As filed with the Securities and Exchange Commission on May 27, 1998
Registration No. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MCHENRY METALS GOLF CORP.
(Name of small business issuer in its charter)
Nevada 3939 87-0429261
(State or other jurisdiction of (Primary S.I.C. (I.R.S. Employer
incorporation or organization) Code Number) Identification No.)
1945 Camino Vida Roble, Suite J, Carlsbad, CA 92008 (760) 929-0015
(Address & phone number of principal executive office & place of business)
Gary V. Adams
1945 Camino Vida Roble, Suite J, Carlsbad, CA 92008 (760) 929-0015
(Name, address & telephone number of agent for service)
Copies to:
Thomas G. Kimble & Van L. Butler THOMAS G. KIMBLE & ASSOCIATES
311 South State Street, #440, Salt Lake City, Utah 84111
(801) 531-0066
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
______________________________________________________________________________
CALCULATION OF REGISTRATION FEE
Title of Each Class|Amount to be|Proposed Maximum |Proposed Maximum|Amount
of Securities to be|Registered |Offering Price/Unit|Aggregate Price |of fee
Registered
- ------------------------------------------------------------------------------
Series A Warrants &
Common Stock 1,271,094 $ 2.00 $2,542,188 $749.95
Shop & Pro Warrants
& Common Stock 1,300,000 $ 5.44 (1) $7,072,000 $2,086.24
--------
TOTAL FEE $2,836.19
========
- ------------------------------------------------------------------------------
(1) Calculated pursuant to Rule 457(c), based on the average of the bid and
asked price as of May 21, 1998.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
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MCHENRY METALS GOLF CORP.
2,571,094 WARRANTS AND UNDERLYING SHARES OF COMMON STOCK
McHenry Metals Golf Corp. (the "Company") is registering:
bullet 1,271,094 Warrants ("Series A Warrants") to be distributed as soon
as practicable after the date of this prospectus, to common
stockholders of record as of March 31, 1997;
bullet 1,300,000 Warrants ("Shop Warrants" and "Pro Warrants") to be
granted to certain dealers of the Company's products, and to golf
professionals who use and endorse the Company's products; and
bullet 2,571,094 shares of $.001 par value common stock, (the "Common
Stock" or the "Shares") issuable upon exercise of these Warrants.
Each Warrant entitles the holder to purchase one share of Common Stock of the
Company. Each Series A Warrant is exercisable at $1.00 per share during the
first year, $1.50 per share during the second year, and $2.00 per share during
the third year following the date of this prospectus. Each Shop Warrant and
Pro Warrant will be exercisable at a price equal to the fair market value of
the Common Stock at the time of issuance of the Warrant, determined by taking
the average of the bid and asked prices quoted by the 3 highest market makers,
during the 5 trading days preceding the date of grant of the Warrant. All of
the Warrants will be callable and can be redeemed by the Company for $.01 per
Warrant on 30 days notice at any time after the closing bid price of the
Common Stock equals or exceeds the exercise price of that Warrant for 10
consecutive trading days (or, in the case of Series A Warrants, 200% of the
exercise price then in effect, for 20 consecutive trading days). Warrants may
only be exercised or redeemed if a current prospectus is in effect. The
exercise and redemption prices of the Warrants were arbitrarily determined by
the Company and bear no relationship to assets, shareholders equity or any
other objective criteria of value. The Company's Common Stock is quoted on
the NASD Electronic Bulletin Board under the Symbol "GLFN" and the current
(May , 1998) bid price quotation is $ .
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL AND IMMEDIATE
DILUTION AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD TO RISK THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" ON PAGE .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The Warrants are being distributed without any cash consideration. The Shares
are being offered by the Company only to the holders of the Warrants, and will
be sold by the Company without any underwriting discounts or other
commissions. The offering price of the Shares is payable in cash upon
exercise of the Warrants. No minimum number of Warrants must be exercised,
and no assurance exists that any Warrants will be exercised.
The date of this Prospectus is , 1998
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TABLE OF CONTENTS Page
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . .13
MARKET INFORMATION & DIVIDEND POLICY . . . . . . . . . . . . . . . .14
MANAGEMENT'S PLAN OF OPERATIONS. . . . . . . . . . . . . . . . . . .14
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .22
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . .29
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . .31
SHARES ELIGIBLE FOR FUTURE SALE. . . . . . . . . . . . . . . . . . .34
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . .35
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . .36
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . See Index
2
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PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus.
THE COMPANY
McHenry Metals Golf Corp. (the "Company") is in the business of
designing, developing, marketing and distributing premium quality golf
clubs using its own design concepts, which utilize state-of-the-art
engineering technology, manufacturing processes, and the newest
materials available to the golf industry. The Company is led by Mr.
Gary V. Adams, the pioneer of the "metal wood" golf club, and a team of
industry professionals with product development, sales and marketing
experience, and extensive relationships within the golf industry. Five
of the Company's executives have over thirty years of experience in the
golf industry, two have been in the business for over twenty years, and
two others played key roles in developing a highly successful golf
company within the past decade. The entrepreneurial nature of the
management team is demonstrated by the fact that eight members of
management have experience starting and managing their own businesses.
Mr. Adams previously founded Taylor Made Golf Company and Founders Club
Golf Company. In the course of influencing a radical change in golf
equipment, namely the evolution from the persimmon wood to the metal
wood, Mr. Adams helped lead the way that transformed the golf club
business from a manufacturing and sales-driven industry to a technology
and marketing-driven industry.
The Company's long term objective is to build a diversified golf
equipment company with a market leadership position in domestic and
international markets. In the short-term, the Company will focus on
developing a business in the metal wood product category. The Company is
currently focusing the majority of its product research and development
efforts on becoming a successful metal wood company. In response to
this perceived market opportunity, the Company introduced its first
product, the TourPure driver, at the PGA International Golf Show in Las
Vegas during September, 1997. As of March, 1998, the Company had
received sales orders in excess of $5 million associated with the
TourPure driver. The Company began shipping product to sales
representatives in January, 1998 and to customers in February, 1998.
A complete line of metal fairway woods complementing the TourPure driver
was introduced at the PGA Merchandise Show in Orlando, Florida, held
January 30 - February 2, 1998. The Company is adding a 3, 4, 5, 7, and
9 wood to the TourPure family. The metal fairway woods incorporate the
features of the TourPure driver, plus design enhancements in terms of
weight distribution.
The Company's principal executive offices are located at 1945 Camino
Vida Roble, Suite J, Carlsbad, California 92008. The Company's
telephone number is (760) 929-0015.
3
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THE OFFERING
Securities 1,271,094 Series A Warrants, 1,000,000 Shop Warrants,
offered 300,000 Pro Warrants, and 2,571,094 Shares of Common
Stock, $.001 par value of the Company issuable upon
exercise of the Series A Warrants, Shop Warrants and
Pro Warrants. See "Description of Securities".
Offering Prices Series A Warrants will be distributed at no
cost; the Shop and Pro Warrants will be
distributed without cash consideration. The
Shares underlying the Series A Warrants
will be sold at $1.00 per share during the
first year, $1.50 per share during the second year
and $2.00 per share during the third year
following the date of this prospectus. The Shares
underlying the Shop and Pro Warrants will be sold
at the exercise prices of those warrants, which
will be based on the fair market value of the
CommonStock at the time of granting of those
warrants.
Plan of Distribution Series A Warrants will be distributed as soon as
practicable after the date of this prospectus,to the
common stockholders of the Company of
record as of March 31, 1997. Shop Warrants and
Pro Warrants will be distributed to certain
dealers of the Company's products and to golf
professionals who agree to use and endorse the
Company's products. The Shares will be offered
and sold by the Company without any underwriting
discounts or other commissions, to the holders
of these Warrants, upon the exercise
thereof. See "Plan of Distribution."
Securities The Company is authorized to issue up to
Outstanding 50,000,000 shares of Common Stock. At March 31,
1998, 10,994,110 shares were issued and
outstanding. The Company has since issued or
agreed to issue 41,700 shares, and has reserved
from its authorized but unissued capital
2,571,094 shares of Common Stock for issuance
upon exercise of the Series A, Shop and Pro
Warrants. 319,033 shares are reserved for issuance
upon exercise of Unit Warrants already outstanding.
The Company is also authorized to issue up to
5,000,000 shares of Preferred Stock in one or more
series with such rights andpreferences as the
Board of Directors may designate. The Board of
Directors has not designated any series
of Preferred Stock. See "Description of Securities."
4
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Warrants Each Warrant entitles the holder to purchase one
share of Common Stock. Series A Warrants are
exercisable at $1.00 during the first year, $1.50
during the second year, and $2.00 during the third
year, after the date of this Prospectus. The
Series A Warrants are callable and can be
redeemed by the Company for $.01 per Series A Warrant
on 30 days notice at any time after the date of this
Prospectus if the closing bid price of the Common
Stock equals or exceeds 200% of the exercise price
for 20 consecutive trading days. Each Shop Warrant
and Pro Warrant is callable and can be redeemed
by the Company for $.01 per Warrant on 30 days
notice at any time after the date of this Prospectus
if the closing bid price of the Common Stock equals
or exceeds the exercise price of that Warrant, for
10 consecutive trading days. The exercise prices for
the Warrants are subject to adjustment in certain
events. See "Description of Securities."
Use of Proceeds There is no assurance as to the amount of
proceeds that may be received from the exercise
of any of the Warrants. Any proceeds that are
received will be used generally to provide
additional working capital, but have not been
specifically allocated, inasmuch as there is
no assurance when or how many (if any)
Warrants will be exercised.
Transfer Agent Interwest Transfer Company, Inc., 1981 East 4800
South, Suite 100, Salt Lake City, Utah 84117,
(801) 272-9294, serves as transfer agent and
registrar for the Company's outstanding
securities.
Risk Factors An investment in the Company is highly speculative.
Investors will suffer substantial dilution in the book
value per share of the Common Stock compared to the
purchase price. If substantial funds are not
received from exercise of the Warrants, of which there
is no assurance,the Company may require additional
funding for which it has no commitments. No person
should invest in the Company who cannot afford to risk
loss of the entire investment. See "Risk Factors."
5
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RISK FACTORS
This prospectus contains certain forward-looking statements. Prospective
investors and other readers are cautioned not to place undue reliance upon
such forward looking statements, which represent only the plans, beliefs,
estimates, expectations and/or anticipation of management as of the date of
this prospectus. Forward looking statements are subject to certain
uncertainties and other factors which could cause actual results in the future
to differ materially from the results contemplated in and by such statements.
Such uncertainties and other factors include those enumerated below as risk
factors.
The securities being offered hereby involve a high degree of risk.
Prospective investors should carefully consider the following risk factors
before investing in the Company.
RISKS INHERENT IN A NEW START UP COMPANY
Lack of Operating History. The Company is a recently formed enterprise with
very limited operating history. All of the risks associated with a start-up
company are inherent in any ownership or investment in this venture. The
Company has no commitments for the future funding that it may require and has
only recently established relationships with suppliers or manufacturers with
respect to production and assembly of the products it is now marketing or
proposes to market in the future.
Operating Losses. The Company incurred an operating loss of $2,599,758 during
1997. No assurance can be given as to when or if the Company will operate on
a profitable basis.
Need for Additional Funding. The Company estimates that it may need
substantial funding, in addition to its present capital, to be able to fully
develop and expand its business. However, the Company has no commitment for
additional funding and may have to seek further equity financing in order to
continue to develop and expand its business, in the event less than the full
amount of this Offering is received. There is no assurance that the Company
will be able to obtain such funding and if obtained it could dilute the
ownership of present shareholders and investors in this Offering.
Dependence on Key Personnel. The Company is dependent upon the management and
leadership skills of Gary V. Adams, the Company's founder and Chief Executive
Officer, and the other members of its management team. Development of
innovative golf clubs will be dependent upon the product development personnel
including Mr. Adams. The research and development team is headed by Mario
Cesario. There is intense competition for qualified personnel in the golf
club industry, and the loss of key personnel or an inability to attract,
retain and motivate key personnel could adversely affect the Company's
business. There is no assurance that the Company will be able to retain its
existing management personnel or to attract additional qualified personnel.
See "Management".
No Cash Dividends. The Company does not currently intend to pay cash
dividends on its Common Stock and does not anticipate paying such dividends at
any time in the foreseeable future. At present, the Company will follow a
policy of retaining all of its earnings, if any, to finance development and
expansion of its business. See "Dividend Policy."
6
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RISKS RELATED TO THE NATURE OF THE PROPOSED BUSINESS
New Product Risks. The Company's business involves relatively new products
which have not established their market share or demand. The products have
only been in use a short time, have a limited track record, and are still
being developed. There is no assurance of feasibility or that such products
will be favorably received by consumers in the golf industry. The Company's
business will be subject to all the risks associated with introduction of new
products.
Competition. The market for premium-quality golf clubs is highly competitive
and is served by a number of well-established, well-financed companies with
recognized brand names. In addition, there are several golf club
manufacturers with substantial resources that, although they do not currently
manufacture premium-quality golf clubs, could pose significant competition to
the Company if they were to enter the market for premium-quality golf clubs.
The golf club industry, in general, has been characterized by widespread
imitation of popular club designs. A company's ability to compete is in part
dependent upon its ability to satisfy various subjective requirements of
golfers, including the golf club's look and "feel" and the level of acceptance
that the golf club has among professional and other golfers. The subjective
preferences of golf club purchasers may also be subject to rapid and
unanticipated changes. There can be no assurances as to whether or how long
the Company's golf clubs will receive market acceptance. A decline in the
size of the golf club market, whether from a decrease in the popularity of
golf or otherwise would have a material adverse effect on the Company's
proposed business.
New Product Introduction. The basis of the Company's future is the
introduction of new, innovative golf clubs. New models and basic design
changes are frequently introduced into the golf club market but are often met
with consumer rejection. No assurances can be given that the Company will be
able to design and market golf clubs that meet with market acceptance. In
addition, prior successful designs may be rendered obsolete within a
relatively short period of time as new products are introduced into the
market. The design of new golf clubs is also greatly influenced by rules and
interpretations of the United States Golf Association ("USGA"). Although the
golf equipment standards established by the USGA generally apply only to
competitive events sanctioned by that organization, it has become critical for
designers of new clubs to assure compliance with USGA standards. Although the
Company has been notified by the USGA that its TourPure driver conforms with
its standards, and believes that all its clubs will comply with USGA
standards, no assurance can be given that any new products will receive USGA
approval or that USGA existing standards will not be altered in ways that
adversely affect the future sales of the Company's products.
Technological Changes. The manufacture and design of golf clubs has undergone
significant changes with respect to design and materials in recent years. The
introduction of new or enhanced technologies or designs by competitors could
render the Company's products less marketable. The ability of the Company to
compete successfully will depend to a large degree on its ability to innovate
and respond to changes and advances in its industry. There can be no
assurance that the Company will be able over the long term to keep pace with
the demands of the marketplace.
7
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Dependence on Certain Suppliers. The Company intends to purchase most of its
metal wood club heads from certain well-known casting houses on a purchase
order basis and to purchase club shafts from certain shaft manufacturers which
may have to make modifications in their standard products to accommodate the
Company's golf club designs. Any significant delay or disruption in the
supply of club heads or shafts would have a material adverse effect on the
company's business. In such event, the Company believes that suitable club
heads and shafts could be obtained from other manufacturers, although the
transition to another supplier could result in production delays of several
weeks. The Company currently is dealing with approximately ten different
suppliers of its product components, but has only a limited experience with
such suppliers.
Developing Markets. The market for the Company's proposed products has
experienced recent growth and appears to be rapidly evolving as new products
are regularly being introduced. The market is characterized by a few dominant
entrants with widely accepted and recognized products. Because the markets
for the Company's products are evolving and because the Company has no
operating experience, it is difficult to assess or predict with any assurance
the growth rate, if any, and the size of the market for the Company's
products. There can be no assurance that a market for the Company's products
will develop. If such a market fails to develop or develop more slowly than
anticipated, the Company's business, operating results and financial condition
will be materially adversely affected.
Risks of Technical Problems or Product Defects. There is no assurance,
despite testing and quality assurance efforts that may be performed by the
Company and/or its industry partners, that technical problems or product
defects will not be found, resulting in loss of or delay in market acceptance
and sales, diversion of development resources, injury to the Company's
reputation or increased service and support costs, any of which could have a
material adverse effect on the Company's business. Moreover, there is no
assurance that the Company will not experience difficulties that could delay
or prevent the development and introduction of its products and services, that
new or enhanced products and services will meet with market acceptance, or
that advancements by competitors will not erode the Company's position or
render the Company's products and services obsolete.
Dependence on Proprietary Technology. The Company's success will be heavily
dependent upon a combination of proprietary design and technology developed
internally. The Company intends to pursue trademark and patent protection and
also expects to rely on a combination of trade secrecy, non-disclosure
agreements and contractual provisions with respect to the proprietary nature
of its technology. However, there can be no assurance that any steps taken by
the Company will prevent misappropriation of this technology. Effective legal
protection of these technologies may be unavailable or limited in certain
foreign countries. Third parties could independently develop competing
technologies that are substantially equivalent or superior to the Company's
technologies. Although the Company believes that its products and the
proprietary rights developed by it do not infringe upon any proprietary rights
of others, there is no absolute assurance of this. An infringement claim has
already been asserted against the Company, and whether or not such claim has
any merit, there is no assurance regarding the outcome of this litigation.
See "Legal Proceedings"
8
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Ability to Manage Growth. The Company intends to pursue a strategy of rapid
growth. The Company plans to significantly expand marketing efforts and to
devote substantial resources to operations and support areas, including
administrative services. There can be no assurance that the Company will
attract qualified personnel or will successfully manage such expanded
operations. The failure to properly manage growth could have a material
adverse effect on the Company.
RISKS RELATED TO THE OFFERING
No Assurance of Warrant Exercise and No Escrow of Funds. There is no
assurance that any proceeds will be received from exercise of Warrants in
this offering. Proceeds may be insufficient to defray offering expenses. No
minimum number of Warrants must be exercised and there is no escrow of funds
received upon exercise. Any proceeds received will immediately be retained by
the Company to be used in its business. In the event that any proceeds from
this offering and the Company's existing capital are not sufficient to enable
the Company to develop and expand its business and generate a profit, the
Company may need to seek additional financing from commercial lenders or other
sources, for which it presently has no commitments or arrangements. This
creates an increased risk to persons who exercise Warrants, because there is
no assurance that any additional Warrants will be exercised or that the
Company will receive any further funding.
Risks of Warrant Exercise. There is no assurance that exercising Warrant
holders will be able to sell their Common Stock in the future at a price which
equals or exceeds their exercise price.
Outstanding Warrants, Options and Other Rights. In addition to the 1,271,094
Series A Warrants, 1,000,000 Shop Warrants and 300,000 Pro Warrants, the
Company has 319,033 Unit Warrants and 1,295,000 management stock options
already outstanding and has authorized up to 1,000,000 warrants/options to be
granted in the future in connection with an employee incentive stock option
program. The holders of such options, warrants or rights are given an
opportunity during the term of such rights to profit from a rise in the market
price of the Company's common stock, with a resultant dilution of the
interests of all other stockholders. The holders thereof are likely to
exercise them only if the then prevailing market price exceeds such exercise
prices, which would be at a time when, in all likelihood, the Company would
otherwise be able to obtain funds from the sale of its securities on terms
more favorable than those provided by the options and warrants. Accordingly,
the Company may find it more difficult to raise additional capital while the
options and warrants are outstanding.
Current Prospectus and Registration Required for Exercise. Holders of the
Warrants will only be able to exercise such securities to acquire the
underlying Common Stock if a current prospectus relating to the Common Stock
is then in effect and such exercise is qualified or exempt from qualification
under applicable securities laws of the states in which such holders of the
Warrants reside. Although the Company intends to use its best efforts to
update this prospectus as necessary to maintain a current prospectus and
federal and state registration/qualification for such exercise, there is no
assurance that the Company will be able to do so at such time as such persons
may wish to exercise Warrants. The value of the Warrants may be greatly
diminished if the ability to exercise them is not maintained. If a current
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prospectus is in effect, each of the Warrants is redeemable for nominal
consideration at any time after the date hereof upon 30 days notice, if the
bid price of the common stock equals or exceeds the exercise price of a Shop
or Pro Warrant for 10 consecutive trading days, or 200% of the exercise price
of the Series A Warrants for 20 consecutive trading days. If redeemed when a
current prospectus is in effect, Warrant holders would have 30 days to
exercise the Warrants, after which they would be compelled to accept the
nominal redemption price.
Dilution. Warrant holders who exercise their Warrants to purchase the
underlying Shares of Common Stock will suffer substantial dilution in the
purchase price of the Shares compared to the net tangible book value per share
immediately after the purchase. The exact amount of dilution will vary
depending upon the total number of Warrants exercised, and will be greater if
less than all the Warrants are exercised. The fewer Warrants exercised, the
greater dilution will be with respect to the Warrants that are exercised. See
"Dilution."
Potential Issuance of Additional Common and Preferred Stock. The Company is
authorized to issue up to 50,000,000 shares of Common Stock. To the extent of
such authorization, the Board of Directors of the Company will have the
ability, without seeking shareholder approval, to issue additional shares of
Common Stock in the future for such consideration as the Board of Directors
may consider sufficient. The issuance of additional Common Stock in the
future will reduce the proportionate ownership and voting power of the Common
Stock offered hereby. The Company is also authorized to issue up to 5,000,000
shares of preferred stock, the rights and preferences of which may be
designated in series by the Board of Directors. To the extent of such
authorization, such designations may be made without shareholder approval.
The Board of Directors has not yet designated any series of Preferred Stock.
The designation and issuance of series of preferred stock will create
additional securities which will have dividend and liquidation preferences
over the Common Stock offered hereby. See "Description of Securities."
Potential Anti-Takeover Measures. Certain provisions in the articles of
incorporation or bylaws of the Company, such as authorization to issue
additional common or preferred stock and designate the rights and preferences
of the preferred stock without further approval of shareholders, could be used
as anti-takeover measures. Provisions such as these could result in the
Company being less attractive to anyone who might consider a takeover attempt,
and result in shareholders receiving less than they otherwise might in the
event of a takeover attempt.
Limited Liability of Management. The Company has adopted provisions to its
Articles of Incorporation and Bylaws which limit the liability of Officers and
Directors and provides for indemnification by the Company of Officers and
Directors to the full extent permitted by Nevada law, which provides that
officers and directors shall have no personal liability to a Company or its
stockholders for monetary damages for breach of fiduciary duties as directors,
except for a breach of their duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
unlawful payment of dividends or unlawful stock purchases or redemptions, or
any transaction from which a director derives an improper personal benefit.
Such provisions substantially limit the shareholders' ability to hold officers
and directors liable for breaches of fiduciary duty, and may require the
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Company to indemnify its officers and directors. See "Certain Transactions -
Conflicts of Interest".
Determination of Offering Prices. The exercise prices of the Warrants were
arbitrarily determined by management of the Company and set at levels
substantially in excess of prices recently paid for securities of the same
class. The prices bear no relationship to the Company's assets, book value,
net worth or other economic or recognized criteria of value. In no event
should the exercise prices be regarded as an indicator of any future market
price for the Company's securities.
No Assurance of a Liquid Public Market for Securities. Although the Company's
shares of common stock are quoted on the Electronic Bulletin Board maintained
by the NASD, there can be no assurance that a regular and established market
will continue for the securities upon completion of this offering. There can
also be no assurance as to the depth or liquidity of any market for common
stock or the prices at which holders may be able to sell the Shares. As a
result, an investment in the Shares may be totally illiquid and investors may
not be able to liquidate their investment readily or at all when they need or
desire to sell.
Volatility of Stock Prices. In the event that an established public market
does develop for the Shares, market prices will be influenced by many factors,
and will be subject to significant fluctuation in response to variations in
operating results of the Company and other factors such as investor
perceptions of the Company, supply and demand, interest rates, general
economic conditions and those specific to the industry, international
political conditions, developments with regard to the Company's activities,
future financial condition and management. See "Plan of Distribution."
Shares Eligible for Future Sale. Of the 11,035,810 shares of the Company's
common stock outstanding prior to the exercise of any Warrants, 1,271,094
shares are freely tradeable or are eligible to be sold in the public market.
All the shares of Common Stock to be issued in this offering will also be
freely tradeable immediately upon issuance. All the remaining shares of
Common Stock presently outstanding are restricted and/or affiliate securities
which are not presently, but may in the future be sold into any public market
that may exist for the Common Stock, pursuant to Rule 144 promulgated pursuant
to the Securities Act of 1933, as amended (the "Securities Act"). Future
sales by current shareholders of substantial amounts of Common Stock into the
public market could depress the market prices of the Common Stock in any such
market. See "Shares Eligible for Future Sale".
Applicability of Low Priced Stock Risk Disclosure Requirements. The common
stock of the Company may be considered a low priced security under rules
promulgated under the Exchange Act. Under these rules, broker-dealers
participating in transactions in low priced securities must first deliver a
risk disclosure document which describes the risks associated with such
stocks, the broker-dealer's duties, the customer's rights and remedies, and
certain market and other information, and make a suitability determination
approving the customer for low priced stock transactions based on the
customer's financial situation, investment experience and objectives. Broker-
dealers must also disclose these restrictions in writing and provide monthly
account statements to the customer, and obtain specific written consent of the
customer. With these restrictions, the likely effect of designation as a low
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priced stock is to decrease the willingness of broker-dealers to make a market
for the stock, to decrease the liquidity of the stock and increase the
transaction cost of sales and purchases of such stocks compared to other
securities.
Qualification for Listing on NASDAQ. Upon completion of this offering the
Company intends to apply for listing of its common stock on the NASDAQ Small-
cap Market. There is no assurance that the company will meet all the
requirements for such listing or, in any event, be accepted for such listing.
Furthermore, if the Company's common stock were to qualify for listing there
is no assurance that the Company would be able to continue to satisfy the
continued listing requirements. In the event of delisting or failure to
qualify initially, trading in the Company's common stock is expected to
continue on the Electronic Bulletin Board. As a result, investors may find it
more difficult to dispose of, or to obtain quotations as to the price of the
common stock.
DILUTION
Dilution is the difference between the price per share being paid for the
Common Stock offered hereby pursuant to the exercise of the Warrants, and the
net tangible book value per share of the Common Stock immediately after its
purchase. The Company's net tangible book value per share of Common Stock is
calculated by subtracting the Company's total liabilities from its total
assets less any intangible assets and liquidation preferences, then dividing
by the number of shares of Common Stock then outstanding. Based on the
unaudited interim financial statements, the Company had 10,994,110 shares of
Common Stock outstanding at March 31, 1998, with a net tangible book value of
$5,741,663 or approximately $.52 per share. These amounts do not give effect
to operating results or any other changes in net tangible book value of the
Company occuring after March 31, 1998. Subsequent to March 31, 1998, the
Company has issued or committed to issue another 41,700 shares, for services
rendered or to be rendered.
If all Series A Warrants were to be exercised during the first year at $1.00
per share (of which there is no assurance), upon the exercise thereof, but
before exercise of any other Warrants, the estimated net tangible book value
of the Company after the offering, on a pro forma basis (which gives effect to
receipt of the estimated net proceeds from such exercise and issuance of the
underlying Shares of Common Stock, but does not take into consideration any
other changes in net tangible book value of the Company subsequent to March
31, 1998), would be $6,952,757 or approximately $.57 per share. This would
result in dilution to persons exercising Series A Warrants of $.43 per share,
or 43% of the exercise price of $1.00 per share. Net tangible book value per
share would increase to the benefit of present stockholders from $.52 prior to
the offering to $.57 after the offering, or an increase of $.05 per share
attributable to the exercise of the Series A Warrants.
If less than all the Series A Warrants are exercised during the first year,
dilution to the Series A Warrant holders who do exercise during the first year
will be greater than the amount shown. The fewer Series A Warrants exercised,
the greater dilution will be to those who do exercise.
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The following table sets forth the estimated net tangible book value ("NTBV")
per share assuming exercise of all Series A Warrants during the first year,
and the dilution to persons purchasing the underlying Shares of Common Stock.
<TABLE>
<S> <C> <C>
Exercise of all Series A Warrants:
Series A Warrant exercise price/share (1st year) $1.00
NTBV/share prior to exercise $ .52
Increase attributable to Series A Warrant exercise .05
Pro forma NTBV/share after exercise .57
Dilution $ .43
</TABLE>
If any Series A Warrants not exercised during the first year are subsequently
exercised during the second or third years at the higher exercise prices of
$1.50 or $2.00 per share, any dilution to such Warrant holders is not
presently determinable and may be higher or lower than the foregoing amount,
depending upon the net tangible book value of the Company immediately prior to
such exercise. Similarly, the exact amount of dilution which exercising
holders of the Shop Warrants and Pro Warrants may suffer is also not presently
determinable and may differ from warrant holder to warrant holder, because the
exercise prices of such warrants may be different. The amount of such
dilution will vary depending on a number of factors presently unknown, such as
exercise price and the number of warrants exercised.
