street address of the said resident agent are identical.
THIRD: The number of shares the corporation is authorized to issue is
20,000,000, all of which are of a par value of .001 dollars each. All of said
shares are of one class and are designated as Common Stock.
No holder of any of the shares of any class of the corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any shares
of any class of the corporation which the corporation proposes to issue or any
rights or options which the corporation proposes to grant for the purchase of
shares of any class of the corporation or for the purchase of any shares,
bonds, securities, or obligations of the corporation which are convertible
into or exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the corporation; and any
and all of such shares, bonds, securities, or obligations of the corporation,
whether now or hereafter authorized or created, may be issued, or may be
reissued or transferred if the same have been reacquired and have treasury
status, and any and all of such rights and options may be granted by the Board
of Directors to such persons, firms, corporations, and associations, and for
such lawful consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any thereof, to
any said holder.
<PAGE> 3
FOURTH: The governing board of the corporation shall be styled as a
"Board of Directors", and any member of said Board shall be styled as a
"Director."
The number of members constituting the first Board of Directors of the
corporation is one (1); and the name and the post office box or street address,
either residence or business, of each of said members are as follows:
NAME ADDRESS
---- -------
Donald Mackey 1700 East Desert Inn Road
Las Vegas, Nevada 89109
The number of directors of the corporation may be increased or
decreased in the manner provided in the Bylaws of the corporation; provided,
that the number of directors shall never be less than one. In the interim
between elections of directors by stockholders entitled to vote, all vacancies,
including vacancies caused by an increase in the number of directors and
including vacancies resulting from the removal of directors by the stockholders
entitled to vote which are not filled by said stockholders, may be filled by
the remaining directors, though less than a quorum.
FIFTH: The name and the post office box or street address, either
residence or business, of the incorporator signing these Articles of
Incorporation are as follows:
NAME ADDRESS
---- -------
George Balis 40 Wall Street
New York, NY 10005
SIXTH: The corporation shall have perpetual existence.
SEVENTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the General Corporation
Law of the State of Nevada, as the same may be amended and supplemented.
EIGHTH: The corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office, and
-2-
<PAGE> 4
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall enure to the benefit of the heirs, executors, and
administrators of such a person.
NINTH: The nature of the business of the corporation and the objects
or the purposes to be transacted, promoted, or carried on by it are as follows,
provided that the corporation may engage in any other lawful activity:
To conduct business relating to any and all aspects of the billiard
industry.
To carry on a general mercantile, industrial, and trading business in
all of its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export,
license as licensor or licensee, lease as lessor or lessee, distribute,
job, enter into, negotiate, execute, acquire, and assign contracts in
respect of, acquire, receive, grant, and assign licensing arrangements,
options, franchises, and other rights in respect of, and generally deal
in and with, at wholesale and retail, as principal, and as sales,
business, special, or general agent, representative, broker, factor,
merchant, distributor, jobber, advisor, and in any other lawful
capacity, goods, wares, merchandise, commodities, and unimproved,
improved, finished, processed, and other real, personal, and mixed
property of any and all kinds, together with the components,
resultants, and by-products thereof; to acquire by purchase or
otherwise own, hold, lease, mortgage, sell, or otherwise dispose of,
erect, construct, make, alter, enlarge, improve, and to aid or
subscribe toward the construction, acquisition, or improvement of any
factories, shops, storehouses, buildings, and commercial and retail
establishments of every character, including all equipment, fixtures,
machinery, implements, and supplies necessary, or incidental to, or
connected with, any and all acts connected therewith or arising
therefrom or incidental thereto, and all acts proper or necessary for
the purpose of the business.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease,
purchase, or otherwise acquire, and to own, use, hold, sell, convey,
exchange, lease, mortgage, work, clear, improve, develop, divide, and
otherwise handle, manage, operate, deal in, and dispose of real estate,
real property, lands, multiple-dwelling structures, houses, buildings,
and other works and any interest or right therein; to take, lease,
purchase, or otherwise acquire, and to own, use, hold, sell, convey,
-3-
<PAGE> 5
exchange, hire, lease, pledge, mortgage, and otherwise handle, and deal
in and dispose of, as principal, agent, broker, and in any lawful
capacity, such personal property, chattels, chattels real, rights,
easements, privileges, choses in action, notes, bonds, mortgages, and
securities as may lawfully be acquired, held, or disposed of, and to
acquire, purchase, sell, assign, transfer, dispose of, and generally
deal in and with, as principal, agent, broker, and in any lawful
capacity, mortgages and other interests in real, personal, and mixed
properties; to carry on a general construction, contracting, building,
and realty management business as principal, agent, representative,
contractor, subcontractor, and in any other lawful capacity.
To enter into general partnerships, limited partnership (whether the
corporation be a limited or general partner), joint ventures,
syndicates, pools, associations, and other arrangements for carrying on
of one or more of the purposes set forth in its Articles of
Incorporation, jointly or in common with others.
To apply for, register, obtain, purchase, lease, take licenses
in respect of, or otherwise acquire, and to hold, own, use, operate,
develop, enjoy, turn to account, grant licenses and immunities in
respect of, manufacture under and to introduce, sell, assign, mortgage,
pledge, or otherwise dispose of, and, in any manner deal with and
contract with reference to:
(a) inventions, devices, formulae, processes,
and any improvements and modifications thereof;
(b) letters patent, patent rights, patented
processes, copyrights, designs, and similar rights,
trade-marks, trade symbols, and other indications of
origin and ownership granted by or recognized under the
laws of the United States of America or of any state or
subdivision thereof, or of any foreign country or
subdivision thereof, and all rights connected therewith
or appertaining thereunto;
(c) franchises licenses, grants, and
concessions.
To purchase or otherwise acquire, and to hold, mortgage, pledge,
sell, exchange, or otherwise dispose of, securities (which term, for the
purpose of this Article NINTH, includes, without limitation of the
generality thereof, any shares of stock, bonds,
-4-
<PAGE> 6
debentures, notes, mortgages, or other obligations, and any certificates,
receipts, or other instruments representing rights to receive, purchase, or
subscribe for the same, or representing any other rights or interests therein
or in any property or assets) created or issued by any persons, firms,
associations, corporations, or governments or subdivisions thereof; to make
payment therefor in any lawful manner; and to exercise, as owner or holder of
any securities, any and all rights, powers, and privileges in respect thereof.
To make, enter into, perform, and carry out contracts of every kind and
description with any person, firm, association, corporation, or government or
subdivision thereof.
To acquire, by purchase, exchange, or otherwise, all, or any part of,
or any interest in, the properties, assets, business, and good will of any one
or more persons, firms, associations, or corporations heretofore or hereafter
engaged in any business for which a corporation may now or hereafter be
organized under the laws of the State of Nevada; to pay for the same in cash,
property, or its own or other securities; to hold, operate, reorganize,
liquidate, sell, or in any manner dispose of the whole or any part thereof; and
in connection therewith, to assume or guarantee performance of any liabilities,
obligations, or contracts of such persons, firms, associations, or
corporations, and to conduct the whole or any part of any business thus
acquired.
To lend its uninvested funds from time to time to such extent, to such
persons, firms, associations, corporations, governments or subdivisions
thereof, and on such terms and on such security, if any, as the Board of
Directors of the corporation may determine.
To endorse or guarantee the payment of principal, interest, or
dividends upon, and to guarantee the performance of sinking fund or other
obligations of any securities, and to guarantee in any way permitted by law the
performance of any of the contracts or other undertakings in which the
corporation may otherwise be or become interested, of any persons, firm,
association, corporation, government or subdivision thereof, or of any other
combination, organization, or entity whatsoever.
To borrow money for any of the purposes of the corporation, from time
to time, and without limit as to amount; from time to time to issue and sell
its own securities in such amounts, on such terms and conditions,
-5-
<PAGE> 7
for such purposes and for such prices, now or hereafter permitted by the laws
of the State of Nevada and by these Articles of Incorporation, as the Board of
Directors of the corporation may determine; and to secure such securities by
mortgage upon, or the pledge of, or the conveyance or assignment in trust of,
the whole or any part of the properties, assets, business, and good will of
the corporation, then owned or thereafter acquired.
To purchase, hold, cancel, reissue, sell, exchange, transfer, or
otherwise deal in, its own securities from time to time to such an extent and
in such manner and upon such terms as the Board of Directors of the corporation
shall determine; provided that the corporation shall not use its funds or
property for the purchase of its own shares of capital stock when such use
would cause any impairment of its capital, except to the extent permitted
by law; and provided further that shares of its own capital stock belonging to
the corporation shall not be voted upon directly or indirectly.
To organize or cause to be organized under the laws of the State of
Nevada, or of any other state of the United States of America, or of the
District of Columbia, or of any territory, dependency, colony, or possession of
the United States of America, or of any foreign country, a corporation or
corporations for the purpose of transacting, promoting, or carrying on any or
all of the objects or purposes for which the corporation is organized, and to
dissolve, wind up, liquidate, merge, or consolidate any such corporation or
corporations or to cause the same to be dissolved, wound up, liquidated,
merged, or consolidated.
To conduct its business in any and all of its branches and maintain
offices both within and without the State of Nevada, in any and all states of
the United States of America, in the District of Columbia, in any or all
territories, dependencies, colonies, or possessions of the United States of
America, and in foreign countries.
To such extent as a corporation organized under the General Corporation
Law of the State of Nevada may now or hereafter lawfully do, to do, either as
principal or agent and either alone or in connection with other corporations,
firms, or individuals, all and everything necessary, suitable, convenient, or
proper for, or in connection with, or incident to, the accomplishment of any of
the purposes or the attainment of any one or more of the objects herein
enumerated, or designed directly or indirectly to promote the interests of the
corporation or
-6-
<PAGE> 8
to enhance the value of its properties; and in general to do any and
all things and exercise any and all powers, rights, and privileges
which a corporation may now or hereafter be organized to do or to
exercise under the General Corporation Law of the State of Nevada or
under any act amendatory thereof, supplemental thereto, or substituted
therefor.
The foregoing provisions of this Article NINTH shall be
construed both as purposes and powers and each as an independent purpose and
power. The foregoing enumeration of specific purposes and powers shall not be
held to limit or restrict in any manner the purposes and powers of the
corporation, and the purposes and powers herein specified shall, except when
otherwise provided in this Article NINTH, be in no wise limited or restricted by
reference to, or inference from, the terms of any provision of this or any other
Article of these Articles of Incorporation; provided, that the corporation shall
not carry on any business or exercise any power in any state, territory, or
country which under the laws thereof the corporation may not lawfully carry on
or exercise.
TENTH: The corporation reserves the right to amend, alter,
change, or repeal any provision contained in these Articles of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, I do hereby execute these Articles of
Incorporation on this 16th day of May, 1995.
/s/ George S. Balis
_______________________________
George S. Balis, Incorporator
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 16th day of May, 1995, personally appeared before me,
a Notary Public in and for the State and County aforesaid, George S. Balis,
known to me to be the person described in and who executed the foregoing
Articles of Incorporation, and who acknowledged to me that he executed the same
freely and voluntarily and for the uses and purposes therein mentioned.
WITNESS my hand and official seal, the day and year first above
written.
Kenneth M. Greenfield
--------------------------------
KENNETH M. GREENFIELD
NOTARY PUBLIC, STATE OF NEW YORK
(NOTARIAL SEAL) No. 31-6865010
QUALIFIED IN NEW YORK COUNTY
COMMISSION EXPIRES JUNE 30, 1996
-7-
<PAGE> 9
STATE OF NEVADA
[NEVADA STATE SEAL]
SECRETARY OF STATE
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 18, 1995
NO. 8330-95
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
IN THE MATTER OF AMERICAN PROFESSIONAL BILLIARDS, INC.
-----------------------------------------------------
Name of corporation
I, The Prentice-Hall Corporation System, Nevada, Inc. with address at Suite
--------------------------------------------------, ---,
Street 502 East John Street
-----------------------------------------------------------------------,
Town of Carson City County of (no county) Zip Code 89706 State of
-------------------, --------------------------,
Nevada, hereby accept the appointment as Resident Agent of the above-entitled
corporation in accordance with NRS 78.090.
FURTHERMORE, that the principal office in this state is located at
Suite Street c/o The Prentice-Hall Corporation System, Nevada, Inc.,
------, 502 East John Street
----------------------------------------------------------,
Town of Carson City County of (no county) Zip Code 89706
----------------------, -------------------------------------,
State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of
--------
May 1995
- ---------, ---.
The Prentice-Hall Corporation
System, Nevada, Inc.
By: /s/ Samuel Saleem, Asst. Sec.
-------------------------------------
Resident Agent
RECEIVED
MAY 18, 1995
150 MK
================================================================================
NRS 78.090 Except during a period of vacancy described in NRS 78.097,
every corporation shall have a resident agent, who may be either a natural
person or a corporation, resident or located in this state, in charge of its
principal office. The resident agent may be any bank or banking corporation, or
other corporation, located and doing business in this state. The certificate
of acceptance must be filed at the time of the initial filing of the corporate
papers.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AMERICAN PROFESSIONAL BILLIARDS, INC.
(a Nevada corporation)
ARTICLE I.
STOCKHOLDERS
1. CERTIFICATE REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation or by agents designated by the Board of Directors, certifying the
number of shares owned by him in the corporation and setting forth any
additional statements that may be required by the General Corporation Law of
the State of Nevada (General Corporation Law). If any such certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, a facsimile of the signature of the officers, the transfer
agent or the transfer clerk or the registrar of the corporation may be printed
or lithographed upon the certificate in lieu of the actual signatures. If any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any certificate or certificates shall cease
to be such officer or officers of the corporation before such certificate or
certificates shall have been delivered by the corporation, the certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the corporation.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, the certificates
representing stock of any such class or series shall set forth thereon the
statements prescribed by the General Corporation Law. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such
shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost,
stolen, or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient
<PAGE> 2
to indemnity the corporation against any claim that may be made against it on
account of the alleged loss, theft, or destruction of any such certificate or
the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation is not obliged to
but may execute and deliver a certificate for or including a fraction of a
share. In lieu of executing and delivering a certificate for a fraction of a
share, the corporation may proceed in the manner prescribed by the provisions
of Section 78.205 of the General Corporation Law.
3. STOCK TRANSFERS. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any, transfers
or registration of transfers of shares of stock of the corporation shall be
made only on the stock ledger of the corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes, if any, due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the directors may fix, in
advance, a record date, which shall not be more than sixty days nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed;
and the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at any meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
-2-
<PAGE> 3
5. MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class upon which or upon whom the
Articles of Incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the Articles of
Incorporation may provide for more than one class or series of shares of stock,
one or more of which are limited or denied such rights thereunder; provided,
however, that no such right shall vest in the event of an increase or a decrease
in the authorized number of shares of stock of any class or series which is
otherwise denied voting rights under the provisions of the Articles of
Incorporation.
6. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization
of the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Nevada, as the directors may, from time to
time, fix.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Notice of all meetings shall be in
writing and signed by the president or a Vice-President, or the Secretary, or
an Assistant Secretary, or by such other person or persons as the directors may
designate. The notice must state the purpose or purposes for which the meeting
is called and the time when, and the place, where it is to be held. A copy of
the notice must be either delivered personally, or mailed postage prepaid to
each stockholder not less than ten nor more than sixty days before the meeting.
If mailed, it must be directed to the stockholder at his address as it appears
upon the records of
-3-
<PAGE> 4
the corporation. Any stockholder may waive notice of any meeting by a writing
signed by him, or his duly authorized attorney, either before or after the
meeting; and whenever notice of any kind is required to be given under the
provisions of the General Corporation Law, a waiver thereof in writing and duly
signed whether before or after the time stated therein, shall be deemed
equivalent thereto.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in the absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in any manner described in, or
otherwise authorized by, the provisions of Section 78.355 of the General
Corporation Law.
- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors, if
any, shall make a report in writing of any challenge, question or matter
determined by him or them and execute a certificate of any fact found by him or
them.
- QUORUM. Stockholders holding at least a majority of the voting
shares are necessary to constitute a quorum at a meeting
-4-
<PAGE> 5
of stockholders for the transaction of business unless the action to be taken
at the meeting shall require a greater quorum. The stockholders present may
adjourn the meeting despite the absence of a quorum.
-- VOTING. Each share of stock shall entitle the holder thereof to one
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by stockholders who hold at least a
majority of the voting power and are present at a meeting at which a quorum is
present, except where the General Corporation Law, the Articles of
Incorporation, or these Bylaws prescribe a different percentage of votes and/or
a different exercise of voting power. In the election of directors, voting need
not be by ballot; and, except as otherwise may be provided by the General
Corporation Law, voting by ballot shall not be required for any other action.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as may otherwise be
provided by the General Corporation Law, any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by stockholders holding at least a majority
of the voting power; provided that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required. In no instance where action is authorized by written
consent need a meeting of stockholders be called or noticed. Any written consent
shall be subject to the requirements of Section 78.320 of the General
Corporation Law and of any other applicable provision of law.
ARTICLE II.
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by the Board of Directors of the corporation. The
Board of Directors shall have authority to fix the compensation of the members
thereof for services in any capacity. The use of the phrase "whole Board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director must be at least 18 years
of age. A director need not be a stockholder or a resident of the State of
Nevada. The initial Board of Directors shall consist of one (1) person. Subject
to the foregoing limitation, and except for the first Board of Directors, such
number may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be five (5). The
number of directors may be increased or decreased by action of the stockholders
or of the directors.
-5-
<PAGE> 6
3. ELECTION AND TERM. Directors may be elected in the manner
prescribed by the provisions of Sections 78.320 through 78.335 of the General
Corporation Law of Nevada. The first Board of Directors shall hold office until
the first election of directors by stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. Any
directors may resign at any time upon written notice to the corporation.
Thereafter, directors who are elected at an election of directors by
stockholders, and directors who are elected in the interim to fill vacancies
and newly created directorships, shall hold office until the next election of
directors by stockholders and until their successors are elected and qualified
or until their earlier resignation or removal. In the interim between elections
of directors by stockholders, newly created directorships and any vacancies in
the Board of Directors, including any vacancies resulting from the removal of
directors for cause or without cause by the stockholders and not filled by said
stockholders, may be filled by the vote of a majority of the remaining
directors then in office, although less than a quorum, or by the sole remaining
director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
State of Nevada as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice, if any, need not be given to a director or to any
member of a committee of directors who submits a written waiver of notice
signed by him before or after the time stated therein.
- QUORUM AND ACTION. A majority of the whole Board shall constitute
a quorum, except when a vacancy or vacancies prevents such majority, whereupon
a majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
-6-
<PAGE> 7
adjourn a meeting to another time and place. Except as the Articles of
Incorporation or these Bylaws may otherwise provide, and except as otherwise
provided by the General Corporation Law, the act of the directors holding a
majority of the voting power of the directors, present at a meeting at which a
quorum is present, is the act of the Board. The quorum and voting provisions
herein stated shall not be construed as conflicting with any provisions of the
General Corporation Law and these Bylaws which govern a meeting of directors
held to fill vacancies and newly created directorships in the Board or action
of disinterested directors.
Members of the Board or of any committee which may be designated by the
Board may participate in a meeting of the Board or of any such committee, as
the case may be, by means of a telephone conference or similar method of
communication by which all persons participating in the meeting hear each
other. Participation in a meeting by said means constitutes presence in person
at the meeting.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and
if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be
removed for cause or without cause in accordance with the provisions of the
General Corporation Law.
6. COMMITTEES. Whenever its number consists of two or more, the
Board of Directors may designate one or more committees which have such powers
and duties as the Board shall determine. Any such committee, to the extent
provided in the resolution or resolutions of the Board, shall have and may
exercise the powers and authority of the Board of Directors in the management
of the business and affairs of the corporation and may authorize the seal or
stamp of the corporation to be affixed to all papers on which the corporation
desires to place a seal or stamp. Each committee must include at least one
director. The Board of Directors may appoint natural persons who are not
directors to serve on committees.
7. WRITTEN ACTION. Any action required or permitted to be taken
at a meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if, before or after the action, a written consent thereto is
signed by all the members of the Board or of the committee, as the case may be.
-7-
<PAGE> 8
ARTICLE III.
OFFICERS
1. The corporation must have a President, a Secretary, and a Treasurer,
and, if deemed necessary, expedient, or desirable by the Board of Directors, a
Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents with such titles as the resolution choosing them shall designate. Each of
any such officers must be natural persons and must be chosen by the Board of
Directors or chosen in the manner determined by the Board of Directors.
2. QUALIFICATIONS. Except as may otherwise be required in the
resolution providing for the appointment of an officer, no officer other than
the Chairman of the Board, if any, and the Vice-Chairman of the Board, if any,
need be a director.
Any person may hold two or more offices, as the directors may determine.
3. TERM OF OFFICE. Unless otherwise provided in the resolution choosing
him, each officer shall be chosen for a term which shall continue until the
meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen or until his
resignation or removal before the expiration of his term.
Any officer may be removed, with or without cause, by the Board of
Directors or in the manner determined by the Board.
Any vacancy in any office may be filled by the Board of Directors or in
the manner determined by the Board.
4. DUTIES AND AUTHORITY. All officers of the corporation shall have
such authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolution designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions or instruments may be inconsistent therewith.
ARTICLE IV.
REGISTERED OFFICE
The location of the initial registered office of the corporation in the
State of Nevada is 1700 East Desert Inn Road, Suite 108, Las Vegas NV 89109,
the address of the initial resident
-8-
<PAGE> 9
agent of the corporation, as set forth in the original Articles of
Incorporation.
The corporation shall maintain at said registered office a copy,
certified by the Secretary of State of the State of Nevada, of its Articles of
Incorporation, and all amendments thereto, and a copy, certified by the
Secretary of the corporation, of these Bylaws, and all amendments thereto. The
corporation shall also keep at said registered office a stock ledger or a
duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all persons who are stockholders of the corporation, showing their
places of residence, if known, and the number of shares held by them
respectively or a statement setting out the name of the custodian of the stock
ledger or duplicate stock ledger, and the present and complete post office
address, including street and number, if any, where such stock ledger or
duplicate stock ledger is kept.
ARTICLE V.
CORPORATE SEAL OR STAMP
The corporate seal or stamp shall be in such form as the Board of
Directors may prescribe.
ARTICLE VI.
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
ARTICLE VII.
CONTROL OVER BYLAWS
The power to amend, alter, and repeal these Bylaws and to make new
Bylaws shall be vested in the Board of Directors subject to the Bylaws, if any,
adopted by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy
of the Bylaws of American Professional Billiards, Inc., a Nevada corporation,
as in effect on the date hereof.
WITNESS my hand and the seal of stamp of the corporation.
Dated: as of May 25, 1995
/s/ Donald E. Mackey
-----------------------------
Donald E. Mackey
Director of American
Professional Billiards, Inc.
-9-
<PAGE> 1
EXHIBIT 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of ____________, 1996 between American
Professional Billiards, Inc. (the "Company") and __________________________, as
Warrant Agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue Redeemable Common Stock
Purchase Warrants, as hereinafter described (the "Warrants"), to purchase up to
an aggregate of 1,150,000 shares (subject to adjustment as provided herein) of
its Common Stock, no par value (the "Common Stock") (the shares of Common Stock
issuable on exercise of the Warrants being referred to herein as the "Warrant
Shares") in connection with a public offering of up to 1,150,000 Units
consisting of 1,150,000 shares of Common Stock and 1,150,000 Warrants (including
150,000 Units subject to an over-allotment option), each Warrant entitling the
holder thereof to purchase one share (subject to adjustment as provided herein)
of Common Stock, and the issuance to Joseph Roberts & Co., Inc. ("Roberts") the
representative of the underwriters in such offering (the "Representative"), of
warrants (the "Underwriter's Warrants") to purchase (the "Purchase Option") up
to an additional 100,000 Units consisting of 100,000 shares of Common Stock and
100,000 Warrants to purchase an additional 100,000 shares of Common Stock.
WHEREAS, the Company wishes the Warrant Agent to act on behalf of
the Company and the Warrant Agent is willing to act in connection with the
issuance, division, transfer, exchange, redemption and exercise of Warrants;
NOW, THEREFORE, in consideration of the foregoing and for the
purposes of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the registered owners of
the Warrants (the "Holders"), the Company and the Warrant Agent hereby agree as
follows:
1. Appointment of Warrant Agent.
The Company hereby appoints the Warrant Agent to act as agent for
the Company in accordance with the instructions set forth in this Agreement, and
the Warrant Agent hereby accepts such appointment.
2. Transferability and Form of Warrant.
2.1 Registration. The Warrants shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person.
2.2 Transfer. The Common Stock and the Warrants may be
transferred separately from each other at any time after the issuance thereof.
The Warrants shall be transferable only on the books of the Company maintained
at the principal office of the Warrant Agent upon delivery thereof
<PAGE> 2
duly endorsed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by a power of attorney, the
original power of attorney, duly approved, or a copy thereof, duly certified,
shall be deposited and remain with the Warrant Agent. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Warrant Agent in its discretion. Upon any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the persons entitled thereto.
2.3 Form of Warrant. The text of the Warrant and the Subscription
Form shall be substantially as set forth in Exhibit A attached hereto. The price
per Warrant Share and the number of Warrant Shares issuable upon exercise of
each Warrant are subject to adjustment upon the occurrence of certain events,
all as hereinafter provided. The Warrant shall be executed on behalf of the
Company by its Chairman of the Board or President under its corporate seal
reproduced thereon and attested by its Secretary or an Assistant Secretary. The
signature of any such officers on the Warrants may be manual or facsimile.
Warrants bearing the manual or facsimile signature of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased to
hold such office prior to the delivery of such Warrants or did not hold such
office on the date of this Agreement.
Warrants shall be dated as of the date of countersignature
thereof by the Warrant Agent either upon initial issuance or upon division,
exchange, substitution or transfer. Warrants shall be numbered serially with the
letter W.
3. Countersignature of Warrants.
The Warrants shall be countersigned by the Warrant Agent (or any
successor to the Warrant Agent then acting as warrant agent under this
Agreement) and shall not be valid for any purpose unless so countersigned.
Warrants may be countersigned, however, by the Warrant Agent (or by its
successor as warrant agent hereunder) and may be delivered by the Warrant Agent,
not withstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature, issuance or delivery. The Warrant Agent
shall, upon written instruction of the Chairman of the Board, President or
Secretary of the Company, countersign issue and deliver Warrants entitling the
Holders thereof to purchase not more than 1,150,000 Warrant Shares (subject to
Section 7 hereof and adjustment pursuant to Section 10 hereof) and shall
countersign and deliver Warrants as otherwise provided in this Agreement.
2
<PAGE> 3
4. Exchange of Warrant Certificates.
Each Warrant certificate may be exchanged for another certificate
or certificates entitling the Holder thereof to purchase a like aggregate number
of Warrant Shares as the certificate or certificates surrendered then entitle
such Holder to purchase. Any Holder desiring to exchange a Warrant certificate
or certificates shall make such request in writing delivered to the Warrant
Agent, and shall surrender, properly endorsed, the certificate or certificates
to be so exchanged. Thereupon, the Warrant Agent shall countersign and deliver
to the person entitled thereto a new Warrant certificate or certificates, as the
case may be, as so requested.
5. Term of Warrants; Exercise of Warrants; Restrictions on
Issuance of Underlying Shares; Fee.
5.1 Term of Warrants. Subject to the terms of this Agreement,
each Holder shall have the right, which may be exercised commencing on ________,
1997 and until 5:00 p.m. Eastern time on ________, 2001, to purchase from the
Company the number of fully paid and non-assessable Warrant Shares which the
Holder may at the time be entitled to purchase on exercise of such Warrants.
5.2 Exercise of Warrants. Warrants may only be exercised for the
purchase of whole Warrant Shares. Warrants may be exercised upon surrender to
the Company at the principal office of the Warrant Agent, of the certificate or
certificates evidencing the Warrants to be exercised (except as otherwise
provided below), together with the form of election to purchase on the reverse
thereof duly filled in and signed, and upon payment to the Warrant Agent for the
account of the Company of the Warrant Price (as defined in and determined in
accordance with the provisions of Sections 9 and 10 hereof), for the number of
Warrant Shares in respect of which such Warrants are then exercised. Payment of
the aggregate Warrant Price shall be made in cash or by certified or official
bank check.
Subject to Section 6 hereof, upon such surrender of Warrants and
payment of the Warrant Price as aforesaid, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
Holder, and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants, together with cash, as provided in Section 12 hereof,
in respect of any fractional Warrant Shares otherwise issuable upon such
exercise of Warrants. Such certificate or certificates shall be deemed to have
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrants and payment of such Warrant Price, as aforesaid; provided,
however, that if, on the date of surrender of such Warrants and payment of such
Warrant Price, the transfer books for the Warrant Shares or other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares in respect of which such Warrants are then exercised
shall be issuable as of the date on which such books shall next be opened
(whether before or after ________, 2001) and until such date the Company shall
be under no duty to deliver any certificate for such Warrant Shares; provided
further, however, that the transfer books of record, unless otherwise
3
<PAGE> 4
required by law, shall not be closed at any one time for a period of longer than
twenty days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the holders thereof either, in full or from time
to time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of less than all of the Warrant Shares purchasable on such
exercise at any time prior to the date of expiration of the Warrant, a new
certificate evidencing the remaining Warrant or Warrants will be issued, and the
Warrant Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant certificate or certificates pursuant to the provisions of
this Section and of Section 3 hereof and the Company, whenever required by the
Warrant Agent, will supply the Warrant Agent with Warrant certificates duly
executed on behalf of the Company for such purpose.
5.3 Restrictions on Issuance of Underlying Shares. The Company is
not obligated to deliver any shares of Common Stock pursuant to the exercise of
the Warrants unless a registration statement under the Securities Act of 1933,
as amended, with respect to such shares of Common Stock is effective. The
Warrants shall not be exercisable by a holder thereof in any state in which such
exercise would be unlawful. The Company is not obligated to qualify the shares
of Common Stock represented by the Warrants for sale in any jurisdiction where
any holder thereof may reside, but the Company is obligated to endeavor to seek
registration or approval for the sale of the shares of Common Stock represented
by the Warrants in those states in which the Units to which the Warrants relate
were sold pursuant to the Company's registration statement and in such other
states in which an exemption from registration is available.
5.4 Fee. If, upon the exercise of any Warrant on or after
________, 1997, (i) the market price of the Company's Common Stock is greater
then the Warrant Price, (ii) the exercise of the Warrant was solicited by
Roberts as determined in accordance with the Purchase Form on the reverse side
of the Warrant certificate, (iii) the Warrant was not held in a discretionary
account, (iv) disclosure of compensation arrangements was made both at the time
of the original offering and at the time of exercise (by delivery of the
Prospectus or as otherwise required by applicable law, rule or regulation), (v)
Roberts provided bona fide services in connection with the solicitation of the
Warrant and (vi) the solicitation of the exercise of the Warrant was not in
violation of Rule l0b-6 (as such rule or any successor rule may be in effect as
of such time of exercise) promulgated under the Securities Exchange Act of 1934,
as amended, then, the Warrant Agent simultaneously with the distribution of
proceeds to the Company received upon the exercise of any Warrant so exercised,
shall, on behalf of the Company, pay from the proceeds received upon exercise of
a Warrant, a fee of ____% of the Warrant Price to Roberts. Within five days
after exercise, the Warrant Agent shall send Roberts a copy of the reverse side
of each Warrant exercised. Roberts and the Company may at any time during
business hours examine the records of the Warrant Agent, including its ledger of
original Warrant Certificates returned to the Warrant Agent upon exercise of the
Warrants. The provisions of this paragraph may not be amended, amended or
deleted without the prior written consent of Roberts.
4
<PAGE> 5
6. Payment of Taxes.
The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which maybe payable in respect of any transfer involved in the
issue or delivery of any Warrants or certificates for Warrant Shares in a name
other than that of the registered Holder of Warrants in respect of which such
Warrant Shares are issued.
7. Mutilated or Missing Warrants.
In case any of the certificates evidencing the Warrants shall be
mutilated, lost, stolen or destroyed, the Company may in its discretion issue,
and the Warrant Agent shall countersign and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant Certificate, or in lieu of
and substitution for the Warrant certificate lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing an equivalent right or
interest; but only upon receipt of evidence satisfactory to the Company and the
Warrant Agent of such loss, theft or destruction of such Warrant and indemnity
if requested, also satisfactory to them. An applicant for such a substitute
Warrant certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company or Warrant Agent may prescribe.
8. Reservation of Warrant Shares; Purchase of Warrants.
8.1 Reservation of Warrant Shares. There have been reserved, and
the Company shall at all times keep reserved and available, out of its
authorized Common Stock, such number of shares of Common Stock as shall be
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The Transfer Agent for the Common Stock and every
subsequent transfer agent for any shares of the Company's capital stock issuable
upon the exercise of any of such rights of purchase will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent or its successors and with every
subsequent transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time to time
from the Transfer Agent or its successors the stock certificates required to
honor outstanding Warrants upon exercise thereof in accordance with the terms of
this Agreement. The Company will supply such Transfer Agent or its successors
with duly executed stock certificates for such purposes and will provide or
otherwise make available any cash which may be payable as provided in Section 12
hereof. All Warrants surrendered in the exercise of the rights thereby evidenced
shall be canceled by the Warrant Agent and shall thereafter be delivered to the
Company.
8.2 Purchase of Warrants by the Company. The Company shall have
the right, except as limited by law, other agreement or herein, to purchase or
otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
5
<PAGE> 6
8.3 Redemption of Warrants by the Company. If and only if the
closing average bid price of the Common Stock is at least 100% of the then
effective exercise price of the Warrants on each of the 20 consecutive trading
days ending on the day prior to the day on which notice is given, then the
Company shall have the right, at any time, to redeem any or all of the Warrants
at $.___ per Warrant. If less than all the Warrants are to be redeemed, the
Warrant Agent shall select the Warrants to be redeemed from those then
outstanding by a method the Warrant Agent considers fair and appropriate.
Notice of the redemption shall be mailed not less than thirty
days prior to the date scheduled for such redemption (the "Call Date") and shall
be given to the Warrant Agent and the Holders in accordance with the provisions
of Section 19 hereof. At the same time that the notice of redemption is mailed
to the Holders pursuant to this Section , notice shall also be given by
publishing, at least once in one or more newspapers printed in the English
language and in general circulation in the City of New York, New York, and such
notice shall state the date, place and price of such redemption. Each Holder
shall continue to have the right to exercise Warrants until 5:00 p.m., Eastern
time, on the first day immediately preceding the Call Date on which the Warrant
Agent is open for the transaction of business. Not later than the Call Date, the
Company shall deposit with the Warrant Agent funds sufficient to purchase all of
the Warrants called for redemption pursuant to this Section 8.3 which are
outstanding at 5:00 p.m., Eastern time, on the date when the right to exercise
expires.
Notwithstanding anything to the contrary herein, the Company
shall not have the right to redeem any Underwriter's Warrants which may be
issued to Roberts and/or its designees upon its or their exercise of the
Purchase Option to be granted to Roberts and/or its designees.
8.4 Cancellation of Warrants. In the event the Company shall
purchase or otherwise acquire Warrants, the same shall thereupon be delivered to
the Warrant Agent and be canceled by it and retired. The Warrant Agent shall
cancel any Warrants surrendered for exchange, substitution, transfer or exercise
in whole or in part.
9. Warrant Price.
The price per share at which Warrant Shares shall be purchasable
upon exercise of Warrants (the "Warrant Price") shall be $______ per share,
subject to adjustment pursuant to Section 10 hereof.
10. Adjustment of Warrant Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise
of each Warrant and the Warrant Price shall be subject to adjustment from time
to time upon the happening of certain events, as thereinafter defined.
10.1 Mechanical Adjustments. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price shall be
subject to adjustment as follows:
6
<PAGE> 7
(a) In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock,
(ii) subdivide or split its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by
reorganization, reclassification or recapitalization of its
shares of Common Stock other securities of the Company, the
number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the
Holder of each Warrant shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which
he would have owned or have been entitled to receive after the
happening of any of the events described above, had such Warrant
been exercised immediately prior to the happening of such event
or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately
after the effective date of such event retroactive to the record
date, if any, for such event.
(b) In case the Company shall distribute to all
holders of its shares of Common Stock evidences of its
indebtedness or assets (excluding cash dividends or distributions
payable out of consolidated earnings or earned surplus and
dividends or distributions referred to in paragraph (a) above) or
rights, options or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase
shares of Common Stock, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant
shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon the exercise of each Warrant, by a
fraction, of which the numerator shall be the then current market
price per share of Common Stock (as defined in Section 10.1 (c)
hereof) on the date of such distribution, and of which the
denominator shall be the then current market price per share of
Common Stock, less the then fair value (as determined by the
Board of Directors of the Company, whose determination shall be
conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of distribution
retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(c) For the purpose of any computation under
Section 10.1(b) and Section 12 hereof, the current market price
per share of Common Stock at any date shall be the average
closing bid price of the Common Stock (if then traded in the
over-the-counter market) or the average closing price of the
Common Stock (if then traded on NASDAQ's National Market System
or on a national securities exchange) for the five consecutive
trading days ending the day prior to the date as of which such
computation is made. If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid or closing prices
are not so reported, the current market price per share shall be
determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
7
<PAGE> 8
(d) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least 1% in the
number of Warrant Shares purchasable upon the exercise of each
Warrant; however, that any adjustments which by reason of this
Section 10.1(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest one-thousandth of a
share.
(e) Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Warrant Price payable upon exercise of each
Warrant in effect immediately prior to such adjustment, shall be
adjusted by multiplying such Warrant Price immediately prior to
such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of
each Warrant immediately prior to such adjustment, and of which
the denominator shall be the number or Warrant Shares so
purchasable immediately thereafter.
(f) For the purpose of this Section 10.1, the term
"shares of Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Company at the date of this
Agreement, or (ii) any other class of stock resulting from
successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at
any time, as a result of an adjustment made pursuant to paragraph
(a) above, the Holders shall become entitled to purchase any
shares of the Company other than shares of Common Stock,
thereafter the number of such other shares so purchasable upon
exercise of each Warrant and the Warrant Price of such shares
shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in Section 10.1(a)
through Section 10.1(e), inclusive, above, and the provisions of
Section 5 and Sections 10.2 and 10.3 hereof, with respect to the
Warrant Shares, shall apply on like terms to any such other
shares.
10.2 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall cause the
Warrant Agent promptly to mail by first class mail, postage prepaid, to each
Holder notice of such adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants employed
by the Company) setting forth the number of Warrant Shares purchasable upon the
exercise of each Warrant and the Warrant Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive of the correctness of such adjustment. The
Warrant Agent shall be entitled to rely on such certificate and shall be under
no duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holders to determine whether any
facts exist which may require any adjustment
8
<PAGE> 9
of the Warrant Price or the number of Warrant Shares or other stock or property
purchasable on exercise thereof, or with respect to the nature or extent of any
such adjustment when made, or with respect to the method employed in making such
adjustment.
10.3 No Adjustment for Dividends. Except as provided in
subsection 10.1, no adjustment in respect of any cash dividend shall be made
during the term of a Warrant or upon the exercise of a Warrant.
10.4 Preservation of Purchase Rights Upon Consolidation, etc. In
case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or conveyance to another corporation
of the property of the Company as an entirety or substantially as an entirety,
the Company or such successor or purchasing corporation, as the case may be,
shall execute with the Warrant Agent an agreement that each Holder shall have
the right thereafter upon payment of the Warrant Price in effect immediately
prior to such action to purchase upon exercise of each Warrant the kind and
amount of shares and other securities and property which he would have owned or
have been entitled to receive after the happening of such consolidation, merger,
sale or conveyance had such Warrant been exercised immediately prior to such
action. The Company shall mail by first class mail, postage prepaid, to each
Holder, notice of the execution of any such agreement. Such agreement shall
provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 10. The provisions
of this Section 10.4 shall similarly apply to successive consolidations,
mergers, sales or conveyances. The Warrant Agent shall be under no duty or
responsibility to determine the correctness of any provisions contained in any
such agreement relating either to the kind or amount of shares of stock or other
securities or property receivable upon exercise of Warrants or with respect to
the method employed and provided therein for any adjustments.
10.5 Reduction of Warrant Price. The Company shall have the right
to reduce the Warrant Price or extend the expiration date of the Warrants at any
time upon 30 days' prior written notice to all Holders.
10.6 Statement on Warrants. Irrespective of any adjustments in
the Warrant Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrant certificates theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrant certificates initially issuable pursuant to this Agreement.
11. Expiration of Warrants.
At 5:00 p.m. Eastern time on ________, 2001, all outstanding
Warrants shall become void and all rights of all holders thereof and thereunder
and under this Agreement shall cease.
12. Fractional Interests.
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants. The number of full Warrant Shares which
shall be issuable upon the exercise of Warrants
9
<PAGE> 10
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrant so presented. If any faction of a Warrant
Share would, except for the provisions of this Section 12, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall pay an
amount in cash equal to the then current market price per Common Share (as
defined in Section 10.1(c) above) multiplied by such fraction.
13. No Rights as Stockholders; Notices to Holders.
Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders or their transferees the right
to vote or to receive dividends or to consent to or receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration of
the Warrants and prior to their exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable
in any securities upon its shares of Common Stock or make any
distribution (other than a cash dividend) to the holders of its
shares of Common Stock; or
(b) the Company shall offer to the holders of its
shares of Common Stock any additional shares of Common Stock or
securities convertible into shares of Common Stock or any right
to subscribe thereto; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger,
or sale of all or substantially all of its property, assets, and
business as an entirety) shall be proposed; then in any one or
more of said events, the Company shall (i) give notice in writing
of such event to the Warrant Agent and the Holders as provided in
Section 19 hereof and (ii) cause notice of such event to be
published once in one or more newspapers printed in the English
language and in general circulation in New York, New York, such
giving of notice and publication to be completed at least fifteen
days prior to the date fixed as a record date or the date of
closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or
subscription rights, or for the determination of stockholders
entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. Failure
to publish or mail such notice or any defect therein or in the
publication or mailing thereof shall not affect the validity of
any action taken in connection with such dividend, distribution
or subscription rights, or proposed dissolution, liquidation or
winding up.
14. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement.
The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and shall pay to the Company weekly all monies
received by the Warrant Agent for
10
<PAGE> 11
the purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the Holders
during normal business hours at its principal office. The Company shall supply
the Warrant Agent from time to time with such numbers of copies of this
Agreement as the Warrant Agent may request.
15. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for the appointment as a successor Warrant
Agent under the provisions of Section 17 hereof. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned; and in case
at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrants either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in all such cases Warrants shall have the full force provided in the
Warrants and in this Agreement.
In any case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrants so countersigned; and in case at that time any of
the Warrants shall not have been countersigned, the Warrant Agent may
countersign such Warrants either in its prior name or in its changed name; and
in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
16. Concerning the Warrant Agent.
The Warrant Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the Holders, by their acceptance of Warrants, shall be bound:
16.1 Correctness of Statements. The statements contained herein
and in the Warrants shall be taken as statements of the Company and the Warrant
Agent assumes no responsibility for the correctness of any of the same except
such as describe the Warrant Agent or action taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrants
except as herein otherwise provided.