USE OF PROCEEDS
Net proceeds to the Company from sale of the Shares of Common Stock underlying
the Warrants will vary depending upon the total number of Warrants exercised,
and the timing of and prices at which they are exercised. If all Series A
Warrants were to be exercised during the first year at $1.00 per share (of
which there is absolutely no assurance, nor any assurance that any Series A
Warrants will be exercised), the Company would receive gross proceeds of
$1,271,094 from Series A Warrants. If all Shop Warrants and Pro Warrants were
to be exercised, the total amount of proceeds that may be received from those
Warrants will depend upon the exercise prices established for such warrants as
well as the total number of such warrants issued, and is not presently
determinable. Regardless of the timing and number of Warrants exercised, the
Company expects to incur offering expenses presently estimated at $60,000 for
legal, accounting, printing and other costs in connection with the offering
pursuant to this prospectus. Inasmuch as there is no assurance that all
Series A, Shop or Pro Warrants will be exercised nor any requirement that any
minimum amount of the Series A, Shop or Pro Warrants be exercised, there are
no escrow provisions and any proceeds that are received will be immediately
available to the Company to provide additional working capital to be used for
general corporate purposes. Proceeds will be used generally to provide
working capital for whatever working capital needs the Company may have at the
time funds are received. The exact uses of any proceeds will depend on the
amounts received and the timing of receipt. Management's general intent is to
use whatever additional funds may be generated from Warrant exercise to
finance further development and expansion of the Company's business. See
"Management's Plan of Operations."
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MARKET INFORMATION & DIVIDEND POLICY
The common stock of the Company has traded in the over-the-counter market
since the acquisition of McHenry on April 1, 1997, and is quoted on the
National Association of Securities Dealers, Inc. Electronic Bulletin Board
under the symbol GLFN. There was no price quoted for the stock prior to the
acquisition. Set forth below is high and low bid information for the Common
Stock as reported on the Bulletin Board system for each calendar quarter
during such part of the past two fiscal years that price quotations have been
available. These prices represent interdealer quotations, without retail
markup, markdown or commissions, and may not represent actual transactions.
As of March 31, 1998, there were approximately 500 record holders of the
Company's common stock.
1997 HIGH BID PRICE LOW BID PRICE
Second Quarter $4.875 $2.50
Third Quarter $7.250 $4.75
Fourth Quarter $6.125 $4.625
1998
First Quarter $8.625 $3.875
DIVIDEND POLICY
The Company has not previously paid any cash dividends on its common stock and
does not anticipate or contemplate paying dividends on common stock in the
foreseeable future. It is the present intention of management of the Company
to utilize all available funds for the development of the Company's business.
The only restrictions that limit the ability to pay dividends on common or
preferred equity or that are likely to do so in the future, are those
restrictions imposed by law. Under Nevada corporate law, no dividends or
other distributions may be made which would render the Company insolvent or
reduce assets to less than the sum of its liabilities plus the amount needed
to satisfy outstanding liquidation preferences.
MANAGEMENT'S PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes associated with them
contained elsewhere in this prospectus. The financial statements of the
Company referred to in this discussion include and reflect the financial
condition and operating results of McHenry Metals Golf Corp. and its
consolidated subsidiaries for the period since its acquisition of McHenry
Metals, Inc. on April 1, 1997, through March 31, 1998, and of McHenry Metals,
Inc. and its consolidated subsidiaries for the period prior to such
acquisition back its date of inception on January 13, 1997. This discussion
should not be construed to imply that the results discussed herein will
necessarily continue into the future or that any conclusion reached herein
will necessarily be indicative of actual operating results in the future.
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PLAN OF OPERATIONS.
Management's plan of operations for the next twelve months is to continue
pursuing a strategy of rapid growth in attempting to build a successful golf
equipment company based on its own product concepts. To accomplish this
objective, the company has raised substantial funds and will seek to raise
additional funds through this Offering, to provide the necessary capital to
finance the continuation and expansion of its business operations. The new
capital will fund the Company's production activities, acquisition of
inventory and accounts receivable, and marketing efforts.
The Company, through its wholly owned subsidiary, is in the business of
designing, developing and marketing premium-quality golf clubs. The Company
is currently focusing the majority of its product research and development
efforts on becoming a successful metal wood company. The Company has
formulated several proprietary concepts which management believes are unique,
which are being incorporated into the design and manufacture of its golf
clubs. The Company has secured certain trademarks associated with its
business and filed patent applications relative to its first product, the
TourPure titanium/tungsten driver. The TourPure driver was introduced
September 8-10, 1997 at the PGA International Golf Show in Las Vegas. The
Company began shipping product to sales representatives in January, 1998 and
to customers in February, 1998. As of March, 1998, the Company had received
in excess of $5 million in sales orders associated with the TourPure golf
clubs, and had recorded approximately $1.2 million in receivables. A complete
line of metal fairway woods complementing the TourPure driver was introduced
at the PGA Merchandise Show in Orlando, Florida, held January 30 - February 2,
1998. The Company is adding a 3, 4, 5, 7, and 9 wood to the TourPure family.
The metal fairway woods incorporate the features of the TourPure driver, plus
design enhancements in terms of weight distribution. The Company will
continue to devote substantial resources to product research and development
as part of its plan of operations. The Company also anticipates hiring
additional hourly wage employees for inventory management, quality assurance
and distribution. The Company is having its products manufactured by outside
manufacturers, rather than make significant purchases or other acquisitions of
its own manufacturing plant and equipment.
The Company anticipates that the funding potentially receivable from this
Offering, together with existing capital and any revenues it receives from
sales of its products, will be sufficient to fund operations for at least the
next twelve months, but there is no assurance any funding will be received
from this offering. However, the Company has already raised several million
dollars to provide funding for product development, operations infrastructure,
marketing and tour promotion and working capital, through several private
placements it has completed, including $700,000 raised in April, 1997, $2.9
million raised in August-September, 1997, approximately $2.4 million raised in
a units offering of common stock and warrants which commenced in December,
1997, and was completed in March, 1998, and nearly $3.5 million raised from a
small group of private investors at the end of March, 1998.
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BUSINESS
HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was incorporated in Utah on October 31, 1985, originally under the
name of White Pine, Inc. The Company was organized initially for the purpose
of creating a vehicle to obtain capital and to seek out, investigate and
acquire interests in products and businesses with the potential for profit.
In 1986, the Company completed a public offering of common stock, conducted
pursuant to the exemption from the registration requirements of the Securities
Act of 1933 provided by Rule 504 of Regulation D promulgated thereunder and
was registered by qualification in the State of Utah. The Company changed its
corporate domicile to the State of Nevada in December, 1993.
On April 1, 1997, the Company entered into an Agreement and Plan of
Reorganization with McHenry Metals, Inc. ("MMI"). MMI was incorporated in
January, 1997, under the laws of the State of Illinois to design and market
golf clubs and related equipment.
Pursuant to the Agreement, the Company forward split its common stock on a 2.2
for 1 basis, and then issued 5,650,000 post split shares of its authorized but
previously unissued common stock to acquire all the issued and outstanding
stock of MMI in a stock for stock exchange (the "Acquisition") whereupon MMI
became a wholly-owned subsidiary of the Company. The Acquisition is treated
as a "reverse merger" for accounting purposes and MMI is deemed to be the
successor entity with a recapitalization of the stockholders equity portion of
its financial statements. As a part of the Acquisition, the Company declared
the distribution of 1,271,094 Series A Warrants to its shareholders as of a
record date immediately prior to the Acquisition..
BACKGROUND OF MMI
MMI is an Illinois corporation with offices in Illinois and California. The
Company's principal business office is located at 1945 Camino Vida Roble,
Suite J, Carlsbad, California, 92008. MMI is the third golf equipment company
to be founded by Gary V. Adams. Mr. Adams assembled a management team along
with a carefully selected group of investors, consultants and advisors to
launch MMI as a golf equipment company developing and marketing unique
proprietary golf clubs. Mr. Adams has an extensive background in the golf
equipment industry, having introduced the first "metal wood" golf club at
Taylor Made Golf Company, which Mr. Adams founded in McHenry, Illinios in
1979. Mr. Adams later started Founders Club Golf Company and developed a line
of golf clubs which became the second-most played clubs by PGA golf
professionals for a time.
MMI designs, develops and markets premium-quality golf clubs. The clubs are
being sold at premium prices to both average and skilled golfers on the basis
of high performance, ease of use and attractive appearance. Mr. Adams has
formulated several unique and proprietary concepts which are being used in the
design and manufacture of the clubs.
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INDUSTRY BACKGROUND
The development and introduction of new golf club designs and technological
advances have dramatically influenced the golf club industry. In the late
1960's cavity-backed, perimeter-weighted irons were successfully introduced.
The "sweet spot" on these irons was significantly increased, making the club
more forgiving to off-center hits and providing the opportunity for many
golfers to make better golf shots. The golf club market was further advanced
in the late 1970's with the introduction of metal woods, which increased the
distance golfers could achieve with drivers or fairway woods and in the early
1990's oversized metal wood clubs were introduced.
Recently, the industry has experienced a return to mid-sized metal wood clubs
to provide greater controllability, reduced wind resistance, and improved club
aesthetics. The Company's TourPure driver is an example of this shift in
product design which has been stimulated by customer demand.
BUSINESS STRATEGY
Several important elements of the Company's business strategy are intended to
enhance its business prospects and to establish a reputation for quality and
innovation.
Active Product Development. The Company's strategy is to develop new golf
clubs that appeal to both average and skilled golfers on the basis of
performance, ease of use and appearance. In order to develop such products,
the Company is committing substantial resources to its product development
activities.
Manufacturing Differentiation. The Company strives to differentiate its
products in part on the basis of the specialized manufacturing process
required by the unique design of its products.
Premium Brand Franchise. The Company intends to build a premium brand
franchise to reflect the innovation, performance and quality of its products.
As a part of this strategy, the Company intends to support its products with
extensive customer service. Consistent with the premium quality image that
the Company seeks to convey, prices for the Company's products will be at the
high end of the U. S. market. The Company will seek to enhance this image by
actively advertising and promoting its products, including entering into
endorsement arrangements with leading golf professionals.
Quality. The Company believes that product quality and responsiveness to
customers are critical factors for success in the market for premium golf
clubs. The Company has adopted a number of quality improvement and
measurement techniques to establish and then monitor all aspects of its
proposed business. To achieve excellence in product quality, the Company
emphasizes inspection throughout the production process, and devotes
significant resources to its research, development and design systems and
maintains close relations with key suppliers and manufacturers. The Company
is establishing extensive customer service to enhance its reputation for
producing high quality golf clubs.
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International Expansion. After a launch of products in the U.S., the Company
intends to explore international distribution of its products.
Protection of Intellectual Property. The Company believes that its golf club
designs, development processes and name recognition will represent valuable
intellectual property rights. The Company intends to aggressively seek to
protect these rights by obtaining and enforcing patents, trademarks, trade
secrets, trade dress and other intellectual property rights.
PRODUCTS
The Company intends to offer a broad line of golf clubs including oversized
metal woods, conventional-sized metal woods, fairway woods, irons, wedges and
putters.
Metal Woods. The Company initially is concentrating on bringing to market its
new and unique designs in its metal wood drivers. These clubs are being
offered in a variety of lofts with titanium, graphite or steel shafts. A
proprietary design in the club heads being marketed as the "Compression
Matched" series in various weights. Mr. Adams believes that his new concepts
will be revolutionary in the industry.
Other Clubs and Products. The Company will follow its development of its
metal wood drivers and fairway woods, with irons, putters and wedges until it
offers a complete line of its own premium golf clubs. The Company also
expects to offer a limited line of other golf products including golf bags,
apparel and other accessories.
PRODUCT DEVELOPMENT
The Company will not limit itself in its research efforts by trying to
duplicate designs that are traditional or conventional and believes it will
create an environment in which new ideas are valued and explored. Product
development at the Company is expected to be a result of the integrated
efforts of its sales and product development staff and outside manufacturers,
all of which will work together to generate new ideas for golf equipment. The
Company's product development department will refine these ideas and work with
outside firms to create prototypes, masters and the necessary tooling.
The design of new golf clubs is greatly influenced by rules and
interpretations of the United States Golf Association ("USGA"). Although the
golf equipment standards established by the USGA generally apply only to
competitive events sanctioned by that organization, it has become critical for
designers of new clubs to assure compliance with USGA standards. The
Company's new product design and development process will involve coordination
with the USGA staff regarding such compliance.
The Company's first product, the TourPure driver, was introduced in September,
1997 and is currently in production. The Company began shipping product to
sales representatives in January, 1998 and to customers in February, 1998.
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Meanwhile, product design and engineering is underway for left-handed versions
of the driver along with a line of fairway metal woods which complements the
TourPure driver. The Company introduced the new products at the PGA
Merchandise Show in Orlando, Florida held January 30 - February 2, 1998. The
TourPure driver is available in three lofts of 7.5 degrees, 9.5 degrees and
10.5 degrees with a proprietary low torque, low frequency shaft that is
designed to accommodate different swing speeds between 70 to 110 mph. The
separate face is constructed of high quality beta titanium which management
believes gives greater feel and transfers more energy to the ball. The 235cc
driver uses the concentrated weight of a tungsten/copper ring in the back of
the club head to maintain the center of gravity and face size advantage of
drivers that are 300cc or larger. Five shafts are offered to cater to all
skill levels.
Design work is also being completed on club face thickness and related matters
for other clubs, after which the Company will have an outside design firm
complete prototypes to undergo a thorough testing program. Tooling will then
be completed and the products will be ready for manufacturing.
SALES AND MARKETING
Sales for Distribution in the United States
The Company targets those golf retailers who sell professional quality golf
clubs and provide the level of customer service appropriate for the sale of
premium golf clubs. This includes "green grass" golf pro shops as well as
off-course golf specialty stores.
The Company has created a national field sales organization with a senior vice
president of sales, a national sales manager, six regional sales managers, and
a network of approximately 30 manufacturer's representatives. The Company is
developing a telephone-based inside sales and customer service function to
generate additional volume and to provide sales support. Each region is
expected to be covered by field and inside sales efforts, targeting
prospective customers with in-person visits and telephone solicitation.
Advertising and Promotion.
The Company initially commenced advertising in trade publications such as PGA
Magazine, Golf Week, Golf Product News, Golf Shop Operations and Golf Pro to
build the company's name awareness within the industry and to promote its
products. In 1998, the Company also began to utilize additional publications
and television advertising to generate brand interest among the consumer
market. The television phase of the advertising commitment includes the
continuation of McHenry Metals' TourPure advertisement on the Golf Channel (5-
times-per-day/7-days-a-week). Since this ad began running in January, the
Company has received over 3,000 requests for its TourPure video. In addition,
TourPure television commercials will be seen on NBC and Fox networks. The
campaign extends into the print media with 4-color, full-page advertisements
in golf publications that reach the upscale, serious golfer. The print media
schedule includes Sports Illustrated Golf Plus Editions featuring the Masters,
US Open, British Open and PGA Championship.
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The Company is establishing relationships with golf professionals and other
celebrities in order to promote its products among both professional and
amateur golfers. The Company is entering into endorsement arrangements with
members of the Professional Golf Association Tour and the Professional Golf
Association Senior Tour, as well as other celebrities associated with golf.
Already this season, golf professionals who were using the Company's TourPure
driver have won two Senior PGA Tour events and finished in second place in
another two events on the PGA and Senior PGA Tours. In addition, McHenry
Metals staff player, Fred Funk, continues to lead the PGA Tour in driving
accuracy and has increased his distance off the tee.
MARKET
According to Golf Pro, a trade magazine, sales of golf clubs in the U.S. in
1995 reached a level of $1.2 billion. The top three premium brands accounted
for over one-half of these sales, the next five companies accounted for
approximately 27% of such sales and approximately thirty other companies
accounted for the balance of 18%.
A publication by the National Golf Foundation entitled Trends in the Golf
Industry 1986-1995 has stated that the number of golfers in the U.S. rose by
more than five million between 1986 and 1995 and that the annual expenditure
on golf clubs saw a 10.6% increase in 1995 (over 1994) and 16.6% increase in
1996 (over 1995). The explanation for these increases, generally, is the
well-being of the U.S. economy, shifting age concentration of the population
and overall increased recreational spending. The publication indicates that
"the long-term growth potential for golf spending is very encouraging".
MANUFACTURING
The manufacture of premium golf clubs involves a number of specialized
processes required by the unique design of the products. The Company is
having its products manufactured by outside manufacturers. The Company
believes that there are numerous manufacturers which can manufacture the
Company products to the high standards developed by the Company. Clubheads,
shafts, grips and other components are being supplied by independent vendors
with whom the Company has established a relationship.
All McHenry products are being manufactured to the Company's precise
specifications by highly competent manufacturers based in part on processes
which are proprietary to the Company. The Company will work closely with its
casting houses, which will enable it to monitor the quality and reliability of
clubhead productions. Any significant delay or disruption in the supply of
clubheads by the casting houses or graphite shaft manufacturers would have a
material adverse effect on the Company's business. In such event, the Company
believes that suitable heads and shafts could be obtained from other
manufacturers, although the transition to another supplier could result in
production delays of several months. The Company is currently in discussions
with potential suppliers of product components and manufacturers, although no
assurance is given that the Company will be able to establish arrangements
with any supplier or manufacturer.
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COMPETITION
The golf club business is highly competitive. The industry has been
characterized by widespread imitation of popular club designs. The
preferences of golf club purchasers may also be subject to rapid and
unanticipated changes. There are several golf club manufacturers that,
although they do not currently manufacture premium-quality golf clubs, could,
in light of their substantial resources, pose significant competition to the
Company if they were to enter the market for premium-quality golf clubs.
The Company's principal competition will come from several large well-
established and recognized leaders in the sale of premium golf clubs. Each of
these companies has substantially more financial, management and technical
resources than does the Company. The Company proposes to compete based on its
own designs and concepts and the recognition of the name of Gary V. Adams and
other persons involved with the Company.
INTELLECTUAL PROPERTY
The Company intends to aggressively seek to protect its intellectual property,
such as product designs, manufacturing processes, new product research and
concepts and trademarks. These rights will be protected through the
acquisition of utility and design patents and trademark registrations, the
maintenance of trade secrets, the development of trade dress, and, when
necessary and appropriate, litigation against those who are, in the Company's
opinion, unfairly competing.
The Company has applied for patents for certain features of its products.
Additionally, it has applied for trademark registration for McHenry Metals and
Compression Matched and for several other product names and descriptions.
There is no assurance that, prior to a court of competent jurisdiction
validating them, any of these patents or trademarks will be enforceable. The
Company intends to aggressively assert its rights against infringers. There
can be no assurance that other golf club manufacturers will not be able to
produce successful golf clubs which imitate the Company's designs without
infringing on any of the Company's intellectual property rights.
The Company is developing stringent procedures to maintain the secrecy of its
confidential business information, which it believes gives it a distinct
competitive advantage. These procedures will include a "need to know"
criteria for dissemination of information and written confidentiality
agreements from visitors and employees. Suppliers, when engaged in joint
research projects will be required to enter into additional confidentiality
agreements.
SEASONALITY
Golf is generally regarded as a warm weather sport. Sales of golf equipment
have historically been strongest during the second and third quarters. To
minimize the disruption caused by these anticipated sales fluctuations, the
Company proposes to increase its product inventories during the fourth
quarter. Although the golf club business generally follows this seasonal
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trend, the Company hopes its new products will tend to mitigate the impact of
seasonality. No assurances can be given, however, that the Company will be
able to successfully introduce new products to offset the impact of
seasonality.
PRODUCT WARRANTIES
The Company intends to support all of its golf clubs with a two year written
warranty. Since the Company does not rely upon traditional designs in the
development of its golf clubs, its products may be more likely to develop
unanticipated problems than those of many of its competitors that use
traditional designs. The Company intends to monitor closely the level and
nature of any product breakage and, where appropriate, incorporate design and
production changes to assure its customers of the highest quality available on
the market. If McHenry clubs were to experience a significant increase in the
incidence of breakage or other product problems, the Company's sales and image
with golfers could be materially adversely affected.
EMPLOYEES
The Company currently has approximately 30 full-time employees, including
persons employed in sales, marketing, research and development, operations,
administration and support. The Company anticipates hiring additional hourly
wage employees for inventory management, quality assurance and distribution.
None of the Company's employees is expected to be represented by unions.
FACILITIES
The Company's principal executive offices are located in Carlsbad, California.
The Company there leases approximately 5,800 square feet of office space which
serves as its corporate headquarters, for $4,261 per month, and 1,500 square
feet of warehouse space for $1,100 per month. The office lease expires in
October, 1998, with option to renew for two years. The warehouse lease
expires January 1, 1999. The Company is also leasing approximately 1,400
square feet of office space in McHenry, Illinois which serves as the office of
its National Sales Manager and his staff. The lease for this space expires
December 31, 1998. The monthly lease payment is $1,500.
AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended (the "Securities Act), with respect to the
securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement. For further information regarding both the
Company and the Securities offered hereby, reference is made to the
Registration Statement, including all exhibits and schedules thereto, which
may be inspected without charge at the public reference facilities of the
Commission's Washington, D.C. office, 450 Fifth Street, NW, Washington, D.C.
20549. Copies may be obtained from the Washington, D.C. office upon request
and payment of the prescribed fee.
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As of the date of this Prospectus, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(The "Exchange Act") and, in accordance therewith, will file reports and other
information with the Commission. Reports and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act will be available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, 75 Park Place, New York, New York
10007; Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained from the public reference
section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains an Internet Web site that
contains reports, proxy and information statements and other information
regarding issuers that file such reports electronically with the Commission.
Such site is accessible by the public through any Internet access service
provider and is located at http://www.sec.gov. Copies of the Company's
Annual, Quarterly and other Reports which will be filed by the Company with
the Commission commencing with the Quarterly Report for the first quarter
ended after the date of this Prospectus (due 45 days after the end of such
quarter) will also be available upon request, without charge, by writing
McHenry Metals Golf Corp., 1945 Camino Vida Roble, Suite J, Carlsbad,
California 92008.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES
The following table sets forth the directors, executive officers and other
significant employees of the Company, their ages, terms of office and all
positions. Directors are elected for a term of one year, and serve until the
next annual meeting or until their successors are duly elected by the
stockholders and qualify. Officers and other employees serve at the will of
the Board of Directors.
Name of Director/Officer&Age Term served Positions with the Company
Gary V. Adams 54 Apr 1997 Chairman, Chief Executive Officer,
Director
Bradley J. Wilhite 33 May 1997 President, Chief Administrative
Officer & Director
Theodore Aroney 58 Apr 1997 Secretary, Vice Chairman & Director
Mark Bergendahl 37 Apr 1997 Director
Mario Cesario 63 May 1997 Director of Product Research &
Development
Henry J. Fleming 54 Apr 1997 Director
Thomas Grimley 53 Apr 1997 Chief Financial Officer
Eddie Langert 62 Apr 1997 Senior Vice President-Sales
Sal Lupo 64 Apr 1997 Senior Vice President- Marketing &
Director
Gary L. Moles 45 Apr 1997 Chief Operating Officer
Thomas Williams 60 May 1997 National Sales Manager
Phillip A. Ward 56 May 1998 Director
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Except for Theodore Aroney, Mark Bergendahl, Henry J. Fleming and Phillip A.
Ward, each of these individuals devotes full time to the Company as employees.
A brief description of these individuals and their background and business
experience follows:
GARY V. ADAMS. Mr. Adams grew up in the golf industry as the son of a golf
professional and worked for many years at the McHenry, Illinois Country Club.
He also played college golf. From 1964-1968, Mr. Adams was vice president-
sales for Wittek Golf Supply Company in Chicago. From 1968-1979, he was a
regional manager for PGA/Victor Golf (now Tommy Armour). In 1979, Gary
founded Taylor Made Golf Company and served as its CEO and President until
early 1989 when he left the company to start Founders Club, a golf company
headquartered in California, of which he served as CEO and President until
1994. Mr Adams is successfully recovering from a serious occurrence of cancer
and established McHenry Metals, Inc. in January 1997. Mr. Adams was elected
to the Illinois PGA Hall Of Fame in 1994, was named "Man of the Year" by the
National Golf Association in 1994, was named "Golf Innovator of the Decade" by
the International Network of Golf in 1995, and in September 1995 received the
"Ernie Sabayrac Award" from the PGA as one of the most acclaimed leaders in
the golf industry.
BRADLEY J. WILHITE. Mr. Wilhite's business background includes over ten years
in the financial service industry with two of the nation's top six banking
organizations - NationsBank and First Union Corporation. During his career, he
served as a corporate banker working with emerging growth companies, managed
several lines of business, directed successful product launches and brand
development programs and led merger and acquisition teams. Mr. Wilhite is the
son of a PGA golf professional, his grandfather was in the golf business and
his sister is currently a PGA golf professional. A native of the Kansas City
area, he was an accomplished junior, collegiate and amateur golfer himself. He
played college golf at Oklahoma State University and Texas Christian
University where his teammates included several current PGA Tour players. He
briefly pursued a professional career upon graduation from TCU. Mr. Wilhite
received a bachelor's degree in business administration and finance from Texas
Christian University and a master's degree in business administration and
marketing from Wichita State University.
THEODORE ARONEY. Mr. Aroney is currently owner of Halo Farms Breeding and
Racing Operation for thoroughbred horses. Mr. Aroney has been associated with
this operation since 1970. From 1985-1990 Mr. Aroney was president of Rancho
Real, Inc., a developer of town houses in LaCosta, California. From 1990-
1993, Mr. Aroney was the founding director of Odyssey Sports, Inc., a golf
company. Mr. Aroney is a private investor and consultant with experience in
many other businesses.
MARK A. BERGENDAHL. Mr. Bergendahl is the President of Redfield Taylor &
Associates, Inc., an investment firm which focuses on investing in small cap
and start up companies, President of Jacobson, Larson Management, Inc., and
managing partner of Edie-Wig-BB, a California limited partnership. Mr.
Bergendahl's experience in the golf industry includes being an initial
investor in Odyssey Sports, Inc. as well as serving on the board of directors
of Odyssey from 1992 through early 1995. From 1989 through 1994, Mr.
Bergendahl was the President of the international weight loss company, Gloria
Marshall Figure Salons. From 1986 to present, Mr. Bergendahl has held various
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posts including Director of Marketing and Corporate Managing Director of
Gloria Marshall Figure Salons of Australia, Pty, Ltd., one of Australia's
leading weight loss companies. Additionally, Mr. Bergendahl was a co-
developer of The Jockey Club luxury condominium development at the La Costa
resort. Mr. Bergendahl is a graduate of the Entrepreneurship Program at the
University of Southern California.
MARIO CESARIO. Mr. Cesario brings to the Company over 40 years of experience
as a recognized leader in the design of high-performance, quality golf clubs.
Since 1962, he has provided assistance to tour professionals and top amateurs
from his custom club design and fifting operation in Redlands, California.
His clients have included Tom Watson, Craig Stadler, Dave Stockton, and Bob
Rosburg, to name a few. Mr. Cesario has also been a club design consultant to
several golf equipment companies over the years. In addition to his
credentials as a golf club designer, Mr. Cesario is an Honorary Life Member of
the Southern California PGA.
HENRY J. FLEMING, JR. Mr. Fleming graduated with a Bachelor of Arts Degree in
accounting from Lewis College in Lockport, Illinois and became a certified
public accountant in 1973. Mr. Fleming has been employed by Fleming and
Company, Certified Public Accountants since 1974. While practicing as a
certified public accountant Mr. Fleming has had extensive experience working
with private industry. Mr. Fleming was involved with Taylor Made Golf
Company. He was also involved with Allison America, a manufacturer of tanning
beds, Ex-Tec Plastics and Advantage Rental, Inc. Mr. Fleming serves on the
board of directors of Amcore Bank Northwest and with various closely-held
corporations. Mr. Fleming is also a member of various professional and civic
associations.
THOMAS GRIMLEY. Mr. Grimley, a certified public accountant, has over twenty
years of experience operating his own accounting practice. Mr. Grimley has
worked with numerous small and medium-sized businesses, providing accounting
services, computer system design and support, and management consulting. In
addition, he has instructed accounting courses for continuing education credit
in California. Mr. Grimley earned a bachelor of arts degree in business and
accounting from the University of California.
EDDIE LANGERT. Mr. Langert graduated with a degree in business from Lamar
University in Beaumont, Texas in 1958 and was a golf professional on PGA tours
for ten years. Mr. Langert also served as a Head Golf Pro at various country
clubs until 1978 when he founded Langert Golf Center in Wisconsin. From 1980-
1985, Mr. Langert was an officer of Taylor Made Golf Co. He operated Langert
Golf Co. from 1986 to 1992 when he sold the company to Prince Sports. Mr.
Langert has designed golf courses, golf clubs and taught golfing instruction
at all levels.
SAL LUPO. Since the late 1970s, Mr. Lupo has served as Mr. Adams' key
marketing resource, providing marketing planning and execution support for the
introduction and development of the Taylor Made Golf Company and Founders
Club. Through his marketing and communications company, Lupo and Associates,
he has provided a variety of services ranging from traditional advertising to
event planning and management. His extensive network of contacts and
knowledge of media outlets are additional strengths he brings to the Company.
In addition to the work with Mr. Adams, Mr. Lupo's firm provided strategic
planning and marketing development for other golf equipment companies such as
Aldila, United Sports Technologies, Wilson, Cleveland Golf, and Tiger Shark.
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Non-golf clients included Budget Rent-a-Car of Southern California and Furon.
Prior to forming his own company, Mr. Lupo held marketing and management posts
at Helene Curtis Industries, including new products manager, corporate
director of marketing, and president of the Hair Fashions Division.
GARY L. MOLES. Mr. Moles received a Bachelor of Science Degree in business
administration from Tennessee Technological University, in Cookeville,
Tennessee in 1978. During 1973-1990 Mr. Moles was an employee of Wilson
Sporting Goods involved as a director of raw material purchases. During 1991-
1992 Mr. Moles served as director of purchasing of Sunbeam-Oster Household
Products. During 1993-1995 Mr. Moles served as vice president of operations
of Founders Club Golf Company in Vista, California.
THOMAS WILLIAMS. Mr. Williams' background in the golf industry includes
thirty-five years experience in all facets of sales, marketing, promotion and
product development in both established and start-up companies. He was a
principal in the development and marketing of the "three wedge concept" as
well as the introduction of frequency matched golf clubs. Recent management
experience includes his position as general sales manager of Ram Golf Corp.,
and most recently as president of Honours Marketing Group, Ltd. Mr. Williams
graduated from DePaul University with a degree in economics.
PHILLIP A. WARD. President and CEO of Bignell-Ward-Bignell, Inc., a
commercial real estate brokerage company and Hawk Financial Services, a
premium finance company; Executive Vice President and CEO of Big Bear
Supermarkets; formerly Executive Director of Finance and Investments for
Golden Eagle Insurance Company and currently Deputy Trustee on the Golden
Eagle Insurance Liquidating Trust. Pension and Profit Sharing Plan trustee
for Golden Eagle Insurance Company and Big Bear Supermarkets; Director, Cook's
Valley Foods, Inc. Golf and sports related organization involvement includes
former Chairman, Century Club of San Diego (the organization that runs the PGA
Tour's Buick Invitational annually in San Diego); member and former director,
Ranch Santa Fe Golf Club; director, Pro Kids Golf Academy; member, Stardust
Country Club; partner, Double Eagle Golf Center. Mr. Ward has played most of
the top ranked golf courses.
There are no arrangements or understandings regarding the length of time a
director is to serve in such capacity, except as otherwise described herein.
The Company may adopt provisions in its by-laws and/or articles of
incorporation to divide the board of directors into more than one class and to
elect each class for a certain term. These provisions may have the effect of
discouraging takeover attempts or delaying or preventing a change of control
of the Company.
CONSULTANTS
The Company is presently negotiating with several well-recognized industry
leaders to retain such persons as consultants to the Company in various
capacities and to use the services of such persons in promoting the name and
products of the Company.
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EXECUTIVE COMPENSATION
The following table summarizes executive compensation paid or accrued during
the past three fiscal years for the Company's Chief Executive Officer during
that period and the most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000 during those years.
Long Term Compensation
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------
Name and Restricted Securities
Principal Stock Underlying LTIP All Other
Position Year Salary($) Bonus($) Awards Options/SARS Payout Compensation($)
- -----------------------------------------------------------------------------
CEO - 1997 95,000 600,000
Gary 1996 -0- -0-
Adams 1995 -0- -0-
- -----------------------------------------------------------------------------
The Company granted the foregoing options to Gary Adams contemporaneously with
and as a part of the acquisition of MMI, on April 1, 1997. The exercise price
was set at $.50 per share, based on the fair market value of the common stock
as of that date, as determined by the Board of Directors. The Company has
entered into an employment agreement with Mr. Adams for a period of three
years commencing April 2, 1997. Mr. Adams is required to devote his full-time
business efforts to the Company for which he is to be paid an annual salary of
$150,000 per year. In addition, Mr. Adams is to be paid a royalty upon the
sale or license of "metal woods" designed by him at the rate of $1.00 per club
for the first 500,000 clubs; at $.50 per club for the next 500,000 clubs; and
$.25 per club for all sales in excess of 1,000,000 clubs.
The Company is also developing employment agreements with the other members of
management. The agreements are expected to have an initial term of one to
three years, renewable for additional one year terms. These agreements will
provide that these persons are entitled to be reimbursed for out of pocket
expenses and may include other benefits including life insurance, health
insurance, an automobile allowance and similar items standard in such
agreements.
STOCK OPTION PLAN
Effective April 1, 1997, the Company adopted the McHenry Metals Golf Corp.
Stock Option Plan which authorizes the issuance of up to 2,295,000 shares of
common stock to employees and consultants. Of the 1,295,000 options issued by
the Company under the Plan to date, 362,768 are qualified Incentive Stock
Options under Section 422 of the Internal Revenue Code of 1986, as amended,
and the balance are nonqualified stock options.
OTHER CONTRACTS
The Company has signed endorsement contracts with four PGA tour professionals
for product promotion. The first is for a period of three years beginning
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January 1, 1997, and calls for payments of $150,000 cash and 60,000 shares of
stock in 1997, $275,000 in 1998 and $300,000 in 1999. In addition, bonuses
will be paid based upon golf tournament performance. The second contract
requires payments of $50,000 per year for three years commencing in 1997, plus
various bonuses. The third contract requires payments of $7,500 in 1998 and
1999, plus various bonuses based upon golf tournament performance. The fourth
contract is through 1998, and requires payment of $75,000 plus 10,000 shares
of common stock. Additional incentives are based on tournament performance.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock by each person who is
proposed to serve or currently serves as a director of the Company, all such
directors and executive officers of the Company as a group, and each person
individually, or group of persons whose shares are required to be aggregated,
known to the Company to be the beneficial owner of more than five percent (5%)
of said securities:
Title of Amount and Nature of Percent1
Name and Address Class Beneficial Ownership1 of Class
Gary V. Adams Common 2,810,500 shares2 24%
2532 LaCosta Ave
Carlsbad, CA 92008
Theodore Aroney Common 1,305,000 shares3 12%
7220 Arenal Lane
Carlsbad, CA 92009
Mark Bergendahl Common 545,500 shares3 5%
2796 Harbor Blvd #375
Costa Mesa, CA 92626
Henry J. Fleming, Jr. Common 100,000 shares3 1%
1322 Surrey Ct
Alonquin, IL 60102
Bradley J. Wilhite Common 205,000 shares3 1%
1736 Woodbine Place
Oceanside, CA 92054
Sal Lupo Common 225,000 shares 1%
41 Antigua
Dana Point, CA 92629
Phillip A. Ward Common 100,000 shares3 1%
3604 Curtis St
San Diego, CA 92106
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All officers & directors
as a group (11 persons) Common 5,556,000 shares4 46%
Craig, Sidney Common 900,000 shares 8%
11355 N Torrey Pines
LaJolla, CA 92037
1The foregoing amounts include any shares not presently outstanding, which
each person or group listed has the right to acquire within 60 days from the
date hereof, pursuant to any warrant, option or other right. Percentages are
calculated alternatively for each person or group listed, by adding to the
total outstanding, only the shares which that person or group has the right to
acquire.
2Includes 600,000 shares not presently outstanding which Mr. Adams presently
has the right to acquire through the exercise of outstanding options.
3Includes 100,000 shares not presently outstanding which Mr. Aroney, Mr.
Bergendahl, Mr. Fleming and Mr. Wilhite each presently has the right to
acquire through the exercise of outstanding options.
4Includes, in addition to the shares previously listed, 110,000 shares not
presently outstanding which other officers presently have the right to
acquire.
CERTAIN TRANSACTIONS
THE COMPANY
Prior to completing the acquisition of MMI, the Company had received advances
from an officer, director and shareholder of the Company in order to pay
minimal operating expenses. As of March 11, 1997, September 30, 1996 and
September 30, 1995, $10,500, $8,350 and $6,000, respectively was payable by
the Company as a result of these advances. These debts were forgiven by the
officer-director at closing of the acquisition of MMI, as a contribution to
the capital of the Company.
Upon closing the acquisition of MMI the Company had 6,921,094 shares of its
common stock outstanding. Subsequent to closing the acquisition of MMI, the
Company issued common stock and/or granted stock options to various persons as
consideration for services or to acquire certain assets. Those transactions
involving management are summarized below. The Company has issued or granted
to:
Gary Adams (Chairman/CEO), 600,000 options exerciseable at $.50 per
share for 5 years from April 1, 1997, to acquire Mr. Adams' design work.
Ted Aroney (Vice Chairman), 150,000 options exerciseable at $1.75 per
share for 5 years from April 2, 1997, for services.
Mark Bergendahl (Director), 50,000 shares to purhase office furnishings,
and 150,000 options exerciseable at $1.75 per share for 5 years from
April 2, 1997, for services.
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Mario Cesario (V.P.-Product Research), 30,000 shares to purchase
equipment. The Company also agreed to issue 60,000 shares for services,
subject to certain buy back provisions.
Henry Fleming (Director), 250,000 options exerciseable at $.50 per share
for 5 years from April 1, 1997, for consulting services.
Brad Wilhite (President-CAO), 100,000 shares and 100,000 options
exerciseable at $4.125 per share for 5 years from September 29, 1997,
for services.
Eddie Langert (V.P.-Sales), 5,000 shares and 25,000 options exerciseable
at $4.125 per share for 5 years from September 29, 1997, for services.
Fred Funk (Company Golf Pro), 60,000 shares for services.
Thomas Grimley (CFO), 50,000 shares for services, subject to certain buy
back provisions.
Gary Moles (COO), 100,000 shares for services, subject to certain buy
back provisions.
Thomas Williams (V.P.- National Sales Manager), 25,000 shares for
services, subject to certain buy back provisions.
The Company has purchased advertising services from a Company owned by an
employee stockholder. Total fees amounted to $ ? through March 31, 1998.
MMI
In January 1997, MMI issued 4,250,000 shares of common stock at a price of
$.0005 per share to its founding shareholders which included Gary V. Adams,
Ted Aroney and Sal Lupo. MMI subsequently sold 1,400,000 of its shares at
$.50 per share to investors including persons who may serve as officers or
directors of the Company. Therefore, MMI had 5,650,000 shares of its common
stock outstanding prior to its acquisition by the Company . All of such
shares were acquired by the Company in exchange for the issuance of 5,650,000
shares of the Company's common stock.
CONFLICTS OF INTEREST
Other than as described herein the Company is not expected to have significant
dealings with affiliates. However, if there are such dealings the parties
will attempt to deal on terms competitive in the market and on the same terms
that either party would deal with a third person. Presently none of the
officers and directors have any transactions which they contemplate entering
into with the Company, aside from the matters described herein. Management
will attempt to resolve any conflicts of interest that may arise in favor of
the Company. Failure to do so could result in fiduciary liability to
management.
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INDEMNIFICATION AND LIMITATION OF LIABILITY OF MANAGEMENT
The General Corporation Law of Nevada permits provisions in the articles, by-
laws or resolutions approved by shareholders which limit liability of
directors for breach of fiduciary duty to certain specified circumstances,
namely, breaches of their duties of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
acts involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. The Company's by-laws indemnify its Officers and Directors
to the full extent permitted by Nevada law. The by-laws with these exceptions
eliminate any personal liability of a Director to the Company or its
shareholders for monetary damages for the breach of a Director's fiduciary
duty and therefore a Director cannot be held liable for damages to the Company
or its shareholders for gross negligence or lack of due care in carrying out
his fiduciary duties as a Director. The Company's Articles provide for
indemnification to the full extent permitted under law which includes all
liability, damages and costs or expenses arising from or in connection with
service for, employment by, or other affiliation with the Company to the
maximum extent and under all circumstances permitted by law. Nevada law
permits indemnification if a director or officer acts in good faith in a
manner reasonably believed to be in, or not opposed to, the best interest's of
the corporation. A director or officer must be indemnified as to any matter
in which he successfully defends himself. Indemnification is prohibited as to
any matter in which the director or officer is adjudged liable to the
corporation. Insofar as indemnification for liabilities arising under the
Securities 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 Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
DESCRIPTION OF SECURITIES
The following statements do not purport to be complete and are qualified in
their entirety by reference to the detailed provisions of the Company's
Articles of Incorporation and Bylaws, copies of which will be furnished to an
investor upon written request therefor.
COMMON STOCK
The Company is presently authorized to issue 50,000,000 shares of $.001 par
value common stock. The Company presently has 11,035,810 shares of common
stock outstanding. The Company has reserved from its authorized but unissued
shares a sufficient number of shares of common stock for issuance of the
Shares offered hereby. The shares of common stock issuable on completion of
the offering will be, when issued in accordance with the terms of the
offering, fully paid and non-assessable.
The holders of common stock, including the Shares offered hereby, are entitled
to equal dividends and distributions, per share, with respect to the common
stock when, as and if declared by the Board of Directors from funds legally
available therefor. No holder of any shares of common stock has a pre-emptive
right to subscribe for any securities of the Company nor are any common shares
subject to redemption or convertible into other securities of the Company.
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Upon liquidation, dissolution or winding up of the Company, and after payment
of creditors and preferred stockholders, if any, the assets will be divided
pro-rata on a share-for-share basis among the holders of the shares of common
stock. All shares of common stock now outstanding are fully paid, validly
issued and non-assessable. Each share of common stock is entitled to one vote
with respect to the election of any director or any other matter upon which
shareholders are required or permitted to vote. Holders of the Company's
common stock do not have cumulative voting rights, so that the holders of more
than 50% of the combined shares voting for the election of directors may elect
all of the directors, if they choose to do so and, in that event, the holders
of the remaining shares will not be able to elect any members to the Board of
Directors.
PREFERRED STOCK
The Company is also presently authorized to issue 5,000,000 shares of $.001
par value Preferred Stock. Under the Company's Articles of Incorporation, as
amended, the Board of Directors has the power, without further action by the
holders of the common stock, to designate the relative rights and preferences
of the preferred stock, and issue the preferred stock in such one or more
series as designated by the Board of Directors. The designation of rights and
preferences could include preferences as to liquidation, redemption and
conversion rights, voting rights, dividends or other preferences, any of which
may be dilutive of the interest of the holders of the common stock or the
Preferred Stock of any other series. The issuance of Preferred Stock may have
the effect of delaying or preventing a change in control of the Company
without further shareholder action and may adversely effect the rights and
powers, including voting rights, of the holders of common stock. In certain
circumstances, the issuance of preferred stock could depress the market price
of the common stock. The Board of Directors effects a designation of each
series of Preferred Stock by filing with the Nevada Secretary of State a
Certificate of Designation defining the rights and preferences of each such
series. Documents so filed are matters of public record and may be examined
in accordance with procedures of the Nevada Secretary of State, or copies
thereof may be obtained from the Company.
SERIES A WARRANTS
In connection with and as part of the terms of the acquisition of McHenry,
shortly prior to consummating such acquisition the Company declared a
distribution of Series A Warrants, to common stockholders of record as of
March 31, 1997, on a 1 for 1 basis, with such distribution to be made subject
to the effectiveness and upon the Effective Date of the registration statement
covering sale of the shares underlying the Warrants (of which this prospectus
is part); so the Company now has 1,271,094 Series A common stock purchase
warrants (the "Warrants") outstanding. The Warrants are exercisable at $1.00
per share during the first year after the Effective Date, $1.50 per share
during the second year after the Effective Date, and $2.00 per share during
the third year after the Effective Date. Warrants are exercisable only if the
registration statement is then in effect, and the exercise is registered or
otherwise qualified in any state or other jurisdiction where required.
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(a) The Company may redeem all or a portion of the Warrants, at $.01
per warrant upon 30 days' prior written notice to the warrant holders in
the event the Closing bid price of the Company's common stock exceeds or
equals 200% of the exercise price per share for 20 consecutive trading
days. The warrants may be redeemed only if a current registration
statement is in effect with respect thereto. Any warrant holder who
does not exercise his Warrants prior to the Redemption Date, as set
forth on the Company's Notice of Redemption, will forfeit his right to
purchase the shares of Common Stock underlying such Warrants, and after
such Redemption Date any outstanding Warrants referred to in such Notice
will become void and be canceled. If the Company does not redeem such
Warrants, such warrants will expire at the conclusion of the exercise
period unless extended by the Company.
(b) The Company may at any time, and from time to time, extend the
exercise period of the Warrants provided that written notice of such
extension is given to the warrant holders prior to the expiration date
thereof. Also, the Company may, at any time, reduce the exercise price
thereof by written notification to the holders thereof. The Company
does not presently contemplate any extensions of the exercise period or
reduction in the exercise price of the Warrants.
(c) The Warrants contain anti-dilution provisions with respect to the
occurrence of certain events, such as stock splits or stock dividends.
The anti-dilution provisions do not apply in the event of a merger or
acquisition. In the event of liquidation, dissolution or winding-up of
the Company, warrant holders will not be entitled to participate in the
assets of the Company. Warrant holders have no voting, preemptive,
liquidation or other rights of a stockholder of a Company, and no
dividends may be declared on the Warrants.
(d) The Warrants may be exercised by surrendering to the Company, a
Warrant certificate evidencing the Warrants to be exercised, with the
exercise form included therein duly completed and executed, and paying
to the Company the exercise price per share in cash or check payable to
the Company. Stock certificates will be issued as soon thereafter as
practicable.
(e) The Warrants were not exercisable until the Warrants and the shares
of Common Stock underlying the Warrants were registered. The Company
filed with the Commission a registration statement with respect to the
issuance of such shares underlying the Warrants as soon as practicable
following the Acquisition. This Prospectus is part of such registration
statement and the date of this Prospectus is the effective date of the
registration statement. The effective date of such registration
statement is the "Commencement Date" for determining the exercise period
of such Warrants. The Company will also seek to register or qualify the
Common Stock issuable upon the exercise of the Warrants under the Blue
Sky laws of all states in which holders of the Warrants may reside.
(f) The Warrants are deemed to be "restricted securities" in a manner
similar to the definition of that term used in Rule 144 and will only be
transferable, prior to registration, upon a showing to the satisfaction
of the Company that the transfer is exempt from the registration
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provisions of the Securities Act of 1933. The Warrants are stamped with
a restrictive legend.
SHOP WARRANTS AND PRO WARRANTS
The Company is proposing to grant up to 1,000,000 warrants, referred to herein
as "Shop Warrants" to dealers of the Company's products who are the first to
purchase certain quantities of the Company's products. The Company is also
proposing to grant up to 300,000 warrants, referred to herein as "Pro
Warrants" to golf professionals who enter into agreements with the Company to
use and endorse the Company's products in connection with Professional Golf
Association events.
It is intended that these warrants will be exercisable for a two year term
after their issuance, and will be issued in the future with exercise prices
equal to their current fair market value at the time of issuance, determined
by taking the average of the bid and asked prices quoted by the three highest
market makers during the five trading days immediately preceding the issuance
of the warrant. The Company will have the ability to redeem all or a portion
of these Warrants also, at $.01 per warrant upon 30 days' prior written notice
to the warrant holders in the event the Closing bid price of the Company's
common stock exceeds or equals the exercise price per share for 10 consecutive
trading days. Otherwise, these Warrants will have the same provisions as the
Series A Warrants previously described.
TRANSFER AGENT
The transfer agent for the Company is Interwest Transfer Co., Inc., 1981 East
4800 South, Suite 100, Salt Lake City, Utah 84117.
ANNUAL REPORTS
The Company intends to furnish annual reports to shareholders which will
contain financial statements audited by independent certified public
accountants and such other interim reports as the Company may determine.
DIVIDEND POLICY
The Company has not paid any cash dividends on common stock to date and does
not anticipate paying cash dividends on common stock in the foreseeable
future. The Company intends for the foreseeable future to follow a policy of
retaining all of its earnings, if any, to finance the development and
expansion of its business. The Company does intend to pay stock dividends on
its preferred stock in accordance with the terms thereof.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 11,035,810 shares of the Company's common stock outstanding prior to
the exercise of any Warrants, 1,271,094 shares are freely tradeable or
eligible to be sold in the public market that exists for the Common Stock. In
34
<PAGE>
addition, the 2,571,094 shares of Common Stock underlying the Warrants will
also be freely tradeable into the public market immediately upon issuance.
Sales of substantial amounts of this common stock in the public market could
adversely affect the market price of the common stock. Furthermore, all of
the remaining shares of Common Stock presently outstanding are restricted
and/or affiliate securities which are not presently, but may in the future be
sold into any public market that may exist for the Common Stock, pursuant to
Rule 144 promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act").
In general, under Rule 144 as currently in effect, a person (or group of
persons whose shares are aggregated), including affiliates of the Company, can
sell within any three-month period, an amount of restricted securities that
does not exceed the greater of 1% of the total number of outstanding shares of
the same class, or (if the Stock becomes quoted on NASDAQ or a stock
exchange), the reported average weekly trading volume during the four calendar
weeks preceding the sale; provided, that at least one year has elapsed since
the restricted securities being sold were acquired from the Company or any
affiliate of the Company, and provided further that certain other conditions
are also satisfied. If at least two years have elapsed since the restricted
securities were acquired from the Company or an affiliate of the Company, a
person who has not been an affiliate of the Company for at least three months
can sell restricted shares under Rule 144 without regard to any limitations on
the amount. Future sales by current shareholders of substantial amounts of
Common Stock into the public market could depress the market prices of the
Common Stock in any such market.
PLAN OF DISTRIBUTION
This Prospectus and the registration statement of which it is part relate to
the offer and sale of 1,271,094 Series A Warrants, 1,000,000 Shop Warrants,
300,000 Pro Warrants, and 2,571,094 shares of Common Stock of the Company
underlying these Warrants. As soon as practicable after the date of this
Prospectus, the Series A Warrants will be distributed to the record holders of
the Company's Common Stock as of March 31, 1997. Series A Warrants are
exercisable at a price of $1.00 per share during the first year, at $1.50
during the second year and at $2.00 during the third year after the date of
this Prospectus. The Shop Warrants and Prop Warrants will be issued at
various dates in the future, and will be exercisable at prices to be
determined at such times, by reference to the current fair market value of the
Common Stock. The Warrants were not distributed and did not constitute an
offer by the Company to sell the Shares prior to the date of this prospectus.
The offering will be managed by the Company without an underwriter, and the
Shares will be offered and sold by the Company, without any discount, sales
commissions or other compensation being paid to anyone in connection with the
offering. In connection therewith, the Company will pay the costs of
preparing, mailing and distributing this Prospectus to the holders of the
Warrants. Brokers, nominees, fiduciaries and other custodians will be
requested to forward copies of this Prospectus to the beneficial owners of
securities held of record by them, and such custodians will be reimbursed for
their expenses.
35
<PAGE>
There is no assurance that all or any of the Shares will be sold, nor any
requirement, or escrow provisions to assure that, any minimum amount of
Warrants will be exercised. All funds received upon the exercise of any
Warrants will be immediately available to the Company for its use.
EXERCISE PROCEDURES
Warrants may be exercised in whole or in part by presentation of the Warrant
Certificate, with the Purchase Form on the reverse side thereof filled out and
signed at the bottom thereof, together with payment of the Exercise Price and
any applicable taxes at the principal office of Interwest Transfer Co., Inc.,
1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117. Payment of the
Exercise Price shall be made in lawful money of the United States of America
by wire transfer or check payable to the order of "McHenry Metals Golf Corp."
All holders of warrants will be given an independent right to exercise their
purchase rights. If, as and when properly completed and duly executed notices
of exercise are received by the Transfer Agent and/or Warrant Agent, together
with the Certificates being surrendered and full payment of the Exercise Price
in cleared funds, the checks or other funds will be delivered to the Company
and the Transfer Agent and/or Warrant Agent will promptly issue certificates
for the underlying Common Stock. It is presently estimated that certificates
for the shares of Common Stock will be available for delivery in Salt Lake
City, Utah at the close of business on the tenth business day after the
receipt of all required documents and funds.
LEGAL PROCEEDINGS
On January 30, 1998, Pacific Golf Holdings, a California corporation operating
as GolfGear International, filed a lawsuit against McHenry Metals Golf Corp.
in U.S. District Court for the Southern District of California, alleging
patent infringement. GolfGear claims that the Company's TourPure line of golf
clubs infringes on two of GolfGear's U.S. patents relating to the materials
and construction of the club face. The suit seeks injunctive relief to enjoin
the alleged infringement, and monetary relief for damages arising from the
alleged infringement, in unspecified amounts. These claims were presented to
the Company prior to filing of the lawsuit, but were rejected by the Company
as being unfounded. The Company has been advised by its patent counsel that
the claims have substantive shortcomings; therefore the Company will
vigorously defend the case against claims which are believed to be invalid.
However, there can be no assurance regarding the outcome of this litigation,
and no assurance exists that the litigation will not have a material adverse
effect on the Company and its business.
To the knowledge of management, there is no other material litigation pending
or threatened against the Company. The validity of the issuance of the Shares
offered hereby will be passed upon for the Company by Thomas G. Kimble &
Associates, Salt Lake City, Utah.
EXPERTS
The December 31, 1997 consolidated financial statements of the Company
(formerly known as McHenry Metals, Inc.), included in this Prospectus have
been audited by Clumeck, Stern, Phillips & Schenkelberg, independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance on such report given upon the authority of that
firm as experts in accounting and auditing.
36
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
FINANCIAL REPORT
MARCH 31, 1998
TABLE OF CONTENTS
Page
Independent Accountants' Report 2
Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statement of Operations 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-10
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
McHenry Metals Golf Corp. and Subsidiary
Carlsbad, California
We have reviewed the accompanying consolidated balance sheet
of McHenry Metals Golf Corp. and Subsidiary as of March 31,
1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the three months then
ended. These financial statements are the responsibility of
the company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally
accepted accounting standards, the objective of which is the
expression of any opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
financial statements for them to be in conformity with
generally accepted accounting principles.
CLUMECK, STERN, PHILLIPS & SCHENKELBERG
Certified Public Accountants
Encino, California
April 29, 1998
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1998
ASSETS
CURRENT ASSETS
Cash $ 5,212,694
Accounts receivable, net of allowance of $77,800 1,202,388
Inventory 1,366,194
Prepaid expenses 162,363
Advances to employees 13,390
---------
Total Current Assets 7,957,029
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $71,677 452,745
OTHER ASSETS
Patents and trademarks, net of
accumulated amortization of $1,796 30,126
Deposits 7,026
----------
TOTAL ASSETS $ 8,446,926
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,459,091
Accrued expenses 171,261
Leases payable - current portion 13,095
---------
Total Current Liabilities 2,643,447
---------
LONG TERM LIABILITIES
Leases payable, net of current portion 31,690
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, authorized
50,000,000 shares; issued and outstanding
10,994,110 shares 10,994
Preferred stock, $.001 par value, authorized
5,000,000 shares; no shares issued or
outstanding -
Additional paid in capital 10,022,183
Unearned compensation ( 471,967)
Accumulated deficit ( 3,789,421)
5,771,789
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,446,926
==========
(See Accountants' Report and Notes to Financial Statements)
3
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
Common Stock Additional
Number of Paid - In Accumulated
Shares Amount Capital Deficit
Balance, December 31, 1997 8,790,794 $ 8,791 $ 3,759,381 $(2,599,758)
Common stock issued 2,203,316 2,203 6,298,104
Cost of raising capital ( 35,302)
Net loss (1,189,663)
---------- ------ ---------- ---------
Balance, March 31, 1998 10,994,110 $10,994 $10,022,183 $(3,789,421)
========== ====== ========== =========
(See Accountants' Report and Notes to Financial Statements)
4
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
NET SALES $ 1,238,489
COST OF SALES 748,268
---------
GROSS PROFIT 490,221
---------
OPERATING EXPENSES
Marketing 538,450
Tour promotion 174,282
Sales and service 472,109
Research and development 110,545
General and administrative 390,054
---------
1,685,440
---------
OPERATING LOSS (1,195,219)
INTEREST INCOME, net 7,181
---------
LOSS BEFORE PROVISION FOR INCOME TAXES (1,188,038)
PROVISION FOR INCOME TAXES
Current 1,625
---------
NET LOSS $(1,189,663)
=========
NET LOSS PER SHARE $( .13)
=========
(See Accountants' Report and Notes to Financial Statements)
5
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,189,663)
----------
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 39,869
Expenses paid by the issuance of stock 38,943
(Increase) decrease in operating assets
Accounts receivable (1,178,388)
Inventory (1,256,490)
Prepaid expenses ( 87,330)
Deposits ( 1,535)
Increase (decrease) in operating liabilities
Accounts payable 2,160,167
Accrued expenses 102,342
Contract payable ( 50,000)
Common stock payable ( 28,389)
----------
Total adjustments ( 260,811)
----------
NET CASH USED IN OPERATING ACTIVITIES (1,450,474)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment ( 90,239)
Patents and trademarks ( 3,856)
Advances to employees ( 1,940)
----------
NET CASH USED IN INVESTING ACTIVITIES ( 96,035)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 5,877,749
Cost of raising capital ( 35,302)
Payment on leases payable ( 4,338)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,838,109
----------
NET INCREASE IN CASH 4,291,600
CASH, January 1 921,094
----------
CASH, March 31 $ 5,212,694
==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID:
Income taxes $ 1,625
==========
Interest $ 405
==========
(See Accountants' Report and Notes to Financial Statements)
6
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
NOTE 1 - FINANCIAL STATEMENTS
The accompanying financial statements include the accounts of
McHenry Metals Golf Corp. and its wholly owned subsidiary McHenry
Metals, Inc. All intercompany transactions have been eliminated.
Prior to 1998, the Company was a development stage company.
In 1998, the Company started the manufacture and sale of its
line of golf clubs.
The Company's financial statements have been prepared assuming
that the Company will continue as a going concern. The
consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The financial statements presented are unaudited and prepared
in accordance with generally accepted accounting principles
for interim reporting. Accordingly, they do not include all
the information and disclosures required by generally accepted
accounting principles for complete financial statements.
These statements should be read in conjunction with the
financial statements and related notes included in the
Company's annual report for the period ended December 31,
1997.
NOTE 2 - INVENTORY
Inventory consists of the following at March 31, 1998
Raw Material $ 708,029
Work-in-process 584,197
Finished goods 73,968
----------
$ 1,366,194
==========
NOTE 3 - LOSS PER SHARE
The computation of loss per share of common stock was based on
the weighted average number of shares outstanding of
9,173,847.
(See Accountants' Report)
7
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
NOTE 4 - LEASES PAYABLE
The Company leases equipment with a cost of $51,775 under
capital leases. The following is a schedule of future minimum
payments required under the leases together with their present
value as of March 31, 1998.