11
<PAGE> 12
16.2 Breach of Covenants. The Warrant Agent shall not be
responsible for any failure of the Company to comply with the covenants
contained in this Agreement or in the Warrants to be complied with by the
Company.
16.3 Performance of Duties. The Warrant Agent may execute any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents (which shall not include its
employees).
16.4 Reliance on Counsel. The Warrant Agent may consult at any
time with legal counsel satisfactory to it (who may be counsel for the Company)
and the Warrant Agent shall incur no liability or responsibility to the Company
or to any Holder in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel.
16.5 Proof of Actions Taken. Whenever in the performance of its
duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed
conclusively to be proved and established by a certificate signed by the
Chairman of the Board, President, the Treasurer or the Secretary of the Company
and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
16.6 Compensation. The Company agrees to pay the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
performance of its duties under this Agreement, to reimburse the Warrant Agent
for all expenses, taxes and governmental charges and other charges of any kind
and nature incurred by the Warrant Agent in the performance of its duties under
this Agreement, and to indemnify the Warrant Agent and save it harmless against
any and all liabilities, including judgments, costs and reasonable counsel fees,
for anything done or omitted in good faith by the Warrant Agent in the
performance of its duties under this Agreement except liabilities, including
judgments, costs and fees, arising as a result of the Warrant Agent's negligence
or bad faith.
16.7 Legal Proceedings. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more Holders
shall furnish the Warrant Agent with reasonable security and indemnity for any
costs and expenses which may be incurred, but this provision shall not affect
the power of the Warrant Agent to take such action as the Warrant Agent may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery of judgment shall be for
the ratable benefit of the Holders, as their respective rights or interests may
appear.
12
<PAGE> 13
16.8 Other Transactions in Securities of Company. The Warrant
Agent and any stockholder, director, officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants, or other securities of the Company
or become pecuniarily interested in any transaction in which the Company may be
interested, or contract with the Company or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
16.9 Liability of Warrant Agent. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence or bad faith.
16.10 Reliance on Documents. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
16.11 Validity of Agreement, etc. The Warrant Agent shall not be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Warrant
Agent) or in respect of the validity or execution of any Warrant (except its
countersignature thereof) or in respect of the necessity or the extent of any
adjustment to the Warrant Price or the number of Warrant Shares purchasable
under a Warrant; nor shall the Warrant Agent by any act hereunder be deemed to
make any representation or warranty as to the authorization, reservation, value
or registration under securities laws of any Warrant Shares (or other stock) to
be issued pursuant to this Agreement or any Warrant, or as to whether any
Warrant Shares (or other stock) will, when issued, be validly issued, fully paid
and non-assessable, or as to the Warrant Price or the number or amount of
Warrant Shares or other securities or other property issuable upon exercise of
any Warrant or the method employed in making any adjustment to the foregoing.
16.12 Instructions from Company. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from the Chairman of the Board, the President, the
Secretary or the Treasurer of the Company and, with respect to Section 2.2
hereof, the Underwriters, and to apply to such officers or the Underwriters, as
the case may be, for advice or instruction in connection with its duties, and
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or officers or the
Underwriters, as the case may be.
17. Change of Warrant Agent.
The Warrant Agent may resign and be discharged from all further
duties and liabilities under this Agreement (except liabilities arising as a
result of the Warrant Agent's own negligence or bad faith) by giving to the
Company thirty days' prior notice in writing. The Warrant Agent may be
13
<PAGE> 14
removed by like notice to the Warrant Agent from the Company. If the Warrant
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of thirty days after such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Warrant Agent or by any Holder (who shall with
such notice submit his Warrant for inspection by the Company), then any Holder
may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor warrant agent, whether appointed
by the Company or such a court, shall be a bank or trust company, in good
standing, incorporated under the laws of the United States of America or any
state thereof and having at the time of its appointment as warrant agent a
combined capital and surplus of at least $50,000,000 or a stock transfer
company. After acceptance in writing of such appointment is received by the
Company, the successor warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor warrant agent any property at the time
held by it hereunder, and legally and validly execute and deliver any further
assurance, conveyance, act or deed necessary for that purpose. Failure to file
any notice provided for in this Section 17, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case may
be. In the event of such resignation or removal, the successor warrant agent
shall mail, first class mail, postage prepaid, to each Holder, written notice of
such resignation or removal and the name and address of such successor warrant
agent.
18. Identity of Transfer Agent.
Forthwith upon the appointment of any subsequent transfer agent
for the Common Stock, or any other shares of the Company's capital stock
issuable upon the exercise of the Warrants, the Company will file with the
Warrant Agent a statement setting forth the name and address of such subsequent
transfer agent.
19. Notices.
Any notice pursuant to this Agreement by the Company, the
Representative or by any Holder to the Warrant Agent, or by the Warrant Agent or
by any Holder to the Company, shall be in writing and shall be mailed first
class, postage prepaid, or delivered (a) to the Company at its offices at 1700
East Desert Inn Road, Las Vegas, Nevada 89109, Attention: Robert Stander, with
copies to ___________________________________________________________; (b) to
the Warrant Agent, to ______________________________________________________; or
(c) to the Representative to Joseph Roberts & Co., Inc., 416 East Atlantic
Boulevard, Pompano Beach, Florida 33060, Attn: Corporate Finance Department.
Each party hereto may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in writing to the other
party.
14
<PAGE> 15
Any notice mailed pursuant to this Agreement shall be in writing
and shall be mailed first class, postage prepaid, or delivered to such Holders
at their respective addresses on the books of the Warrant Agent.
20. Supplements and Amendments.
The Company and the Warrant Agent may from time to time
supplement or amend this Agreement in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interests of the Holders; provided, however, that this Agreement
shall not otherwise be supplemented or amended in any respect except with the
consent in writing of the Holders of Warrants representing not less than 50% of
the Warrants then outstanding; and provided further, that no change in the
number or nature of the securities purchasable upon the exercise of any Warrant,
or the Purchase Price therefor shall be made without the consent in writing of
the Holder of the certificate representing such Warrant, other than changes as
are specifically prescribed by this Agreement as originally executed.
21. Successors.
All covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their representative successors and assigns.
22. Applicable Law.
This Agreement and each Warrant issued hereunder shall be
governed by, and construed in accordance with, the laws of the State of Nevada,
without giving effect to any principles of conflicts of law.
23. Persons Having Rights Under this Agreement.
Nothing in this Agreement expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the parties hereto
and the registered holders of the Warrants (and, for the purposes set forth in
Section 5.3 and in the last paragraph of Section 8.3 hereof, Roberts and/or its
designees) any right, remedy, or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise, or agreement hereof. All
covenants, conditions, stipulations, promises, and agreements contained in this
Agreement shall be for the sole and exclusive benefit of the parties hereto and
their successors and assigns and of the registered holders of the Warrants.
15
<PAGE> 16
24. Counterparts.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
25. Captions.
The captions of the Sections and subsections of this Agreement
have been inserted for convenience only and shall have no substantive effect.
26. Termination.
This Agreement shall terminate at 5:00 p.m. Eastern time on
________, 2001, or such earlier date upon which all Warrants have been
exercised, except that the Warrant Agent shall account to the Company for any
cash held by it after the termination hereof.
*(Signatures)
16
<PAGE> 1
EXHIBIT 4.3
CONFIDENTIAL
FOR ACCREDITED INVESTORS ONLY
$1,100,000
10% CONVERTIBLE SUBORDINATED NOTES
DUE DECEMBER 31, 1996
- --------------------------------------------------------------------------------
AMERICAN PROFESSIONAL BILLIARDS, INC.
- --------------------------------------------------------------------------------
AMERICAN PROFESSIONAL BILLIARDS, INC.
1700 EAST DESERT INN ROAD
LAS VEGAS, NEVADA 89109
MARCH 1, 1996
DOCUMENT NUMBER: _____________
NAME OF OFFEREE: _____________
<PAGE> 2
FOR ACCREDITED INVESTORS ONLY
PRIVATE PLACEMENT MEMORANDUM
UP TO $1,100,000 PRINCIPAL AMOUNT OF
NON-NEGOTIABLE 10% CONVERTIBLE SUBORDINATED NOTES
DUE DECEMBER 31, 1996
AMERICAN PROFESSIONAL BILLIARDS, INC.
American Professional Billiards, Inc., a Nevada corporation (the "Company") is
offering up to $1,100,000 Principal Amount of non-negotiable 10% Convertible
Subordinated Notes, Due December 31, 1996 (the "Notes"). The Notes are
subordinate to all bank debt currently outstanding as well as any additional
amounts that may be incurred by the Company during the term of the Notes. Unless
earlier converted into equity securities as described below, the principal of
the Notes, together with accrued unpaid interest at the rate of 10% per annum
from the date of issuance, will be due and payable on the close of business on
December 31, 1996 (the "Maturity Date"). However, no interest shall be payable
in the event of automatic or optional conversion.
The Notes will be automatically converted into Units (as hereinafter defined)
upon the closing of a public offering of the Company's common stock, provided
that such closing occurs on or before the Maturity Date, and, if not
automatically converted, will be converted into Units at the option of the
holder at any time through the Maturity Date. The Notes are convertible into
Units consisting of One (1) share of Common Stock and One (1) Redeemable Common
Stock Purchase Warrant at the rate of one (1) Unit for each dollar ($1.00) of
principal amount of Notes.
The Notes are offered at par on a best efforts basis by the Company. The Company
may pay a commission, not greater than 8.0% of the principal amount of Notes
sold, to broker-dealers which are registered as such with the Securities and
Exchange Commission and which are members of the National Association of
Securities Dealers, Inc. and the Company may agree to indemnify such persons
against certain liabilities.
The offering of the Notes will terminate on March 31, 1996 unless earlier
terminated or extended by the Company. The Notes are being offered only to
investors who qualify as Accredited Investors as defined under the Securities
Act of 1933, as amended ("Act").
The Notes are offered in increments of $10,000 with a $50,000 minimum
investment. The Company has the right, in its sole discretion, to reject the
subscription of any investor for any reason or to accept subscriptions of less
than $50,000. There is no minimum amount of this offering and proceeds from the
sale of Notes will be used by the Company as subscriptions are accepted.
INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE "RISKS ASSOCIATED
WITH AN INVESTMENT IN THE NOTES." INVESTORS MUST BE PREPARED TO BEAR THE
ECONOMIC RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD AND BE ABLE TO
WITHSTAND A TOTAL LOSS OF INVESTMENT.
THE DATE OF THIS PRIVATE PLACEMENT MEMORANDUM IS MARCH 1, 1996.
-2-
<PAGE> 3
THE INFORMATION PRESENTED HEREIN WAS PREPARED BY THE COMPANY AND IS BEING
FURNISHED BY THE COMPANY SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN
CONNECTION WITH THE OFFERING. NOTHING CONTAINED HEREIN IS, OR SHOULD BE RELIED
ON AS, A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE COMPANY.
THIS MEMORANDUM DOES NOT PURPORT TO BE ALL INCLUSIVE OR TO CONTAIN ALL THE
INFORMATION THAT A PROSPECTIVE INVESTOR MAY DESIRE IN INVESTIGATING THE COMPANY.
EACH INVESTOR MUST CONDUCT AND RELY ON ITS OWN EVALUATION OF THE COMPANY AND THE
TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN MAKING AN
INVESTMENT DECISION WITH RESPECT TO THE SECURITIES. SEE "RISKS ASSOCIATED WITH
AN INVESTMENT IN THE NOTES" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH THE PURCHASE OF THE SECURITIES.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. EXCEPT AS
OTHERWISE INDICATED, THIS MEMORANDUM SPEAKS AS OF THE DATE HEREOF. NEITHER THE
DELIVERY OF THIS MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY AFTER THE DATE HEREOF.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OTHER THAN THAT CONTAINED
IN THIS MEMORANDUM, OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON HAS HAVING BEEN AUTHORIZED BY THE
COMPANY. THE COMPANY DISCLAIMS ANY AND ALL LIABILITIES FOR REPRESENTATIONS OR
WARRANTIES, EXPRESSED OR IMPLIED, CONTAINED IN, OR OMISSIONS FROM, THIS
MEMORANDUM OR WRITTEN COMMUNICATION TRANSMITTED OR MADE AVAILABLE TO THE
RECIPIENT. EACH INVESTOR WILL BE ENTITLED TO RELY SOLELY ON THOSE
REPRESENTATIONS AND WARRANTIES THAT MAY BE MADE TO IT IN ANY FINAL PURCHASE
AGREEMENT RELATING TO THE SECURITIES.
FOR RESIDENTS OF ALL STATES:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ACT OR THE
SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND SUCH LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN
-3-
<PAGE> 4
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, AND ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THE SECURITIES ARE OFFERED PURSUANT TO EXEMPTIONS PROVIDED BY SECTION 4(2) OF
THE ACT, REGULATION D THEREUNDER, CERTAIN STATE SECURITIES LAWS AND CERTAIN
RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE SECURITIES MAY NOT BE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
CONFIDENTIAL INFORMATION
THE INFORMATION CONTAINED IN THIS MEMORANDUM IS CONFIDENTIAL AND PROPRIETARY TO
THE COMPANY AND IS BEING SUBMITTED TO PROSPECTIVE INVESTORS BY THE COMPANY
SOLELY FOR SUCH INVESTORS' CONFIDENTIAL USE WITH THE EXPRESS UNDERSTANDING THAT,
WITHOUT THE PRIOR EXPRESS WRITTEN PERMISSION OF THE COMPANY, SUCH PERSONS WILL
NOT RELEASE THIS DOCUMENT OR DISCUSS THE INFORMATION CONTAINED HEREIN OR MAKE
REPRODUCTIONS OF OR USE THIS MEMORANDUM FOR ANY PURPOSE OTHER THAN EVALUATING A
POTENTIAL INVESTMENT IN THE SECURITIES.
A PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES TO
COMPLY WITH THE FOREGOING PARAGRAPH AND PROMPTLY TO RETURN TO THE PLACEMENT
AGENT OR THE COMPANY THIS MEMORANDUM AND ANY OTHER DOCUMENTS OR INFORMATION
FURNISHED IF THE PROSPECTIVE INVESTOR ELECTS NOT TO PURCHASE ANY OF THE
SECURITIES OFFERED HEREBY.
-4-
<PAGE> 5
TABLE OF CONTENTS
PAGE NO.
--------
THE NOTE PLACEMENT 6
RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES 7
USE OF PROCEEDS 8
THE COMPANY 8
INVESTOR SUITABILITY REQUIREMENTS 9
EXHIBITS
Exhibit A Balance Sheet and Statement of Income as of December 31, 1995
(Unaudited).
Exhibit B Form of Subscription Agreement.
Exhibit C Form of Promissory Note.
-5-
<PAGE> 6
THE NOTE PLACEMENT
DESCRIPTION OF SECURITIES OFFERED
The Company is offering up to a maximum of $1,100,000 principal amount of
non-negotiable 10% Convertible Subordinated Notes. Unless earlier converted, the
unpaid principal amount of the Notes, together with accrued unpaid interest at
the rate of 10% per annum, will be due and payable at the close of business,
Eastern Time, on December 31, 1996. However, no interest shall be payable in the
event of automatic or optional conversion. The Notes are subordinate to all bank
debt currently outstanding as well as any additional amounts that may be
incurred by the Company during the term of the Notes. The Notes will be
automatically converted into Units upon either of the following events: (i)
closing of a public offering of the Company's common stock or (ii) provided that
such closing occurs on or before the Maturity Date, and, if not automatically
converted, will be converted into Units at the option of the holder at any time
through the Maturity Date. The Notes are convertible into Units consisting of
One (1) share of Common Stock and One (1) Redeemable Common Stock Purchase
Warrant at the rate of One Unit for each $1.00 of principal amount of Notes.
The Company will grant certain registration rights with respect to the Shares
issued upon automatic conversion of the Notes (see Exhibit B - "Subscription
Agreement").
INVESTOR SUITABILITY
The placement will be made pursuant to exemptions from registration provided by
Section 4(2) of the Act, Regulation D promulgated thereunder, and exemptions
available under applicable state securities laws and regulations. The Notes will
be offered for sale only to persons who are "accredited investors" as such term
is defined under Regulation D adopted under the Act. The Company reserves the
right to reject any subscription in whole or in part in its sole discretion.
See "Investor Suitability Requirements".
PLAN OF DISTRIBUTION
The Company intends to offer the Notes through its officers and directors and
may also engage one or more broker-dealers which are registered as such with the
Securities and Exchange Commission and which are members of the NASD (National
Association of Securities Dealers, Inc.) to offer the Notes on a "best effort"
basis for which it will pay commissions of not more than 8% of the principal
amount of Notes sold.
THERE IS NO MINIMUM PRINCIPAL AMOUNT OF NOTES REQUIRED TO BE
SUBSCRIBED AS A CONDITION OF THIS PLACEMENT. THEREFORE, NO ESCROW OR
SIMILAR ARRANGEMENTS WILL BE MADE AND THE COMPANY WILL USE
-6-
<PAGE> 7
PROCEEDS FROM THE SALE OF ANY NOTE UPON RECEIPT AND ACCEPTANCE OF A SUBSCRIPTION
AGREEMENT.
SUBSCRIPTION
Qualified investors who wish to subscribe for Notes may do so by executing a
Subscription Agreement in the form attached hereto as Exhibit B and delivering
the Subscription Agreement and payment for the Notes subscribed for. A
subscription may not be considered for acceptance unless it is completely filled
out and properly executed and is accompanied by payment in full for the Notes
subscribed for. Subscriptions accompanied by payment in the form of a personal
check, if accepted, will be so accepted conditioned upon and subject to
clearance of the check and a certificate representing the Notes will not be
delivered until the check clears.
THE SUBSCRIPTION AGREEMENT INCLUDES CERTAIN REPRESENTATIONS AND WARRANTIES OF
THE INVESTOR ON WHICH THE COMPANY AND THE PLACEMENT AGENT WILL RELY IN
DETERMINING WHETHER TO ACCEPT THE SUBSCRIPTION. THE MATERIAL INACCURACY OF ANY
SUCH REPRESENTATION OR WARRANTY, AS IT APPLIES TO ANY INVESTOR, COULD RESULT IN
LEGAL LIABILITY OF THAT INVESTOR. PROSPECTIVE INVESTORS ARE URGED TO READ THE
SUBSCRIPTION AGREEMENT CAREFULLY AND, TO THE EXTENT THEY DEEM APPROPRIATE, TO
DISCUSS THE SUBSCRIPTION AGREEMENT AND THEIR PROPOSED INVESTMENT IN THE NOTES
WITH THEIR LEGAL OR OTHER ADVISORS.
RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES
The purchase of Notes involves a number of significant risks including without
limitation those described below.
1. Highly Competitive Industry. Competition in the billiard and pool
industries is intense. There are many companies in both of these
businesses which have greater financial and other resources than the
Company. The Company's ability to compete will depend upon its ability
to develop additional sources of capital and to continue to price its
services competitively.
2. No Minimum Amount of Notes. Because there is no minimum principal
amount of Notes that is required to be subscribed for as a condition of
this placement, it is possible that the proceeds of this offering will
be substantially less than the maximum amount contemplated.
3. Public Company Status Not Assured. There can be no assurances given
that the Company will ever become publicly held or that a publicly
traded market for its shares will ever develop. In the absence of a
public offering or possible merger, acquisition or business
combination, there can be no assurance that the Company will be able to
generate revenues sufficient to repay the Notes.
-7-
<PAGE> 8
4. No Market for Notes. There currently is no market for the Notes and it
is not anticipated that one will develop. The sale of the Notes has not
been registered under the Act or the securities laws of any state. The
Notes therefore may not be resold unless such resale is subsequently
registered or an exemption from registration is available.
5. No Audited Financial Statements. All financial information contained in
this memorandum has been prepared from the books and records of the
Company and has not been audited by an independent accountant.
6. No Operating History. The Company is a newly formed development stage
company with no operating history. As such, there can be no assurances
given that it will be successful in generating revenues or business
opportunities.
7. Reliance on Key Persons. The Company will rely significantly on Robert
M. Stander, its Chairman, and Don Mackey, who will serve as a director
and a consultant . In the absence of Messrs. Stander and Mackey, there
can be no assurances given that the Company will be viable. In
addition, Mr. Mackey will continue to serve as the Commissioner of the
Professional Billiards Tour, and in this capacity he will have certain
fiduciary duties towards the Professional Billiards Tour Association,
Inc., which may result in a conflict, from time to time, with his
duties as a Director of the Company. In particular, Mr. Mackey may be
required to present business opportunities to the Professional
Billiards Tour Association, Inc., which he might not be able to present
to the Company.
USE OF PROCEEDS
The net proceeds from the sale of all of the Notes offered hereby are estimated
to be approximately $1,000,000 after deducting estimated expenses. The net
proceeds will be used as follows: $340,000 to pay a note issued to World Wide
Collectibles, Inc. to pay for the purchase from World Wide Collectibles, Inc.,
certain of its billiard assets, including but not limited to, World Team
Billiards, sanctions from the Professional Billiards Tour, patents and
copyrights, if any, and the balance will be used for general working capital.
THE COMPANY
American Professional Billiards, Inc. was incorporated in the State of Nevada in
May 1995 and its corporate headquarters are located at 1700 East Desert Inn
Road, Las Vegas, Nevada 89109. The Company's principal business is (i) the
production of pocket billiard programming for sale to television, (ii) formation
of a professional billiards league, (iii) the production of professional and
amateur tournaments both domestic and international, and (iv) the merchandising
and licensing of billiard equipment and apparel items related to billiards.
-8-
<PAGE> 9
INVESTOR SUITABILITY REQUIREMENTS
GENERAL
Investment in the Notes involves significant risks and is suitable only for
persons of adequate financial means who have no need for liquidity with respect
to this investment and who can bear the economic risk of a complete loss of
their investment. This placement is made in reliance on exemptions from
registration requirements of the Act and applicable state securities laws or
regulations.
The suitability standards discussed below represent minimum suitability
standards for prospective investors. The satisfaction of such standards by a
prospective investor does not necessarily mean that the Notes are a suitable
investment for such prospective investor. Prospective investors are encouraged
to consult their personal financial advisors to determine whether an investment
in the Notes is appropriate. The Company may reject subscriptions, in whole or
in part, in its absolute discretion.
The Company will require each investor to represent in a Subscription Agreement,
among other things, that (i) by reason of the investor's business or financial
experience, or that of the investor's professional advisor, the investor is
capable of evaluating the merits and risks of an investment in the Notes and of
protecting its own interests in connection with the transaction, (ii) the
investor is acquiring the Notes for its own account, for investment only and not
with a view toward the resale or distribution thereof, (iii) the investor is
aware that the Notes have not been registered under the Act or any state
securities laws and that transfer thereof is restricted and the absence of a
market for the Notes and (iv) such investor meets the suitability requirements
set forth below.
SUITABILITY REQUIREMENTS
The Company will only sell Notes to those investors it reasonably believes meet
the financial qualifications for an "accredited investor" as defined below. To
be an accredited investor, an investor must fall within any of the following
categories at the time of the sale of Notes to that investor.
(1) A bank as defined in Section (3)(a)(2) of the Act, or a savings and
loan association or other institution as defined in Section (3)(a)(5)
(A) of the Act, whether acting in its individual or fiduciary capacity;
a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(130
of the Act; an investment company registered under the Investment
Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of such Act; a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established
and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivision, for the
benefit of its employees, if such a plan has total assets
-9-
<PAGE> 10
in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment
decision made by a plan fiduciary, as defined in Section 3(21) of such
Act, which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000, or, if a self directed
plan, with investment decisions made solely by persons that are
accredited investors;
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisors Act of 1940;
(3) An organization described in Section 501(c)(3) of the Internal
Revenue Code, a corporation, Massachusetts or similar business trust,
or a partnership, not formed for the specific purpose of acquiring the
Notes, with total assets in excess of $5,000,000;
(4) A director or executive officer of the Company;
(5) A natural person who's individual net worth, or joint net worth
with that person's spouse, at the time of such person's purchase of the
Notes exceeds $1,000,000;
(6) A natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year;
(7) A trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Notes offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
of Regulation D; and
(8) An entity in which all of the equity owners are accredited
investors (as defined above).
As used in this Memorandum, the term "net worth" means the excess of total
assets over liabilities. In computing net worth for the purpose of (5) above,
the principal residence of the investor must be valued at cost, including cost
of improvements, or at recently appraised value by an institutional lender
making a secured loan, net of encumbrances. In determining income, an investor
should add to the investor's adjusted gross income any amounts attributable to
tax exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an IRA or KEOGH
retirement plan, alimony payments, and any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income.
-10-
<PAGE> 11
EXHIBIT A
<PAGE> 12
APB FINANCIALS
[TO BE PROVIDED]
<PAGE> 13
EXHIBIT B
<PAGE> 14
SUBSCRIPTION AGREEMENT
American Professional Billiards, Inc.
1700 East Desert Inn Road, Suite 108
Las Vegas, Nevada 89109
Re: Offering of Notes
Gentlemen:
In connection with the offer (the "Offering") and proposed issuance by American
Professional Billiards, Inc., a Nevada corporation (the "Company"), of up to
$1,100,000 principal amount of non-negotiable 10% Convertible Subordinated
Notes, due December 31, 1996 ("Notes"), the undersigned prospective investor
("Investor") and the Company hereby agree as follows:
1. SUBSCRIPTION. The Investor hereby subscribes for the purchase of Notes
and agrees to purchase the aggregate principal amount of Notes set forth on the
signature page of this Agreement at par, subject to the following conditions and
understandings:
(a) ACCEPTANCE OR REJECTION. The Company, in its sole discretion and
for any reason, may accept or reject this subscription, in whole or
part, at any time not later than five days after receipt of this
subscription. The Company may also allocate to the Investor less than
the principal amount of Notes subscribed for, in which case there shall
be remitted to the Investor the difference between the subscription
amount paid and the subscription price allocable to the Notes accepted.
(b) TREATMENT OF FUNDS SUBMITTED IN CONNECTION WITH REJECTED
SUBSCRIPTIONS. If this subscription is rejected by the Company in its
entirety, the Investor's check accompanying this subscription will be
returned to the Investor without interest thereon. If this subscription
is accepted in whole or in part, the Investor's check will be cashed
and funds paid to the Company and the Company will promptly remit to
the Investor the funds relating to that portion of the subscription, if
any, that is not accepted, without interest.
2. REPRESENTATIONS AND WARRANTIES. The Investor makes the representations,
declarations and warranties set forth in this Section 2 with the intent that the
same may be relied upon in determining the Investor's suitability as a purchaser
of the Notes. If the Investor includes or consists of more than one person or
entity the obligations of the Investor shall be joint and several and the
representations and warranties herein contained shall be deemed to be made by
and be binding upon each such person or entity and their respective heirs,
executors, administrators, successors and assigns.
(a) NO REGULATORY REVIEW. The Investor is aware that this is a limited
offering and that no federal, state or other agency has made any
finding or determinations as to fairness of the investment nor made any
recommendation or endorsement of the Notes.
(b) INVESTMENT INTENT. The Investor acknowledges that the purchase of
Notes hereunder and any securities into which the Notes are convertible
is being made for the Investor's own account, for investment purposes
only and not with the present intention of distributing
-1-
<PAGE> 15
or reselling the Notes in whole or in part. The Investor further
understands that neither the Notes, nor any such securities have been
registered under the Securities Act of 1933, as amended (the "Act"), or
under state securities laws by reason of specific exemptions therefrom,
which depend upon, among other things, the accuracy of the Investor's
representations as expressed in this Subscription Agreement. The
Investor further understands that transfer of the Notes, and of the
Units into which they are convertible, is restricted under the Act and
under state securities laws.
The Investor further understands that each Note and any instruments
representing the Units will bear a legend substantially similar to the
following legend which may further restrict the liquidity of an
investment in such securities:
"The securities represented by this (Note or certificate) have
not been registered under the Securities Act of 1933, as
amended (the "Act"), or any applicable state law, and such
securities may not be sold or otherwise transferred unless
they are registered under the Act and the applicable state law
or such sale or transfer is exempt from such registration and
the (Maker or Company) has received an opinion of counsel
acceptable to it to the effect that such sale or transfer is
so exempt."
(c) INVESTMENT INFORMATION. The Investor has received and read the
Company's Private Placement Memorandum and the exhibits thereto (the
"Memorandum"), prior to the execution of this Subscription Agreement.
The Investor will rely solely upon the Memorandum, and independent
investigations made by the Investor in making the decision to purchase
the Notes. In particular, and without limiting the generality of the
foregoing, the Investor has not relied on, and the Investor's decision
to subscribe for Notes has not been influenced by: (i) newspaper,
magazine or other media articles or reports related to the Company or
its business; (ii) promotional literature or other materials or (iii)
any other written or oral statement of the Company or persons
purporting to represent the Company, except the Memorandum and other
documents furnished to the Investor by the Company, or oral statements
of management of the Company, furnished or communicated to the Investor
in connection with the Offering. The Investor has had the opportunity
to discuss all aspects of this transaction with management of the
Company, has made or has had the opportunity to make such inspection of
the books and records of the Company as the Investor has deemed
necessary in connection with this investment, and any questions asked
have been answered to the satisfaction of the Investor; however, no
oral or written representations apart from the Memorandum have been
made to the Investor.
(d) INVESTOR ACKNOWLEDGEMENT. The Investor understands and acknowledges
that the investment in Notes is subject to considerable risk and that
the entire investment may be lost for any of a number of reasons,
including the risk factors discussed in the Memorandum and for other
reasons all of which are acknowledged by Investor.
(e) CONFIDENTIALITY. The Investor understands that the Memorandum is
confidential. The Investor has not distributed the Memorandum, or
divulged the contents thereof, to anyone other than such legal or
financial advisors as the Investor has deemed necessary for purposes of
evaluating an investment in the Notes and no one (except such advisors)
has used the Memorandum, and the Investor has not made any copies
thereof.
-2-
<PAGE> 16
(f) AUTHORIZATION AND FORMATION OF SUBSCRIBER. The Investor, if a
corporation, partnership, limited liability company, trust or other
form of business entity, is authorized and otherwise duly qualified to
purchase and hold Notes and such entity has not been formed for the
specific purpose of acquiring Notes in the Offering. If the Investor is
one of the aforementioned entities, it hereby agrees that upon request
of the Company it will supply the Company with any additional written
information that may be requested by the Company.
(g) INVESTOR STATUS. Subscriber represents and warrants that it is an
"accredited investor" as defined in Rule 501(a) of Regulation D under
the Act.
The term accredited investor includes any bank as defined in Section
3(a)(2) of the Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act whether acting
in its individual or fiduciary capacity; any broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of
1934; any insurance company as defined in Section 2(13) of the Act; any
investment company registered under the Investment Company of 1940 or
business development company as defined in Section 2(a)(48) of that
Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Act of 1958; any plan established and maintained by a state or
its political sub-divisions, for the benefit of its employees if such a
plan has total assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement Income Security Act
of 1974 if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings
and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self- directed plan, with investment decision made
solely by persons that are accredited investors. The term accredited
investor also includes any trust with total assets in excess of
$5,000,000, any private business development company as defined in
Section 202(a)(22) of the Investment Advisors Act of 1940, and certain
individuals whose net worth or joint net worth with the person's spouse
exceeds $1,000,000 or any person who has an individual income in excess
of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the
current year.
3. RELIANCE ON REPRESENTATIONS AND WARRANTIES; INDEMNITY. The Investor
understands that the Company and any agent offering the Note(s) for sale
("Selling Agent") will rely on the representations and warranties of the
Investor herein in determining whether a sale of the Notes to the Investor is in
compliance with federal and applicable state securities laws and exemptions
therefrom. The Investor hereby agrees to indemnify the Company and the Selling
Agent and their respective affiliates, and hold the Company and the Selling
Agent and their respective affiliates harmless from and against any and all
liability, damage, cost or expense (including reasonable attorney's fees)
incurred on the account of or arising out of: (a) any inaccuracy in the
Investor's declarations, representations and warranties set forth in this
Subscription Agreement; (b) the disposition of any of the Notes which the
Investor will receive or any securities into which the Notes are convertible,
contrary to the Investor's declarations, representations and warranties in this
Subscription Agreement; (c) any suit or proceeding based upon the claim that
said declarations, representations or warranties were inaccurate or misleading
or otherwise cause for obtaining damages or redress from the Company or the
Selling Agent or any of their respective
-3-
<PAGE> 17
affiliates or the disposition of all or any part of the Investor's Notes or any
such securities; and (d) the Investor's failure to fulfill any or all of the
Investor's obligations herein.
4. UPDATING INFORMATION. All of the information set forth herein with
respect to the Investor, including, without limitation, all of the
representations as warranties set forth in Section 2, is correct and complete as
of the date hereof and, if there should be any material change in such
information prior to the acceptance of this subscription by the Company, the
Investor will immediately furnish the revised or corrected information to the
Company.
5. REGISTRATION RIGHTS.
(a) DEFINITION. As used in this section, the term "Registerable
Securities" shall mean any and all equity securities of the Company
that may be obtained (i) upon conversion of the Notes or (ii) upon
exercise of all or part of the Noteholder's Purchase Option expiring on
December 31, 1999.
(b) REGISTRATION. If the Company determines that, at any time prior to
December 31, 1996, it will file a registration statement pursuant to
the Act in connection with a public offering of securities by the
Company for cash on a form appropriate for the inclusion of the
Registrable Securities ("Public Offering") it shall include in such
registration statement all of the Registrable Securities to be
registered under the Act pursuant to such registration.
(c) PREPARATION AND FILING. Whenever the Company is under obligation
pursuant to the provisions of this Subscription Agreement to use its
best efforts to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement on an
appropriate form with respect to such Registrable Securities
and use its best efforts to cause such registration statement
to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a period of one year
following the later of the effective date of such registration
statement and the expiration of "lockup" or "holdback" periods
required, if any, pursuant to this Agreement, or until the
Registerable Securities covered thereunder have been sold,
whichever is earlier, and to comply with the provisions of the
Act with respect to the sale or other disposition of all
Registerable Securities covered by such registration
statement;
(iii) furnish to each selling holder such number of copies of
the prospectus contained in such registration statement,
including any preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as such
Registerable Securities; and
(iv) use its best efforts to register or qualify the
Registerable Securities covered by such registration statement
under the securities or blue sky laws of the same
jurisdictions in which the sale of securities in the Public
Offering are registered or
-4-
<PAGE> 18
qualified; or if the Registerable Securities are not being
registered in connection with a Public Offering, in such
states as the holders of the Registerable Securities so
registered shall reasonably request.
(d) EXPENSES. All expenses incurred by the Company in complying with
Section 5(c) above, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the
National Association of Securities Dealers, Inc.), fees and expenses of
complying with securities and blue sky laws, printing expenses, fees
and disbursements of counsel for the Company, fees and expenses for
independent certified public accountants (including the expenses of any
special audits in connection with any such registration) shall be paid
by the Company; provided, however, that all underwriting discounts and
selling commissions applicable to the Registerable Securities covered
by such registration and all fees and disbursements of special counsel
to any seller or sellers of Registerable Securities shall be borne by
the seller or sellers.
(e) INDEMNIFICATION. In the event of any registration of any
Registerable Securities under the Act pursuant to this Subscription
Agreement or registration or qualification of any Registerable
Securities pursuant to Section 5(c)(iv) above, the Company shall
indemnify and hold harmless the seller of such Registerable Securities,
each underwriter of such Registerable Securities, each broker or any
other person acting on behalf of such seller and each other person, if
any, who controls any of the foregoing persons, within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing persons may become subject under
the Act or otherwise, insofar as such losses, claims damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which Registrable
Securities were registered under the Act, or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to
make the statements therein in light of the circumstances under which
they were made, not misleading or any violation by the Company of the
Act or state securities or blue sky laws applicable to the Company in
connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse such seller, such
underwriter, broker or other person acting on its behalf of such seller
and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage liability or action; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, or
said prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
seller, underwriter or controlling person seeking indemnification
hereunder.
Before Registerable Securities held by a prospective seller shall be
included in any registration pursuant to this Subscription Agreement,
such prospective seller and any underwriter acting on its behalf (i)
shall have agreed to indemnify and hold harmless (in manner and to the
same extent as set forth in the preceding paragraph of this section)
the Company, each director of the Company, each officer of the Company
who shall sign such registration statement and any person who controls
the Company within the meaning of
-5-
<PAGE> 19
the Act, with respect to any statement or omission from such
registration statement, any final prospectus contained therein, or any
amendment or supplement thereto, but only with reference to statements
or omissions made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such seller or
such underwriter specifically for use in the preparation of such
registration statement, final prospectus or amendment or supplement and
with reference to statements or omissions made in reliance upon an
omission or failure by such seller or such underwriter to furnish any
statement with respect to such seller or underwriter required to be
included therein, and (ii) shall have entered into an underwriting
agreement in usual and standard form, if such registration relates to
an offering that is to be underwritten.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the
preceding paragraphs of this section, such indemnified party will, if a
claim in respect thereof is made against an indemnifying party, give
written notice to the latter of the commencement of such action. In
case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that they may wish, with counsel reasonably
satisfactory to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall be responsible for any
legal or other expenses subsequently incurred by the latter in
connection with the defense thereof.
(f) SELLER TO PROVIDE INFORMATION. As a condition to the Company's
obligation hereunder to cause Registerable Securities to be included in
a registration statement, the seller of such Registerable Securities
shall provide information and shall execute such documents in
connection with such registration as the Company shall reasonably
request.
(g) LOCK-UP OR HOLDBACK PERIOD. If Registerable Securities are included
in any registration pursuant to which the Company is also offering
securities for its own account, the seller of Registerable Securities
will not offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of such Registerable Securities for a period of 90
days after the effective date of the registration statement without
prior written consent of the managing underwriter of the securities
being offered by the Company or, if such securities are not
underwritten, of the Company. If Registerable Securities are included
in any registration other than one pursuant to which the Company is
also offering securities and, during the period of effectiveness of
such registration, the Company proposes to offer securities in an
underwritten public offering, then, (i) during a period beginning on
the effective date of the registration statement relating to such
underwritten public offering and ending 90 days thereafter, the seller
of Registerable Securities will not offer to sell, contract to sell,
grant any option to purchase or otherwise dispose of such Registerable
Securities without prior written consent of the managing underwriter of
the securities being offered by the Company, and (ii) if such event
occurs during the one-year period in which the Company is required to
maintain the effectiveness of the registration relating to the
Registerable Securities, the period in which the Company is required to
maintain such effectiveness shall be extended to a date one year after
the end of the period during which the restriction on resale described
in this sentence applies.
6. NOTICES. Any notices or other communications required or permitted hereunder
shall be sufficiently given if in writing and sent by registered or certified
mail, postage prepaid, return receipt requested, if to the Company, to: American
Professional Billiards, Inc., 1700 East Desert
-6-
<PAGE> 20
Inn Road, Suite 108, Las Vegas, Nevada 89109, Attention: Chief Executive
Officer; and if to the Investor, at the address set forth following the
Investor's signature to this Subscription Agreement, or, in the case of notice
to the Investor or the Company, to such address as either the Company or the
Investor shall designate to the other to notice in writing; and if to a holder
of Registerable Securities other than the Investor, to the address of such
holder on the books and records of the Company.
7. GOVERNING LAW. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without giving
effect to the rules governing conflicts of laws.
8. SIGNATURES. The Investor declares under penalty of perjury that the
statements, representations and warranties contained herein are true, correct
and complete and that this subscription Agreement was executed at:
____________________________ ____________________________
(City) (State)
Principal amount Notes: $________________________
MAKE ALL CERTIFIED OR BANK CHECKS PAYABLE TO: AMERICAN PROFESSIONAL BILLIARDS,
INC.
Exact Name(s) in which ownership of Notes is to be registered:
______________________________________________________________________________
Address: ________________________________________________________________
City, State, Zip Code: ______________________________________________________
Social Security/Tax ID Number:
SUBSCRIBER JOINT SUBSCRIBER:(IF NECESSARY)
- ---------- -------------------------------
___________________________ ___________________________
(Print Name) (Print Name)
___________________________ ___________________________
(Signature) (Signature)
___________________________ ___________________________
(Title) (Title)
Date: _____________________ Date: __________________
RECEIVED AND ACCEPTED:
-7-
<PAGE> 21
$___________________________ Notes: __________________
Date: _______________________
AMERICAN PROFESSIONAL BILLIARDS, INC.
By ____________________________
Its ___________________________
-8-
<PAGE> 22
THE SECURITIES REPRESENTED BY THIS CONVERTIBLE PROMISSORY NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS.
CONVERTIBLE SUBORDINATED NOTE
(Non-negotiable)
$ __________________ ______, 1996
FOR VALUE RECEIVED, American Professional Billiards, Inc., a Nevada corporation
("Maker"), promises to pay to , ("Creditor"), at the principal office of Maker,
in Las Vegas the principal sum of Dollars ($ ), together with interest, if any,
as provided herein, from the date of this Note on the unpaid principal balance
at the rate of ten percent (10.0%) per annum. This Note is one of a series of
Notes aggregating up to One Million One Hundred Thousand Dollars ($1,100,000) in
principal amount, issued in a private offering by the Maker. Each of the Notes
shall represent the general unsecured obligation of the Maker and shall be in
pari passu with each of the other Notes with respect to all rights and
preferences of such Notes.
Unless this Note is converted as provided herein, the principal amount hereof,
together with all accrued and unpaid interest thereon are due and payable in
full on or before the close of business, Eastern Time, on December 31, 1996 (the
"Maturity Date"). Interest on this Note shall accrue and be payable upon payment
of principal of this Note in full; provided, however, that no interest shall be
payable with respect to this Note upon conversion. The Maker shall have no right
to prepay this Note prior to the Maturity Date.
The Notes will be automatically converted into shares of Units (as hereinafter
defined) upon the closing of the Company's proposed public offering of Units
(the "Public Offering"), provided that such closing occurs on or before the
Maturity Date, and, if not automatically converted, will be converted into Units
at the option of the holder at any time through the Maturity Date. Each Unit
obtained on automatic conversion will be identical to the Units offered to the
public in the Public Offering, consisting of one (1) share of Common Stock and
one (1) redeemable Common Stock Purchase Warrant, and will be convertible at a
conversation rate of six (6) Units for each amount of principal equal to the
initial public offering price of the Units offered in the Public Offering. For
the purpose of the provisions of this Note relating to automatic conversion, the
term "Unit" means the smallest denomination of securities that can be purchased
in the Public Offering, whether that denomination consists of one or more
securities.
Each Unit obtained on optional conversion will consist of one (1) Share of
Common Stock and one (1) redeemable Common Stock Purchase Warrant. Upon any
optional conversion, a holder of a Note will be entitled to receive one (1) Unit
for each one dollar ($1.00) of principal of Notes.