December 31,
1998 $ 14,040
1999 21,055
2000 17,691
2001 7,435
-------
Total minimum lease payments 60,221
Less amount representing interest 15,436
-------
Present value of minimum lease payments $ 44,785
=======
NOTE 5 - RESTRICTED STOCK AND STOCK OPTIONS GRANTED
The Company has awarded restricted stock to some of its
employees and others as part of their compensation package. It
also granted, in 1997, stock options to other employees as
part of their compensation package. The Company applies APB
Opinion No. 25 and related interpretations in accounting for
its plans. Accordingly, for the stock options, no
compensation cost has been recognized. Had compensation cost
for the stock options been determined based on the fair value
at the grant dates, consistent with the alternative method set
forth under SFAS 123, the Company's net loss for 1998 would
have been increased by an immaterial amount.
(See Accountants' Report)
8
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
NOTE 5 - RESTRICTED STOCK AND STOCK OPTIONS GRANTED (CONTINUED)
The Board of Directors has granted the following stock options:
Options Option Price Exercise date
Options granted 600,000 $ .500 Up to April, 2002
Options granted 250,000 $ .500 100,000 on or after
December 31, 1997;
150,000 on or after
December 31, 1998
Up to April, 2002
Options granted 300,000 $ 1.750 200,000 on or after
December 31, 1997;
100,000 on or after
December 31, 1998
up to April 2, 2002
Options granted 125,000 $ 4.125 Up to Sept. 29, 2002
Options granted 20,000 $ 4.125 Before Sept.29, 2000
Options granted 20,000 $ 4.750 2,500 shares per quarter
beginning April 15, 1998
Expire January 4, 2000
Options outstanding
at March 31, 1998 1,315,000
Options exercisable
at March 31, 1998 1,045,000
Unearned compensation has been charged for the value of the
stock on the date of grant based upon the market value of the
stock at that date. These amounts are amortized over the
earning period. The unamortized portion is shown as a
reduction of stockholders' equity.
NOTE 6 - STOCK OPTION PLAN
The Company has an employee incentive stock option plan under
Internal Revenue Code Section 422. Twenty thousand options
have been granted under this plan.
(See Accountants' Report)
9
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
NOTE 7 - SUBSEQUENT EVENTS
The Board of Directors authorized the registration for public
sale of 300,000 warrants for the purchase of 300,000 shares of
common stock at the current market price of the stock on the
date such warrants are issued.
The Company has committed to issue 41,700 shares in exchange
for services.
The Company is negotiating with a bank for a $4,000,000 line
of credit. The current letter of intent would require the
issuance of 25,000 warrants as a loan fee. The line of credit
would be collateralized by the Company's assets excluding
inventory and leased equipment.
(See Accountants' Report)
10
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
FINANCIAL REPORT
DECEMBER 31, 1997
TABLE OF CONTENTS
Page
Independent Auditors' Report 2
Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statement of Operations 5
Consolidated Statement of Cash Flow 6
Notes to Consolidated Financial Statements 7-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
McHenry Metals Golf Corp. and Subsidiary
Carlsbad, California
We have audited the consolidated balance sheet of McHenry Metals Golf
Corp. and Subsidiary (a development stage company), as of December 31,
1997 and the related consolidated statements of stockholders' equity,
operations and cash flows for the period January 13, 1997 to December
31, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
McHenry Metals Golf Corp. and Subsidiary as of December 31, 1997 and the
results of its operations and its cash flow for the period January 13,
1997 to December 31, 1997 in conformity with generally accepted
accounting principles.
CLUMECK, STERN, PHILLIPS & SCHENKELBERG
Certified Public Accountants
Encino, California
February 12, 1998
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS
Cash $ 921,094
Inventory 109,704
Prepaid expenses 75,033
Advances to employees 11,450
Note receivable 24,000
---------
Total Current Assets 1,141,281
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $32,814 401,369
OTHER ASSETS
Patents and trademarks, net of
accumulated amortization of $790 27,276
Deposits 5,491
---------
TOTAL ASSETS $ 1,575,417
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 298,924
Accrued salaries and benefits 68,919
Common stock payable 28,389
Contract payable 50,000
Leases payable 12,243
---------
Total Current Liabilities 458,475
---------
LONG TERM LIABILITIES
Leases payable, net of current portion 36,880
---------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, authorized 50,000,000
shares; issued and outstanding 8,790,794 shares 8,791
Preferred stock, $.001 par value, authorized 5,000,000
shares; no shares issued or outstanding -
Additional paid in capital 3,759,381
Unearned compensation ( 88,352)
Deficit accumulated during development stage (2,599,758)
---------
1,080,062
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,575,417
=========
(See Notes to Financial Statements)
3
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JANUARY 13, 1997 TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the Total
Number of Paid - In Unearned Development Stockholders
Shares Amount Capital Compensation Stage Equity
--------- ------ ---------------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued
for cash
February, 1997 4,250,000 $ 4,250 $( 2,125)
March, 1997 1,390,000 1,390 693,610
April, 1997 10,000 10 4,990
September, 1997 1,447,000 1,447 2,892,553
--------- ------ ---------- ------- ---------- ---------
7,097,000 7,097 3,589,028 $3,596,125
--------- ------ ---------- ------- ---------- ---------
Common stock issued
in subsidiary
acquisition transaction 1,271,094 1,271 ( 1,271) -
Common stock issued
for furniture
And compensation 422,700 423 288,427 (88,352) 200,498
Cost of raising capital ( 116,803) ( 116,803)
Common stockholder loss
for the period
January 13 to
December 31, 1997 (2,599,758) (2,599,758)
--------- ------ ---------- ------- ---------- ---------
8,790,794 $ 8,791 $ 3,759,381 $(88,352) $(2,599,758) $1,080,062
========= ====== ========== ======= ========== =========
</TABLE>
(See Notes to Financial Statements)
4
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
JANUARY 13, 1997 TO DECEMBER 31, 1997
SALES $ -
-----------
EXPENSES
Contract labor $ 325,014
Depreciation and amortization 33,604
Event sponsorship 5,900
Insurance 14,037
Legal and professional 94,820
Marketing costs 472,355
Office expense 79,372
Payroll taxes and benefits 53,375
Postage and delivery 42,003
Professional players fees 312,500
Rent 54,182
Research and development 123,595
Salaries 788,713
Supplies 37,547
Telephone 33,839
Travel and entertainment 101,331
Miscellaneous 47,590
-----------
2,619,777
INTEREST INCOME 20,819
-----------
LOSS BEFORE PROVISION FOR INCOME TAXES (2,598,958)
PROVISION FOR INCOME TAXES
Current 800
-----------
NET LOSS $ (2,599,758)
===========
NET LOSS PER SHARE $ ( .38)
===========
(See Notes to Financial Statements)
5
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
JANUARY 13, 1997 TO DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,599,758)
----------
Adjustments to reconcile net loss to net
cash (used in) operating activities
Depreciation and amortization 33,604
Expenses paid by the issuance of stock 136,648
(Increase) decrease in operating assets
Inventory ( 109,704)
Prepaid expenses ( 75,033)
Deposits ( 5,491)
Increase (decrease) in operating liabilities
Accounts payable 277,149
Accrued salaries and benefits 68,919
Contract payable 50,000
Common stock payable 28,389
----------
Total adjustments 404,481
----------
NET CASH USED IN OPERATING ACTIVITIES (2,195,277)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment ( 296,782)
Patents and trademarks ( 28,066)
Advances to employees ( 11,450)
Increase in note receivable ( 24,000)
----------
NET CASH USED IN INVESTING ACTIVITIES ( 360,298)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 3,596,125
Cost of raising capital ( 116,803)
Payment on leases payable ( 2,653)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,476,669
----------
NET INCREASE IN CASH 921,094
CASH, Beginning of period -
----------
CASH, End of period $ 921,094
==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID:
Income taxes $ 800
==========
Interest $ 618
==========
NON CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of equipment under capitalized leases $ 51,775
==========
(See Notes to Financial Statements)
6
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
McHenry Metals Golf Corp. was incorporated in 1985 in Utah under the
name of White Pine, Inc.. In 1986 the name was changed to Symphony
Holding Company. In 1993 the corporate domicile was changed from
Utah to Nevada and the corporation changed its name to Symphony
Ventures, Inc.. In 1996, the name was changed to Micro-ASI
International, Inc.. Upon the acquisition of 100% ownership of
McHenry Metals, Inc. (subsidiary) in April, 1997, the company's name
was changed to McHenry Metals Golf Corp..
McHenry Metals, Inc., the subsidiary, was organized under the laws
of Illinois on January 13, 1997, to engage in the manufacture and
sale of a new line of golf related equipment. It is currently in
the developmental stage of operations devoting its time to raising
capital, promotion of future products and administrative functions.
The acquisition of McHenry Metals, Inc. is accounted for as a
reverse acquisition that results in a recapitalization of
Subsidiary as it is deemed to be the acquiring corporation.
All intercompany transactions have been eliminated.
Inventory
Inventory is valued at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Raw materials $ 84,693
Work in process 25,011
---------
$ 109,704
=========
Property and Equipment
Property and equipment are stated at cost. Those items that had been
placed in service are being depreciated over their estimated useful
lives of two to seven years using the straight-line method.
Patents and Trademarks
The patents and trademarks are recorded at cost and amortized over
seventeen years using the straight-line method.
7
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Stock Based Compensation
In October, 1995, the Financial Accounting Standards Board issued
Statement 123, Accounting for Stock-Based Compensation. This
statement permits a company to choose either a new fair value based
method or the current APB Opinion 25 intrinsic value based method of
accounting for its stock-based compensation arrangements. The
statement requires pro forma disclosures of net income and earnings
per share computed as if the fair value method had been applied in
financial statements of companies that continue to follow current
practice in accounting for such arrangements under Opinion 25. The
Company has elected to follow Opinion 25 and make the required
disclosures as outlined in Statement 123 (see Note 9).
Income Taxes
The Company accounts for income taxes in accordance with statement
Financial Accounting Standards No. 109, Accounting for Income Taxes,
which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the year
which the differences are expected to be settled or realized.
Loss per Share
The computations of loss per share of common stock are based on the
weighted average number of shares outstanding of 6,897,795 shares.
Advertising Costs
The Company expenses advertising costs when incurred. Trade and
consumer ad space and event sponsorships totaled $248,103.
8
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 2 - PROPERTY & EQUIPMENT
Property and equipment are recorded as follows:
Capitalized lease equipment $ 51,775
Office equipment and furniture 95,672
Computer equipment and software 65,099
Machinery and equipment 10,536
Show booth 75,250
Leasehold improvements 21,493
Tooling 114,358
---------
434,183
Accumulated depreciation 32,814
---------
$ 401,369
=========
NOTE 3 - COMMON STOCK PAYABLE
The Company has committed to issue 108,750 shares in connection with
employee compensation and the purchase of services from vendors.
NOTE 4 - LEASES PAYABLE
The Company leases equipment with a cost of $51,775 under capital leases
and accumulated depreciation of $1,202 at December 31, 1997. The
following is a schedule of future minimum payments required under the
leases together with their present value as of December 31, 1997:
1998 $ 21,055
1999 21,055
2000 17,691
2001 7,435
---------
Total minimum lease payments 67,236
Less amount representing interest 18,113
---------
Present value of minimum lease payments $ 49,123
=========
9
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 5 - INCOME TAXES
The Company has an operating loss for the year that can be used to
offset future taxable income. Since this is a development stage company
and the future taxable income stream is uncertain, no deferred tax
benefit has been recorded for the possible use of this operating loss.
If unused, the loss will expire for federal purposes in 2012.
NOTE 6 - COMMITMENTS
Lease
The Company has signed a lease for office space in Illinois beginning
January 1, 1998 and ending December 31, 2000. The lease calls for
monthly payments of $1,500, plus escalations.
The Company has also signed a lease for space in California beginning
May 1, 1997 and ending October 31, 1998. The lease calls for monthly
payments of $4,261 plus increases in maintenance charges. The
Company has an option to extend the lease an additional two years.
The future minimum rentals including the anticipated option period
are:
1998 $ 68,858
1999 71,529
2000 65,407
--------
$ 205,794
========
Rent expense, representing minimum rents, amounted to $49,836.
Contracts
The Company has signed three contracts for product promotion for
periods through December 31, 1999. The contracts call for payments
of $179,167 cash and 80,000 shares of stock in 1997, $332,500 in 1998
and $357,500 in 1999. In addition, bonuses will be paid based upon
golf tournament performance. The stock has not yet been issued on
one of the contracts.
10
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 6 - COMMITMENTS (CONTINUED)
Employment Contracts
An employment contract has been signed with an officer/stockholder
for a term of three years. The minimum annual compensation is
$150,000. Employment contracts with other employees of the Company
do not exceed one year.
Warrants
The Board of Directors has authorized the registration for restricted
public sale up to a maximum of 1,000,000 warrants representing the
right to purchase a maximum of 1,000,000 shares of common stock. The
purchase price of the shares will be the trading price of the Company
stock on the date the warrants are issued. The warrants will be
offered to a limited number of customers.
The Company has declared a warrant distribution of Common Stock
Purchase Warrants to all stockholders of the Parent who were
stockholders of record as of March 31, 1997. These warrants and the
common stock underlying the warrants will be registered with the
Securities and Exchange Commission.
NOTE 7 - CONCENTRATION OF RISK
The Company maintains its cash in bank deposit and brokerage accounts
which, at times, may exceed federally insured limits. The Company
believes it is not exposed to any significant credit risk on cash.
11
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 8 - FORWARD STOCK SPLIT
As a negotiated term of the acquisition of the subsidiary, the Parent's
Board of Directors approved a 2.2 to 1 forward split of its outstanding
common stock effective April 1, 1997. This increased the number of
shares outstanding, from 577,770 shares to 1,271,094 shares, before the
issuance of shares for the acquisition of the subsidiary.
NOTE 9 - RESTRICTED STOCK AND STOCK OPTIONS GRANTED
The Company has awarded restricted stock to some of its employees as
part of the compensation package under the employment contracts being
finalized. It has also granted stock options to other employees as part
of their compensation package. The Company applies APB Opinion No. 25
and related interpretations in accounting for its plans. Accordingly,
for the stock options, no compensation cost has been recognized. The
compensation cost charged against income for the restricted stock award
was $48,837. Had compensation cost for the stock options been
determined based on the fair value at the grant dates, consistent with
the alternative method set forth under SFAS 123, the Company's net loss
would have been increased by $99,000.
The Board of Directors has granted the following stock options:
Options Option Price Exercise date
Options granted 600,000 $ .500 Up to September 1, 2000
Options granted 250,000 $ .500 100,000 on or after
December 31, 1997;
150,000 on or after
December 31, 1998
Options granted 300,000 $ 1.750 200,000 on or after
December 31, 1997;
100,000 on or after
December 31, 1998
up to May 27, 2000
12
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 9 - RESTRICTED STOCK AND STOCK OPTIONS GRANTED (CONTINUED)
Options Option Price Exercise date
Options granted 125,000 $ 4.125 Up to September 28, 2000
Options granted 20,000 $ 4.125 After January 31, 1998 and
before September 1, 2000
Options outstanding at
December 31, 1997 1,295,000
Options exercisable
at December 31, 1997 725,000
Unearned compensation has been charged for the value of the stock
granted to employees on the date of grant based upon the value of the
stock at that date. These amounts are amortized over the earning
period. The unamortized portion is shown as a reduction of
stockholders' equity.
NOTE 10 - STOCK OPTION PLAN
The Board of Directors and the Shareholders have approved a stock option
plan effective April 1, 1997. The plan authorized the granting of
options to purchase an aggregate of 2,295,000 shares of common stock of
the Company. The purchase price of each share of stock covered by the
option plan shall be equal to the fair market value of the Company's
common stock on the date of grant. Options granted to a ten percent or
more shareholder will have a price equal to one hundred ten percent
(110%) of the fair market value on the grant date. No options have been
granted under this plan.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Board of Directors approved the issuance of 107,700 shares of stock
to stockholders, board members and others for purchase of furniture and
equipment from them valued at $53,850.
The Company purchased advertising services from a company owned by an
employee/stockholder. Total was approximately $300,000.
13
<PAGE>
MCHENRY METALS GOLF CORP. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 13, 1997 TO DECEMBER 31, 1997
NOTE 12 401(k) PLAN
The Company adopted a 401(k) plan effective February 1, 1998. Employees
who have reached the age of 21 and have completed one year of service
or were employees as of the effective date are eligible to participate.
Contributions by the Company will be made at the discretion of the Board
of Directors.
NOTE 13 SUBSEQUENT EVENTS
The Company is a defendant in a patent infringement lawsuit filed in
1998. McHenry Metals has been advised by its patent counsel that in his
opinion, the claims made in the suit have substantive shortcomings.
However, there can be no assurance regarding the outcome of the
litigation; and no assurance exists that the litigation will not have
a material adverse effect upon the Company and its business.
Effective January 1, 1998, the Company signed professional endorsement
agreements with two individuals. The agreements are for a two year
term. Compensation will be the issuance of 40,000 shares of the Company
stock.
14
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAT THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES COVERED HEREBY IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
UNTIL [90 DAYS AFTER THE DATE OF THIS PROSPECTUS], ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS 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 WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . .INSIDE FRONT COVER
MCHENRY METALS GOLF CORP.
2,571,094 WARRANTS AND
UNDERLYING SHARES
WARRANTS AND
COMMON STOCK
PROSPECTUS
, 1998
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, bylaws, contracts or other arrangements
under which controlling persons, directors or officers of the registrant are
insured or indemnified in any manner against any liability which they may
incur in such capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides that each
corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with the action, suit or 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 corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of
the action or suit 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
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction, determines upon application that in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections 1 and 2, or in defense of any claim,
issue or matter therein, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably incurred by him
in connection with the defense.
<PAGE>
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal
counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act, suit
or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The certificate or articles of incorporation, the bylaws or an agreement
made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than director of officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made pursuant to subsection 5,
may not be made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a director, officer, employee
or agent and inures to the benefit of the heirs, executors and administrators
of such a person."
(b) The registrant's Articles of Incorporation limit liability of its
Officers and Directors to the full extent permitted by the Nevada Business
Corporation Act.
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following table sets forth all estimated costs and expenses, other than
underwriting discounts, commissions and expense allowances, payable by the
registrant in connection with the maximum offering for the securities included
in this registration statement:
Amount
SEC registration fee $ 2,896.19
Blue sky fees and expenses 4,500.00
Printing and shipping expenses 500.00
Legal fees and expenses 45,000.00
Accounting fees and expenses 6,000.00
Transfer and Miscellaneous expenses 1,103.81
-----------------
Total $ 60,000.00
* All expenses are estimated except the Commission filing fee.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On April 1, 1997, the Company entered into an Agreement and Plan of
Reorganization with McHenry Metals, Inc. ("MMI"). Pursuant to the Agreement,
the Company forward split its common stock on a 2.2 for 1 basis, and then
issued 5,650,000 post split shares of its authorized but previously unissued
common stock to the shareholders of MMI (fewer than 35 persons), and acquired
all the issued and outstanding stock of MMI in a stock for stock exchange
(the "Acquisition") whereupon MMI became a wholly-owned subsidiary of the
Company. The Acquisition was not registered under the Securities Act of 1933
(the "Act") in reliance on the exemption from registration in Section 4(2) of
the Act, as a transaction not involving any public offering. These securities
were issued as restricted securities and the certificates were stamped with
restrictive legends to prevent any resale without registration under the Act
or in compliance with an exemption.
MMI was incorporated in January, 1997, under the laws of the State of Illinois
to design and market golf clubs and related equipment. In February, 1997,
shortly after incorporation, MMI issued 4,250,000 shares to its founding
stockholders in exchange for $2,125 cash. This transaction was not registered
under the Act in reliance on the exemption from registration in Section 4(2)
of the Act, as a transaction not involving any public offering. These
securities were issued as restricted securities and the certificates were
stamped with restrictive legends to prevent any resale without registration
under the Act or in compliance with an exemption.
Contemporaneous with the Acquisition, MMI issued 1,400,000 shares of common
stock to 30 persons, and raised $700,000 in a non public offering of its
securities. There were no underwriting discounts or commissions. These
transactions were not registered under the Act, in reliance on the exemption
from registration in Section 4(2) of the Act, as transactions not involving
any public offering. These securities were issued as restricted securities
and the certificates were stamped with restrictive legends to prevent any
resale without registration under the Act or in compliance with an exemption.
<PAGE>
Subsequent to the Acquisition, in September, 1997, the Company issued
1,447,000 shares of common stock to 90 accredited investors and 13 other
persons, and raised $2,894,000 of capital through a non public offering of
its securities. There were no underwriting discounts or commissions. These
transactions were not registered under the Act in reliance on the exemption
from registration in Section 4(2) of the Act, and Rule 506 of Regulation D
promulgated thereunder, as transactions not involving any public offering.
Form D was filed with the Securities and Exchange Commission. These
securities were issued as restricted securities and the certificates were
stamped with restrictive legends to prevent any resale without registration
under the Act or in compliance with an exemption.
During 1997, the Company has issued a total of 422,700 shares of its common
stock in privately negotiated transactions, to 9 different persons, in
exchange for furniture or other assets, or as compensation. These
transactions were not registered under the Act in reliance on the exemption
from registration in Section 4(2), as transactions not involving any public
offering. These securities were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
During December, 1997, to March, 1998, the Company conducted a non public
offering of units consisting of common stock and warrants. Pursuant thereto,
the Company sold 638,066 shares of common stock and 319,033 warrants to 84
accredited investors and 4 other persons, and raised $2,392,747.50 in gross
proceeds. There were no underwriting discounts or commissions. These
transactions were not registered under the Act in reliance on the exemption
from registration in Section 4(2) of the Act, and Rule 506 of Regulation D
promulgated thereunder. Form D was filed with the Securities and Exchange
Commission. These securities were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
During April, 1998, the Company offered and sold 1,394,000 shares of common
stock to a small group of investors, and raised $3,485,000. This transaction
was not registered under the Act in reliance on the exemption from
registration in Section 4(2), as a transaction not involving any public
offering. These securities were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
During 1998, the Company has thus far issued a total of 204,250 shares of its
common stock in privately negotiated transactions, to 14 different persons, in
exchange for furniture or other assets, or as compensation. These
transactions were not registered under the Act in reliance on the exemption
from registration in Section 4(2), as transactions not involving any public
offering. These securities were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
<PAGE>
ITEM 27. EXHIBITS INDEX
SEC No. Document Exhibit No.
2 Agreement & Plan of Reorganization 2.1
3 Articles of Incorporation 3.1
3 Articles of Amendment 3.2
3 Articles of Amendment 3.3
3 By-Laws 3.4
4 Common Stock Specimen Certificate 4.1
4 Form of Warrant Agreement 4.2
4 Form of Warrant Certificate 4.3
5,24 Opinion & Consent of Counsel 5.1 & 24.1
10 Lease Agreement - Carlsbad, CA 10.1
10 Lease Agreement - McHenry, IL 10.2
10 Stock Option Plan 10.3
10 Employment Agreement - Gary Adams 10.4
10 Employment Agreement - Bradley Wilhite 10.5
10 Employment Agreement - Mario Cesario 10.6
10 Employment Agreement -Thomas Grimley 10.7
10 Employment Agreement - Eddie Langert 10.8
23 Consent of Accountants 23.1
27 Financial Data Schedules 27.1
<PAGE>
ITEM 28. UNDERTAKINGS
The registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) Include any additional or changed material information on the plan of
distribution; and
(iii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement.
(2) For determining any liability under the Securities Act, treat each post-
effective amendment as a new Registration Statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 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 in the opinion of the Securities and Exchange 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
its 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.
<PAGE>
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 authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Carlsbad, State of California, on May 18, 1998.
McHENRY METALS GOLF CORP.
By: /s/ Gary V. Adams
Gary V. Adams, Chairman (Chief Executive Officer)
By: /s/ Thomas Grimley
Thomas Grimley, (Chief Financial Officer)
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Thomas G. Kimble or Van L. Butler, the
undersigned's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing, requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
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 date indicated.
Signature: /s/ Gary V. Adams Date: May 18, 1998
Gary V. Adams, Director
Signature: /s/ Theodore Aroney Date: May 18, 1998
Theodore Aroney, Director
Signature: /s/ Mark Bergendahl Date: May 18, 1998
Mark Bergendahl, Director
Signature: /s/ Henry J. Fleming Date: May 19, 1998
Henry J. Fleming, Director
Signature: /s/ Bradley J. Wilhite Date: May 18, 1998
Bradley J. Wilhite, Director
Signature: /s/ Sal Lupo Date: May 18, 1998
Sal Lupo, Director
Signature: /s/ Phillip A. Ward Date: May 18, 1998
Phillip A. Ward, Director
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
MICRO-ASI INTERNATIONAL, INC.,
AND
McHENRY METALS, INC.
<PAGE>
TABLE OF CONTENTS
1. Plan of Reorganization. . . . . . . . . . . . . . . . . . . . . . . . .1
2. Exchange of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. Pre-Closing Events. . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . .2
5. Post Acquisition Events . . . . . . . . . . . . . . . . . . . . . . . .3
6. Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
7. Delivery of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .3
8. Representations of McHenry Historical Shareholders. . . . . . . . . . .3
9. Representations of McHenry. . . . . . . . . . . . . . . . . . . . . . .4
10. Representations of Micro and Schneider . . . . . . . . . . . . . . . .5
11. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
12. Conditions Precedent to the Obligations of McHenry . . . . . . . . . .7
13. Conditions Precedent to the Obligations of Micro . . . . . . . . . . .9
14. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. Nature and Survival of Representations . . . . . . . . . . . . . . . 10
16. Documents at Closing . . . . . . . . . . . . . . . . . . . . . . . . 10
17. Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Signature Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit A - McHenry Stockholder Schedule
Exhibit B - Amendment to Articles of Incorporation
Exhibit C - Investment Letter
(i)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter the "Agreement")
is entered into effective as of this 21st day of March, 1997, by and among
Micro-ASI International, Inc., a Nevada corporation (hereinafter "Micro");
Mark N. Schneider an officer, director and principal shareholder of Micro
(hereinafter "Schneider"); McHenry Metals, Inc., an Illinois corporation
(hereinafter "McHenry"), and the owners of all the outstanding shares of
common stock of McHenry (hereinafter the "McHenry Stockholders").
RECITALS:
WHEREAS, the McHenry Stockholders own all of the issued and outstanding
common stock of McHenry which comprises 5,650,000 shares (the "McHenry Common
Stock"). Micro desires to acquire the McHenry Common Stock solely in exchange
for voting common stock of Micro, making McHenry a wholly-owned subsidiary of
Micro; and
WHEREAS, the McHenry Stockholders (as set forth on the attached Exhibit
"A") desire to acquire voting common stock of Micro in exchange for the
McHenry Common Stock, as more full set forth herein.
NOW THEREFORE, for the mutual consideration set out herein, and other
good and valuable consideration, the receipt of and legal sufficiency of which
is hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Plan of Reorganization. It is hereby agreed that all of the McHenry
Common Stock shall be acquired by Micro in exchange solely for Micro common
voting stock (the "Micro Shares"). It is the intention of the parties hereto
that all of the issued and outstanding shares of capital stock of McHenry
shall be acquired by Micro in exchange solely for Micro common voting stock
and that this entire transaction qualify as an organizational exchange under
Section 351 of the Internal Revenue Code of 1986, as amended, and related or
other applicable sections thereunder and/or a corporate reorganization under
Section 368(a)(1)(B).
2. Exchange of Shares. Micro and McHenry Stockholders agree that on
the Closing Date or at the Closing as hereinafter defined, the McHenry Common
Stock shall be delivered at Closing to Micro in exchange for the Micro shares,
after giving effect to a 2.2 for 1 forward stock split as to all presently
outstanding shares of Micro common stock, as follows:
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(a) The Micro Shares will, on the Closing Date or at the Closing, be
delivered to McHenry Stockholders in exchange for their McHenry Common Stock
on a share-for-share basis.
(b) At Closing, Micro shall, subject to the conditions set forth
herein, issue an aggregate of 5,650,000 shares of Micro common stock to the
McHenry Stockholders. The 5,650,000 shares and all future references herein
to the Micro Shares are stated after giving effect to a 2.2 for 1 forward
stock split of the currently outstanding shares of common stock of Micro (the
"Micro Forward Stock Split").
(c) Each McHenry Stockholder shall execute this Agreement.
(d) Unless otherwise agreed by Micro and McHenry this transaction shall
close only in the event Micro is able to acquire all of the outstanding
McHenry Common Stock.
3. Pre-Closing Events. The Closing is subject to the completion of
the following:
(a) McHenry shall have provided Micro with a copy of McHenry audited
financial statements dated within thirty days of Closing, demonstrating a
tangible net worth of at least $500,000.
(b) Micro shall have authorized 50,000,000 shares of $.001 par value
common stock an 5,000,000 shares of $.001 par value preferred stock. The
preferred stock shall be subject to issuance in such series and with such
rights, preferences and designations as determined in the sole discretion of
the board of directors.
(c) Micro shall have effectuated the Micro Forward Stock Split at or
prior to Closing, and shall have 1,271,094 shares of its common stock issued
and outstanding and no other shares of capital stock issued or outstanding.
4. Exchange of Securities. As of the Closing Date each of the
following shall occur:
(a) Each share of McHenry Common Stock issued and outstanding
immediately prior to the Closing Date shall be exchanged for one share of
Micro common stock. All such outstanding shares of McHenry Common Stock shall
be deemed, after Closing, to be owned by Micro. The holders of such
certificates previously evidencing shares of McHenry Common Stock outstanding
immediately prior to the Closing Date shall cease to have any rights with
respect to such shares of McHenry Common Stock except as otherwise provided
herein or by law;
(b) Any shares of McHenry Common Stock held in the treasury of McHenry
immediately prior to the Closing Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto;
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(c) The 1,271,094 shares of Micro common stock previously issued and
outstanding prior to the Closing will remain outstanding.
5. Post-Acquisition Events. Upon Closing, the following shall be
accomplished:
(a) Micro shall file an amendment to its articles of incorporation with
the Secretary of State of the State of Nevada in substantially the form
attached hereto as Exhibit "B" effecting the amendment to its articles of
incorporation to change its name to "McHenry Metals Golf Corp." or such other
name as is selected by McHenry and to accomplish the other matters agreed to
by the parties hereto and set forth in the attached Exhibit "B".
(b) McHenry intends to cause Micro to declare a distribution of Series
A Warrants wherein the shareholders of Micro, owning the 1,271,094 shares of
Micro Common Stock outstanding at Closing, shall be entitled to receive one
Series A Warrant for each outstanding share of Micro common stock (1,271,094
warrants). The distribution and exercise of the Series A Warrants shall be
subject to registration with the Securities and Exchange Commission.
(c) The resignation of the existing Micro officers and directors and
appointment of new officers and directors as described in Section 14(f)
hereof.
6. Other Matters.
(a) Except for the recapitalization of Micro, including the Micro
Forward Stock Split, there shall be no stock dividend, stock split,
recapitalization, or exchange of shares with respect to or rights issued in
respect of, Micro's capital stock after the date hereof and there shall be no
dividends paid on Micro's capital stock after the date hereof, in each case
through and including the Closing Date.
(b) McHenry shall have received all requisite director and shareholder
approval of all matters set forth herein, and no shareholder of McHenry shall
have exercised any dissenters rights under applicable corporate law.
(c) Micro shall have received all requisite shareholder approval of the
matters set forth herein.
7. Delivery of Shares. On or as soon as practicable after the Closing
Date, McHenry will use its best efforts to cause the McHenry Stockholders to
surrender for cancellation certificates representing their shares of McHenry
Common Stock, against delivery of certificates representing the Micro Shares
for which the shares of McHenry Common Stock are to be exchanged at Closing.
8. Representations of McHenry Stockholders. McHenry Stockholders
hereby represent and warrant each only as to its own McHenry Common Stock,
effective this date and the Closing Date as follows:
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(a) Except as may be set forth in Exhibit "A", the McHenry Common Stock
is free from claims, liens, or other encumbrances, and at the Closing Date
McHenry Stockholders will have good title and the unqualified right to
transfer and dispose of such McHenry Common Stock.
(b) Each McHenry Stockholder, respectively, is the sole owner of the
issued and outstanding McHenry Common Stock as set forth in Exhibit "A";
(c) No McHenry Stockholder has the present intent to sell or dispose of
the Micro Shares and no McHenry Stockholder is under a binding obligation,
formal commitment, or existing plan to sell or otherwise dispose of the Micro
Shares.
9. Representations of McHenry. McHenry hereby represents and warrants
as follows, which warranties and representations shall also be true as of the
Closing Date:
(a) Except as noted on Exhibit "A", the McHenry Stockholders listed on
the attached Exhibit "A" are the sole owners of record and beneficially of the
issued and outstanding common stock of McHenry.
(b) McHenry has no outstanding or authorized capital stock, warrants,
options or convertible securities other than as described in Exhibit A,
attached hereto.
(c) The audited financial statements as of and for the period ended
March 31, 1997, which have been delivered to Micro (hereinafter referred to as
the "McHenry Financial Statements") are complete and accurate and fairly
present the financial condition of McHenry as of the date thereof and the
results of its operations for the period covered, subject to normal year-end
adjustments. There are no material liabilities or obligations, either fixed
or contingent, not disclosed in the McHenry Financial Statements or in any
exhibit thereto or notes thereto other than contracts or obligations in the
ordinary course of business; and no such contracts or obligations in the
ordinary course of business constitute liens or other liabilities which
materially alter the financial condition of McHenry as reflected in the
McHenry Financial Statements. McHenry has good title to all assets shown on
the McHenry Financial Statements subject only to dispositions and other
transactions in the ordinary course of business, the disclosures set forth
therein and liens and encumbrances of record. The McHenry Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated therein or in the
notes thereto).
(d) Since the date of the McHenry Financial Statements, there have not
been any material adverse changes in the financial position of McHenry except
changes arising in the ordinary course of business, which changes will in no
event materially and adversely affect the financial position of McHenry.
(e) McHenry is not a party to any material pending litigation or, to
its best knowledge, any governmental investigation or proceeding, not
reflected in the McHenry Financial Statements, and to its best knowledge, no
material litigation, claims, assessments or any governmental proceedings are
threatened against McHenry.
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(f) McHenry is in good standing in its state of incorporation, and is
in good standing and duly qualified to do business in each state where
required to be so qualified except where the failure to so qualify would have
no material negative impact on McHenry.
(g) McHenry has (or, by the Closing Date, will have filed) all material
tax, governmental and/or related forms and reports (or extensions thereof) due
or required to be filed and has (or will have) paid or made adequate
provisions for all taxes or assessments which have become due as of the
Closing Date.
(h) McHenry has not materially breached any material agreement to which
it is a party. McHenry has previously given Micro copies or access thereto of
all material contracts, commitments and/or agreements to which McHenry is a
party including all relationships or dealings with related parties or
affiliates.
(i) McHenry has no subsidiary corporations.
(j) McHenry has made its corporate financial records, minute books, and
other corporate documents and records available for review to present
management of Micro prior to the Closing Date, during reasonable business
hours and on reasonable notice.
(k) The execution of this Agreement does not materially violate or
breach any material agreement or contract to which McHenry is a party and has
been duly authorized by all appropriate and necessary corporate action and
McHenry, to the extent required, has obtained all necessary approvals or
consents required by any agreement to which McHenry is a party.
(l) All information regarding McHenry which is set forth in its
Confidential Business Plan dated February 27, 1997, or otherwise delivered to
Micro by McHenry for use in connection with the transaction described herein
is true, complete and accurate in all material respects.
10. Representations of Micro and Schneider. Micro and Schneider hereby
jointly and severally represent and warrant as follows, each of which
representations and warranties shall continue to be true as of the Closing
Date:
(a) As of the Closing Date, the Micro Shares, to be issued and
delivered to the McHenry Stockholders hereunder will, when so issued and
delivered, constitute, duly authorized, validly and legally issued shares of
Micro common stock, fully-paid and nonassessable.
(b) Micro has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the board of directors of Micro. The execution
and performance of this Agreement will not constitute a material breach of any
agreement, indenture, mortgage, license or other instrument or document to
which Micro is a party and will not violate any judgment, decree, order, writ,
rule, statute, or regulation applicable to Micro or its properties. The
execution and performance of this Agreement will not violate or conflict with
any provision of the articles of incorporation or by-laws of Micro.
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(c) Micro has delivered to McHenry a true and complete copy of its
audited financial statements for the years ended September 30, 1996 and 1995,
(the "Micro Financial Statements"). The Micro Financial Statements are
complete, accurate and fairly present the financial condition of Micro as of
the dates thereof and the results of its operations for the periods then
ended. There are no material liabilities or obligations either fixed or
contingent not reflected therein except as provided in subparagraph (d) below.
The Micro financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present the financial
position of Micro as of the dates thereof and the results of its operations
and changes in financial position for the periods then ended.
(d) Since September 30, 1996, there have not been any material adverse
changes in the financial condition of Micro except advances by Schneider to
pay reasonable and ordinary expenses in connection with maintaining its
corporate status and pursuing the matters contemplated in this Agreement. At
Closing such advances and all accounts payable and other liabilities reflected
on the Micro Financial Statements shall be paid and satisfied.
(e) Micro is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the Micro
Financial Statements or otherwise disclosed herein, and there are no lawsuits,
claims, assessments, investigations, or similar matters, to the best knowledge
of Schneider, threatened or contemplated against or affecting Micro, its
management or its properties.
(f) Micro is duly organized, validly existing and in good standing
under the laws of the State of Nevada; has the corporate power to own its
property and to carry on its business as now being conducted and is duly
qualified to do business in any jurisdiction where so required except where
the failure to so qualify would have no material negative impact.
(g) Micro has filed all federal, state, county and local income,
excise, property and other tax, governmental and/or related returns, forms, or
reports, which are due or required to be filed by it prior to the date hereof,
except where the failure to do so would have no material adverse impact on
Micro, and has paid or made adequate provision in the Micro Financial
Statements for the payment of all taxes, fees, or assessments which have or
may become due pursuant to such returns or pursuant to any assessments
received. Micro is not delinquent or obligated for any tax, penalty,
interest, delinquency or charge.
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(h) There are no existing options, calls, warrants, preemptive rights
or commitments of any character relating to the issued or unissued capital
stock or other securities of Micro, except as contemplated in this agreement.
(i) The corporate financial records, minute books, and other documents
and records of Micro have been made available to McHenry prior to the Closing.
(j) Micro has not breached, nor is there any pending, or to the
knowledge of management, any threatened claim that Micro has breached, any of
the terms or conditions of any agreements, contracts or commitments to which
it is a party or by which it or its properties is bound. The execution and
performance hereof will not violate any provisions of applicable law or any
agreement to which Micro is subject. Micro hereby represents that it is not a
party to any material contract or commitment other than appointment documents
with its transfer agent, and that it has disclosed to McHenry all
relationships or dealings with related parties or affiliates.
(k) Micro common stock is eligible for quotation on the NASD Electronic
Bulletin Board and there are no stop orders in effect with respect thereto.
(l) All information regarding Micro which has been provided to McHenry
in the Micro Corporate Information Statement dated January 2, 1997 or
otherwise disclosed to the public in connection with the transactions
contemplated herein, is true, complete and accurate in all material respects.
Micro and Schneider make no representations or warranties regarding
disclosures as to McHenry or its proposed business.
11. Closing. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing shall be no later than April 15, 1997,
unless extended by mutual consent of all parties hereto. The "Closing Date"
of the transactions described herein (the "Acquisition"), shall be that date
on which all conditions set forth herein have been met and the Micro Shares
are issued in exchange for the McHenry Common Stock.
12. Conditions Precedent to the Obligations of McHenry. All
obligations of McHenry under this Agreement are subject to the fulfillment,
prior to or as of the Closing and/or the Closing Date, as indicated below, of
each of the following conditions:
(a) The representations and warranties by or on behalf of Schneider and
Micro contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at
and as of the Closing and Closing Date as though such representations and
warranties were made at and as of such time.
(b) Micro shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and delivered
all documents required by this Agreement to be performed or complied with or
executed and delivered by it prior to or at the Closing.
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(c) On or before the Closing, the board of directors and shareholders
representing a majority interest, of Micro shall have approved in accordance
with applicable state corporation law the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein.
(d) On or before the Closing Date, Micro shall have delivered to
McHenry certified copies of resolutions of the board of directors and
shareholders of Micro approving and authorizing the execution, delivery and
performance of this Agreement and authorizing all of the necessary and proper
action to enable Micro to comply with the terms of this Agreement including
the election of McHenry's nominees to the Board of Directors of Micro and all
matters outlined herein.
(e) The Acquisition shall be permitted by applicable state law and
Micro shall have sufficient shares of its capital stock authorized to complete
the Acquisition.
(f) At Closing, the existing officers and directors of Micro shall have
resigned in writing from all positions as directors and officers of Micro upon
the election and appointment of the McHenry nominees.
(g) At the Closing, all instruments and documents delivered to McHenry
and McHenry Stockholders pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for McHenry.
(h) The shares of restricted Micro capital stock to be issued to
McHenry Stockholders at Closing will be validly issued, nonassessable and
fully-paid under Nevada corporation law and will be issued in a nonpublic
offering and isolated transaction in compliance with all federal, state and
applicable securities laws.
(i) McHenry shall have received the advice of its tax advisor, if
deemed necessary by McHenry, that the exchange of shares is a tax free
reorganization as to the exchanging McHenry shareholders.
(j) McHenry shall have received all necessary and required approvals
and consents from required parties and its shareholders.
(k) At the Closing, Micro shall have delivered to McHenry an opinion of
its counsel dated as of the Closing to the effect that:
(i) Micro is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation;
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(ii) This Agreement has been duly authorized, executed and
delivered by Micro and is a valid and binding obligation of Micro
enforceable in accordance with its terms;
(iii) Micro each through its board of directors and stockholders
has taken all corporate action necessary for performance under this
Agreement;
(iv) The documents executed and delivered by Micro to McHenry and
McHenry Stockholders hereunder are valid and binding in accordance with
their terms and vest in McHenry Stockholders, as the case may be, all
right, title and interest in and to the Micro Shares to be issued
pursuant to the terms hereof, and the Micro Shares when issued will be
duly and validly issued, fully-paid and nonassessable;
(v) Micro has the corporate power to execute, deliver and perform
under this Agreement;
(vi) Legal counsel for Micro is not aware of any liabilities,
claims or lawsuits involving Micro;
13. Conditions Precedent to the Obligations of Micro. All obligations
of Micro under this Agreement are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions:
(a) The representations and warranties by McHenry contained in this
Agreement or in any certificate or document delivered pursuant to the
provisions hereof shall be true in all material respects at and as of the
Closing as though such representations and warranties were made at and as of
such time.
(b) McHenry shall have performed and complied with, in all material
respects, all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing;
(c) McHenry shall deliver on behalf of the McHenry Stockholders a
letter commonly known as an "Investment Letter," signed by each of said
shareholders, in substantially the form attached hereto as Exhibit "D",
acknowledging that the Micro Shares are being acquired for investment
purposes.
(d) McHenry shall have delivered the McHenry Financial Statements
demonstrating a net worth of at least $500,000.
(e) McHenry shall deliver an opinion of its legal counsel to the effect
that:
(i) McHenry is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and is
duly qualified to do business in any jurisdiction where so required
except where the failure to so qualify would have no material adverse
impact on McHenry;
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(ii) This Agreement has been duly authorized, executed and
delivered by McHenry.
(iii) The documents executed and delivered by McHenry and McHenry
Stockholders to Micro hereunder are valid and binding in accordance with
their terms and vest in Micro all right, title and interest in and to
the McHenry Common Stock, which stock is duly and validly issued, fully-
paid and nonassessable.
14. Indemnification. For a period of one year from the Closing, Micro
and Schneider agree to jointly and severally indemnify and hold harmless
McHenry, and McHenry agrees to indemnify and hold harmless Micro and
Schneider, at all times after the date of this Agreement against and in
respect of any liability, damage or deficiency, all actions, suits,
proceedings, demands, assessments, judgments, costs and expenses including
attorney's fees incident to any of the foregoing, resulting from any material
misrepresentations made by an indemnifying party to an indemnified party, an
indemnifying party's breach of covenant or warranty or an indemnifying party's
nonfulfillment of any agreement hereunder, or from any material
misrepresentation in or omission from any certificate furnished or to be
furnished hereunder.
15. Nature and Survival of Representations. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for one
year from the Closing. All of the parties hereto are executing and carrying
out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement and not upon any investigation upon which it might have made or any
representation, warranty, agreement, promise or information, written or oral,
made by the other party or any other person other than as specifically set
forth herein.
16. Documents at Closing. At the Closing, the following documents
shall be delivered:
(a) McHenry will deliver, or will cause to be delivered, to Micro the
following:
(i) a certificate executed by the President and Secretary of
McHenry to the effect that all representations and warranties made by
McHenry under this Agreement are true and correct as of the Closing, the
same as though originally given to Micro on said date;
(ii) a certificate from the state of incorporation of McHenry
dated at or about the Closing to the effect that McHenry is in good
standing under the laws of said state;
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(iii) Investment Letters in the form attached hereto as Exhibit
"D" executed by each McHenry Stockholder;
(iv) such other instruments, documents and certificates, if any,
as are required to be delivered pursuant to the provisions of this
Agreement;
(v) certified copies of resolutions adopted by the shareholders
and directors of McHenry authorizing this transaction; and
(vi) all other items, the delivery of which is a condition
precedent to the obligations of Micro as set forth herein.
(vii) the legal opinion required by Section 15(d) hereof.
(b) Micro will deliver or cause to be delivered to McHenry:
(i) stock certificates representing the Micro Shares to be issued
as a part of the stock exchange as described herein;
(ii) a certificate of the President of Micro, to the effect that
all representations and warranties of Micro made under this Agreement
are true and correct as of the Closing, the same as though originally
given to McHenry on said date;
(iii) certified copies of resolutions adopted by Micro's board of
directors and Micro's Stockholders authorizing the Acquisition and all
related matters;
(iv) certificate from the jurisdiction of incorporation of Micro
dated at or about the Closing Date that Micro is in good standing under
the laws of said state;
(v) opinion of Micro's counsel as described in Section 14(k)
above;
(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of all of the existing officers and directors
of Micro; and
(viii) all other items, the delivery of which is a condition
precedent to the obligations of McHenry, as set forth in Section 14
hereof.
17. Finder's Fees. Micro, represents and warrants to McHenry, and
McHenry represents and warrants to Micro that neither of them, or any party
acting on their behalf, has incurred any liabilities, either express or
implied, to any "broker" of "finder" or similar person in connection with this
Agreement or any of the transactions contemplated hereby. In this regard,
Micro, on the one hand, and McHenry on the other hand, will indemnify and hold
the other harmless from any claim, loss, cost or expense whatsoever (including
reasonable fees and disbursements of counsel) from or relating to any such
express or implied liability.
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18. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with
any of its
obligations, agreements or conditions hereunder may be waived in writing by
the party to whom such compliance is owed.
(c) Termination. All obligations hereunder may be terminated at the
discretion of either party's board of directors if (i) the closing conditions
specified in Sections 14 and 15 are not met by April 15, 1997, unless
extended, or (ii) any of the representations and warranties made herein have
been materially breached.
(d) Amendment. This Agreement may be amended only in writing as agreed
to by all parties hereto.
(e) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or
sent by prepaid first class registered or certified mail, return receipt
requested.
(f) Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(h) Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
constitute the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) Time. Time is of the essence.
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(k) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
(l) Responsibility and Costs. All fees, expenses and out-of-pocket
costs and expenses, including, without limitation, fees and disbursements of
counsel, advisors and accountants, incurred by the parties hereto shall be
borne solely and entirely by the party that has incurred such costs and
expenses.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MICRO-ASI INTERNATIONAL, INC.
By: /s/ David K. Chambers By: /s/ Mark N. Schneider
David K. Chambers, Secretary Mark N. Schneider, President
/s/ Mark N. Schneider
Mark N. Schneider, individually
McHENRY METALS, INC.
By: /s/ John V. Stanley By: /s/ Gary V. Adams
John V. Stanley, Secretary Gary V. Adams, President
SHAREHOLDERS OF McHENRY METALS, INC.
/s/ Gary V. Adams
Gary V. Adams
/s/ Sal Lupo
Sal Lupo
/s/ Theodore Aroney
Theodore Aroney
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<PAGE>
CERTIFICATE OF INCORPORATION
OF
SYMPHONY VENTURES, INC.
ARTICLE I
NAME
The name of the corporation (the "Corporation") shall be:
Symphony Ventures, Inc.
ARTICLE II
DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES
The purposes for which the Corporation is organized are:
To seek, investigate, acquire interests in, and dispose of business
opportunities, ventures, and assets; to own and operate any lawful enterprise
whatsoever; to acquire, hold, and dispose of real or personal properties of
any kind or nature whether tangible or intangible; and generally to do or
perform any act necessary or desirable in connection with the foregoing;
To acquire by purchase or otherwise, own, hold, lease, rent, mortgage,
or otherwise trade with and deal in real estate, lands, and interests in lands
and all other property of every kind and nature;
To borrow money and to execute notes and obligations and security
contracts therefore, and to lend any of the monies or funds of the Corporation
and to take evidence of indebtedness therefore; to carry on a general
mercantile business and to purchase, sell, and deal in such goods and
supplies, and merchandise as are necessary or desirable in connection
therewith;
To do all and everything necessary, suitable, convenient, or proper for
the accomplishment of any of the purposes or the attainment of any one or more
of the objects herein enumerated or incidental to the powers herein named or
which shall at any time appear conducive or expedient for the protection or
benefit of the Corporation, with all the powers hereafter conferred by the
laws under which this Corporation is organized; and
<PAGE>
To engage in any and all other lawful purposes, activities, and
pursuits, whether similar or dissimilar to the foregoing, for which
corporations may be organized under the Nevada Revised Statutes and to
exercise all powers allowed or permitted thereunder.
ARTICLE IV
AUTHORIZED SHARES
The Corporation shall have authority to issue an aggregate of 50,500,000
shares, of which 500,000 shares shall be preferred stock, par value $0.001
(the "Preferred Stock"), and 50,000,000 shares shall be common stock, par
value $0.001 (the "Common Stock"). The powers, preferences, and rights, and
the qualifications, limitations, or restrictions of the shares of stock of
each class and series which the Corporation shall be authorized to issue, are
as follows:
(a) Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more series as may from time to time be determined by
the board of directors. Each series shall be distinctly designated. All
shares of any one series of the Preferred Stock shall be alike in every
particular, except that there may be different dates from which dividends
thereon, if any, shall be cumulative, if made cumulative. The powers,
preferences, participating, optional, and other rights of each such series and
the qualifications, limitations, or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. Except as
hereinafter provided, the board of directors of this Corporation is hereby
expressly granted authority to fix by resolution or resolutions adopted prior
to the issuance of any shares of each particular series of Preferred Stock,
the designation, powers, preferences, and relative participating, optional,
and other rights and the qualifications, limitations, and restrictions
thereof, if any, of such series, including, without limiting the generality of
the foregoing, the following:
(i) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute each series, which number may be
increased (except as otherwise fixed by the board of directors) or
decreased (but not below the number of shares thereof outstanding) from
time to time by action of the board of directors;
(ii) The rate and times at which, and the terms and conditions on
which, dividends, if any, on the shares of the series shall be paid; the
extent of preferences or relation, if any, of such dividends to the
dividends payable on any other class or classes of stock of this
Corporation or on any series of Preferred Stock and whether such
dividends shall be cumulative or noncumulative;
(iii) The right, if any, of the holders of the shares of the same
series to convert the same into, or exchange the same for, any other
class or classes of stock of this Corporation and the terms and
conditions of such conversion or exchange;
(iv) Whether shares of the series shall be subject to redemption
and the redemption price or prices, including, without limitation, a
redemption price or prices payable in shares of any other class or
classes of stock of the Corporation, cash, or other property and the
time or times at which, and the terms and conditions on which, shares of
the series may be redeemed;
2
<PAGE>
(v) The rights, if any, of the holders of shares of the series on
voluntary or involuntary liquidation, merger, consolidation,
distribution, or sale of assets, dissolution, or winding up of this
Corporation;
(vi) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
(vii) The voting powers, if any, of the holders of shares of the
series which may, without limiting the generality of the foregoing,
include (A) the right to more or less than one vote per share on any or
all matters voted on by the shareholders, and (B) the right to vote as a
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, on such matters,
under such circumstances, and on such conditions as the board of
directors may fix, including, without limitation, the right, voting as a
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, to elect one or
more directors of this Corporation in the event there shall have been a
default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and upon such
conditions as the board of directors may determine.
(b) Common Stock. The Common Stock shall have the following powers,
preferences, rights, qualifications, limitations, and restrictions:
(i) After the requirements with respect to preferential dividends
of Preferred Stock, if any, shall have been met and after this
Corporation shall comply with all the requirements, if any, with respect
to the setting aside of funds as sinking funds or redemption or purchase
accounts and subject further to any other conditions which may be
required by the Nevada Revised Statutes, then, but not otherwise, the
holders of Common Stock shall be entitled to receive such dividends, if
any, as may be declared from time to time by the board of directors
without distinction as to series;
(ii) After distribution in full of any preferential amount to be
distributed to the holders of Preferred Stock, if any, in the event of a
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution, or winding up of this Corporation, the holders of the
Common Stock shall be entitled to receive all of the remaining assets of
the Corporation, tangible and intangible, of whatever kind available for
distribution to stockholders, ratably in proportion to the number of
shares of Common Stock held by each without distinction as to series;
and
(iii) Except as may otherwise be required by law or this
Certificate of Incorporation, in all matters as to which the vote or
consent of stockholders of the Corporation shall be required or be
taken, including any vote to amend this Certificate of Incorporation, to
increase or decrease the par value of any class of stock, effect a stock
split or combination of shares, or alter or change the powers,
preferences, or special rights of any class or series of stock, the
holders of the Common Stock shall have one vote per share of Common
Stock on all such matters and shall not have the right to cumulate their
votes for any purpose.
3
<PAGE>
(c) Other Provisions.
(i) The board of directors of the Corporation shall have
authority to authorize the issuance, from time to time without any vote
or other action by the stockholders, of any or all shares of the
Corporation of any class at any time authorized, and any securities
convertible into or exchangeable for such shares, in each case to such
persons and for such consideration and on such terms as the board of
directors from time to time in its discretion lawfully may determine;
provided, however, that the consideration for the issuance of shares of
stock of the Corporation having par value shall not be less than such
par value. Shares so issued, for which the full consideration
determined by the board of directors has been paid to the Corporation,
shall be fully paid stock, and the holders of such stock shall not be
liable for any further call or assessments thereon.
(ii) Unless otherwise provided in the resolution of the board of
directors providing for the issue of any series of Preferred Stock, no
holder of shares of any class of the Corporation or of any security or
obligation convertible into, or of any warrant, option, or right to
purchase, subscribe for, or otherwise acquire, shares of any class of
the Corporation, whether now or hereafter authorized, shall, as such
holder, have any preemptive right whatsoever to purchase, subscribe for,
or otherwise acquire shares of any class of the Corporation, whether now
or hereafter authorized.
(iii) Anything herein contained to the contrary notwithstanding,
any and all right, title, interest, and claim in and to any dividends
declared or other distributions made by the Corporation, whether in
cash, stock, or otherwise, which are unclaimed by the stockholder
entitled thereto for a period of six years after the close of business
on the payment date, shall be and be deemed to be extinguished and
abandoned; and such unclaimed dividends or other distributions in the
possession of the Corporation, its transfer agents, or other agents or
depositories, shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any person
whatsoever.
ARTICLE V
LIMITATION ON LIABILITY
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (b) the
payment of distributions in violation of section 78.300 of the Nevada Revised
Statutes.
ARTICLE VI
ELECTION NOT TO BE GOVERNED BY NRS 78.378 TO 78.3793
The Corporation elects not to be governed by the provisions of sections
78.378 to 78.3793, inclusive, of the Nevada Revised Statutes regarding control
share acquisitions.
4
<PAGE>
ARTICLE VII
ELECTION NOT TO BE GOVERNED BY NRS 78.411 TO 78.444
The Corporation elects not to be governed by the provisions of sections
78.411 to 78.444, inclusive, of the Nevada Revised Statutes regarding
combinations with interested shareholders.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that such person is or was a director or officer of the
Corporation, or who is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with the action, suit or proceeding, to the full extent
permitted by the Nevada Revised Statutes as such statutes may be amended from
time to time.
ARTICLE IX
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the state of
Nevada is 50 West Liberty Street, Suite 880, Reno, Nevada 89501, and the name
of the Corporation's registered agent for service of process is Nevada Agency
and Trust. Either the registered office or the registered agent may be
changed in the manner provided by law.
ARTICLE X
AMENDMENT
The Corporation reserves the right to amend, alter, change, or repeal
all or any portion of the provisions contained in its Certificate of
Incorporation from time to time in accordance with the laws of the state of
Nevada, and all rights conferred on stockholders herein are granted subject to
this reservation.
ARTICLE XI
ADOPTION AND AMENDMENT OF BYLAWS
The initial bylaws of the Corporation shall be adopted by the board of
directors. The power to alter, amend, or repeal the bylaws or adopt new
bylaws shall be vested in the board of directors,
5
<PAGE>
but the stockholders of the Corporation may also alter, amend, or repeal the
bylaws or adopt new bylaws. The bylaws may contain any provisions for the
regulation or management of the affairs of the Corporation not inconsistent
with the laws of the state of Nevada now or hereafter existing.
ARTICLE XII
DIRECTORS
The governing board of the Corporation shall be known as the board of
directors. The number of directors comprising the board of directors shall be
not less than one (1) nor more than nine (9) as determined from time to time
in the manner provided in the bylaws of the Corporation. The original board
of directors shall consist of two persons. The names and addresses of the
persons who are to serve as directors until the first annual meeting of
stockholders and until their respective successors are elected and qualified
are as follows:
Name Address
Mark N. Schneider 455 South 300 East, Suite 350
Salt Lake City, Utah 84105
David K. Chambers 8726 North Gorgoza
Park City, Utah 84060
ARTICLE XIII
INCORPORATOR
The name and mailing address of the sole incorporator signing this
certificate of incorporation is as follows:
Name Address
Mark N. Schneider 455 South 300 East, Suite 350
Salt Lake City, Utah 84111
The undersigned, being the sole incorporator named above, for the
purpose of forming a corporation pursuant to the Nevada Revised Statutes,
makes this certificate, hereby declaring and certifying that it is his act and
deed and that the facts herein stated are true, and accordingly has hereunto
set his hand this _____ day of March, 1994.
__________________________________
Mark N. Schneider
6
<PAGE>
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
I, a notary public, hereby certify that on the _____ day of March, 1994,
personally appeared before me Mark N. Schneider, who being by me first duly
sworn, declared that he signed the instrument as his own act and deed and that
the facts stated therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
__________________________________
Notary Public
7
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF
SYMPHONY VENTURES, INC.
Pursuant to section 78.390 of the Nevada Revised Statutes, Symphony
Ventures, Inc., hereinafter referred to as the "Corporation," hereby adopts
the following amendment to its Articles of Incorporation.