-1-
<PAGE> 23
Each Warrant will entitle the holder thereof to purchase tone share of Common
Stock for a period of three years commencing with the date that the Registration
Statement is declared effective by the SEC at a price equal to 150% of the
initial Public Offering Price. During the exercise period of the Warrants, each
Warrant shall be redeemable by the Company at a redemption price of $.10 per
Warrant upon 30 days prior written notice to each Warrant holder, provided,
however, that the closing average bid price of the Company's Common Stock, for a
period of 20 consecutive trading days prior to any such call for redemption,
shall have been 100% or more of the then effective exercise price of the
Warrants.
The Maker shall grant certain registration rights with respect to the securities
issuable upon the automatic conversion of this Note as set forth in the
Subscription Agreement executed by the Maker and the Creditor in connection with
the issuance of this Note (the "Subscription Agreement") which is incorporated
herein by reference.
Upon the occurrence of any of the following events of default the Creditor may,
by written notice to the Maker, declare all or any portion of the unpaid
principal amount due to such Creditor, together with accrued interest thereon,
immediately due and payable:
1. The nonpayment, when due, of any principal or interest on this
Note;
2. The material breach by the Maker of any representation made in
this Note or in the Subscription Agreement to which this Note
relates;
3. The Maker shall commence any voluntary proceeding under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter
in effect; or the Maker shall be adjudicated insolvent or
bankrupt by a decree of a court of competent jurisdiction; or
the Maker shall petition or apply for, acquiesce on, or
consent to, the appointment of any receiver or trustee of the
Maker for all or a substantial part of the property of the
Maker; or the Maker shall make an assignment for the benefit
of creditors, or the Maker shall admit in writing its
inability to pay its debt as they mature; or
4. There shall be commenced against the Maker any proceeding
relating to the Maker under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debts, receivership,
dissolution or liquidation law or statute of any jurisdiction,
whether now or hereinafter in effect; or a receiver or trustee
shall be appointed for the Maker or for all or a substantial
part of the property of the Maker; or a warrant of attachment,
execution or similar process shall be issued against any
substantial part of the property of the Maker.
The Maker hereby waives notice of default or presentment, protest or notice of
nonpayment or dishonor and all other notices or demands relative to this
instrument. Maker agrees to pay reasonable attorney's fees, if any, incurred by
Creditor in connection with any action to collect this Note.
This Note shall be governed, construed and interpreted in accordance with the
laws of the State of Florida, without giving effect to the rules governing
conflicts of law.
-2-
<PAGE> 24
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE LAW, AND
SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE ACT AND THE APPLICABLE STATE LAW OR SUCH SALE OR TRANSFER
IS EXEMPT FROM SUCH REGISTRATION AND THE MAKER HAS RECEIVED AN OPINION OF
COUNSEL ACCEPTABLE TO IT TO THE EFFECT THAT SUCH SALE OR TRANSFER IS SO EXEMPT.
AMERICAN PROFESSIONAL BILLIARDS, INC.
By: _______________________________
Its: _______________________________
________________________
Creditor's Name
________________________
Creditor's Name
________________________
________________________
-3-
<PAGE> 1
EXHIBIT 4.4
SUBSCRIPTION AGREEMENT
American Professional Billiards, Inc.
1700 East Desert Inn Road, Suite 108
Las Vegas, Nevada 89109
Re: Offering of Notes
Gentlemen:
In connection with the offer (the "Offering") and proposed issuance by American
Professional Billiards, Inc., a Nevada corporation (the "Company"), of up to
$1,100,000 principal amount of non-negotiable 10% Convertible Subordinated
Notes, due December 31, 1996 ("Notes"), the undersigned prospective investor
("Investor") and the Company hereby agree as follows:
1. SUBSCRIPTION. The Investor hereby subscribes for the purchase of Notes
and agrees to purchase the aggregate principal amount of Notes set forth on the
signature page of this Agreement at par, subject to the following conditions and
understandings:
(a) ACCEPTANCE OR REJECTION. The Company, in its sole discretion and
for any reason, may accept or reject this subscription, in whole or
part, at any time not later than five days after receipt of this
subscription. The Company may also allocate to the Investor less than
the principal amount of Notes subscribed for, in which case there shall
be remitted to the Investor the difference between the subscription
amount paid and the subscription price allocable to the Notes accepted.
(b) TREATMENT OF FUNDS SUBMITTED IN CONNECTION WITH REJECTED
SUBSCRIPTIONS. If this subscription is rejected by the Company in its
entirety, the Investor's check accompanying this subscription will be
returned to the Investor without interest thereon. If this subscription
is accepted in whole or in part, the Investor's check will be cashed
and funds paid to the Company and the Company will promptly remit to
the Investor the funds relating to that portion of the subscription, if
any, that is not accepted, without interest.
2. REPRESENTATIONS AND WARRANTIES. The Investor makes the representations,
declarations and warranties set forth in this Section 2 with the intent that the
same may be relied upon in determining the Investor's suitability as a purchaser
of the Notes. If the Investor includes or consists of more than one person or
entity the obligations of the Investor shall be joint and several and the
representations and warranties herein contained shall be deemed to be made by
and be binding upon each such person or entity and their respective heirs,
executors, administrators, successors and assigns.
(a) NO REGULATORY REVIEW. The Investor is aware that this is a limited
offering and that no federal, state or other agency has made any
finding or determinations as to fairness of the investment nor made any
recommendation or endorsement of the Notes.
(b) INVESTMENT INTENT. The Investor acknowledges that the purchase of
Notes hereunder and any securities into which the Notes are convertible
is being made for the Investor's own account, for investment purposes
only and not with the present intention of distributing
-1-
<PAGE> 2
or reselling the Notes in whole or in part. The Investor further
understands that neither the Notes, nor any such securities have been
registered under the Securities Act of 1933, as amended (the "Act"), or
under state securities laws by reason of specific exemptions therefrom,
which depend upon, among other things, the accuracy of the Investor's
representations as expressed in this Subscription Agreement. The
Investor further understands that transfer of the Notes, and of the
Units into which they are convertible, is restricted under the Act and
under state securities laws.
The Investor further understands that each Note and any instruments
representing the Units will bear a legend substantially similar to the
following legend which may further restrict the liquidity of an
investment in such securities:
"The securities represented by this (Note or certificate) have
not been registered under the Securities Act of 1933, as
amended (the "Act"), or any applicable state law, and such
securities may not be sold or otherwise transferred unless
they are registered under the Act and the applicable state law
or such sale or transfer is exempt from such registration and
the (Maker or Company) has received an opinion of counsel
acceptable to it to the effect that such sale or transfer is
so exempt."
(c) INVESTMENT INFORMATION. The Investor has received and read the
Company's Private Placement Memorandum and the exhibits thereto (the
"Memorandum"), prior to the execution of this Subscription Agreement.
The Investor will rely solely upon the Memorandum, and independent
investigations made by the Investor in making the decision to purchase
the Notes. In particular, and without limiting the generality of the
foregoing, the Investor has not relied on, and the Investor's decision
to subscribe for Notes has not been influenced by: (i) newspaper,
magazine or other media articles or reports related to the Company or
its business; (ii) promotional literature or other materials or (iii)
any other written or oral statement of the Company or persons
purporting to represent the Company, except the Memorandum and other
documents furnished to the Investor by the Company, or oral statements
of management of the Company, furnished or communicated to the Investor
in connection with the Offering. The Investor has had the opportunity
to discuss all aspects of this transaction with management of the
Company, has made or has had the opportunity to make such inspection of
the books and records of the Company as the Investor has deemed
necessary in connection with this investment, and any questions asked
have been answered to the satisfaction of the Investor; however, no
oral or written representations apart from the Memorandum have been
made to the Investor.
(d) INVESTOR ACKNOWLEDGEMENT. The Investor understands and acknowledges
that the investment in Notes is subject to considerable risk and that
the entire investment may be lost for any of a number of reasons,
including the risk factors discussed in the Memorandum and for other
reasons all of which are acknowledged by Investor.
(e) CONFIDENTIALITY. The Investor understands that the Memorandum is
confidential. The Investor has not distributed the Memorandum, or
divulged the contents thereof, to anyone other than such legal or
financial advisors as the Investor has deemed necessary for purposes of
evaluating an investment in the Notes and no one (except such advisors)
has used the Memorandum, and the Investor has not made any copies
thereof.
-2-
<PAGE> 3
(f) AUTHORIZATION AND FORMATION OF SUBSCRIBER. The Investor, if a
corporation, partnership, limited liability company, trust or other
form of business entity, is authorized and otherwise duly qualified to
purchase and hold Notes and such entity has not been formed for the
specific purpose of acquiring Notes in the Offering. If the Investor is
one of the aforementioned entities, it hereby agrees that upon request
of the Company it will supply the Company with any additional written
information that may be requested by the Company.
(g) INVESTOR STATUS. Subscriber represents and warrants that it is an
"accredited investor" as defined in Rule 501(a) of Regulation D under
the Act.
The term accredited investor includes any bank as defined in Section
3(a)(2) of the Act, or any savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act whether acting
in its individual or fiduciary capacity; any broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of
1934; any insurance company as defined in Section 2(13) of the Act; any
investment company registered under the Investment Company of 1940 or
business development company as defined in Section 2(a)(48) of that
Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
Business Act of 1958; any plan established and maintained by a state or
its political sub-divisions, for the benefit of its employees if such a
plan has total assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement Income Security Act
of 1974 if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings
and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self- directed plan, with investment decision made
solely by persons that are accredited investors. The term accredited
investor also includes any trust with total assets in excess of
$5,000,000, any private business development company as defined in
Section 202(a)(22) of the Investment Advisors Act of 1940, and certain
individuals whose net worth or joint net worth with the person's spouse
exceeds $1,000,000 or any person who has an individual income in excess
of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and
has a reasonable expectation of reaching the same income level in the
current year.
3. RELIANCE ON REPRESENTATIONS AND WARRANTIES; INDEMNITY. The Investor
understands that the Company and any agent offering the Note(s) for sale
("Selling Agent") will rely on the representations and warranties of the
Investor herein in determining whether a sale of the Notes to the Investor is in
compliance with federal and applicable state securities laws and exemptions
therefrom. The Investor hereby agrees to indemnify the Company and the Selling
Agent and their respective affiliates, and hold the Company and the Selling
Agent and their respective affiliates harmless from and against any and all
liability, damage, cost or expense (including reasonable attorney's fees)
incurred on the account of or arising out of: (a) any inaccuracy in the
Investor's declarations, representations and warranties set forth in this
Subscription Agreement; (b) the disposition of any of the Notes which the
Investor will receive or any securities into which the Notes are convertible,
contrary to the Investor's declarations, representations and warranties in this
Subscription Agreement; (c) any suit or proceeding based upon the claim that
said declarations, representations or warranties were inaccurate or misleading
or otherwise cause for obtaining damages or redress from the Company or the
Selling Agent or any of their respective
-3-
<PAGE> 4
affiliates or the disposition of all or any part of the Investor's Notes or any
such securities; and (d) the Investor's failure to fulfill any or all of the
Investor's obligations herein.
4. UPDATING INFORMATION. All of the information set forth herein with
respect to the Investor, including, without limitation, all of the
representations as warranties set forth in Section 2, is correct and complete as
of the date hereof and, if there should be any material change in such
information prior to the acceptance of this subscription by the Company, the
Investor will immediately furnish the revised or corrected information to the
Company.
5. REGISTRATION RIGHTS.
(a) DEFINITION. As used in this section, the term "Registerable
Securities" shall mean any and all equity securities of the Company
that may be obtained (i) upon conversion of the Notes or (ii) upon
exercise of all or part of the Noteholder's Purchase Option expiring on
December 31, 1999.
(b) REGISTRATION. If the Company determines that, at any time prior to
December 31, 1996, it will file a registration statement pursuant to
the Act in connection with a public offering of securities by the
Company for cash on a form appropriate for the inclusion of the
Registrable Securities ("Public Offering") it shall include in such
registration statement all of the Registrable Securities to be
registered under the Act pursuant to such registration.
(c) PREPARATION AND FILING. Whenever the Company is under obligation
pursuant to the provisions of this Subscription Agreement to use its
best efforts to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement on an
appropriate form with respect to such Registrable Securities
and use its best efforts to cause such registration statement
to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a period of one year
following the later of the effective date of such registration
statement and the expiration of "lockup" or "holdback" periods
required, if any, pursuant to this Agreement, or until the
Registerable Securities covered thereunder have been sold,
whichever is earlier, and to comply with the provisions of the
Act with respect to the sale or other disposition of all
Registerable Securities covered by such registration
statement;
(iii) furnish to each selling holder such number of copies of
the prospectus contained in such registration statement,
including any preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as such
Registerable Securities; and
(iv) use its best efforts to register or qualify the
Registerable Securities covered by such registration statement
under the securities or blue sky laws of the same
jurisdictions in which the sale of securities in the Public
Offering are registered or
-4-
<PAGE> 5
qualified; or if the Registerable Securities are not being
registered in connection with a Public Offering, in such
states as the holders of the Registerable Securities so
registered shall reasonably request.
(d) EXPENSES. All expenses incurred by the Company in complying with
Section 5(c) above, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the
National Association of Securities Dealers, Inc.), fees and expenses of
complying with securities and blue sky laws, printing expenses, fees
and disbursements of counsel for the Company, fees and expenses for
independent certified public accountants (including the expenses of any
special audits in connection with any such registration) shall be paid
by the Company; provided, however, that all underwriting discounts and
selling commissions applicable to the Registerable Securities covered
by such registration and all fees and disbursements of special counsel
to any seller or sellers of Registerable Securities shall be borne by
the seller or sellers.
(e) INDEMNIFICATION. In the event of any registration of any
Registerable Securities under the Act pursuant to this Subscription
Agreement or registration or qualification of any Registerable
Securities pursuant to Section 5(c)(iv) above, the Company shall
indemnify and hold harmless the seller of such Registerable Securities,
each underwriter of such Registerable Securities, each broker or any
other person acting on behalf of such seller and each other person, if
any, who controls any of the foregoing persons, within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing persons may become subject under
the Act or otherwise, insofar as such losses, claims damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which Registrable
Securities were registered under the Act, or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to
make the statements therein in light of the circumstances under which
they were made, not misleading or any violation by the Company of the
Act or state securities or blue sky laws applicable to the Company in
connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse such seller, such
underwriter, broker or other person acting on its behalf of such seller
and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage liability or action; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, or
said prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
seller, underwriter or controlling person seeking indemnification
hereunder.
Before Registerable Securities held by a prospective seller shall be
included in any registration pursuant to this Subscription Agreement,
such prospective seller and any underwriter acting on its behalf (i)
shall have agreed to indemnify and hold harmless (in manner and to the
same extent as set forth in the preceding paragraph of this section)
the Company, each director of the Company, each officer of the Company
who shall sign such registration statement and any person who controls
the Company within the meaning of
-5-
<PAGE> 6
the Act, with respect to any statement or omission from such
registration statement, any final prospectus contained therein, or any
amendment or supplement thereto, but only with reference to statements
or omissions made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such seller or
such underwriter specifically for use in the preparation of such
registration statement, final prospectus or amendment or supplement and
with reference to statements or omissions made in reliance upon an
omission or failure by such seller or such underwriter to furnish any
statement with respect to such seller or underwriter required to be
included therein, and (ii) shall have entered into an underwriting
agreement in usual and standard form, if such registration relates to
an offering that is to be underwritten.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the
preceding paragraphs of this section, such indemnified party will, if a
claim in respect thereof is made against an indemnifying party, give
written notice to the latter of the commencement of such action. In
case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that they may wish, with counsel reasonably
satisfactory to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall be responsible for any
legal or other expenses subsequently incurred by the latter in
connection with the defense thereof.
(f) SELLER TO PROVIDE INFORMATION. As a condition to the Company's
obligation hereunder to cause Registerable Securities to be included in
a registration statement, the seller of such Registerable Securities
shall provide information and shall execute such documents in
connection with such registration as the Company shall reasonably
request.
(g) LOCK-UP OR HOLDBACK PERIOD. If Registerable Securities are included
in any registration pursuant to which the Company is also offering
securities for its own account, the seller of Registerable Securities
will not offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of such Registerable Securities for a period of 90
days after the effective date of the registration statement without
prior written consent of the managing underwriter of the securities
being offered by the Company or, if such securities are not
underwritten, of the Company. If Registerable Securities are included
in any registration other than one pursuant to which the Company is
also offering securities and, during the period of effectiveness of
such registration, the Company proposes to offer securities in an
underwritten public offering, then, (i) during a period beginning on
the effective date of the registration statement relating to such
underwritten public offering and ending 90 days thereafter, the seller
of Registerable Securities will not offer to sell, contract to sell,
grant any option to purchase or otherwise dispose of such Registerable
Securities without prior written consent of the managing underwriter of
the securities being offered by the Company, and (ii) if such event
occurs during the one-year period in which the Company is required to
maintain the effectiveness of the registration relating to the
Registerable Securities, the period in which the Company is required to
maintain such effectiveness shall be extended to a date one year after
the end of the period during which the restriction on resale described
in this sentence applies.
6. NOTICES. Any notices or other communications required or permitted hereunder
shall be sufficiently given if in writing and sent by registered or certified
mail, postage prepaid, return receipt requested, if to the Company, to: American
Professional Billiards, Inc., 1700 East Desert
-6-
<PAGE> 7
Inn Road, Suite 108, Las Vegas, Nevada 89109, Attention: Chief Executive
Officer; and if to the Investor, at the address set forth following the
Investor's signature to this Subscription Agreement, or, in the case of notice
to the Investor or the Company, to such address as either the Company or the
Investor shall designate to the other to notice in writing; and if to a holder
of Registerable Securities other than the Investor, to the address of such
holder on the books and records of the Company.
7. GOVERNING LAW. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without giving
effect to the rules governing conflicts of laws.
8. SIGNATURES. The Investor declares under penalty of perjury that the
statements, representations and warranties contained herein are true, correct
and complete and that this subscription Agreement was executed at:
____________________________ ____________________________
(City) (State)
Principal amount Notes: $________________________
MAKE ALL CERTIFIED OR BANK CHECKS PAYABLE TO: AMERICAN PROFESSIONAL BILLIARDS,
INC.
Exact Name(s) in which ownership of Notes is to be registered:
______________________________________________________________________________
Address: ________________________________________________________________
City, State, Zip Code: ______________________________________________________
Social Security/Tax ID Number:
SUBSCRIBER JOINT SUBSCRIBER:(IF NECESSARY)
- ---------- -------------------------------
___________________________ ___________________________
(Print Name) (Print Name)
___________________________ ___________________________
(Signature) (Signature)
___________________________ ___________________________
(Title) (Title)
Date: _____________________ Date: __________________
RECEIVED AND ACCEPTED:
-7-
<PAGE> 8
$___________________________ Notes: __________________
Date: _______________________
AMERICAN PROFESSIONAL BILLIARDS, INC.
By ____________________________
Its ___________________________
-8-
<PAGE> 9
THE SECURITIES REPRESENTED BY THIS CONVERTIBLE PROMISSORY NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS.
CONVERTIBLE SUBORDINATED NOTE
(Non-negotiable)
$ __________________ ______, 1996
FOR VALUE RECEIVED, American Professional Billiards, Inc., a Nevada corporation
("Maker"), promises to pay to , ("Creditor"), at the principal office of Maker,
in Las Vegas the principal sum of Dollars ($ ), together with interest, if any,
as provided herein, from the date of this Note on the unpaid principal balance
at the rate of ten percent (10.0%) per annum. This Note is one of a series of
Notes aggregating up to One Million One Hundred Thousand Dollars ($1,100,000) in
principal amount, issued in a private offering by the Maker. Each of the Notes
shall represent the general unsecured obligation of the Maker and shall be in
pari passu with each of the other Notes with respect to all rights and
preferences of such Notes.
Unless this Note is converted as provided herein, the principal amount hereof,
together with all accrued and unpaid interest thereon are due and payable in
full on or before the close of business, Eastern Time, on December 31, 1996 (the
"Maturity Date"). Interest on this Note shall accrue and be payable upon payment
of principal of this Note in full; provided, however, that no interest shall be
payable with respect to this Note upon conversion. The Maker shall have no right
to prepay this Note prior to the Maturity Date.
The Notes will be automatically converted into shares of Units (as hereinafter
defined) upon the closing of the Company's proposed public offering of Units
(the "Public Offering"), provided that such closing occurs on or before the
Maturity Date, and, if not automatically converted, will be converted into Units
at the option of the holder at any time through the Maturity Date. Each Unit
obtained on automatic conversion will be identical to the Units offered to the
public in the Public Offering, consisting of one (1) share of Common Stock and
one (1) redeemable Common Stock Purchase Warrant, and will be convertible at a
conversation rate of six (6) Units for each amount of principal equal to the
initial public offering price of the Units offered in the Public Offering. For
the purpose of the provisions of this Note relating to automatic conversion, the
term "Unit" means the smallest denomination of securities that can be purchased
in the Public Offering, whether that denomination consists of one or more
securities.
Each Unit obtained on optional conversion will consist of one (1) Share of
Common Stock and one (1) redeemable Common Stock Purchase Warrant. Upon any
optional conversion, a holder of a Note will be entitled to receive one (1) Unit
for each one dollar ($1.00) of principal of Notes.
-1-
<PAGE> 10
Each Warrant will entitle the holder thereof to purchase tone share of Common
Stock for a period of three years commencing with the date that the Registration
Statement is declared effective by the SEC at a price equal to 150% of the
initial Public Offering Price. During the exercise period of the Warrants, each
Warrant shall be redeemable by the Company at a redemption price of $.10 per
Warrant upon 30 days prior written notice to each Warrant holder, provided,
however, that the closing average bid price of the Company's Common Stock, for a
period of 20 consecutive trading days prior to any such call for redemption,
shall have been 100% or more of the then effective exercise price of the
Warrants.