1. The Articles of Incorporation of the Corporation are hereby
amended by deleting Article I thereof in its entirety and inserting the
following in lieu thereof:
ARTICLE I
NAME
The name of the corporation (the "Corporation") shall be:
Micro-ASI International, Inc.
2. The Articles of Incorporation of the Corporation are hereby
amended by deleting the first paragraph of Article IV thereof and substituting
the following therefor:
ARTICLE IV
AUTHORIZED SHARES
The Corporation shall have authority to issue an aggregate of
55,000,000 shares, of which 5,000,000 shares shall be preferred stock,
par value $0.001 (the "Preferred Stock"), and 50,000,000 shares shall be
common stock, par value $0.001 (the "Common Stock"). The powers,
preferences, and rights, and the qualifications, limitations, or
restrictions of the shares of stock of each class and series which the
Corporation shall be authorized to issue, are as follows:
[Continue with subparagraph (a) of original Article IV]
3. At the effective time of this Amendment, the Corporation shall
effect a reverse split in its issued and outstanding shares of Common Stock so
that the 5,777,702 shares currently issued and outstanding shall be reverse
split, or consolidated, on a 1-for-10 basis, and stockholders shall receive
one share of the Corporation's post-split Common Stock (hereinafter the
"Consolidated Common Stock"), for each 10 shares of Common Stock, $0.001 par
value, held by them on the effective date of the reverse split. No scrip or
fractional shares will be issued in connection with the reverse split and any
fractional interests will be rounded to the nearest whole share. The reverse
split will not result in any
<PAGE>
modification of the rights of shareholders, and will have no effect on the
shareholders' equity in the Corporation. All shares returned to the
Corporation as a result of the reverse split will be canceled and returned to
the status of authorized and unissued shares.
4. Except as specifically provided herein, the Corporation's Articles
of Incorporation shall remain unamended and shall continue in full force and
effect.
5. By execution hereof, the president and secretary of the
Corporation do hereby certify that this Amendment to Certificate of
Incorporation was duly authorized and adopted by the shareholders of the
Corporation at special meeting held September 3, 1996, at which a total of
5,098,965 shares of the Corporation's 5,777,702 issued and outstanding shares
of common stock were represented in person or by proxy and of which 5,095,425
shares, or 88.2%, were voted in favor of this Amendment, 3,540 shares, or .06%
were voted against this Amendment, and 0 shares, or 0 %, abstained from
voting.
DATED the 3rd day of September, 1996.
Symphony Ventures, Inc.
By__________________________________
Mark N. Schneider, President
By__________________________________
David K. Chambers, Secretary
<PAGE>
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On this 3rd day of September, 1996, personally appeared before me Mark
N. Schneider and David K. Chambers, who being by me duly sworn did say that
they are the president and secretary, respectively, of Symphony Ventures,
Inc., a Nevada corporation, that they are the persons who executed the
foregoing Certificate of Amendment to Articles of Incorporation on behalf of
said corporation by authority of resolutions of a majority of its
shareholders, and each duly acknowledged to me that said corporation executed
the same.
___________________________________
Notary Public
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MICRO-ASI INTERNATIONAL, INC.
Pursuant to the applicable provisions of the Nevada Business
Corporations Act, Micro-ASI International, Inc. (the
"Corporation") adopts the following Articles of Amendment to its
Articles of Incorporation by stating the following:
FIRST: The present name of the Corporation is Micro-ASI
International, Inc.
SECOND: The following amendment to its Articles of
Incorporation was adopted by majority consent of shareholders of
the Corporation in the manner prescribed by applicable law.
The Article entitled ARTICLE I - NAME, is amended to read as
follows:
ARTICLE I - NAME
The name of the corporation (the "Corporation") shall be:
McHenry Metals Golf Corp.
THIRD: The Corporation has effectuated a 2.2 for 1 forward
stock split as to its shares of common stock outstanding as of
March 31, 1997, which increases the outstanding shares as of that
date from 577,770 shares to 1,271,094 shares. The forward split
shall not change the authorized capital stock of the Corporation.
FOURTH: The number of shares of the Corporation outstanding
and entitled to vote at the time of the adoption of said
amendment was 577,770.
FIFTH: The number of shares voted for such amendments was
402,990 (69.7%) and no shares were voted against such amendment.
DATED this day of March, 1997.
MICRO-ASI INTERNATIONAL, INC.
By:
Mark N. Schneider, President
By:
David K. Chambers, Secretary
<PAGE>
VERIFICATION
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states:
that the undersigned is the President of Micro-ASI International,
Inc., that the undersigned has read the Certificate of Amendment
and knows the contents thereof and that the same contains a
truthful statement of the Amendment duly adopted by the board of
directors and stockholders of the Corporation.
Mark N. Schneider, President
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said
County and State, personally appeared the President and Secretary
of Micro-ASI International, Inc., a Nevada corporation, and
signed the foregoing Articles of Amendment as their own free and
voluntary acts and deeds pursuant to a corporate resolution for
the uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this
day of March, 1997.
NOTARY PUBLIC
Notary Seal:
BYLAWS
OF
MCHENRY METALS GOLF CORP.
A NEVADA CORPORATION
<PAGE>
T A B L E O F C O N T E N T S
Page
ARTICLE I OFFICES
Section 1.01 Registered Office
............................................................ 1
Section 1.02 Locations of Offices
............................................................ 1
ARTICLE II SHAREHOLDERS
Section 2.01 Annual Meeting
............................................................ 1
Section 2.02 Special Meetings
............................................................ 1
Section 2.03 Place of Meetings
............................................................ 1
Section 2.04 Notice of Meetings
............................................................ 1
Section 2.05 Waiver of Notice
............................................................ 2
Section 2.06 Fixing Record Date
............................................................ 2
Section 2.07 Voting Lists
............................................................ 2
Section 2.08 Quorum
............................................................ 2
Section 2.09 Vote Required
............................................................ 2
Section 2.10 Voting of Stock
............................................................ 3
Section 2.11 Proxies
............................................................ 3
Section 2.12 Written Consent to Action
by Stockholders
............................................................ 3
ARTICLE III DIRECTORS
Section 3.01 Number, Term, and Qualifications
............................................................ 3
Section 3.02 Vacancies and Newly
Created Directorships
............................................................ 3
Section 3.03 General Powers
............................................................ 3
Section 3.04 Regular Meetings
............................................................ 4
Section 3.05 Special Meetings
............................................................ 4
Section 3.06 Meetings by Telephone Conference Call
............................................................ 4
Section 3.07 Notice
............................................................ 4
Section 3.08 Quorum
............................................................ 4
Section 3.09 Manner of Acting
............................................................ 4
Section 3.10 Compensation
............................................................ 4
Section 3.11 Presumption of Assent
............................................................ 4
Section 3.12 Resignations
............................................................ 4
Section 3.13 Written Consent to Action by Directors
............................................................ 5
Section 3.14 Removal
............................................................ 5
ii
<PAGE>
ARTICLE IV OFFICERS
Section 4.01 Number
............................................................ 5
Section 4.02 Election, Term of Office,
and Qualifications
............................................................ 5
Section 4.03 Subordinate Officers, Etc.
............................................................ 5
Section 4.04 Resignations
............................................................ 5
Section 4.05 Removal
............................................................ 5
Section 4.06 Vacancies and Newly
Created Offices
............................................................ 5
Section 4.07 The Chairman of the Board
............................................................ 5
Section 4.08 The President
............................................................ 6
Section 4.09 The Vice Presidents
............................................................ 6
Section 4.10 The Secretary
............................................................ 6
Section 4.11 The Treasurer
............................................................ 7
Section 4.12 General Manager
............................................................ 7
Section 4.13 Salaries
............................................................ 8
Section 4.14 Surety Bonds
............................................................ 8
ARTICLE V EXECUTION OF INSTRUMENTS, BORROWING OF
MONEY, AND DEPOSIT OF CORPORATE FUNDS
Section 5.01 Execution of Instruments
............................................................ 8
Section 5.02 Loans
............................................................ 8
Section 5.03 Deposits
............................................................ 8
Section 5.04 Checks, Drafts, Etc.
............................................................ 8
Section 5.05 Bonds and Debentures
............................................................ 9
Section 5.06 Sale, Transfer, Etc. of Securities
............................................................ 9
Section 5.07 Proxies
............................................................ 9
ARTICLE VI CAPITAL SHARES
Section 6.01 Stock Certificates
............................................................ 9
Section 6.02 Transfer of Stock
............................................................ 9
Section 6.03 Regulations
............................................................ 10
Section 6.04 Maintenance of Stock Ledger
at Principal Place of Business
............................................................ 10
Section 6.05 Transfer Agents and Registrars
............................................................ 10
Section 6.06 Closing of Transfer Books and
Fixing of Record Date
............................................................ 10
Section 6.07 Lost or Destroyed Certificates
............................................................ 10
iii
<PAGE>
ARTICLE VII EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 7.01 How Constituted
............................................................ 11
Section 7.02 Powers
............................................................ 11
Section 7.03 Proceedings
............................................................ 11
Section 7.04 Quorum and Manner of Acting
............................................................ 11
Section 7.05 Resignations
............................................................ 11
Section 7.06 Removal
............................................................ 11
Section 7.07 Vacancies
............................................................ 11
Section 7.08 Compensation
............................................................ 11
ARTICLE VIII INDEMNIFICATION, INSURANCE, AND OFFICER AND DIRECTOR CONTRACTS
Section 8.01 Indemnification: Third Party Actions
............................................................ 12
Section 8.02 Indemnification: Corporate Actions
............................................................ 12
Section 8.03 Determination
............................................................ 12
Section 8.04 Advances
............................................................ 12
Section 8.05 Scope of Indemnification
............................................................ 13
Section 8.06 Insurance
............................................................ 13
Section 8.07 Officer and Director Contracts
............................................................ 13
ARTICLE IX FISCAL YEAR
............................................................ 13
ARTICLE X DIVIDENDS
............................................................ 13
ARTICLE XI AMENDMENTS
............................................................ 14
CERTIFICATE OF SECRETARY
............................................................ 14
iv
<PAGE>
RESTATED
BYLAWS
OF
MCHENRY METALS GOLF CORP.
ARTICLE I
OFFICES
Section 1.01 Registered Office. The registered office shall be in the
city of Reno, state of Nevada.
Section 1.02 Locations of Offices. The corporation may also have
offices at such other places both within and without the state of Nevada as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
SHAREHOLDERS
Section 2.01 Annual Meeting. The annual meeting of the stockholders
shall be held at such time and at such date between 90 and 180 days after the
end of the corporation's fiscal year as the board of directors may designate
and provide for in the notice of the meeting. If the election of directors
shall not be held on the day designated herein for the annual meeting of the
stockholders, or at any adjournment thereof, the board of directors shall
cause the election to be held at a special meeting of the stockholders as soon
thereafter as may be convenient.
Section 2.02 Special Meetings. Special meetings of the stockholders
may be called at any time by the board of directors.
Section 2.03 Place of Meetings. The board of directors may designate
any place, either within or without the state of incorporation, as the place
of meeting for any annual meeting or for any special meeting called by the
board of directors. A waiver of notice signed by all stockholders entitled to
vote at a meeting may designate any place, either within or without the state
of incorporation, as the place for the holding of such meeting. If no
designation is made, the place of meeting shall be at the principal office of
the corporation.
Section 2.04 Notice of Meetings. The secretary or assistant secre
tary, if any, shall cause notice of the time, place, and purpose or purposes
of all meetings of the stockholders (whether annual or special), to be mailed
at least ten days, but not more than 50 days, prior to the meeting, to each
stockholder of record entitled to vote.
1
<PAGE>
Section 2.05 Waiver of Notice. Any stockholder may waive notice of
any meeting of stockholders (however called or noticed, whether or not called
or noticed and whether before, during, or after the meeting), signing a
written waiver of notice or a consent to the holding of such meeting, or an
approval of the minutes thereof. Attendance at a meeting, in person or by
proxy, shall constitute waiver of all defects of notice regardless of whether
waiver, consent, or approval is signed or any objections are made, unless
attendance is solely for the purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. All such waivers, consents, or approvals shall
be made a part of the minutes of the meeting.
Section 2.06 Fixing Record Date. For the purpose of determining
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 stockholder entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect to any change, conversion, or exchange of
stock, or for the purpose of any other lawful action, the board of directors
may fix in advance a date as the record date for any such determination of
stockholders, such date in any case to be not more than 50 days and, in case
of a meeting of stockholders, not less than 10 days prior to the date on which
the particular action requiring such determination of stockholders is to be
taken. If no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting, the day preceding the date on
which notice of the meeting is mailed shall be the record date. For any other
purpose, the record date shall be the close of business on the date on which
the resolution of the board of directors pertaining thereto is adopted. When
a determination of stockholders entitled to vote at any meeting of stockhold
ers has been made as provided in this section, such determination shall apply
to any adjournment thereof. Failure to comply with this section shall not
affect the validity of any action taken at a meeting of stockholders.
Section 2.07 Voting Lists. The officers of the corporation shall
cause to be prepared from the stock ledger, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at such meeting or any adjournment thereof, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares regis
tered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. The
original stock ledger shall be prima facie evidence as to who are the stock
holders entitled to examine the stock ledger, the list required by this
section, or the books of the corporation, or to vote in person or by proxy at
any meeting of stockholders.
Section 2.08 Quorum. Stock representing a majority of the voting
power of all outstanding stock of the corporation entitled to vote, present in
person or represented by proxy, shall constitute a quorum at a meeting of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the articles of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the stock
holders entitled to vote thereat, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 2.09 Vote Required. When a quorum is present at a meeting,
the vote of the holders of stock having a majority of the voting power present
in person or represented by proxy shall decide all questions brought before
such meeting, unless a question is one on which, by express provision of the
2
<PAGE>
statutes of the state of Nevada or of the articles of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.10 Voting of Stock. Unless otherwise provided in the
articles of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
the voting capital stock held by such stockholder, subject to the modification
of such voting rights of any class or classes of the corporation's capital
stock by the articles of incorporation.
Section 2.11 Proxies. At each meeting of the stockholders, each
stockholder entitled to vote shall be entitled to vote in person or by proxy;
provided, however, that the right to vote by proxy shall exist only in case
the instrument authorizing such proxy to act shall have been executed in
writing by the registered holder or holders of such stock, as the case may be,
as shown on the stock ledger of the corporation or by his attorney thereunto
duly authorized in writing. Such instrument authorizing a proxy to act shall
be delivered at the beginning of such meeting to the secretary of the corpora
tion or to such other officer or person who may, in the absence of the
secretary, be acting as secretary of the meeting. In the event that any such
instrument shall designate two or more persons to act as proxy, a majority of
such persons present at the meeting, or if only one be present, that one shall
(unless the instrument shall otherwise provide) have all of the powers
conferred by the instrument on all persons so designated. Persons holding
stock in a fiduciary capacity shall be entitled to vote the stock so held and
the persons whose shares are pledged shall be entitled to vote, unless the
transfer by the pledgor in the books and records of the corporation shall have
expressly empowered the pledgee to vote thereon, in which case the pledgee, or
his proxy, may represent such stock and vote thereon. No proxy shall be voted
or acted on after 6 months from its date, unless it is coupled with an
interest or the proxy provides for a longer period, which may not exceed 7
years from the date of the proxy.
Section 2.12 Written Consent to Action by Stockholders. Unless
otherwise provided in the articles of incorporation, any action required to be
taken at any annual or special meeting of stockholders of the corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of a majority of the outstanding stock entitled
to vote with respect to the subject matter thereof.
ARTICLE III
DIRECTORS
Section 3.01 Number, Term, and Qualifications. The number of direc
tors which shall constitute the whole board shall be not less than two nor
more than nine. Within the limits above specified, the number of directors
shall be determined by resolution of the board of directors or by the stock
holders at the annual meeting of the stockholders or a special meeting called
for such purpose, except as provided in section 3.02 of this article, and each
director elected shall hold office until his successor is elected and quali
fied. Directors need not be residents of the state of incorporation or
stockholders of the corporation.
Section 3.02 Vacancies and Newly Created Directorships. Vacancies and
newly created directorships resulting from any increase in the number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
Section 3.03 General Powers. The business of the corporation shall be
managed under the direction of its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are
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not by statute, by the articles of incorporation, or by these bylaws, directed
or required to be exercised or done by the stockholders.
Section 3.04 Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
following, and at the same place as, the annual meeting of stockholders. The
board of directors may provide by resolution the time and place, either within
or without the state of incorporation, for the holding of additional regular
meetings without other notice than such resolution.
Section 3.05 Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the board,
president, vice president, or any two directors. The person or persons
authorized to call special meetings of the board of directors may fix any
place, either within or without the state of incorporation, as the place for
holding any special meeting of the board of directors called by them.
Section 3.06 Meetings by Telephone Conference Call. Members of the
board of directors may participate in a meeting of the board of directors or a
committee of the board of directors by means of conference telephone or
similar communication equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this section shall constitute presence in person at such meeting.
Section 3.07 Notice. Notice of any special meeting shall be given at
least five days prior thereto by written notice delivered personally or mailed
to each director at his regular business address or residence, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice
of any meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
solely for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 3.08 Quorum. The presence of a majority of the directors
shall constitute a quorum for the transaction of business at any meeting of
the board of directors, but if less than a majority is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
Section 3.09 Manner of Acting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the
board of directors, and individual directors shall have no power as such.
Section 3.10 Compensation. By resolution of the board of directors,
the directors may be paid their expenses, if any, of attendance at each
meeting of the board of directors, and may be paid a fixed sum for attendance
at each meeting of the board of directors or a stated salary as director. No
such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
Section 3.11 Presumption of Assent. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting,
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof, or shall
forward such dissent by registered or certified mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 3.12 Resignations. A director may resign at any time by
delivering a written resignation to either the president, a vice president,
the secretary, or assistant secretary, if any. The resignation shall become
effective on its acceptance by the board of directors; provided, that if the
board has not acted thereon within ten days from the date presented, the
resignation shall be deemed accepted.
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Section 3.13 Written Consent to Action by Directors. Any action
required to be taken at a meeting of the directors of the corporation or any
other action which may be taken at a meeting of the directors or of a commit
tee, may be taken without a meeting, if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors, or all of the
members of the committee, as the case may be. Such consent shall have the
same legal effect as a unanimous vote of all the directors or members of the
committee.
Section 3.14 Removal. Any director may be removed from office by the
vote of stockholders representing not less than two-thirds of the voting power
of issued and outstanding stock entitled to voting power.
ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the corporation shall be a
president, a secretary, a treasurer, and such other officers as may be
appointed by the board of directors, including, a chairman of the board, one
or more vice presidents, an assistant secretary, an assistant treasurer, or a
general manager.
Section 4.02 Election, Term of Office, and Qualifications. The
officers shall be chosen by the board of directors annually at its annual
meeting. In the event of failure to choose officers at an annual meeting of
the board of directors, officers may be chosen at any regular or special
meeting of the board of directors. Each such officer (whether chosen at an
annual meeting of the board of directors to fill a vacancy or otherwise) shall
hold his office until the next ensuing annual meeting of the board of direc
tors and until his successor shall have been chosen and qualified, or until
his death, or until his resignation or removal in the manner provided in these
bylaws. Any one person may hold any two or more of such offices. No person
holding two or more offices shall act in or execute any instrument in the
capacity of more than one office. The chairman of the board, if any, shall be
and remain director of the corporation during the term of his office. No
other officer need be a director.
Section 4.03 Subordinate Officers, Etc. The board of directors from
time to time may appoint such other officers or agents as it may deem advis
able, each of whom shall have such title, hold office for such period, have
such authority, and perform such duties as the board of directors from time to
time may determine. The board of directors from time to time may delegate to
any officer or agent the power to appoint any such subordinate officer or
agents and to prescribe their respective titles, terms of office, authorities,
and duties. Subordinate officers need not be stockholders or directors.
Section 4.04 Resignations. Any officer may resign at any time by
delivering a written resignation to the board of directors, the president, or
the secretary. Unless otherwise specified therein, such resignation shall
take effect on delivery.
Section 4.05 Removal. Any officer may be removed from office at any
special meeting of the board of directors called for that purpose or at a
regular meeting, by the vote of a majority of the directors, with or without
cause. Any officer or agent appointed in accordance with the provisions of
section 4.03 hereof may also be removed, either with or without cause, by any
officer on whom such power of removal shall have been conferred by the board
of directors.
Section 4.06 Vacancies and Newly Created Offices. If any vacancy
shall occur in any office by reason of death, resignation, removal, disquali
fication, or any other cause, or if a new office shall be created, then such
vacancies or newly created offices may be filled by the board of directors at
any regular or special meeting.
Section 4.07 The Chairman of the Board. The chairman of the board, if
there be such an officer, shall have the following powers and duties:
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(a) He or she shall preside at all stockholders' meetings; and all
meetings of the board of directors;
(b) He or she shall be a member of the executive committee; and
(c) He shall be the Chief Executive Officer of the Corporation, and
subject to the direction of the Board of Directors or Executive Committee,
shall have general charge of the business, affairs, and property of the
Corporation.
Section 4.08 The President. The president shall have the following
powers and duties:
(a) He shall be the Chief Administrative officer of the Corporation,
and subject to the direction of the Chairman of the Board, shall have
general administrative charge of the business, affairs, and general
supervision over it's officers, employees, and agents;
(b) If the Chairman of the Board and the Vice Chairman of the Board
are absent or disabled, he shall preside at the meetings of the
stockholders and Board of Directors;
(c) He shall be a member of the executive committee;
(d) He shall have such additional powers and perform such duties as
from time to time may be assigned to him by the Chairman of the Board,
Board of Directors, or Executive Committee, and
(e) At the request of or in the absence or disability of the
Chairman of the Board, he shall perform all the duties of the Chairman of
the Board, and when so acting, shall have all of the powers of, and be
subject to all the restrictions upon the Chief Executive Officer.
Section 4.09 The Vice Presidents. The board of directors may, from
time to time, designate and elect one or more vice presidents, one of whom may
be designated to serve as executive vice president. Each vice president shall
have such powers and perform such duties as from time to time may be assigned
to him by the board of directors or the president. At the request of or in
the absence or disability of the president, the executive vice president or,
in the absence or disability of the executive vice president, the vice
president designated by the board of directors or (in the absence of such
designation by the board of directors) by the president, the senior vice
president, shall perform all the duties of the president, and when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
president.
Section 4.10 The Secretary. The secretary shall have the following
powers and duties:
(a) He or she shall keep or cause to be kept a record of all of
the proceedings of the meetings of the stockholders and of the board of
directors in books provided for that purpose;
(b) He or she shall cause all notices to be duly given in
accordance with the provisions of these bylaws and as required by
statute;
(c) He or she shall be the custodian of the records and of the
seal of the corporation, and shall cause such seal (or a facsimile
thereof) to be affixed to all certificates representing stock of the
corporation prior to the issuance thereof and to all instruments, the
execution of which on behalf of the corporation under its seal shall
have been duly authorized in accordance with these bylaws, and when so
affixed, he may attest the same;
(d) He or she shall assume that the books, reports, statements,
certificates, and other documents and records required by statute are
properly kept and filed;
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(e) He or she shall have charge of the stock ledger and books of
the corporation and cause such books to be kept in such manner as to
show at any time the amount of the stock of the corporation of each
class issued and outstanding, the manner in which and the time when such
stock was paid for, the names alphabetically arranged and the addresses
of the holders of record thereof, the amount of stock held by each
holder and time when each became such holder of record; and he shall
exhibit at all reasonable times to any director, on application, the
original or duplicate stock ledger. He or she shall cause the stock
ledger referred to in section 6.04 hereof to be kept and exhibited at
the principal office of the corporation, or at such other place as the
board of directors shall determine, in the manner and for the purpose
provided in such section;
(f) He or she shall be empowered to sign certificates repre-
senting stock of the corporation, the issuance of which shall have been
authorized by the board of directors; and
(g) He or she shall perform in general all duties incident to
the office of secretary and such other duties as are given to him by
these bylaws or as from time to time may be assigned to him by the board
of directors or the president.
Section 4.11 The Treasurer. The treasurer shall have the following
powers and duties:
(a) He or she shall have charge and supervision over and be
responsible for the monies, securities, receipts, and disbursements of
the corporation;
(b) He or she shall cause the monies and other valuable effects
of the corporation to be deposited in the name and to the credit of the
corporation in such banks or trust companies or with such banks or other
depositories as shall be selected in accordance with section 5.03
hereof;
(c) He or she shall cause the monies of the corporation to be
disbursed by checks or drafts (signed as provided in section 5.04
hereof) drawn on the authorized depositories of the corporation, and
cause to be taken and preserved property vouchers for all monies
disbursed;
(d) He or she shall render to the board of directors or the
president, whenever requested, a statement of the financial condition of
the corporation and of all of his transactions as treasurer, and render
a full financial report at the annual meeting of the stockholders, if
called upon to do so;
(e) He or she shall cause to be kept correct books of account of
all the business and transactions of the corporation and exhibit such
books to any directors on request during business hours;
(f) He or she shall be empowered from time to time to require
from all officers or agents of the corporation reports or statements
giving such information as he may desire with respect to any and all
financial transactions of the corporation; and
(g) He or she shall perform in general all duties incident to
the office of treasurer and such other duties as are given to him by
these bylaws or as from time to time may be assigned to him by the board
of directors or the president.
Section 4.12 General Manager. The board of directors may employ and
appoint a general manager who may, or may not, be one of the officers or
directors of the corporation.
The general manager, if any, shall have the following powers and duties:
(a) He or she shall be the chief executive officer of the
corporation and, subject to the directions of the board of directors,
shall have general charge of the business affairs and property of the
corporation and general supervision over its officers, employees, and
agents;
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(b) He or she shall be charged with the exclusive management of
the business of the corporation and of all of its dealings, but at all
times subject to the control of the board of directors;
(c) Subject to the approval of the board of directors or the
executive committee, if any, he shall employ all employees of the
corporation, or delegate such employment to subordinate officers, or
such division chiefs, and shall have authority to discharge any person
so employed; and
(d) He or she shall make a report to the president and directors
quarterly, or more often if required to do so, setting forth the results
of the operations under his charge, together with suggestions looking
toward improvement and betterment of the condition of the corporation,
and shall perform such other duties as the board of directors may
require.
Section 4.13 Salaries. The salaries and other compensation of the
officers of the corporation shall be fixed from time to time by the board of
directors, except that the board of directors may delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
section 4.03 hereof. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he is also a director of the
corporation.
Section 4.14 Surety Bonds. In case the board of directors shall so
require, any officer or agent of the corporation shall execute to the corpora
tion a bond in such sums and with such surety or sureties as the board of
directors may direct, conditioned on the faithful performance of his duties to
the corporation, including responsibility for negligence and for the account
ing of all property, monies, or securities of the corporation which may come
into his hands.
ARTICLE V
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
Section 5.01 Execution of Instruments. Subject to any limitation
contained in the articles of incorporation or these bylaws, the president or
any vice president or the general manager, if any, may, in the name and on
behalf of the corporation, execute and deliver any contract or other instru
ment authorized in writing by the board of directors. The board of directors
may, subject to any limitation contained in the articles of incorporation or
in these bylaws, authorize in writing any officer or agent to execute and
deliver any contract or other instrument in the name and on behalf of the
corporation. Any such authorization may be general or confined to specific
instances.
Section 5.02 Loans. No loan or advance shall be contracted on behalf
of the corporation, no negotiable paper or other evidence of its obligation
under any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred, or
conveyed as security for the payment of any loan, advance, indebtedness, or
liability of the corporation, unless and except as authorized by the board of
directors. Any such authorization may be general or confined to specific
instances.
Section 5.03 Deposits. All monies of the corporation not otherwise
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or other depositories as the board of
directors may select, or as from time to time may be selected by any officer
or agent authorized to do so by the board of directors.
Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances,
checks, endorsements, and, subject to the provisions of these bylaws, evi
dences of indebtedness of the corporation, shall be signed by such officer or
officers or such agent or agents of the corporation and in such manner as the
board of directors from time to time may determine. Endorsements for deposit
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to the credit of the corporation in any of its duly authorized depositories
shall be in such manner as the board of directors from time to time may
determine.
Section 5.05 Bonds and Debentures. Every bond or debenture issued by
the corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed
with the seal of the corporation. The seal may be a facsimile, engraved or
printed. Where such bond or debenture is authenticated with the manual
signature of an authorized officer of the corporation or other trustee
designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the corporation's officers named
thereon may be a facsimile. In case any officer who signed, or whose facsim
ile signature has been used on any such bond or debenture, should cease to be
an officer of the corporation for any reason before the same has been deliv
ered by the corporation, such bond or debenture may nevertheless be adopted by
the corporation and issued and delivered as through the person who signed it
or whose facsimile signature has been used thereon had not ceased to be such
officer.
Section 5.06 Sale, Transfer, Etc. of Securities. Sales, transfers,
endorsements, and assignments of stocks, bonds, and other securities owned by
or standing in the name of the corporation, and the execution and delivery on
behalf of the corporation of any and all instruments in writing incident to
any such sale, transfer, endorsement, or assignment, shall be effected by the
president, or by any vice president, together with the secretary, or by any
officer or agent thereunto authorized by the board of directors.
Section 5.07 Proxies. Proxies to vote with respect to stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any
vice president and the secretary or assistant secretary of the corporation, or
by any officer or agent thereunder authorized by the board of directors.