The Maker shall grant certain registration rights with respect to the securities
issuable upon the automatic conversion of this Note as set forth in the
Subscription Agreement executed by the Maker and the Creditor in connection with
the issuance of this Note (the "Subscription Agreement") which is incorporated
herein by reference.
Upon the occurrence of any of the following events of default the Creditor may,
by written notice to the Maker, declare all or any portion of the unpaid
principal amount due to such Creditor, together with accrued interest thereon,
immediately due and payable:
1. The nonpayment, when due, of any principal or interest on this
Note;
2. The material breach by the Maker of any representation made in
this Note or in the Subscription Agreement to which this Note
relates;
3. The Maker shall commence any voluntary proceeding under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter
in effect; or the Maker shall be adjudicated insolvent or
bankrupt by a decree of a court of competent jurisdiction; or
the Maker shall petition or apply for, acquiesce on, or
consent to, the appointment of any receiver or trustee of the
Maker for all or a substantial part of the property of the
Maker; or the Maker shall make an assignment for the benefit
of creditors, or the Maker shall admit in writing its
inability to pay its debt as they mature; or
4. There shall be commenced against the Maker any proceeding
relating to the Maker under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debts, receivership,
dissolution or liquidation law or statute of any jurisdiction,
whether now or hereinafter in effect; or a receiver or trustee
shall be appointed for the Maker or for all or a substantial
part of the property of the Maker; or a warrant of attachment,
execution or similar process shall be issued against any
substantial part of the property of the Maker.
The Maker hereby waives notice of default or presentment, protest or notice of
nonpayment or dishonor and all other notices or demands relative to this
instrument. Maker agrees to pay reasonable attorney's fees, if any, incurred by
Creditor in connection with any action to collect this Note.
This Note shall be governed, construed and interpreted in accordance with the
laws of the State of Florida, without giving effect to the rules governing
conflicts of law.
-2-
<PAGE> 11
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE LAW, AND
SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE ACT AND THE APPLICABLE STATE LAW OR SUCH SALE OR TRANSFER
IS EXEMPT FROM SUCH REGISTRATION AND THE MAKER HAS RECEIVED AN OPINION OF
COUNSEL ACCEPTABLE TO IT TO THE EFFECT THAT SUCH SALE OR TRANSFER IS SO EXEMPT.
AMERICAN PROFESSIONAL BILLIARDS, INC.
By: _______________________________
Its: _______________________________
________________________
Creditor's Name
________________________
Creditor's Name
________________________
________________________
-3-
<PAGE> 1
EXHIBIT 4.5
EXHIBIT TO UNDERWRITING AGREEMENT
THIS PURCHASE OPTION MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED PRIOR TO
____________, 1997. THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS
ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS
PURCHASE OPTION PRIOR TO THAT DATE OTHER THAN TO AN OFFICER OR PARTNER OF SUCH
HOLDER.
NOT EXERCISABLE PRIOR TO ___________, 1997. VOID AFTER 5:00 P.M. EASTERN TIME,
____________, 2001.
PURCHASE OPTION
For the Purchase of up to 100,000 Units
of
AMERICAN PROFESSIONAL BILLIARDS, INC.
(A Nevada Corporation)
THIS CERTIFIES THAT, in consideration of $1,000.00 aggregate purchase
price duly paid by Joseph Roberts & Co., Inc., its successors or assigns as
provided herein (the "Holder"), as registered owner of this Purchase Option, to
American Professional Billiards, Inc. (the "Company"), is entitled to at any
time or from time to time at or after ____________, 1997 and at or before 5:00
p.m., Eastern Time, ____________, 2001 ("Termination Date"), but not
thereafter, to subscribe for, purchase and receive 100,000 Units ("Units"),
each Unit consisting of one (1) share of common stock, no par value ("Common
Shares") of the Company and one (1) four-year callable warrant to purchase one
share of common stock of the Company ("Warrants"). This Purchase Option is
exercisable at $7.20 per Unit so purchased ("the Exercise Price"), upon
presentation and surrender of this Purchase Option and upon payment of the
Exercise Price for such of the Units at the principal office of the Company;
provided, however, that upon the occurrence of any of the events specified in
the Statement of Rights of Purchase Option, a copy of which is attached as
Annex I hereto and by this reference made a part hereof, the rights granted by
this Purchase Option, including the number of Units to be received upon such
exercise, shall be adjusted as therein specified. If the Termination Date is a
day on which banking institutions are authorized by law to close, then this
Purchase Option may be exercised in accordance with the terms herein on the
next succeeding day which is not such a day on which banking institutions are
authorized by law to close. During the period ending on the Termination Date,
the Company agrees not to take any action that would terminate the Purchase
Option.
The Exercise Price may be paid in cash, by check or the surrender to
the Company of that number of the Units which is calculated by multiplying (i)
the total number of Units by (ii) the Exercise Price and (iii) dividing the
product by the then-current inside offer, on the date of exercise, of the
underlying securities (the "Cashless Exercise Price"). The Cashless Exercise
Price may be tendered pro rata by the holder or holders of less than all the
Units hereunder as the case may be.
<PAGE> 2
Upon exercise of this Purchase Option, the form of election attached
hereto must be duly executed and the instructions for registration of the Units
acquired by such exercise must be completed. If the subscription rights
represented hereby shall not be exercised at or before 5:00 p.m., Eastern Time,
on the Termination Date, then, from and after such date and time, this Purchase
Option shall become and be void without further force or effect, and all rights
represented hereby shall cease and expire.
The registered Holder of this Purchase Option, by its acceptance
hereof, agrees that it will not sell, transfer or assign or hypothecate this
Purchase Option prior to ____________, 1997 to anyone other than an officer or
partner of such Holder or other firm(s) which shall have participated in the
public offering of the Company's securities (SEC File No. __________) to which
this Purchase Option relates. Subsequent to that date, this Purchase Option may
be assigned by the Holder in whole or in part by execution by the Holder of the
form of assignment, a copy of which is attached hereto, to certain persons,
including dealers or their officers or partners. In the event of any assignment
made as aforesaid, the Company, upon request and surrender of this Purchase
Option by the Holder at the principal office of the Company accompanied by
payment of all transfer taxes, if any, payable in connection therewith, shall
transfer this Purchase Option on the books of the Company and shall execute and
deliver a new Purchase Option or Purchase Options of like tenor to the
appropriate assignee expressly evidencing the right to purchase the aggregate
number of Units purchasable hereunder or such portion of such aggregate number
as shall be contemplated by any such agreement.
Notwithstanding anything herein to the contrary, each certificate for
securities purchased under this Purchase Option shall bear a legend as follows:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 ("the Act"). The securities may not be
offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act, or pursuant to an
exemption from registration under the Act, the availability of which is
to be established to the satisfaction of the Company."
The Purchase Option Holder agrees for itself and all subsequent owners,
that before any disposition is made of any securities purchased pursuant to the
Purchase Option, the owner shall give written notice to the Company describing
briefly the manner of any such proposed disposition. The securities shall not
be transferred unless and until (i) the Company has received the opinion of
counsel for such owners that the securities may be sold pursuant to an
exemption from registration under the Securities Act of 1933, as amended (the
"1933 Act"), or (ii) a Registration Statement relating to such securities has
been filed by the Company and made effective by the Securities and Exchange
Commission (the "Commission").
Subject to the above, this Purchase Option may be exercised or assigned
in whole or in part. In the event of the exercise or assignment hereof in part
only, upon surrender of this Purchase Option for cancellation, together with
the duly executed exercise or assignment and funds sufficient to pay
2
<PAGE> 3
any transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Purchase Option of like tenor to this Purchase Option in
the name of the Holder evidencing the right of the Holder to purchase the
number of Common Shares and Warrants purchasable hereunder as to which this
Purchase Option has not been exercised or assigned.
Upon receipt of the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Purchase Option and of reasonably
satisfactory indemnification, the Company shall execute and deliver a new
Purchase Option of like tenor and date. Any such new Purchase Option executed
and delivered as a result of such loss, theft, mutilation or destruction shall
constitute an additional contractual obligation on the part of the Company.
The Company upon request, and subject to the availability of audited
financial statements which would comply with Regulation S-B or S-X under the
1933 Act, agrees to register expeditiously on one separate occasion the
Purchase Option and the securities underlying the Purchase Option and will file
on such occasion a registration statement, or Notification under Form 1-A,
under the 1933 Act, covering such Purchase Option or the securities underlying
the Purchase Option within twenty business days after receipt of each such
request. Such request must be made at any time during a period of four years
beginning one year from the effective date of the offering. In connection with
the request the Company shall bear all expenses, one time only, attendant to
registering the securities. The Company agrees to use its best efforts to cause
the filing required herein to become effective to qualify or register the
Purchase Option and/or the securities underlying the Purchase Option. In
addition, for a period of four years beginning one year after the effective
date of the offering, the holders of the Purchase Option shall have the right
to include such securities as part of any other registration of securities,
other than on Forms S-4, S-8 or other inappropriate form, filed by the Company
and the Company agrees to give the holders thereof not less than forty (40) days
written notice thereof, including any terms or conditions, prior to the filing
of any such registration statement with the Commission.
The Company will also cooperate with the then Holder(s) of the Purchase
Option or securities issued upon the exercise of the Purchase Option in
preparing and signing any Registration Statement or Notification, in addition
to the registration rights hereinabove provided, required in order to sell or
transfer the Units, Common Shares or Warrants underlying this Purchase Option
and will supply all information required therefor, but such additional
Registration or Notification shall be at the then Holder(s) cost and expense.
The Company's agreements with respect to registration of the securities will
continue in effect regardless of the exercise or surrender of this Purchase
Option.
In no event shall this Purchase Option (or the securities issuable upon
full or partial exercise hereof) be offered or sold except in conformity with
the 1933 Act.
This Purchase Option shall be governed by, and construed in accordance
with, the laws of the State of Florida, without regard to its conflicts of laws
principles.
3
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officers and to be sealed with the seal of the
Company as of this ____ day of __________, 1996.
AMERICAN PROFESSIONAL BILLIARDS, INC.
By: ____________________________
President
( S E A L )
By: ____________________________
Secretary
4
<PAGE> 5
ANNEX I
AMERICAN PROFESSIONAL BILLIARDS, INC.
STATEMENT OF RIGHTS OF PURCHASE OPTION
(a) In the event, prior to the expiration of the Purchase Option to
which this Statement of Rights is attached ("Option") by exercise or by its
terms, the Company shall issue any of its Common Shares as a share dividend or
shall subdivide the number of outstanding Common Shares into a greater number
of shares, then, in either of such events, the then applicable Exercise Price
per Unit comprised of the shares of Common Stock and Warrants purchasable
pursuant to this Option in effect at the time of such action shall be reduced
proportionately and the number of shares of the Common Shares and Warrants at
that time purchasable pursuant to this Option shall be increased
proportionately; and, conversely, in the event that the Company shall reduce
the number of outstanding Common Shares by combining such shares into a smaller
number of shares, then, in such event, the then applicable Exercise Price per
Unit purchasable pursuant to this Option in effect at the time of such action
shall be increased proportionately and the number of Common Shares and Warrants
at that time purchasable pursuant to this Option proportionately shall be
decreased. Any dividend paid or distributed upon the Common Shares in shares of
any other class of the Company or securities convertible into Common Shares
shall be treated as a divided paid in Common Shares to the extent that the
Common Shares are issuable upon the conversion thereof.
(b) In the event, prior to the expiration of this Option by exercise
or by its terms, the Company shall be recapitalized by reclassifying its
outstanding Common Shares (other than into shares with a different par value, or
by changing its outstanding Common Shares to Shares without par value), or in
the event the Company or a successor corporation shall consolidate or merge with
or convey all or substantially all of its, or of any successor corporation's
property and assets to any other corporation or corporations (any such other
corporation being included within the meaning of the term "successor
corporation" hereinbefore used in the context of any consolidation or merger of
any other corporation with, or the sale of all or substantially all of the
property of any such other corporation to, another corporation or corporations),
or in the event of any other material change in the capital structure of the
Company or of any successor corporation by reason of any reclassification,
reorganization, recapitalization, consolidation, merger, conveyance or
otherwise, then, as a condition of any such reclassification, reorganization,
recapitalization, consolidation, merger or conveyance, a prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby the Holder of
this Option shall thereafter have the right to purchase, upon the basis and the
terms and conditions specified in this Option, in lieu of the securities of the
Company theretofore purchasable upon the exercise of this Option, such shares,
securities or assets as may be issued or payable with respect to or in exchange
for the number of securities of the Company theretofore purchasable upon the
exercise of this Option had such reclassification, reorganization,
recapitalization, consolidation, merger or
5
<PAGE> 6
conveyance not taken place; and in any such event, the rights of the Holder of
this Option to any adjustment in the number of Common Shares or Warrants
purchasable upon exercise of this Option, as hereinbefore provided, shall
continue and be preserved in respect of any shares, securities or assets which
the Holder becomes entitled to purchase. Notwithstanding anything herein to the
contrary, the provisions of this paragraph (b) shall not apply to a merger with
a subsidiary provided the Company is the continuing corporation and provided
further such merger does not result in any reclassification, capital
reorganization or other change of the securities issuable under this Option.
The foregoing provisions of this paragraph (b) shall apply to successive
reclassifications, capital reorganizations and changes of securities and to
successive consolidation, mergers, sales or conveyances.
(c) In the event the Company, at any time while this Option shall
remain unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates, or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as part
of the terms of any such sale, dissolution, liquidation, or winding up such
that the Holder of this Option may thereafter receive, upon exercise hereof, in
lieu of the securities of the Company which it would have been entitled to
receive, the same kind and amount of any shares, securities or assets as may be
issuable, distributable or payable upon any such sale, dissolution, liquidation
or winding up with respect to each Common Share of the Company; provided,
however, that in the event of any such sale, dissolution, liquidation or
winding up, the right to exercise this Option shall terminate on a date fixed
by the Company, such date so fixed to be not earlier than 5:00 p.m., Eastern
Time, on the 45th day next succeeding the date on which notice of such
termination of the right to exercise this Option has been given by mail to the
Holder of this Option at such Holder's address as it appears on the books of
the Company.
(d) If the Company should at any time or from time to time hereafter
issue or sell any Common Shares (other than the Common Shares which may be
purchased under this Option) without consideration or for a consideration per
share less than the portion of the Exercise Price allocable per Common Share
therein in effect immediately prior to the time of such issue or sale, then
forthwith upon such issue or sale, the Exercise Price shall be adjusted to a
price (computed to the nearest cent) determined by dividing the sum of (i) the
number of Common Shares outstanding immediately prior to such issue or sale
multiplied by the portion of the Exercise Price attributable to a Common Share
in each Unit in effect immediately prior to such issue or sale, and (ii) the
consideration, if any, received by the Company upon such issue or sale, by the
total number of Common Shares outstanding immediately after such issue or sale.
For purposes of this paragraph (d), the following provisions (1) to (5) shall
also be applicable.
(1) In case at any time hereafter the Company shall in any manner
grant any right to subscribe for or to purchase, any option for the
purchase of Common Shares or any stock or other securities convertible
into or exchangeable for Common Shares (such convertible or exchangeable
stock or securities being hereinafter referred to as "Convertible
Securities") other than those comprising a portion of this Option, and
the minimum price per share for the Common Shares, pursuant to such
rights or option or upon conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any,
received or
6
<PAGE> 7
receivable by the Company as consideration for the granting of such rights or
options, plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in the case
of such Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange thereof, by (ii)
the total maximum number of Common Shares issuable pursuant to such rights or
options or upon the conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon exercise of such rights or options) shall
be less than the Exercise Price in effect immediately prior to the time of the
granting of such rights or options, then the total maximum number of Common
Shares issuable pursuant to such rights or options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such rights and options shall (as of the date of granting
of such rights or options) be deemed to be outstanding and to have been issued
for said price per share as so determined; provided that no further adjustment
of the Exercise Price shall be made upon the actual issue of Common Shares so
deemed to have been issued; and further provided, that, upon the expiration of
such rights (including rights to convert or exchange) or options, (A) the
number of Common Shares deemed to have been issued and outstanding by reason of
the fact that they were issuable pursuant to such rights or options (including
rights to convert or exchange) were not exercised, shall no longer be deemed to
be issued and outstanding; and (B) the Exercise Price shall forthwith be
adjusted to the price which would have prevailed had all adjustments been made
on the basis of the issue only of the Common Shares actually issued upon the
exercise of such rights or options or upon conversion or exchange of such
Convertible Securities.
(2) In case the Company shall in any manner issue or sell any
Convertible Securities, and the minimum price per share for which such Common
Shares are issuable upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of all such
Convertible Securities by (ii) the total maximum number of Common Shares
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Exercise Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of Common Shares issuable
upon conversion or exchange of all such Convertible Securities shall (as of the
date of the issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for said price per share as so determined;
provided, that no further adjustment of the Exercise Price shall be made upon
the actual issue of Common Shares so deemed to have been issued; and, further
provided, that if any such issue or sale of such Convertible Securities is made
upon exercise of any right to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which an adjustment of the
Exercise Price has been or is to be made pursuant to other provisions of this
paragraph (d) no further adjustment of the Exercise Price shall be made by
reason of such issue or sale; and, further provided, that, upon the termination
of the right to convert or to exchange such Convertible Securities for Common
Shares, (A) the number of Common Shares deemed to
7
<PAGE> 8
have been issued and outstanding by reason of the fact that they were
issuable upon conversion or exchange of any such Convertible Securities,
which were not so converted or exchanged, shall no longer be deemed to
be issued and outstanding, and (B) the Exercise Price shall forthwith be
adjusted to the price which would have prevailed had all adjustments
been made on the basis of the issue only of the number of Common Shares
actually issued upon conversion or exchange of such Convertible
Securities.
(3) In case any Common Shares or Convertible Securities or any
rights or options to purchase any such stock or securities shall be
issued solely for cash, the consideration received therefor, after
deducting therefrom any commission or other expenses paid or incurred by
the Company for any underwriting of, or otherwise in connection with,
the issuance thereof, shall be deemed to be the amount received by the
Company therefor. In case any Common Shares or Convertible Securities or
any rights or options to purchase any such stock or securities shall be
issued for a consideration part or all of which shall be other than
cash, then, for the purpose of this paragraph (d), the Board of
Directors of the Company shall determine the fair value of such
consideration, which is not cash, irrespective of accounting treatment,
and such Common Shares, Convertible Securities, rights or options shall
be deemed to have been issued for an amount of cash equal to the value
of such consideration other than cash so determined by the Board of
Directors plus any cash received therefor. The reclassification of
securities other than Common Shares into securities including Common
Shares shall be deemed to involve the issuance for a consideration other
than cash of such Common Shares immediately prior to the close of
business on the date fixed for the determination of security holders
entitled to receive such Common Shares. In case any Common Shares or
Convertible Securities or any rights or options to purchase any such
stock or other securities shall be issued together with other stock or
securities or other assets of the Company for a consideration which
includes both, the Board of Directors of the Company shall determine
what part of the consideration so received is to be deemed to be
consideration for the issue of such Common Shares, Convertible
Securities, rights or options.
(4) For purposes of paragraphs (a) and (d), in case the Company
shall take a record of the holders of any Common Shares for the purpose
of entitling them (i) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (ii) to
subscribe for or purchase Common Shares or Convertible Securities, then
such record date shall be deemed to be the date of the issue or sale of
the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as
the case may be.
(5) For the purpose of this paragraph (d), Common Shares at any
relevant time owned or held by, or for the account of, the Company shall
not be deemed outstanding.
Anything in this paragraph (d) or paragraph (a), above, to the contrary
notwithstanding. The Company shall not be required to give effect to any
adjustment in the Exercise Price of less than one
8
<PAGE> 9
cent, but when the cumulative net effect of more than one adjustment so
determined shall be to change the actual Exercise Price by at least one cent,
such change in the Exercise Price shall thereupon be given effect.
(e) Upon any exercise of this Option by the Holder, the Company shall
not be required to deliver fractions of any securities, but prompt,
proportionate, equitable, lawful and adequate adjustment in the Exercise Price
payable by the Holder shall be made in respect of any such fraction of any
securities on the basis of the Exercise Price per Unit then applicable upon the
exercise of this Option.
(f) In the event, prior to the expiration of this Option by exercise or
by its terms, the Company shall determine to take a record of its securities
holders for the purpose of determining securities holders entitled to receive
any share dividend, distribution or other right which will cause any change or
adjustment in the number, amount, price or nature of the Common Shares or other
shares, Warrants, securities or assets deliverable upon the exercise of this
Option pursuant to the foregoing provisions, the Company shall specify the date
as of which such record is to be taken; the purpose for which such record is to
be taken; and the number, amount, price and nature of the Common Shares or
other shares, Warrants, securities or assets which will be deliverable upon
exercise of this Option after the action for which such record will be taken
has been consummated.
(g) The Company may deem and treat the registered Holder of this Option
at any time as the absolute owner hereof for all purposes, and the Company
shall not be affected by any notice to the contrary.
(h) Whenever the Exercise Price shall be adjusted as required by the
provisions of paragraphs (a) or (d) hereof, the Company shall forthwith file in
the custody of its Secretary or Assistant Secretary at its principal office,
and with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided and setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
the Holder and the Company shall, forthwith after each such adjustment, deliver
a copy of such certificate to the Holder. Such certificate shall be conclusive
as to the correctness of such adjustment.