ARTICLE VI
CAPITAL SHARES
Section 6.01 Stock Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by the president
or any vice president and the secretary or assistant secretary, and sealed
with the seal (which may be a facsimile, engraved or printed) of the corpora
tion, certifying the number and kind, class or series of stock owned by him in
the corporation; provided, however, that where such a certificate is counter
signed by (a) a transfer agent or an assistant transfer agent, or (b) regis
tered by a registrar, the signature of any such president, vice president,
secretary, or assistant secretary may be a facsimile. In case any officer who
shall have signed, or whose facsimile signature or signatures shall have been
used on any such certificate, shall cease to be such officer of the corpora
tion, for any reason, before the delivery of such certificate by the corpora
tion, such certificate may nevertheless be adopted by the corporation and be
issued and delivered as though the person who signed it, or whose facsimile
signature or signatures shall have been used thereon, has not ceased to be
such officer. Certificates representing stock of the corporation shall be in
such form as provided by the statutes of the state of incorporation. There
shall be entered on the stock books of the corporation at the time of issuance
of each share, the number of the certificate issued, the name and address of
the person owning the stock represented thereby, the number and kind, class or
series of such stock, and the date of issuance thereof. Every certificate
exchanged or returned to the corporation shall be marked "Canceled" with the
date of cancellation.
Section 6.02 Transfer of Stock. Transfers of stock of the corporation
shall be made on the books of the corporation by the holder of record thereof,
or by his attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the secretary of the corporation or any of
its transfer agents, and on surrender of the certificate or certificates,
properly endorsed or accompanied by proper instruments of transfer, represent
ing such stock. Except as provided by law, the corporation and transfer
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agents and registrars, if any, shall be entitled to treat the holder of record
of any stock as the absolute owner thereof for all purposes, and accordingly
shall not be bound to recognize any legal, equitable, or other claim to or
interest in such stock on the part of any other person whether or not it or
they shall have express or other notice thereof.
Section 6.03 Regulations. Subject to the provisions of the articles
of incorporation, the board of directors may make such rules and regulations
as they may deem expedient concerning the issuance, transfer, redemption, and
registration of certificates for stock of the corporation.
Section 6.04 Maintenance of Stock Ledger at Principal Place of
Business. A stock ledger (or ledgers where more than one kind, class, or
series of stock is outstanding) shall be kept at the principal place of
business of the corporation, or at such other place as the board of directors
shall determine, containing the names, alphabetically arranged, of original
stockholders of the corporation, their addresses, their interest, the amount
paid on their shares, and all transfers thereof and the number and class of
stock held by each. Such stock ledgers shall at all reasonable hours be
subject to inspection by persons entitled by law to inspect the same.
Section 6.05 Transfer Agents and Registrars. The board of directors
may appoint one or more transfer agents and one or more registrars with
respect to the certificates representing stock of the corporation, and may
require all such certificates to bear the signature of either or both. The
board of directors may from time to time define the respective duties of such
transfer agents and registrars. No certificate for stock shall be valid until
countersigned by a transfer agent, if at the date appearing thereon the
corporation had a transfer agent for such stock, and until registered by a
registrar, if at such date the corporation had a registrar for such stock.
Section 6.06 Closing of Transfer Books and Fixing of Record Date.
(a) The board of directors shall have power to close the stock
ledgers of the corporation for a period of not to exceed 50 days
preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or
capital stock shall go into effect, or a date in connection with
obtaining the consent of stockholders for any purpose.
(b) In lieu of closing the stock ledgers as aforesaid, the board
of directors may fix in advance a date, not exceeding 50 days preceding
the date of any meeting of stockholders, or the date for the payment of
any dividend, or the date for the allotment of rights, or the date when
any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining any such consent, as a
record date for the determination of the stockholders entitled to a
notice of, and to vote at, any such meeting and any adjournment thereof,
or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such
consent.
(c) If the stock ledgers shall be closed or a record date set
for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for, or
such record date shall be, at least ten days immediately preceding such
meeting.
Section 6.07 Lost or Destroyed Certificates. The corporation may
issue a new certificate for stock of the corporation in place of any certifi
cate theretofore issued by it, alleged to have been lost or destroyed, and the
board of directors may, in its discretion, require the owner of the lost or
destroyed certificate or his legal representatives, to give the corporation a
bond in such form and amount as the board of directors may direct, and with
such surety or sureties as may be satisfactory to the board, to indemnify the
corporation and its transfer agents and registrars, if any, against any claims
that may be made against it or any such transfer agent or registrar on account
of the issuance of such new certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the board of directors, it
is proper to do so.
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ARTICLE VII
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 7.01 How Constituted. The board of directors may designate an
executive committee and such other committees as the board of directors may
deem appropriate, each of which committees shall consist of one or more
directors. Members of the executive committee and of any other committee
shall be designated annually at the annual meeting of the board of directors;
provided, however, that at any time the board of directors may abolish or
reconstitute the executive committee or any other committee. Each member of
the executive committee and of any other committee shall hold office until his
successor shall have been designated or until his resignation or removal in
the manner provided in these bylaws.
Section 7.02 Powers. During the intervals between meetings of the
board of directors, the executive committee shall have and may exercise all
powers of the board of directors in the management of the business and affairs
of the corporation, except for the power to fill vacancies in the board of
directors or to amend these bylaws, and except for such powers as by law may
not be delegated by the board of directors to an executive committee.
Section 7.03 Proceedings. The executive committee, and such other
committees as may be designated hereunder by the board of directors, may fix
its own presiding and recording officer or officers, and may meet at such
place or places, at such time or times and on such notice (or without notice)
as it shall determine from time to time. It will keep a record of its
proceedings and shall report such proceedings to the board of directors at the
meeting of the board of directors next following.
Section 7.04 Quorum and Manner of Acting. At all meetings of the
executive committee, and of such other committees as may be designated
hereunder by the board of directors, the presence of members constituting a
majority of the total authorized membership of the committee shall be neces
sary and sufficient to constitute a quorum for the transaction of business,
and the act of a majority of the members present at any meeting at which a
quorum is present shall be the act of such committee. The members of the
executive committee, and of such other committees as may be designated
hereunder by the board of directors, shall act only as a committee and the
individual members thereof shall have no powers as such.
Section 7.05 Resignations. Any member of the executive committee, and
of such other committees as may be designated hereunder by the board of
directors,may resign at any time by delivering a written resignation to either
the president, the secretary, or assistant secretary, or to the presiding
officer of the committee of which he is a member, if any shall have been
appointed and shall be in office. Unless otherwise specified therein, such
resignation shall take effect on delivery.
Section 7.06 Removal. The board of directors may at any time remove
any member of the executive committee or of any other committee designated by
it hereunder either with or without cause.
Section 7.07 Vacancies. If any vacancy should occur in the executive
committee or of any other committee designated by the board of directors
hereunder, by reason of disqualification, death, resignation, removal, or
otherwise, the remaining members shall, until the filling of such vacancy,
constitute the then total authorized membership of the committee and continue
to act, unless such committee consisted of more than one member prior to the
vacancy or vacancies and is left with only one member as a result thereof.
Such vacancy may be filled at any meeting of the board of directors.
Section 7.08 Compensation. The board of directors may allow a fixed
sum and expenses of attendance to any member of the executive committee, or of
any other committee designated by it hereunder, who is not an active salaried
employee of the corporation for attendance at each meeting of the said
committee.
11
<PAGE>
ARTICLE VIII
INDEMNIFICATION, INSURANCE, AND
OFFICER AND DIRECTOR CONTRACTS
Section 8.01 Indemnification: Third Party Actions. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, except an action by
or in the right of the corporation, by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enter
prise, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connec
tion with the action, suit, or proceeding, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit, or proceeding by judgment, order, settlement, conviction, or
on a plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 8.02 Indemnification: Corporate Actions. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, or agent of the corpora
tion, or is or was serving at the request of the corporation as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses, including amounts paid
in settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue, or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the corpora
tion, unless and only to the extent that the court in which the action or suit
was brought or other court of competent jurisdiction determines upon applica
tion that in view of all circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
Section 8.03 Determination. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in
sections 8.01 and 8.02 hereof, or in defense of any claim, issue, or matter
therein, he must be indemnified against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense. Any
indemnification under sections 8.01 or 8.02, unless ordered by a court, shall
be made by the corporation only as authorized in the specific case on a
determination that indemnification of the director, officer, employee, or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in sections 8.01 or 8.02. The determination
shall be made: (a) by the stockholders; (b) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to the
act, suit, or proceeding; (c) if a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or (d) if a quorum consisting
of directors who were not parties to the act, suit or proceeding cannot be
obtained, by independent legal counsel in a written opinion.
Section 8.04 Advances. Expenses incurred by officers and directors in
defending a civil or criminal action, suit, or proceeding shall be paid by the
corporation as they are incurred and in advance of the final disposition of
the action, suit, or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay the amount if it is ultimately determined
by a court of competent jurisdiction that he is not entitled to be indemnified
12
<PAGE>
by the corporation. The provisions of this section do not affect any rights
to advancement of expenses to which corporate personnel other than directors
or officers may be entitled under any contract or otherwise by law.
Section 8.05 Scope of Indemnification. The indemnification and
advancement of expenses authorized in or ordered by the corporation pursuant
to sections 8.01, 8.02, 8.04:
(a) does not exclude any other rights to which a person seeking
indemnification or advancement of expenses, including corporate person
nel other than directors or officers, may be entitled under the articles
of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise for either an action in his
official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant
to section 8.02 or for the advancement of expenses made pursuant to
section 8.04, may not be made to or on behalf of any director or officer
if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action; and
(b) continues for a person who has ceased to be a director,
officer, employee, or agent and inures to the benefit of the heirs,
executors, and administrators of such a person.
Section 8.06 Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in his capacity as a director,
officer, employee, or agent, or arising out of his status as such, whether or
not the corporation has the authority to indemnify him against such liability
and expenses.
Section 8.07 Officer and Director Contracts. No contract or other
transaction between the corporation and any other firm or corporation shall be
affected by the fact that a director or officer of the corporation has an
interest in, or is a director or officer of the corporation or any such other
corporation. Any officer or director, individually or with others, may be a
party to, or may have an interest in, any transaction of the corporation or
any transaction in which the corporation is a party or has an interest. Each
person who is now or may become an officer or director of the corporation is
hereby relieved from liability that he might otherwise obtain in the event
such officer or director contracts with the corporation for the benefit of
himself or any firm or other corporation in which he may have an interest;
provided, such officer or director acts in good faith.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
ARTICLE X
DIVIDENDS
The board of directors may from time to time declare, and the corpora
tion may pay, dividends on its outstanding stock in the manner and on the
terms and conditions provided by the certificate of incorporation and by the
laws.
13
<PAGE>
ARTICLE XI
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors
or the stockholders, shall be subject to amendment, alteration, or repeal, and
new bylaws may be made, except that no bylaw adopted or amended by the
stockholders shall be altered or repealed by the board of directors.
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that he is the secretary of
McHenry Metals Golf Corp., a corporation duly organized and existing under and
by virtue of the laws of the state of Nevada; that the above and foregoing
bylaws of said corporation were duly and regularly adopted as such by the
board of directors of said corporation by unanimous consent dated April 28,
1998, and that the above and foregoing bylaws are now in full force and effect
and supersede and replace any prior bylaws of the corporation.
DATED this ___ day of April, 1998.
McHenry Metals Golf Corp.
By___________________________________
Theodore Aroney, Secretary
14
[Stock Certificate Border Graphics]
Not Valid Unless Countersigned by Transfer Agent
Incorporated Under the Laws of the State of Nevada
Number Shares
[No. of Cert] [No. of Shares]
MCHENRY METALS GOLF CORP.
Authorized Common Stock: 50,000,000 Shares
Par Value: $.001
THIS CERTIFIES THAT [Name of Shareholder]
IS THE RECORD HOLDER OF [Number of Shares]
Shares of MCHENRY METALS GOLF CORP. Common Stock
transferable on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated: [date of Certificate]
/s/Theodore Aroney /s/Gary V. Adams
Secretary President
[Graphic of Corporate Seal]
[Border Graphics]
Interwest Transfer Co. Inc. P.O. Box 17136/Salt Lake City, Utah 84117
Countersigned & Registered ______________________________
WARRANT AGREEMENT
MCHENRY METALS GOLF CORP.
AND
INTERWEST TRANSFER CO., INC.
WARRANT AGENT
<PAGE>
THIS WARRANT AGREEMENT (the "Agreement") is dated effective
as of _____________, 1998, between McHenry Metals Golf Corp., a
Nevada Corporation (the "Company"), and Interwest Transfer Co.,
Inc., Salt Lake City, Utah (the "Warrant Agent").
WHEREAS, the Company proposes to issue with respect to
shares of its Common Stock, Common Stock Purchase Warrants (the
"Warrants"), each of which will entitle the holder thereof to
purchase one share of Common Stock in the future at such time as
the conditions set forth in the Warrant Certificate are
fulfilled.
WHEREAS, in conjunction with the potential exercise of the
Warrants, the Company anticipates the issuance of _____________
shares of its Common Stock (the "Warrant Shares");
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to
act, in connection with the issuance, registration, transfer and
exchange of Warrant Certificates and exercise of the Warrants.
NOW, THEREFORE, in consideration of the promises and the
mutual agreements hereinafter set forth, it is agreed that:
1. WARRANTS/WARRANT CERTIFICATES. Each Warrant will, in
the future during the period specified in the Warrant
Certificate, upon fulfillment of the conditions and subject to
the terms set forth therein, entitle the holder (the "Registered
Holder" or, in the aggregate, the "Registered Holders") in whose
name the Warrant Certificate shall be registered on the books
maintained by the Warrant Agent to purchase one share of Common
Stock on exercise thereof, subject to modification and adjustment
as provided in Section 8. Warrant Certificates representing the
right to purchase Warrant Shares shall be executed by the
Company's President and attested to by the Company's Secretary or
Assistant Secretary, or shall bear facsimile signatures of such
officers, and shall be delivered to the Warrant Agent upon
execution of this Agreement for distribution to the Company's
shareholders pursuant to written instructions from the Company to
the Warrant Agent.
Subject to the provisions of Sections 3, 5, 6 and 8, the
Warrant Agent shall deliver Warrant Certificates in required
whole number denominations to Registered Holders in connection
with any transfer or exchange permitted under this Agreement.
Except as provided in Section 6 hereof, no Warrant Certificates
shall be issued except (i) Warrant Certificates initially issued
hereunder, (ii) Warrant Certificates issued on or after the
initial issuance date, upon the exercise of any Warrants, to
evidence the unexercised Warrants held by the exercising
Registered holder, and (iii) Warrant Certificates issued after
the initial issuance date, upon
<PAGE>
any transfer or exchange of Warrant Certificates or replacements
of lost or mutilated Warrant Certificates.
2. FORM AND EXECUTION OF WARRANT CERTIFICATES. The
Warrant Certificates shall be substantially in the form attached
hereto as an exhibit. The Warrant Certificates shall be dated as
of the date of their issuance, whether on initial issuance,
transfer or exchange or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates.
Each Warrant Certificate shall be numbered serially with the
designation "_________ Warrant", appearing on each Warrant
Certificate.
The Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless
so countersigned. In the event any officer of the Company who
executed the Warrant Certificates shall cease to be an officer of
the Company before the date of issuance of the Warrant
Certificates or before countersignature and delivery by the
Warrant Agent, such warrant Certificates may be countersigned,
issued and delivered by the Warrant Agent with the same force and
effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
3. EXERCISE. Subject to the provisions of Sections 4, 7
and 8, the Warrants, when evidenced by a Warrant Certificate, may
be exercised at the price per share set forth on the face thereof
(the "Exercise Price") in whole or in part, commencing on the
date of issuance (the "Initial Exercise Date") and terminating on
the date three years later, unless extended by the Company's
Board of Directors (the "Exercise Period"). A Warrant shall be
deemed to have been exercised immediately prior to the close of
business on the date (the "Exercise Date") of the surrender for
exercise of the Warrant Certificate. The exercise form shall be
executed by the Registered Holder thereof or his attorney duly
authorized in writing and will be delivered together with payment
to the Warrant Agent at 1981 East 4800 South, Salt Lake City,
Utah 84117, (the "Corporate Office") or such other place as
designated by the Company, in cash or by official bank or
certified check, of an amount equal to the aggregate Exercise
Price, in lawful money of the United States of America.
Unless Warrant Shares may not be issued as provided herein,
the person entitled to receive the number of Warrant Shares
deliverable on such exercise shall be treated for all purposes as
the holder of such Warrant Shares as of the close of business on
the Exercise date. In addition, the Warrant Agent shall also, at
such time, verify that all of the conditions precedent to the
issuance of Warrant Shares set forth in Section 4 have been
satisfied as of the Exercise Date. If any one of the conditions
precedent set forth in Section 4 are not satisfied as of the
Exercise Date, the Warrant Agent shall request written
<PAGE>
instructions from the Company as to whether to return the Warrant
and pertinent Exercise Price to the exercising Registered Holder
or to hold the same until all such conditions have been
satisfied. The Company shall not be obligated to issue any
fractional share interests in Warrant Shares issuable or
deliverable on the exercise of any Warrant or scrip or cash
therefor and such fractional shares shall be of no value
whatsoever. If more than one Warrant shall be exercised at one
time by the same Registered Holder, the number of full Shares
which shall be issuable on exercise thereof shall be computed on
the basis of the aggregate number of full shares issuable on such
exercise.
Within thirty days after the Exercise Date and in any event
prior to the pertinent Expiration Date, the Warrant Agent shall
cause to be issued and delivered to the person or persons
entitled to receive the same, a certificate or certificates for
the number of Warrant Shares deliverable on such exercise. No
adjustment shall be made in respect of cash dividends on Warrant
Shares delivered on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise and
of the number of Warrant Shares delivered and shall cause payment
of an amount in cash equal to the pertinent Exercise Price to be
promptly made to the order of the Company.
Upon the exercise of any Warrant, the Warrant Agent shall
promptly deposit the payment into a segregated account
established by mutual agreement of the Company and the Warrant
Agent at a federally insured commercial bank. All funds
deposited in the escrow account will be disbursed on a weekly
basis to the Company once they have been determined by the
Warrant Agent to be collected funds. Once the funds are
determined to be collected the Warrant Agent shall cause the
share certificate(s) representing the exercised Warrants to be
issued.
Expenses incurred by the Warrant Agent while acting in the
capacity as Warrant Agent will be paid by the Company. These
expenses, including delivery of exercised share certificates to
the shareholder, will be deducted from the exercise fee submitted
prior to distribution of funds to the Company.
A detailed accounting statement relating to the number of
shares exercised and the net amount of exercised funds remitted
will be given to the Company with the payment of each exercise
amount. This will serve as an interim accounting for the
Company's use during the exercise periods. A complete accounting
will be made by the Warrant Agent to the Company concerning all
persons exercising Warrants, the number of shares issued and the
amounts paid at the completion of the Exercise Period.
The Company may deem and treat the Registered Holder of the
Warrants at any time as the absolute owner thereof for all
purposes, and the Company shall not be affected by any notice to
<PAGE>
the contrary. The Warrants shall not entitle the holder thereof
to any of the rights of shareholders or to any dividend declared
on the Common Stock unless the holder shall have exercised the
Warrants and purchased the shares of Common Stock prior to the
record date fixed by the Board of Directors of the Company for
the determination of holders of Common Stock entitled to such
dividend or other right.
4. RESERVATION OF SHARES AND PAYMENT OF TAXES. The
Company covenants that it will at all times reserve and have
available from its authorized Common Stock such number of shares
as shall then be issuable on the exercise of all outstanding
Warrants. The Company covenants that all Warrant Shares which
shall be so issuable shall be duly and validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any shares of Common Stock to be reserved for the purpose
of exercise of Warrants hereunder require any other registration
with or approval of any government authority under any federal or
state law before such shares may be validly issued or delivered,
then the Company covenants that it will in good faith and as
expeditiously as possible endeavor to secure such registration or
approval, as the case may be. No Warrant Shares shall be issued
unless and until any such registration requirements have been
satisfied.
The Registered Holder shall pay all documentary, stamp or
similar taxes and other government charges that may be imposed
with respect to the issuance of the Warrants, or the issuance,
transfer or delivery of any Warrant Shares on exercise of the
Warrants. In the event the Warrant Shares are to be delivered in
a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the
person requesting the same has paid to the Warrant Agent the
amount of any such taxes or charges incident thereto.
In the event the Warrant Agent ceases to also serve as the
stock transfer agent for the Company, the Warrant Agent is
irrevocably authorized to requisition the Company's new transfer
agent from time to time for Certificates of Warrant Shares
required upon exercise of the Warrants, and the Company will
authorize such transfer agent to comply with all such
requisitions. The Company will file with the Warrant Agent a
statement setting forth the name and address of its new transfer
agent, for shares of Common Stock or other capital stock issuable
upon exercise of the Warrants and of each successor transfer
agent.
5. REGISTRATION OF EXERCISE OR TRANSFER. The Warrant
Certificates may be exercised or transferred in whole or in part
if permitted by the Company. In any permitted exercise or
transfer, the Warrant Certificates to be exchanged shall be
<PAGE>
surrendered to the Warrant Agent at its Corporate Office. The
Company shall execute and the Warrant Agent shall countersign,
issue and deliver in exchange therefor the Warrant Certificate or
Certificates which the holder making the exercise or transfer
shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate
Office which shall register Warrant Certificates and the transfer
thereof. On due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and
the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants. All Warrant
Certificates presented for registration of transfer or exercise
shall be duly endorsed or be accompanied by a written instrument
or instruments or transfer in form satisfactory to the Company
and the Warrant Agent. At the time of exercise, the transfer fee
shall be paid by the Company. The Company may require payment of
a sum sufficient to cover any tax or other government charge that
may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for
exercise, or for exchange in case of mutilated Warrant
Certificates, shall be promptly canceled by the Warrant Agent and
thereafter retained by the Warrant Agent until termination of the
agency created by this Agreement. Prior to due presentment for
registration of transfer thereof, the Company and the Warrant
Agent may treat the Registered Holder of any Warrant Certificate
as the absolute owner thereof (notwithstanding any notations of
ownership or writing thereon made by anyone other than the
Company or the Warrant Agent), and the parties hereto shall not
be affected by any notice to the contrary.
6. LOSS OR MUTILATION. On receipt by the Company and the
Warrant Agent of evidence satisfactory as to the ownership of and
the loss, theft, destruction or mutilation of any Warrant
Certificate, the Company shall execute, and the Warrant Agent
shall countersign and deliver in lieu thereof, a new Warrant
Certificate representing an equal aggregate number of Warrants.
In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and
Warrant Agent in an amount satisfactory to each of them. In the
event a Warrant Certificate is mutilated, such certificate shall
be surrendered and canceled by the Warrant Agent prior to
delivery of a new Warrant Certificate. Applicants for a new
Warrant Certificate shall also comply with such other regulations
and pay such other reasonable charges as the Company may
prescribe.
7. CALL OPTION. At any time after the closing bid price
of the Company's common stock equals or exceeds _______________
(including any adjustment or reduction of such price pursuant
<PAGE>
to Section 8 or 9 hereof), for ______ consecutive trading days,
the Company shall have the right and option with respect to the
Warrants, upon thirty (30) days written notice to each Warrantholder
(or such longer period as is required under any applicable law), to
call, redeem and acquire all of the Warrants which remain outstanding
and unexercised at the date specified for such redemption in such
notice (the "Redemption Date"), which Redemption Date shall be 30
days after the date of such notice, for an amount equal to $.01
per Warrant; provided, however, the Warrantholders shall have the
right during the 30-day period immediately following the date of
such notice to exercise the Warrants in accordance with the
provisions of Section 3 hereof. In the event any Warrants are
exercised during such 30-day period, this call option shall be
deemed not to have been exercised by the Company as to the
Warrants so exercised by the holders thereof. Said notice of
redemption shall require each Warrantholder to surrender to the
Company, on the Redemption Date, at the Corporate Office of the
Warrant Agent (or its successor), his certificate or certificates
representing the Warrants to be redeemed. Notwithstanding the
fact that any Warrants called for redemption have not been
surrendered for redemption and cancellation on the Redemption
Date, after the Redemption Date, such Warrants shall be deemed to
be expired and all rights of the holders of such unsurrendered
Warrants shall cease and terminate, other than the right to
receive the redemption price of $.01 per Warrant for such
Warrants, without interest provided, however, that such right to
receive the redemption price of $.01 per Warrant for such
Warrants shall itself expire on the Expiration Date of the
Warrants. The Company shall notify the Warrant Agent verbally,
with confirmation in writing, of the call of the Warrants and of
the Redemption Date and the Company shall instruct the Warrant
Agent accordingly as to the procedures to be followed by the
Warrant Agent in connection with the redemption of the Warrants.
8. ADJUSTMENT OF EXERCISE PRICE AND SHARES. After each
adjustment of the Exercise Price pursuant to this Section 8, the
number of shares of Common Stock purchasable on the exercise of
each Warrant shall be the number derived by dividing such
adjusted pertinent Exercise Price into the original pertinent
Exercise Price. The pertinent Exercise Price shall be subject to
adjustment as follows:
(a) In the event, prior to the expiration of the Warrants
by exercise or by their terms, the Company shall issue any shares
of its Common Stock as a share dividend or shall subdivide the
number of outstanding shares of Common Stock into a greater
number of shares, then, in either of such events, the Exercise
Price per share of Common Stock purchasable pursuant to the
Warrants in effect at the time of such action shall be reduced
proportionately and the number of shares purchasable pursuant to
the Warrants shall be increased proportionately. Conversely, in
the event the Company shall reduce the number of shares of its
<PAGE>
outstanding Common Stock by combining such shares into a smaller
number of shares, then, in such event, the Exercise Price per
share purchasable pursuant to the Warrants in effect at the time
of such action shall be increased proportionately and the number
of shares of Common Stock at that time purchasable pursuant to
the Warrants shall be decreased proportionately. Any dividend
paid or distributed on the Common Stock in shares of any other
class of the Company or securities convertible into shares of
Common Stock shall be treated as a dividend paid in Common Stock
to the extent that shares of Common Stock are issuable on the
conversion thereof.
(b) In the event the Company, at any time while the
Warrants 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 a Warrant may thereafter receive, on exercise thereof,
in lieu of each share of Common Stock of the Company which he
would have been entitled to receive, the same kind and amount of
any share, securities, or assets as may be issuable,
distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common
Stock of the Company; provided, however, that in the event of any
such sale, dissolution, liquidation or winding up, the right to
exercise this Warrant shall terminate on a date fixed by the
Company, such date to be not earlier than 4:00 p.m., Eastern
Time, on the 10th day next succeeding the date on which notice of
such termination of the right to exercise the Warrants has been
given by mail to the holders thereof at such addresses as may
appear on the books of the company.
(c) In the event, prior to the expiration of the Warrants
by exercise or by their terms, the Company shall determine to
take a record of the holders of its Common Stock for the purpose
of determining shareholders entitled to receive any share
dividend or other right which will cause any change or adjustment
in the number, amount, price or nature of the shares of Common
Stock or other securities or assets deliverable on exercise of
the Warrants pursuant to the foregoing provisions, the Company
shall give to the Registered Holders of the Warrants at the
addresses as may appear on the books of the Company at least 10
days prior written notice to the effect that it intends to take
such a record. Such notice 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, securities or assets which will be
deliverable on exercise of the Warrants after the action for
which such record will be taken has been completed. Without
limiting the obligation of the Company to provide notice to the
Registered Holders of the Warrant Certificates of any corporate
<PAGE>
action hereunder, the failure of the Company to give notice shall
not invalidate such corporate action of the Company.
(d) No adjustment of the Exercise Price shall be made as a
result of or in connection with (i) the issuance of Common Stock
of the Company pursuant to options, warrants and share purchase
agreements outstanding or in effect on the date hereof, (ii) the
establishment of additional option plans of the Company, the
modification, renewal or extension of any plan now in effect or
hereafter created, or the issuance of Common Stock, on exercise
of any options pursuant to such plans, in connection with
compensation arrangements for officers, employees or agents of
the Company or any subsidiary, and the like or (iii) the issuance
of Common Stock in connection with an acquisition or merger of
any type (therefore, the antidilution provisions of this Section
8 will not apply in the event a merger or acquisition is
undertaken by the Company).
(e) This Agreement shall be incorporated by reference on
the Warrant Certificates.
Upon any adjustment of the exercise Price required to be
made pursuant to this Section 8, the Company within 30 days
thereafter shall (A) cause to be filed with the Warrant Agent a
certificate setting forth the pertinent Exercise Price after such
adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based,
and (B) cause to be mailed to each of the Registered Holders of
the Warrant Certificates written notice of such adjustment.
9. REDUCTION IN EXERCISE PRICE AT COMPANY'S OPTION. In
addition to any adjustments made to the Exercise Price pursuant
to Section 8, the Company's Board of Directors may, at its sole
discretion, reduce the Exercise Price of the Warrants in effect
at any time either for the life of the Warrants or any shorter
period of time determined by the Company's Board of Directors.
The Company shall promptly notify the Warrant Agent and the
Registered Holders of any such reductions in the Exercise Price.
10. DUTIES. Compensation and Termination of Warrant Agent.
The Warrant Agent shall act hereunder as agent and in a
ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by
any other act hereunder, be deemed to make any representation as
to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common
Stock or other property delivered on exercise of any Warrant.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of the Warrant Certificates to make
or cause to be made any adjustment of the Exercise Price or to
determine whether any fact exists which may require any such
adjustments.
<PAGE>
The Warrant Agent shall not (i) be liable for any recital or
statement of fact contained herein or for any action taken or
omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine
and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations
contained in this Agreement except for its own negligence or
willful misconduct, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or
willful misconduct.
The Company agrees to indemnify the Warrant Agent against
any and all losses, expenses and liabilities which the Warrant
Agent may incur in connection with the delivery of copies of the
Company's prospectus to exercising Registered Holders upon the
exercise of any Warrants as set forth in Section 4.