(i) This Option shall not entitle the Holder hereof to any of the
rights of shareholders or to any dividend declared upon the Common Shares
unless the Holder shall have exercised this Option and purchased the Common
Shares prior to the record date fixed by the Board of Directors of the Company
for the determination of holders of Common Shares entitled to such dividend or
other right.
(j) This Option is subject in all respects to the terms and provisions
of that certain Underwriting Agreement dated ____________, 1996, by and between
the Company and Joseph Roberts & Co., Inc., the Representative of the several
underwriters therein and the initial Holder hereof, relating to a public
offering of the Company's shares of Common Stock and Common Stock Purchase
Warrants.
9
<PAGE> 10
FORM TO BE USED TO EXERCISE OPTION:
AMERICAN PROFESSIONAL BILLIARDS, INC.
1700 EAST DESERT INN ROAD
SUITE 108
LAS VEGAS, NEVADA 89109
Date: ____________, 19__
The Undersigned hereby elects irrevocably to exercise the Option
granted to it by that certain Purchase Option dated ______________, 1996
and to purchase _____ Units of American Professional Billiards, Inc. called
for thereby, and hereby makes payment of $ _____________________ (at the
rate of $____________ per Unit) in payment of the Exercise Price pursuant
thereto or the surrender herewith of the Purchase Option to purchase
______ Units in consideration of the Cashless Exercise Price pursuant thereto,
as the case may be. Please issue the Units as to which this Option is exercised
in accordance with the instructions given below.
________________________________
Signature
________________________________
Signature Guaranteed
INSTRUCTIONS FOR REGISTRATION OF COMMON SHARES AND WARRANTS
Name ____________________________________________________________
(Print in Block Letters)
Address _________________________________________________________
10
<PAGE> 11
FORM TO BE USED TO ASSIGN OPTION:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Option:)
FOR VALUE RECEIVED, _________________________________ does hereby sell,
assign and transfer unto ______________________ the right to purchase _________
Units of American Professional Billiards, Inc. evidenced by that certain
Purchase Option dated __________________________ and does hereby irrevocably
constitute and appoint ____________________________ attorney to transfer such
right on the books of such Company with full power of substitution in the
premises.
Dated: __________________, 19__.
_________________________
Signature
_________________________
Signature Guaranteed
NOTICE: The signature to the form to exercise or form to assign must
correspond with the name as written upon the face of the within Option in every
particular without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
11
<PAGE> 12
TO: Joseph Roberts & Co., Inc.
416 East Atlantic Boulevard
Pompano Beach, Florida 33060.
We hereby subscribe for Units of American Professional
Billiards, Inc. in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Prospectus referred to
in the first paragraph thereof relating to said Units. We further state that in
purchasing said Units we have relied upon said Prospectus and upon no other
statement whatsoever, whether written or oral. We confirm that we are a dealer
actually engaged in the investment banking or securities business and that we
are either (i) a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or (ii) a dealer with its principal place
of business located outside the United States, its territories and possessions
and not registered under the Act of 1934, as amended, who hereby agrees not to
make any sales within the United States, its territories and possessions or to
persons who are nationals thereof or residents therein. We hereby agree to
comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of NASD, and if we are a foreign dealer and not a member of the NASD,
we also agree to comply with the NASD's interpretation with respect to
free-riding and withholding, to comply, as though we were a member of the NASD,
with the provisions of Sections 8 and 36 of Article III thereof as that Section
applies to non-member foreign dealers.
--------------------------------------
By:
----------------------------------
Address:
------------------------------
--------------------------------------
Dated: , 1996
------------------
<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of October 3, 1995 between World Wide
Collectibles, Inc., a Nevada Corporation (the "Seller"), and American
Professional Billiards, Inc. (the "Buyer").
WITNESSETH
WHEREAS, the Seller is engaged in the certain aspects of the billiard
industry (the "Business"); and
WHEREAS, Buyer wishes to purchase certain assets of the Seller used in
connection with the Business; and
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereby agree as follows:
ARTICLE I
TRANSFER OF CERTAIN ASSETS AND RELATED MATTERS
1.1 Transfer of Assets. On the terms and subject to the conditions of
this Agreement, at the Closing, the Seller shall transfer, convey and assign to
the Buyer, and the Buyer shall purchase and acquire from the Seller, all of the
assets, rights and properties of the Seller (as the same shall exist
immediately prior to the Closing), which relate in any manner to or are used or
held for use in connection with the Business (other than the collectible
billiard cards (the "Cards") and the name "World Wide Collectibles, Inc.," the
"Purchase Assets") including, without limitation, the following assets, rights
and properties:
(a) the sanctions from the Professional Billiards Tour;
(b) the name "World Team Billiards" and all billiard related assets
owned by World Team Billiards, Inc. ("WTB"), a wholly owned
subsidiary of the Seller;
(c) all books, records, files, lists and names, addresses and telephone
numbers of any and all business contacts and other information
(whether in hard copy or machine readable form), including, without
<PAGE> 2
limitation, property records, mailing lists, relating to the
Purchased Assets, customer and vendor lists and records, computer
programs, records, files and related software and all documentation
related in any way to the Purchased Assets;
(d) all rights in, to and under any contracts, commitments, customer
purchase orders, vendor purchase orders and other agreements;
(e) all rights in, to and under any license agreement or arrangement of
any kind relating to the Purchased Assets;
(f) all rights and chooses in action against third parties, including,
but not limited to, all warranty or other contractual claims
(express, implied or otherwise), against third parties relating in
any manner to any asset or property transferred, conveyed or
assigned to the Buyer pursuant to this Agreement;
(g) all federal, state, local and foreign governmental licenses,
permits, authorizations and approvals, if any, of the Seller which
relate in any manner to or are used or held for use in connection
with the manufacture and sale of products by Seller and the
operation of the Business, if and to the extent such licenses,
permits, authorizations and approvals may be transferred legally by
the Seller;
(h) all catalogs, brochures, art work, photographs, advertising
materials, printing materials and showroom samples related to the
Purchased Assets; and
(i) with regard to the Purchased Assets, all intellectual property
rights, including, without limitation, patent, trademarks, trade
names, service marks, copyrights, applications for the foregoing,
inventions, certificates of public convenience and necessity,
franchises, licenses, trade secrets, logos, slogans, proprietary
processes, technology, know-how, formulae, designs and customer
lists and all other information and intellectual property rights,
whether patentable or unpatentable (collectively, the "Intellectual
Property").
1.2 Assets Not Being Transferred. Any assets, property or rights of
the Seller not constituting Purchased Assets are not being transferred
hereunder. Anything contained in Section 1.1 to the contrary notwithstanding,
there are expressly excluded from the assets, properties and rights to be
transferred, conveyed and assigned to the Buyer the following:
-2-
<PAGE> 3
(a) the consideration delivered by the Buyer to the Seller
pursuant to this Agreement;
(b) the corporate minute books, stock record books, corporate
tax returns, personnel and payroll records, and accounting
records of the Seller;
(c) all cash and cash equivalents on hand and in banks,
certificates of deposit, commercial paper, marketable
securities and other similar securities owned by the
Seller;
(d) accounts receivable as of the closing date;
(e) those assets of the Seller related to the Cards;
(f) the name "World Wide Collectibles, Inc." and
(g) WTB.
For convenience of reference, the assets, properties and rights which are not
to be transferred, conveyed and assigned to the Buyer pursuant to this Section
1.2 are herein collectively referred to as the "Excluded Assets."
1.3 Instruments of Conveyance and Transfer, Etc. At the Closing, the
Seller shall deliver to the Buyer a bill of sale (the "Bill of Sale"), and such
deeds, endorsements, assignments and other good and sufficient instruments of
conveyance and transfer as shall be necessary to transfer, convey and assign
good and marketable title to the Purchased Assets to the Buyer.
1.4 Further Assurances. The Seller shall promptly deliver to the Buyer
any assets received by the Seller after the Closing which constitute Purchased
Assets, and the Buyer shall promptly deliver to the Seller any assets received
by it after the Closing which constitute Excluded Assets. The Seller shall, at
any time and from time to time, upon the request of the Buyer, do, execute,
acknowledge and deliver, and cause to be done, executed, acknowledged or
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney or assurances as may be reasonably required to transfer,
assign, convey, grant and confirm to the Buyer, or to aid and assist in the
collection of or
-3-
<PAGE> 4
reducing to possession by the Buyer, of the Purchased Assets, or to vest in the
Buyer good and marketable title to the Purchased Assets as herein provided.
1.5 Assignment of Contracts, Rights, Etc. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement or an attempted agreement to transfer, sublease or assign any
contract, license, lease, commitment or other agreement or property or any
claim or right of any benefit arising thereunder or resulting therefrom
(collectively, the "Contract Rights"), if an attempted transfer, sublease or
assignment of any such Contract Rights, without the consent of any other party
thereto, would constitute a breach thereof or in any way affect the rights of
the Buyer thereunder. The Seller and the Buyer shall use their respective best
efforts to obtain the consent of the other party to any of the foregoing to the
transfer, sublease or assignment of such Contract Rights to the Buyer in all
cases in which such consent is required for the transfer, sublease or
assignment of any such Contract Rights. If such consent is not obtained, the
Seller shall cooperate with the Buyer, at the Seller's reasonable expense, in
any legal arrangements necessary to provide for the Buyer the benefits of such
Contract Rights, including, without limitation, enforcement for the benefit of
the Buyer of any and all rights of the Seller against the other party thereto.
ARTICLE II
ASSUMPTION OF CERTAIN LIABILITIES
2.1 Liabilities Being Assumed. Except as otherwise provided herein
and subject to the terms and conditions of this Agreement, simultaneously with
the transfer, conveyance and assignment to the Buyer of the Purchased Assets,
the Buyer shall assume the following liabilities and obligations, and only the
following liabilities and obligations, of the Seller (the "Assumed
Obligations"): the liabilities and obligations to be performed after the
Closing under those Assigned Contracts which are assigned to the Buyer pursuant
to this Agreement.
2.2 Liabilities Not Being Assumed. Any liability or obligation of the
Seller which is not specifically described or enumerated in Section 2.1 shall
not constitute an
-4-
<PAGE> 5
Assumed Obligation. For convenience of reference, the liabilities and
obligations not being assumed by the Buyer as aforesaid are hereinafter
collectively referred to as the "Excluded Obligations".
ARTICLE III
CLOSING
3.1 Closing. Subject to the satisfaction of the conditions set
forth herein, the closing for the consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at Herzfeld & Rubin, P.C.,
40 Wall Street, New York, New York 10005 on October 3, 1995, at 2:00 p.m., or
at such other date and time as shall be agreed to in writing by Seller and
Buyer.
ARTICLE IV
PURCHASE PRICE: ALLOCATION
4.1 Purchase Price and Terms of Payment. The purchase price
consists of (i) a note in the form attached hereto in the principal amount of
$340,000, which shall be delivered at the Closing and (ii) 2,000,000 shares of
common stock of Buyer which shall be delivered at Closing, or as otherwise
agreed by the parties.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
A. The Seller represents and warrants to the Buyer, as follows:
5.1 Organization: Good Standing; Qualification and Power. The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, has all requisite corporate power and
authority to own, lease and operate its properties, to carry on its business,
to enter into this Agreement and all other
-5-
<PAGE> 6
agreements contemplated hereby, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
5.2 Authority; Enforceability; No Violation, Etc. The Seller has
full and absolute power and authority to enter into this Agreement, the Bill of
Sale, and the other agreements to which it is a party as contemplated hereby,
to perform its obligations under each such Agreement, and to consummate the
transactions contemplated by each such Agreement. This Agreement, the Bill of
Sale and the other documents referred to herein are herein collectively
referred to as the "Documents" and individually as a "Document". The execution,
delivery and performance of the Documents to which it is a party, and the
consummation of the transactions contemplated by such Documents have been duly
and validly authorized by all necessary corporate action on the part of the
Seller. Each Document to which the Seller is a party is, or upon its execution
and delivery will be, a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms. Neither the execution,
delivery or performance by the Seller of the Documents to which it is a party
nor the consummation by the Seller of the transactions contemplated thereby,
nor compliance by the Seller with any of the provisions thereof will (a)
conflict with or result in a breach of any provision of the certificate of
incorporation or by-laws of the Seller, (b) cause a default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any agreement, instrument or obligation to which
the Seller is a party, or by which any of the Purchased Assets may be bound or
(c) violate any law, statute, rule or regulation or judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body,
in each case applicable to the Seller or its properties or assets. Other than
any consents which may be required under the Assigned Contracts, no filing
(other than those required under applicable bulk sales laws) with, and no
permit, authorization, consent or approval of, any person (governmental or
private) is necessary for the consummation by the Seller of the transactions
contemplated by the Documents.
5.3 Title to Property and Related Matters. The Seller has good and
marketable title to the Purchased Assets, free and clear of all security
interests, judgments, liens, pledges, charges, escrows, encumbrances, options,
rights of first refusal, rights of first
-6-
<PAGE> 7
offer, mortgages, indentures, security agreements or other agreements,
arrangements, contracts, commitments, understandings or obligations of any kind
or character, whether written or oral and whether or not relating in any way to
credit or the borrowing of money (collectively, "Claims"). The Seller has
complete and unrestricted power and the unqualified right to sell, convey,
assign, transfer and deliver the Purchased Assets to the Buyer. The Bill of
Sale will be sufficient to transfer, convey and assign to the Buyer good and
marketable title to the Purchased Assets.
5.4 Agreements, Etc. The Seller has in all material respects
performed all the obligations required to be performed by it to date under the
Assigned Contracts and is not in default or alleged to be in default under any
Assigned Contract and there exists no event, condition or occurrence which,
after notice or lapse of time, or both, would constitute a default by it of any
of the foregoing. The Seller has furnished to the Buyer a correct and complete
copy of each Assigned Contract.
5.5 Litigation, Etc. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the best knowledge of the Seller, threatened against the Seller or in any
manner relating to or potentially affecting the Purchased Assets, whether at
law or in equity, whether civil or criminal in nature or whether before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign. There are no
judgments, decrees, injunctions or orders of any court, governmental
department, commission, agency, instrumentality or arbitrator against the
Seller or in any manner relating to or potentially affecting the Business or
the Purchased Assets.
5.6 Compliance; Licenses and Permits. The Seller has complied in all
material respects with all federal, state, local or foreign laws, ordinances,
regulations or orders applicable to the operation of its business and the
Seller has all federal, state, local and foreign governmental licenses and
permits which are required for the conduct of the business previously conducted
by the Seller, which licenses and permits are in full force and effect, and no
violations are outstanding or uncured with respect to any such licenses or
permits and no proceeding is pending or, to the best of the Seller's knowledge,
threatened to revoke or limit any thereof.
-7-
<PAGE> 8
5.7 Intellectual Property. The Seller owns all Intellectual Property
necessary or required to develop and to conduct its Business. No royalties,
honoraria or fees are payable by the Seller to other persons by reason of the
ownership or use of the Requisite Rights. The products of the Seller do not
violate any license or infringe upon any Intellectual Property rights or
assumed name of another; and there is no pending or threatened claim or
litigation against the Seller contesting the validity or right to use of any of
the foregoing, nor has the Seller received any notice that any of the Requisite
Rights or the operation of the Business conflicts, or will conflict, with the
asserted rights of others.
5.8 Business Generally. There has been no event or transaction, or
information which has come to the attention of the Seller, which, as it relates
to the Business, could reasonably be expected to have a material effect on, the
Purchased Assets or the relationship of the Seller with the customers,
licensors, licensees, suppliers, manufacturers or sales representatives of the
business of the Seller.
5.9 No Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate, or be in conflict with, or constitute a default under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, any
agreement or commitment to which Seller is a party or by which Seller is bound,
or violate any statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority.
5.10 Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to the Buyer by or on behalf of the Seller
in connection with the transactions contemplated hereby contains any untrue
statement of fact or omits to a will omit to state any material fact necessary
in light of the circumstances under which it was made, to make the statements
contained herein and therein not misleading.
5.11 Brokers. Neither the Seller has, nor have any of its officers,
directors or employees, employed any broker or finder or incurred any liability
for brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
-8-
<PAGE> 9
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
6.1 Organization; Good Standing; Qualification and Power. The Buyer
is a corporation validly existing and in good standing under the laws of the
State of Nevada and has all requisite power and authority to own, lease and
operate its properties, to carry on its business, to enter into each Document
to which it is a party, to perform its obligations under each Document and to
consummate the transactions contemplated by such Documents.
6.2 Authority; Enforceability; No Violation, Etc. The execution,
delivery and performance by the Buyer of each Document to which it is a party
and the consummation of the transactions contemplated thereby, have been duly
and validly authorized by all necessary action on the part of the Buyer, and
each such Document is a valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms. Neither the execution, delivery
and performance of the Documents, nor the consummation of the transactions
contemplated thereby, nor compliance by the Buyer with any of the provisions
thereof will (a) conflict with or result in a breach of any provision of the
certificate of incorporation or By-laws, (b) cause a default (or give rise to
any right of termination, cancellation or acceleration), under any of the
terms, conditions or provisions of any agreement, instrument or obligation to
which it is a party, or by which any of its properties or assets may be bound,
or (c) violate any statute, rule or regulation or judgment, order, writ,
injunction or decree of any court, administrative agency or governmental body,
in each case applicable to its properties or assets. No filing with, and no
permit, authorization, consent or approval of, any person (governmental or
private), is necessary for the consummation by the Buyer of the transactions
contemplated by the Documents.
6.3 Brokers. Neither the Buyer nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage
-9-
<PAGE> 10
fees, commissions or finders' fees in connection with the transactions
contemplated hereby by this Agreement.
ARTICLE VII
CONDITIONS TO CLOSING -- BUYER
The obligations of Buyer under this Agreement are, at the option of the
Buyer, subject to the satisfaction, at or prior to the Closing Date, of each of
the following conditions, unless waived in writing by the Buyer:
7.1 Proceedings and Instruments. All proceedings taken in connection with
the transactions contemplated hereby and all instruments and documents incident
thereto are satisfactory in form and substance to Buyer and its counsel.
7.2 Actions or Proceedings. On the Closing Date, no action or proceeding
before any court or governmental body is pending (or to the best of the
knowledge of Seller, threatened), and no investigation has been commenced and is
continuing, wherein an unfavorable judgment, decree or order would prevent the
carrying out of this Agreement or any of the transactions or events contemplated
hereby, declare unlawful the transactions or events contemplated by this
Agreement or cause such transactions to be rescinded.
7.3 Representations and Warranties as of the Closing Date; Certificate.
The representations and warranties of Seller made in this Agreement or in any
document or certificate delivered to Buyer hereunder shall be in all material
respects, true and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date and Buyer shall have received a certificate, dated the Closing
Date, to such effect certified by Seller.
-10-
<PAGE> 11
ARTICLE VIII
CONDITIONS TO CLOSING - SELLER
The obligations of Seller under this Agreement are, at their option,
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Stockholders:
8.1 Proceedings and Instruments. All proceedings taken in
connection with the transactions contemplated hereby and all instruments and
documents incident thereto are satisfactory in form and substance to the Seller
and its counsel.
8.2 Representations and Warranties of the Closing Date;
CERTIFICATE. The representations and warranties of Buyer made in this
Agreement shall be in all material respects true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, and the Stockholders and Buyer
shall have received a certificate, dated the Closing Date, to such effect
certified by the Buyer.
ARTICLE IX
ADDITIONAL AGREEMENT
9.1 Taxes. The Seller shall bear all sales and transfer taxes
relating to the transfer of the Purchased Assets to the Buyer hereunder.
ARTICLE X
MISCELLANEOUS
10.1 Amendment, Modification and Waiver. This Agreement shall not
be altered or otherwise amended except pursuant to an instrument in writing
signed by each of the parties hereto, except that any party to this Agreement
may waive any obligation owed to it by another party under this Agreement. The
waiver by any party hereto of a
- 11 -
<PAGE> 12
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
10.2 Expenses. Each party hereto shall bear the fees, costs and
expenses incurred by it in connection with, relating to or arising out of the
execution, delivery and performance of the Documents and the consummation of
the transactions contemplated by the Documents, including, without limitation,
legal and accounting fees and expenses.
10.3 Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors,
heirs, legal representatives, and assigns of the parties hereto; provided,
however, that this Agreement shall not be assignable by any party without the
prior written consent of the other parties, except the Buyer may assign all or
any portion of its rights hereunder to any affiliate of the Buyer if such
affiliate shall agree to be bound by the terms of this Agreement and provided
such assignment shall not relieve the Buyer of its obligations hereunder.
Except as set forth in this Section, this Agreement constitutes an agreement
among the parties and none of the agreements, covenants, representations or
warranties contained herein shall be for the benefit of any third party not a
party to this Agreement.
10.4 Entire Agreement. This Agreement, and the other writings
referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter.
10.5 Survival. All representations and warranties contained in this
Agreement shall survive the Closing. All agreements contained herein shall
survive the Closing until they are otherwise terminated, whether by their
terms or as a matter of applicable law.
10.6 Headings. the section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.7 Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if delivered personally, sent by prepaid air courier or
sent by registered or certified first
- 12 -
<PAGE> 13
class mail, postage prepaid, return receipt requested. Any such communication
shall be deemed to have been given, in the case of personal delivery, if sent
by air courier, on the next business day after dispatch, and in the case of
mailing, on the third business day following the day on which the piece of mail
containing such communication is posted.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
10.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada applicable to
contracts made and to be performed therein.
10.10 Parties. Nothing contained in this Agreement is intended or
shall be construed to give any person or corporation, other than the parties
hereto and their respective successors and permitted assigns, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained, this Agreement being intended to be and being for
the sole and exclusive benefit of the parties hereto and their respective
successors and permitted assigns and for the benefit of no other person or
corporation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered on the date first above written.
WORLD WIDE COLLECTIBLES, INC.
By: /s/ John P. O'Meara
---------------------------
Treasurer, Director
AMERICAN PROFESSIONAL BILLIARDS, INC.
By: /s/ Robert M. Stander
---------------------------
Chairman & CEO
- 13 -
<PAGE> 1
EXHIBIT 10.2
[PRO BILLIARDS TOUR Logo]
PROFESSIONAL BILLIARDS TOUR
GRANT OF PERMANENT AND EXCLUSIVE
SANCTION AND ENDORSEMENT
WHEREAS, the Professional Billiards Tour Association, Inc. (hereinafter referred
to as PBT) is the governing body of professional billiards, and
WHEREAS, the mission and primary objective of the PBT is to promote and protect
the professional interests of its player members and
WHEREAS, the PBT has the duty, the legitimate right, and the authority to ensure
that any and all tournaments, events, exhibitions and competitions that
involve the participation of Professional and Touring Professional PBT
members are financed, promoted, produced and managed subject to
guidelines promulgated by the PBT for the purpose of protecting the
interests of all players and ensuring that ethical and legal standards
be adhered to, and
WHEREAS, the grant of a PBT sanction is the process through which the PBT
establishes and enforces its event guidelines and carries out its duty
to protect its player members, and
WHEREAS, the PBT seeks to create, promote, and maintain universal rules of play
which will help to foster the growth of the sport of billiards, and
WHEREAS, the PBT has been petitioned by World Team Billiards, Inc. (hereinafter
referred to as WTB) to be provided a permanent and exclusive PBT
sanction for all professional team events produced by WTB and
WHEREAS, WTB is legally incorporated in the State of Delaware and has invented,
created, developed and repeatedly demonstrated a unique and innovative
competitive format that incorporates professional team competition and
utilizes a set period of time within which
<PAGE> 2
competition takes place (game clock), a set period of time within which
each shot must take place (shot clock), a set line-up of players,
participation by a minimum of two players per team up to five players
per team, and other elements and unique variations of the rules of play
for 9-Ball and
WHEREAS, the WTB competitive format is known as the WTB Professional Team
Format and
WHEREAS, the WTB Professional Team Format has been determined to be suitable
for both amateur and professional competition,
Let all men know by these presents that:
the PBT hereby grants a Permanent and Exclusive Sanction to WTB,
its agents, representatives, assignees, or successors for any
and all tournaments, events, exhibitions, television programs,
or amateur and professional league competition/operations
developed, produced, promoted, organized, staged, operated or
licensed by WTB, its agents, representatives, assignees, or
successors utilizing the WTB Professional Team Format and that
the PBT hereby permanently and officially recognizes and
endorses the WTB Professional Team Format as the Official
Professional Team Format of the PBT and hereby grants full
rights to WTB to use the PBT name, logo, recognition and
endorsement in all advertising, promotional materials, marketing
materials, TV commercials, banners, signage, official apparel
and official equipment, promotional merchandise and media
releases that are utilized, or produced to develop, produce,
market, promote or advertise World Team Billiards, the WTB
Professional Team Format, any professional team tournament event
utilizing the WTB Professional Team Format, or any professional
team event, financed and/or produced by World Team Billiards,
Inc., its agents, representatives, assignees, successors, or
licensees.
2
<PAGE> 3
6) This Grant of Permanent and Exclusive Sanction and Endorsement shall be
considered to include both amateur and professional team competition
within the United States and in all other countries on Earth and shall
apply to all events, tournaments, productions, exhibitions, television
programs and league operations produced, organized, licensed, promoted,
marketed or financed under the name and auspices of World Team
Billiards, Pro Team Billiards, American Team Billiards, American
Billiards League, Hardball, National Billiards League, Worldwide
Collectibles, Inc., American Professional Billiards, Inc. or any logo,
name, or image produced and trademarked by APB in conjunction with the
World Team Professional Format.
7) WTB, its agents, representatives, successors and assignees may make
specific changes to the Official WTB Format and Rules of Play as they
may require from time to time, without seeking the prior approval of the
PBT and without fear of losing the PBT Sanction.
8) WTB, its agents, representatives, successors, and assignees must stage an
event, tournament, production or program within any two calendar years,
beginning January 1, 1996 and providing for a minimum purse of $100,000
and exclusively permitting PBT player members to participate, or this
Grant of Permanent and Exclusive Sanction and Endorsement shall
automatically expire with all rights reverting back to the PBT.
9) PBT players will be used exclusively in all WTB events, tournaments,
productions and programs unless a written waiver is provided by PBT to
WTB prior to the event.
10) This Grant of Permanent and Exclusive Sanction and Endorsement shall
supercede all letters, resolutions, stipulations, terms and conditions
3
<PAGE> 4
This Grant of Permanent and Exclusive Sanction and Endorsement is fully
transferable and assignable subject to the following terms and conditions:
1) Payment of $50,000 from WorldWide Collectibles, Inc. (hereinafter
referred to as WWC) directly to the PBT, which was executed in
October 1994.
2) WWC hereby grants to PBT a credit of $50,000 to be considered as
full and final payment of any and all amounts due and owing to
WWC from PBT for fees paid in conjunction with the production of
the 1994 Players Championship and 1994 Florida Flare Up. WWC
hereby indemnifies PBT from any and all past, present, and
future liability and/or obligation arising from or related to
any WWC involvement in PBT produced and/or sanctioned event and
any past or future WTB/WWC events or endeavors.
3) Total consideration for the Permanent and Exclusive Grant of
Sanction and Endorsement shall be One Hundred Thousand Dollars
($100,000), having been composed of the $50,000 cash paid under
Item #1 and the $50,000 credit as provided for in Item #2.
4) The PBT hereby acknowledges that WTB is currently engaged in the
process of being acquired by WWC. PBT hereby expressly approves
the acquisition of WTB by WWC and the transfer of this permanent
and exclusive sanction and endorsement of WWC.
5) The PBT hereby acknowledges that WWC is going to assign its
permanent and exclusive sanction granted by PBT to American
Professional Billiards, Inc. (hereinafter referred to as APB), a
Nevada corporation with offices at 1700 East Desert Inn Road,
Suite 108, Las Vegas, Nevada 89109. PBT hereby expressly
approves the transfer of this permanent and exclusive sanction
and endorsement to APB upon the execution and completion of the
assignment from WWC.
4
<PAGE> 5
provided by the PBT to WTB and/or WWC, and shall be considered in full
force and be the basis upon which WTB will begin to develop Pro Team
Billiards, a league of professional billiard teams utilizing PBT
players. The structure of the Pro Team Billiards League shall be
defined and formed in conjunction with the PBT and subject to PBT
approval.
Approved by /s/ Pat Fleming Date: October 3, 1995
------------------------
Pat Fleming, Director
Approved by /s/ Nick Varner Date: October 3, 1995
------------------------
Nick Varner
Approved by /s/ Date: October 3, 1995
------------------------
Buddy Hall, Director
Approved by /s/ Howard Vickery Date: October 3, 1995
------------------------
Howard Vickery, Director
Approved by Date: October 3, 1995
------------------------
Sam Jones, Director
Approved by /s/ Donald E. Mackey Date: October 3, 1995
------------------------
Donald E. Mackey, Director
<PAGE> 1
EXHIBIT 10.3
EXCLUSIVE EVENT MANAGEMENT AGREEMENT
This Exclusive Event Management Agreement (the "Agreement") is entered
into by and between the Men's Professional Billiards Tour Association, a
Delaware corporation, with a place of business in Spring Hill, Florida ("PBT"),
and American Professional Billiards, Inc., a corporation ongoing and existing
under the laws of the State of Nevada, with a place of business at Las Vegas,
Nevada ("APB").
WHEREAS, APB is, inter alia, engaged in the business of managing and
organizing of sporting events; and,
WHEREAS, the PBT is the sanctioned association of professional
billiards players; and,
WHEREAS, the PBT organizes and sanctions official tournaments
consisting of professional billiards players, and other billiards-related
events (the "Events"); and,
WHEREAS, the PBT desires that APB provide management, and
organizational services in connection with the Events; and,
WHEREAS, APB desires to so provide management and organizational
services for such Events;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
SECTION 1
GRANT OF AUTHORITY
PBT hereby grants APB, and APB hereby accepts, the sole and exclusive
right to organize, market, and otherwise promote and manage the Events
worldwide.
SECTION 2
TERM OF AGREEMENT
The term of this Agreement shall commence on the date hereof, and shall
expire on the fifth anniversary thereof; provided, however, that this Agreement
may be extended for an additional five (5) years at the option of APB.
<PAGE> 2
SECTION 3
OBLIGATIONS OF APB
3.1 EVENT RELATED OBLIGATIONS
3.1.1 APB shall be responsible for all of the commercial aspects of
the managing, planning and organization of the PBT Events set forth on an Event
schedule to be prepared and communicated to APB sixty (60) days prior to the
commencement of the calendar year in which such Events (the "Scheduled Events")
are to take place. In the event that PBT desires to schedule additional events
within the course of a calendar year other than the Scheduled Events, APB shall
have the right, but no obligation, to manage such Events.
3.1.2 With respect to each Scheduled Event, APB shall procure such
facilities and services as may be reasonably required to conduct any such
Scheduled Event in accordance with the standards and guidelines established by
the PBT, including but not limited to procurement of space, insurance,
personnel other than such personnel required to be provided by the PBT pursuant
to Section 5.2 of this Agreement, accounting and budgeting services, Event
related marketing and advertising, including but not limited to, providing and
positioning of banners, signs, flags, posters and other promotional displays,
commercialization through television contracts and other media outlets.
3.2 NON EVENT RELATED OBLIGATIONS
3.2.1 APB shall develop and implement on a nationwide basis an overall
marketing and advertising concept relating to PBT Events and Professional
Billiards in general. In particular, APB shall prepare and distribute
promotional materials relating to the PBT and its players, including the
production and distribution of a promotional video with the title "Annual
Highlight Film", and, among other things, provide PBT Media Kits, Event
Marketing, and Sponsor Marketing Kits.
3.2.2 APB shall recruit and, subject to PBT's approval in accordance
with Section 6 hereof, contract with corporate and individual Sponsors for
individual as well as for multiple Events, provided, however, that absent the
explicit prior consent in writing of PBT, APB shall not enter into any
negotiation or agreement relating to sponsorship of Events with persons engaged
in the manufacture, distribution, marketing, promotion or advertising of
tobacco products. For the purposes of this Section, APB shall employ a
professional staff in sufficient numbers to accomplish such objective. APB
shall, on a regular basis, report to PBT on its efforts to recruit additional
sponsors, and maintain an
-2-
<PAGE> 3
accurate record of its communications with existing and potential sponsors.
3.2.3 APB shall maintain for the term of this Agreement a Press and
Media capability suitable to handle all public relations issues concerning the
PBT and its Events, and strive towards creating a positive public image of the
PBT and its players.
3.3 FINANCIAL OBLIGATIONS OF APB
In addition to providing, at its own expense, all of the funding
required to carry out its obligations under Section 3.1. hereof, including, but
not limited to, the underwriting of the total budget for the Scheduled Events,
and under Section 3.2. hereof, APB shall furnish all cash and expenses required
for (i) purse moneys, (ii) site procurement expenses (including, but not
limited to, travel and hotel expenses, transportation expenses and meal
expenses), (iii) official staff apparel, and (iv) salaries for tournament
directors and assistant tournament directors.
SECTION 4
COMPENSATION OF APB
4.1 PBT shall compensate APB for its services in connection with
this Agreement as follows:
PBT shall apply (i) all revenues derived from ticket sales,
sponsorship, television rights, fees and commercial sales, and (ii) certain
other revenues from any and each Event as the parties may agree upon from time
to time, to reimburse APB for the actual amounts invested (the "Invested
Amount") by it to produce, market, promote and televise a particular Event. ABP
shall also be entitled to receive from PBT an amount equal to one hundred
percent (100%) (the "Second Return") of the Invested Amount with respect to
such Event in addition to the Invested Amount. In addition, PBT shall pay to
APB fifty percent (50%) of any revenues remaining from a particular Event after
APB has received the Invested Amount and the Second Return.
4.2 In addition to the foregoing, PBT shall have the obligation to
make available any sponsorship monies paid to PBT with respect to any Scheduled
Event to fund the expenses APB would otherwise be required to fund with respect
to Scheduled Events pursuant to Section 3 of this Agreement. APB shall also be
entitled to receive from PBT a commission in the amount of Ten Percent (10%)
for all royalties and licensing fees paid by licensors to PBT as a result of
each and any licensing, royalty, or comparable agreement arranged for by APB
between PBT and third parties.
-3-
<PAGE> 4
SECTION 5
OBLIGATIONS OF PBT
5.1 NON-EVENT RELATED OBLIGATIONS OF PBT
For the term of this Agreement, PBT shall organize, maintain and promote
Professional Billiards as a professional sport in accordance with the highest
standards of ethics and sportsmanship. For this purpose, PBT shall establish,
maintain, and enforce rules of play, a code of conduct, rules of entry for
Events, tournament rules, fee schedules for membership with the various leagues
of the PBT, and any other rules and regulations as may be customary and
reasonably desirable (hereinafter collectively the "Rules").
5.2 EVENT RELATED OBLIGATIONS OF PBT
PBT shall, for each calendar year, establish a schedule of tournaments and
comparable Events, consisting of no less than twelve (12) Events. For each such
Event, PBT shall furnish no less than thirty-two (32) qualified professional
billiards players as competitors, and also players in sufficient numbers for
pre-event promotions. For each such Event, PBT shall furnish a tournament
director, and assistant tournament directors, referees, timekeepers,
statisticians, and such other personnel required for the conducting of the
particular event in accordance with the Rules. PBT shall also establish the
Prize Money Buy Out Formula, and have input on establishing the ticket prices.
PBT shall for each Event provide scorecards and flowcharts, organize the opening
and closing ceremonies, establish an exhibitor floor-plan, a seating diagram,
and a schematic for the display of Banners.
SECTION 6
6.1 Any provision to the contrary set forth in this Agreement
notwithstanding, PBT shall retain the overall control and supervision of the
sports related aspects of any Event and shall have the right to take appropriate
and reasonable steps necessary to protect the integrity of the Professional
Billiards Sport and its players.
6.2 All letters, by telecopy, or other means of delivery, of APB directed
to third parties, or phone calls intended to be made to third parties by APB
must be pre-approved by PBT where the obtaining of such prior approval would not
unreasonably hinder APB's ability to do business. PBT specifically reserves the
right to pre-approve all media-releases, posters, commercials, banners, flyers,
promotional materials and letters, and solicitations disseminated on its behalf
by APB which prior approval will not be unreasonably withheld. APB shall not
enter
-4-
<PAGE> 5
into any sponsorship negotiations or contracts, or distribute any sponsorship
kits relating to approved sponsors, or enter into any agreements with
exhibitors for certain Events without prior explicit approval of PBT which
prior approval will not be unreasonably withheld. APB shall be prohibited from
entering into any negotiations, or contracts relating to television or other
media productions, or disseminate or cause to be disseminated or to be
distributed any media production or programming without obtaining the prior
explicit consent by PBT to do so which prior approval will not be unreasonably
withheld. Similarly, PBT specifically reserves the right to nominate any
tournament director for the Events, and to issue passes granting free admission
to the Events in reasonable numbers.
SECTION 7
PRIOR TERMINATION
7.1 Either party, at its option, may terminate this Agreement with
immediate effect by notice in writing to the other party in the event of:
(i) the insolvency of the other party or the voluntary
institution by the other party of any proceeding under any bankruptcy or
insolvency law, or the involuntary institution against the other party
of any proceeding under any bankruptcy or state insolvency law which is
not vacated within sixty (60) days from the institution thereof; or the
appointment of a receiver or other officer having similar powers for the
other party or its business who is not removed within sixty (60) days;
or
(ii) the other party shall admit in writing its inability to
pay its debts as they mature; or
(iii) any substantial breach by the other party of any
material obligation, warranty or representation pursuant to the this
Agreement that is not remedied within 1) fifteen (15) days after written
notice is given by PBT within seventy two (72) hours following the due
date in the event of any failure of APB to make timely payment for any
of the Purse Moneys or 2) sixty (60) days after written notice is given
to such other party demanding such remedy in the case of any other
substantial breach by APB.
7.2 In addition, PBT, at its option, may terminate this Agreement
with immediate effect, by notice in writing to APB, if any of the following
events shall occur:
- 5 -
<PAGE> 6
(i) Conviction of APB or of any of APB's directors,
executives or consultants of any crime or violation of law, if in PBT's
opinion, such conviction may adversely affect the conduct of business or
would tend to be harmful to the goodwill of PBT or to the reputation of
the Professional Billiards Sports;
(ii) Any assignment, transfer or delegation, or attempted
assignment, transfer or delegation, by APB, in whole or in part, of this
Agreement, or any interest in this Agreement, or any duty or obligation
under this Agreement, without the prior written consent of PBT.
Any failure to insist upon strict performance of any of the terms of
this Agreement, shall not constitute a waiver of any such breach or any of the
terms of this Agreement. No breach shall be waived and no duty to be performed
shall be altered or modified except by written instrument. One or more waivers
shall not be considered as a waiver of a subsequent or continuing breach of the
same covenant.
SECTION 8
GENERAL PROVISIONS
8.1 Authority to Sign for PBT. APB acknowledges that only the
Commissioner and CEO of PBT is authorized on behalf of PBT to execute this
Agreement or to agree to any variation, modification or amendment of any of its
provisions or to sign any notice of prior termination.
8.2 Variations; Modifications; Amendments. This Agreement may not
be varied, modified or amended except by an express instrument in writing to
that effect signed on behalf of both PBT and APB. Neither a course of
performance nor a course of dealing nor usage of trade shall be used to
interpret, construe, qualify, explain or supplement any of the provisions of
this Agreement.
8.3 Entire Agreement. This instrument contains the entire
agreement between the parties with respect to the subject matter hereof and
terminates and supersedes, as of the beginning of its term, all prior
agreements, if any, written or oral, between the parties with respect to such
subject matter. No representations or statements other than those expressly set
forth herein were made by PBT or relied upon by the parties in entering into
this Agreement the parties.
8.4 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement is not intended, and shall not be deemed, to
create or confer any right or interest for the benefit of any person or not a
party hereto.
- 6 -
<PAGE> 7
8.5 AGREEMENT NONTRANSFERABLE. No part of this Agreement, no interest
in this Agreement and no duty or obligation under this Agreement may be
assigned, transferred or delegated by APB without the prior written consent of
PBT.
8.6 NOTICES. Notices permitted or required to be given under this
Agreement shall be deemed sufficient if given (i) by registered or certified
air mail, postage prepaid, return receipt requested, addressed to the
respective addresses of the parties as first above written or to such other
addresses as the respective parties may designate for themselves by like notice
from time to time, or (ii) by telefax and confirmed by telephone to the telefax
and telephone numbers set forth below or to such other telefax or telephone
numbers as the respective parties may designate for themselves by like notice
from time to time. If given by mail, notices shall be effective upon receipt by
the party to which notice is given, or on the fourteenth day following the date
such notice was posted, whichever occurs first. If given by telefax and
confirmed by telephone, notices shall be effective the next business day after
receipt.
Telefax and Telephone Numbers:
APB: American Professional Billiards, Inc.
1700 East Desert Inn Road, Suite 108
Las Vegas, Nevada 89109
Attn: Mr. Robert M. Stander,
Chairman of the Board
Tel.: (702) 893-1277
Fax : (702) 893-3884
PBT: Professional Billiards Tour Association
10579 Hearth Road
Spring Hill, Florida 34608
Attn: Mr. Donald E. Mackey,
Commissioner
Tel.: (352) 688-5837
Fax : (352) 686-5515
8.7 WAIVERS. The waiver by either party of any breach or violation of
or default by the other party under any provision of this Agreement will not
operate as a waiver of such provision or of any subsequent breach or violation
thereof or default thereunder.
-7-
<PAGE> 8
8.8 Applicable Law and Jurisdiction. The substantive law of the State of
Nevada, without regard to principles of conflicts of law, shall be applicable to
this Agreement and all transactions of PBT with APB, their construction,
interpretation, effect, performance or non-performance, or the consequences
thereof. For all disputes or controversies which may arise between PBT and APB
out of or in connection with this Agreement or any transaction of PBT with APB,
or the construction, interpretation, effect, performance or non-performance of
this Agreement or any such transaction, or the consequences thereof, each of the
parties hereby irrevocably consents to the exclusive jurisdiction of the courts
located in the State of Nevada.
8.9 Divisibility. If any provision of this Agreement should be held
invalid or unenforceable for any reason whatsoever or to violate any law of the
Territory or any political subdivision thereof, this Agreement is to be
considered divisible as to such provision, and such provision is to be deemed
deleted from this Agreement or, in the event that it should be held to violate
only the laws of a political subdivision of the Territory, to be inapplicable
within such political subdivision, and the remainder of this Agreement will be
valid and binding as if such provision were not included in this Agreement or as
if it were included in this Agreement only with respect to areas outside of such
political subdivision, as the case may be.
8.10 Titles. The titles appearing at the beginning of the Articles and
paragraphs of this Agreement have been inserted for convenient reference only
and do not in any way affect the construction, interpretation or meaning of the
text.
Dated: as of June 3, 1996
AMERICAN PROFESSIONAL BILLIARDS, INC.
By:
------------------------------------
Robert M. Stander, Chairman, CEO
PROFESSIONAL BILLIARDS TOUR ASSOCIATION
By:
-------------------------------------
Donald E. Mackey, Commissioner
-8-