The Warrant Agent may at any time consult with counsel
satisfactory to it (which may be counsel for the Company) and
shall incur no liability or responsibility for any action taken
or omitted by it in good faith in accordance with the opinion or
advice of such counsel. Any notice, statement, instruction,
request, direction, order or demand of the Company shall be
sufficiently evidenced by an instrument signed by its President
and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted
by it in accordance with such notice, statement, instruction,
request, order or demand.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse the
Warrant Agent for its reasonable expenses. The Company further
agrees to indemnify the Warrant Agent against any and all losses,
expenses and liabilities, including judgments, costs and counsel
fees, for any action taken or omitted by the Warrant Agent in the
execution of its duties and powers hereunder, excepting losses,
expenses and liabilities arising as a result of the Warrant
Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may
terminate the Warrant Agent and the Warrant Agent shall be
discharged from all further duties and liabilities hereunder
(except liabilities arising as a result of the Warrant Agent's
own negligence or willful misconduct), on 30 days' prior written
notice to the other party. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate. On such
resignation or termination the Company shall appoint a new
warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified
in writing of the resignation by the Warrant Agent, then the
<PAGE>
registered holder of any Warrant Certificate may apply to any
court of competent jurisdiction for the appointment of a new
warrant agent.
After acceptance in writing of an appointment of a new
warrant agent is received by the Company, such new warrant agent
shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the
Warrant Agent, without any further assurance, conveyance, act or
deed; provided, however, if it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and
shall be legally and validly executed. The Company shall file a
notice of appointment of a new warrant agent with the resigning
Warrant Agent and shall forthwith cause a copy of such notice to
be mailed to the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, or any corporation
resulting from any consolidation to which the Warrant Agent or
any new warrant agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent
shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor
to the Warrant Agent under the provisions of the preceding
paragraph. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the
Company and to the Registered Holder of each Warrant Certificate.
No further action shall be required for establishment and
authorization of such successor warrant agent.
The Warrant Agent, its officers or directors and its
subsidiaries or affiliates may buy, hold or sell Warrants or
other securities of the Company and otherwise deal with the
Company in the same manner and to the same extent and with like
effect as though it were not Warrant Agent. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
11. MODIFICATION OF AGREEMENT. The Warrant Agent and the
Company may by supplemental agreement make any changes or
corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or
inconsistent provision or mistake or error herein contained; or
(ii) that they may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Warrant
Certificates; provided, however, this Agreement shall not
otherwise be modified, supplemented or altered in any other
respect except with the consent in writing of the registered
holders of Warrant Certificates representing not less than 51% of
each class of Warrants outstanding. Additionally, except as
provided in Section 8, no change in the number or nature of the
<PAGE>
Warrant Shares purchasable on exercise of a Warrant, increase the
purchase price therefor, or the acceleration of the Expiration
Date of a Warrant shall be made without the consent in writing of
the Registered Holder of the Warrant Certificate representing
such Warrant, other than such changes as are specifically
prescribed or allowed by this Agreement.
12. NOTICES. All notices, demands, elections, opinions or
requests (however characterized or described) required or
authorized hereunder shall be deemed given sufficiently if in
writing and sent by registered or certified mail, return receipt
requested and postage prepaid, or by tested telex, telegram or
cable to the last known address of the Company, the Warrant Agent
and if to the Registered Holder of a Purchase Warrant
Certificate, at the address of such holder as set forth on the
books maintained by the Warrant Agent.
13. BINDING AGREEMENT. This Agreement shall be binding
upon and inure to the benefit of the Company, the Warrant Agent
and their respective successors and assigns, and the holders from
time to time of Purchase Warrant Certificates. Nothing in this
Agreement is intended or shall be construed to confer upon any
other person any right, remedy or claim or to impose on any other
person any duty, liability or obligation.
14. FURTHER INSTRUMENTS. The parties shall execute and
deliver any and all such other instruments and shall take any and
all other actions as may be reasonably necessary to carry out the
intention of this Agreement.
15. SEVERABILITY. If any provision of this Agreement shall
be held, declared or pronounced void, voidable, invalid,
unenforceable, or inoperative for any reason by any court of
competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely
any other provision of this Agreement, which shall otherwise
remain in full force and effect and be enforced in accordance
with its terms, and the effect of such holding, declaration or
pronouncement shall be limited to the territory or jurisdiction
in which made.
16. WAIVER. All the rights and remedies of either party
under this Agreement are cumulative and not exclusive of any
other rights and remedies as provided by law. 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 shall operate as a
waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party
where required hereunder to act or occurrence shall not be deemed
to be a consent to any other action or occurrence.<PAGE>
17. GENERAL PROVISIONS. This Agreement shall be construed
and enforced in accordance with, and governed by, the laws of the
<PAGE>
State of Nevada. Except as otherwise expressly stated herein,
time is of the essence in performing hereunder. This Agreement
embodies the entire agreement and understanding between the
parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not
be modified or amended or any term or provisions hereof waived or
discharged except in writing signed by the party against whom
such amendment, modification, waiver or discharge is sought to be
enforced. The headings of this Agreement are for convenience in
reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
MCHENRY METALS GOLF CORP.
By
Authorized Officer
THE WARRANT AGENT:
INTERWEST TRANSFER CO., INC.
By
Authorized Officer
WARRAGR.MMG
COMMON STOCK PURCHASE WARRANT
MCHENRY METALS GOLF CORP.
(A NEVADA CORPORATION)
Dated: , 199
THIS CERTIFIES THAT
(hereinafter called the "Holder") will in the future during the
period hereinafter specified, upon fulfillment of the conditions
and subject to the terms hereinafter set forth, be entitled to
purchase from McHenry Metals Golf Corp., a Nevada corporation
(hereinafter called the "Company"), shares (the "Shares") of the
Company's common stock, par value $.001 per share ("Common Stock"),
at an exercise price of $_____per Share (the "Exercise Price"),
on the basis of one share for each warrant (the "Warrants")
indicated on the face hereof.
1. Commencing with the issuance of this certificate and
ending on the date three years later, unless extended by the
Company ("Expiration Date"), the Holder shall have the right to
purchase the Shares hereunder at the Exercise Price. After the
Expiration Date, the Holder shall have no right to purchase any
Shares hereunder and this Warrant shall expire thereon effective at
4:00 p.m., New York time.
2. The rights represented by this Warrant may be exercised
at any time within the period above specified, in whole or in part,
by (i) the surrender of this Warrant (with the purchase form at the
end hereof properly executed) at the principal executive office of
the Company (or such other office or agency of the Company as it
may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to
the Company of the Exercise Price then in effect for the number of
Shares specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any; and (iii) delivery to the
Company, if the Company so requires, of a duly executed agreement
signed by the Holder to the effect that such person agrees to be
bound by all provisions hereof. This Warrant shall be deemed to
have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date this Warrant
is surrendered and payment is made in accordance with the foregoing
provisions of this Paragraph 2, and the person or persons in whose
name or names the certificates for Shares shall be issuable upon
such exercise shall become the holder or holders of record of such
Shares at that time and date. The certificates for the Shares so
purchased shall be delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been
exercised.
<PAGE>
3. This Warrant may not be exercised or sold, transferred,
assigned, or otherwise disposed of at any time by the Holder unless
the transaction is registered or, in the opinion of the Company
(which may in its discretion require the Holder to furnish it with
an opinion of counsel in form and substance satisfactory to it),
such exercise, sale, transfer, assignment or other disposition does
not require registration under the Act and a valid exemption is
available under applicable federal and state securities laws. Any
permitted transfer or assignment shall be effected by the Holder
(i) completing and executing the form of assignment at the end
hereof and (ii) surrendering this Warrant with such duly completed
and executed assignment form for cancellation, accompanied by funds
sufficient to pay any transfer tax, at the principal executive
office of the Company, accompanied by a written representation from
each such assignee addressed to the Company stating that such
assignee agrees to be bound by the terms of this Warrant; whereupon
the Company shall issue, in the name or names specified by the
Holder (including the Holder) a new Warrant or Warrants of like
tenor with appropriate legends restricting transfer under the Act
and representing in the aggregate rights to purchase the same
number of Shares as are purchasable hereunder.
4. The Company covenants and agrees that all Shares
purchased hereunder will, upon issuance, be duly and validly
issued, fully paid and non-assessable and no personal liability
will attach to the Holder thereof. The Company further covenants
and agrees that during the period within which this Warrant may be
exercised, the Company will at all times have authorized and
reserved a sufficient number of shares of Common Stock to provide
for the exercise of this Warrant.
5. This Warrant shall not entitle the Holder to any voting
rights or other rights as a stockholder of the Company, either at
law or in equity, and the rights of the Holder are limited to those
expressed in this Warrant and are not enforceable against the
Company except to the extent set forth herein.
6. In the event that the Company shall at any time subdivide
or combine into a greater or lesser number the number of outstand-
ing shares of Common Stock, the number of Shares purchasable upon
exercise of the Warrant shall be proportionately increased and the
Exercise Price proportionally decreased in the case of subdivision
or, in the case of combination, the number of Shares purchasable
upon the exercise of the Warrant shall be proportionately decreased
and the Exercise Price proportionately increased. Irrespective of
any adjustments in the Exercise Price or the number of Shares
purchasable upon exercise of the Warrant, the Warrant theretofore
or thereafter issued may continue to express the same price and
number and kind of Shares as are stated in the Warrant initially
issued.
7. The Warrants represented by this certificate are subject
to redemption by the Company at $.01 per Warrant, at any time after
the date hereof, upon 30 days notice if the closing bid price of
the Company's common stock equals or exceeds the exercise price
hereof for 10 consecutive trading days at any time prior to notice
of redemption. The terms of the redemption and other terms of
these Warrants are set forth in a Warrant Agreement between the
Company and its Warrant Agent, which agreement shall control the
terms and conditions of this Warrant.
<PAGE>
8. This Warrant Certificate does not constitute an offer to
sell, nor does it confer any right to purchase securities of the
company until such time as the conditions precedent to its
exercisability have been fulfilled.
9. This Warrant shall be governed by and be in accordance
with the laws of the State of Nevada and may not be amended other
than by written instrument executed by the parties hereto except as
provided in the Warrant Agreement between the Company and the
Warrant Agent.
IN WITNESS WHEREOF, McHenry Metals Golf Corp. has caused this
Warrant to be signed by its duly authorized officers.
MCHENRY METALS GOLF CORP., a Nevada Corporation
By:
Bradley Wilhite, President
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the Holder of the foregoing Warrant, hereby
irrevocably elects to exercise the purchase rights represented by
such Warrant for, and to purchase thereunder, Shares of
the Common Stock of McHenry Metals Golf Corp., and herewith makes
payment of $ therefore, and requests that the share
certificates be issued in the name(s) of, and delivered to
_________________________________________________________________
whose address(es) is (are) ______________________________________
_________________________________________________________________
________________________________________________________________.
Dated: _______________________
______________________________
(Signature)
______________________________
Name (Print or Type)
______________________________
Address
______________________________
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby assigns and
transfers unto _____________________________________________ the
right to purchase shares of the Common Stock of McHenry Metals Golf
Corp. represented by the foregoing Warrant to the extent of
________ Shares, and appoints ___________________________, attorney
to transfer such rights on the books of ___________________________
__________________, with full power of substitution in the
premises.
Dated: _______________________
______________________________
(Signature)
______________________________
Name (Print or Type)
______________________________
Address
______________________________
THOMAS G. KIMBLE & ASSOCIATES
311 South State Street, Suite 440
Salt Lake City, Utah 84111
(801) 531-0066
May 26, 1998
Board of Directors
McHenry Metals Golf Corp.
1945 Camino Vida Roble, Suite J
Carlsbad, CA 92008
Re: Opinion and Consent of Counsel with respect to
Registration Statement on Form SB-2
TO WHOM IT MAY CONCERN:
You have requested the opinion and consent of this law firm, as
counsel, with respect to the proposed issuance and public
distribution of certain securities of the Company pursuant to the
filing of a registration statement on Form SB-2 with the Securities
and Exchange Commission.
The proposed offering and public distribution relates to 2,571,094
shares of Common Stock, $.001 par value to be offered and sold to
the holders of: 1,271,094 Series A Warrants, at prices ranging
from $1.00 to $2.00 per share; up to 1,300,000 Shop Warrants and
Pro Warrants, at prices to be determined upon issuance, based on
the fair market value of the Common Stock at that time. It is our
opinion that the shares of Common Stock will, when issued in
accordance with the terms and conditions set forth in the
registration statement, be duly authorized, validly issued, fully
paid and nonassessable shares of common stock of the Company in
accordance with the corporation laws of the State of Nevada.
We hereby consent to be named as counsel for the Company in the
registration statement and prospectus included therein.
Sincerely yours,
THOMAS G. KIMBLE & ASSOCIATES
/s/ Van L. Butler
Van L. Butler
SUBLEASE
THIS SUBLEASE, dated as of April 30, 1997, is entered into by
and between ODYSSEY SPORTS, INC., a California corporation
("Sublessor") and MCHENRY METALS, an Illinois corporation
("Sublessee").
RECITALS
A. Sublessor currently leases certain premises (the
"Premises") consisting of approximately 5,799 rentable square feet
of space (reduced from 8206 square feet), as shown on Exhibit A
attached hereto, located in that certain building located at 1945
Camino Via Roble, Carlsbad, California (the "Building"). Sublessor
leases the Premises from Pacific Ridge Commerce Centre Associates
("Master Lessor") pursuant to that certain Standard Industrial
Lease (Multi-Tenant) dated September 15, 1993 (the "Master Lease").
An accurate and complete copy of the Master Lease is attached
hereto as Exhibit B. Except as otherwise expressly provided herein,
any capitalized terms herein without definition shall have the same
meaning as they have in the Master Lease.
B. Sublessor desires to sublease to Sublessee, and Sublessee
desires to Sublease from Sublessor, the Premises, pursuant to the
terms and provisions hereof.
Now, THEREFORE, in consideration of the covenants and
conditions contained herein, Sublessor and Sublessee agree as
follows:
AGREEMENT
1. Subleased Premises. Sublessor hereby leases to
Sublessee, and Sublessee hereby leases from Sublessor, the
Premises, subject to the following terms and conditions set forth
herein.
2. Term. The initial term of this Sublease shall commence
on May 1, 1997 (the "Commencement Date") and shall expire, unless
sooner terminated or extended pursuant to the further provisions
hereof, at 11:59 p.m. on October 31, 1998, or such earlier date as
the Master Lease may be terminated pursuant to the terms thereof.
3. Rent. Notwithstanding anything to the contrary contained
in the Master Lease relating to Rent, Sublessee shall pay to
Sublessor fixed monthly rent ("Rent") as provided below.
(a) Commencing on the Commencement Date and continuing
thereafter through October 31, 1997, Sublessee shall pay to
Sublessor as monthly Rent for the Premises on the first day of each
calendar month, the sum of $4,260.73, which sum includes the
1
<PAGE>
following monthly charges: $3.363/42 for Base Rent ("Base Rent"),
$120.00 for water/trash services, and $777.31 for Operating
Expenses charges applicable to the Premises. The foregoing amount
does not include any charges for utilities which Sublessee shall
pay directly as provided in Section 9 hereof. If the term of this
Sublease commences on a day other than the first day of a calendar
month or if the term of this Sublease terminates on a day other
than the last day of a calendar month, the Rent for such first or
last month of the term of the Sublease, as the case may be, shall
be prorated based on the number of days the term of this Lease is
in effect during such month.
(b) In addition, effective as of November 1, 1997, Rent may
be increased as provided in Section 5 of the Addendum to the Lease.
Charges for water/trash services and Operating Expenses may also
increase as provided in Section 5 of the Addendum to Lease.
Sublessee shall pay all increases in such charges commencing on
November 1, 1997.
(c) Sublessee shall pay, as additional rent ("Additional
Rent") within ten (10) days after demand, all other amounts payable
by Sublessor under the Master Lease which are incurred at the
request of Sublessee or which are applicable to the Premises. It
is the intent of the parties that Sublessee shall pay all costs and
expenses relating to the Premises which arise under the Master
Lease, whether or not such costs and expenses are specifically
referred to herein.
(d) Rent shall be payable to Sublessor, in advance, in lawful
money of the United States, without prior notice, demand, or
offset, on or before the first day of each calendar month during
the term hereof.
(e) In the event of any casualty or condemnation affecting
the Premises, Rent payable by Sublessee shall be abated hereunder,
but only to the extent that Rent under the Master Lease is abated.
Sublessee waives any right to terminate the Sublease in connection
with such casualty or condemnation except to the extent the Master
Lease is also terminated as to the Premises or any portion thereof.
4. Condition of the Premises/Tenant Improvements. Sublessee
has inspected the Premises and agrees to accept the Premises "where
is, as is" without any obligation on the part of Sublessor to
modify, improve or otherwise prepare the Subleased Premises for
Sublessee's occupancy, except as hereinafter provided. Sublessor,
at its expense, shall (a) clean carpets, (b) paint walls, and (c)
provide such additional maintenance as is mutually agreed upon to
deliver Premises in presentable, broom-clean condition.
5. Use. Sublessee may use the Premises for the manufacture,
storage and distribution of golf products.
6. Master Lease. This Sublease shall be subject and
subordinate to all of the terms and provisions of the Master Lease.
Except for payments of Rent (which payments shall be made by
Sublessor and as otherwise expressly provided herein), Sublessee
2
<PAGE>
hereby assumes and agrees to perform for Sublessor's benefit,
during the term of this Sublease, all of Sublessor's obligations
under the Master Lease (hereinafter the "Assumed Obligations").
7. Incorporation of Master Lease. Except as provided below,
all of the terms and provisions of the Master Lease are
incorporated into and made a part of this Sublease and the rights
and obligations of the parties under the Master Lease are hereby
imposed upon the parties hereto with respect to the Premises, the
Sublessor being substituted for the "Landlord" in the Master Lease,
the Sublessee being substituted for the "Tenant" in the Master
Lease, and this Sublease being substituted for the "Lease" in the
Master Lease. Notwithstanding the foregoing, the following
Paragraphs of the Master Lease are not incorporated herein:
Paragraphs 3, 5, 8.2, 9 (excepting therefrom 9.6 and 9.7), 12.2,
38, and 39 and Addendum. The parties specifically agree that any
provisions relating to any construction obligations of "Landlord"
under the Master Lease with respect to construction which occurred
or was to have occurred prior to the Commencement Date hereof, are
hereby deleted.
Notwithstanding the provisions of the preceding paragraph, for
the purposes of incorporating the terms and provisions of the
Master Lease into this Sublease, the Master Lease is hereby amended
as follows:
(a) Insurance. With respect to Sublessee's insurance
obligations under Paragraphs 8 of the Master Lease, Sublessee's
policies of liability insurance shall name Master Lessor and its
property manager, as well as Sublessor, as additional insurers.
(b) Default. The three (3) day cure period provided for rent
defaults in Paragraph 13. 1 (b) is reduced to one (1) day and the
thirty (30) day cure period provided for defaults other than Rent
is reduced from thirty (30) days to twenty (20) days.
(c) Notices. The addresses specified in Paragraph 23 for
receipt of notices to each of the parties are deleted and replaced
with the following:
To Sublessor at: Odyssey Sports, Inc.
1969 Kellogg Avenue
Carlsbad, CA 92008
Attn: Michael Brower
To Sublessee at: McHenry Metals
1945 Camino Via Roble
Carlsbad, CA
Attn: Ted Aroney
Vice President of Finance
(d) Sublessor's Liability. With respect to Paragraph 17, the
following language is added at the end of said section:
3
<PAGE>
Notwithstanding any other term or provision of this Sublease,
the liability of Sublessor for its obligations under this
Sublease is limited solely to Sublessor's interest in the
Master Lease, and no personal liability shall at any time be
asserted or enforceable against any other assets of Sublessor
or against Sublessor's stockholders, directors, officers or
partners on account of any of Sublessor's obligations or
actions under this Sublease.
8. Sublessor's Obligations.
(a) Provided Sublessee is not in default under the terms of
this Sublease, Sublessor agrees to make timely payments of the Base
Rent and Additional Rent due under the Master Lease to the end that
the Master Lease shall not be terminated due to the default of
Sublessor.
(b) To the extent that the provision of any services or the
performance of any maintenance or any other act (collectively
"Master Lessor Obligations") is the responsibility of Master
Lessor, Sublessor, upon Sublessee's request, shall make reasonable
efforts to cause Master Lessor to perform such Master Lessor
Obligations; provided, however, that in no event shall Sublessor be
liable to Sublessee for any liability, loss or damage whatsoever in
the event that Master Lessor should fail to perform the same, nor
shall Sublessee be entitled to withhold the payment of Base Rent or
terminate this Sublease.
(c) Except as provided in this Paragraph 8, Sublessor shall
have no other obligations to Sublessee with respect to the Premises
or the performance of the Master Lease Obligations. Sublessee
acknowledges that Sublessor is not in a position to furnish the
services set forth in the Master Lease, obtain a nondisturbance
agreement, or to perform certain other obligations which are not
within Sublessor's control, including but not limited to,
maintenance, repairs and replacements, compliance with laws, and
restoration of the Premises after casualty or condemnation.
9. Utilities. Sublessee agrees to have all utilities
serving the Premises billed directly to Sublessee in Sublessee's
name and Sublessee shall pay the cost of any such utilities
directly to such utility company or service provider.
10. Early Termination of Master Lease. If, without the fault
of Sublessor or Sublessee, the Master Lease should terminate prior
to the expiration of this Sublease, neither party shall have any
liability to the other party. To the extent that the Master Lease
grants Sublessor any discretionary right to terminate the Master
Lease, whether due to casualty, condemnation, or otherwise,
Sublessor shall be entitled to exercise or not exercise such right
in its complete and absolute discretion.
11. Consent of Master Lessor. If Sublessee desires to take
any action which requires the consent of Master Lessor pursuant to
the terms of the Master Lease, including, without limitation,
making any alterations or entering into a further sublease or
assignment of this Sublease, then, notwithstanding anything to the
contrary herein, (a) Sublessor shall have the same rights of
4
<PAGE>
approval or disapproval as Master Lessor has under the Master
Lease, (b) Sublessee shall not take any such action until it
obtains the consent of both Sublessor and Master Lessor, and (c)
Sublessee shall request that Sublessor obtain Master Lessor's
consent on Sublessee's behalf, unless Sublessor agrees that
Sublessee may contact Master Lessor directly with respect to the
specific action for which Master Lessor's consent is required.
12. Surrender of Premises. Upon the termination of the
Sublease, Sublessee shall surrender the Premises to Sublessor
broom-clean and in the same condition as on the Commencement Date,
ordinary wear and tear excepted. In addition, Sublessor may
require Sublessee to remove any alterations, additions and
improvements (whether or not made with Sublessor's consent) prior
to the termination of the Sublease and to restore the Premises to
its prior condition, normal wear and tear excepted, repairing all
damage caused by or related to any such removal, all at Sublessee's
expense.
13. No Third Party Rights. The benefit of tile provisions of
this Sublease is expressly limited to Sublessor and Sublessee and
their respective permitted successors and assigns. Under no
circumstances will any third party be construed to have any rights
as a third party beneficiary with respect to any of said
provisions; provided, however, that Master Lessor shall be entitled
to the benefit of Sublessee's assumption of Sublessor's
obligations, as "Tenant" under the Master Lease, pursuant to
Paragraph 6 above.
14. Time of Essence. It is expressly understood and agreed
that time is of the essence with respect to each and every
provision of this Sublease.
15. Attorneys Fees. If any action or proceeding at law or in
equity shall be brought to enforce or interpret any of the
provisions of this Sublease, the prevailing party shall be entitled
to recover from the other party its reasonable attorneys' fees and
costs incurred in connection with the prosecution or defense of
such action or proceeding.
16. Approval of Master Lessor. This Sublease shall be
conditioned upon, and shall not take effect until, receipt of the
written approval of Master Lessor thereto. Upon receipt of such
approval, this Sublease shall be effective as of the date first
written above.
IN WITNESS WHEREOF, the parties have executed this Sublease as
of the date first written above.
"SUBLESSOR" "SUBLESSEE"
ODYSSEY SPORTS, INC., McHENRY METALS,
a California corporation an Illinois corporation
5
<PAGE>
CONSENT OF MASTER LESSOR
PACIFIC RIDGE COMMERCE CENTRE ASSOCIATES, a "Master Lessor"
under the Master Lease identified in that certain Sublease dated as
of April 30, 1997 to which this Consent is attached, hereby
consents to said Sublease. This Consent shall not be deemed to
relieve Sublessor, as Tenant under the Master Lease, from any
obligation or liability thereunder, nor shall this Consent be
deemed Master Lessor's consent to any further subletting or
assignment.
MASTER LESSOR:
PACIFIC RIDGE COMMERCE CENTRE ASSOCIATES
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ADDENDUM TO SUBLEASE
This Addendum is made to that certain Sublease by and between
Odyssey Sports, Inc., a California corporation ("Sublessor") and
McHenry Metals, Inc., an Illinois corporation ("Sublessee"), dated
as of April 30, 1997, (the "Sublease"), and the parties further
agree as follows:
1. At Sublessee's option, Sublessor shall exercise its
option to extend the term of the Master Lease in accordance with
the terms of the Master Lease and Addendum thereto, subject to the
following terms and conditions:
a. Sublease shall give Sublessor written notice of its
request to exercise such option not less than sixty (60) days prior
to the expiration of the initial term of the Master Lease;
b. Sublessee shall not be in default of any of the terms of
the Sublease or the obligations of the Master Lease assumed by
Sublessee;
c. Upon exercise of such option by Sublessor, Sublessee
shall assume all obligations of Sublessor under the Master Lease;
d. Sublessee shall pay to Sublessor any security deposit or
unused prepaid rent paid to the Master Lessor; and
e. The Master Lessor shall, upon exercise of such option,
consent to assignment of the Master Lease to Sublessee and the full
release of Sublessor from all of its obligations thereunder.
2. Capitalized terms not otherwise defined in this Addendum
shall have the meanings defined in the Sublease.
IN WITNESS WHEREOF this Addendum has been executed as of this
30th day of April, 1997.
SUBLESSOR SUBLESSEE
ODYSSEY SPORTS, INC. McHENRY METALS, INC.
LEASE
Section I
Parties
This lease is made between FLEMING & CO., P.C., an Illinois
professional corporation, as lessor, and McHENRY METALS GOLF
CORPORATION., a Nevada corporation, and McHENRY METALS, Inc., an
Illinois corporation, as lessee.
Section II
Description of Leased Premises
Lessor hereby leases to lessee and lessee hereby leases from
lessor, the space as presently constituted known as Unit A,
referred to below as the premises, on the first floor in the
building known as 4123 W. Shamrock Lane, McHenry, Illinois 60050,
referred to below as the building.
Section III
Term
The space is leased for a term to commence on January 1, 1998,
and to end on December 31, 2000, or on such earlier date as this
lease may terminate as provided below, except that, if any such
date falls on a Sunday or a holiday, then this lease shall end on
the business day next preceding the above-mentioned date.
Section IV
Rent
The monthly rent shall be as follows:
January 1, 1998 to December 31, 1998 $1,500.00 per month
January 1, 1999 to December 31, 1999 $1,700.00 per month
January 1, 2000 to December 31, 2000 $1,900.00 per month
Said rent shall be payable in equal monthly installments, in
advance on the first day of each calendar month during the term as
stated above.
Section V
Security Deposit
Lessee shall deposit with Lessor upon execution of this Lease
the sum of Two Thousand and no/100 ($2,000.00) Dollars as a
Security Deposit. The Security Deposit shall be held by Lessor,
with no obligation to pay interest, as security for the performance
of all covenants and agreements by lessee hereunder. Lessor may at
time or times apply all or any portion thereof in payment of any
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amounts due lessor from lessee. Upon termination of the Lease and
full performance of all of lessee's obligations hereunder, so much
of the Security Deposit as remains unapplied shall be returned
to lessee.
Section VI
Use and Occupancy
Lessee shall use and occupy the premises for general office
purposes and for no other purpose. Lessor represents that the
premises may lawfully be used for such purpose.
Section VII
Place for Payment of Rent
Lessee shall pay rent, and any additional rent as provided
below, to lessor at lessor's below stated address, or at such other
place as lessor may designate in writing, without demand and
without counterclaim, deduction or setoff.
Section VIII
Care and Repair of Premises
Lessee shall commit no act of waste and shall take good care
of the premises and the fixtures and appurtenances therein, and
shall, in the use and occupancy of the premises, conform to all
laws, orders, and regulations of the federal, state and municipal
governments or any of their departments. Lessor shall make all
necessary repairs to the premises, except where the repair has been
made necessary by misuse or neglect by lessee or lessee's agents,
servants, visitors or licensees. All improvements made by lessee
to the premises which are so attached to the premises that they
cannot be removed without material injury to the premises, shall
become the property of lessor upon installation.
Not later than the last day of the term lessee shall, at
lessee's expense, remove all of lessee's personal property and
those improvements made by lessee which have not become the
property of lessor, including trade fixtures, cabinet work, movable
paneling, partitions and the like; repair all injury done by or in
connection with the installation or removal of the property and
improvements; and surrender the premises in as good condition as
they were at the beginning of the term, reasonable wear, and damage
by fire, the elements, casualty, or other cause not due to the
misuse or neglect by lessee or lessee's agent, servants, visitors
or licensees, excepted. All property of lessee remaining on the
premises after the last day of the term of this lease shall be
conclusively deemed abandoned and may be removed by lessor, and
lessee shall reimburse lessor for the cost of such removal. Lessor
may have any such property stored at lessee's risk and expense.
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Section IX
Alterations, Additions or Improvements
Lessee shall not, without first obtaining the written consent
of lessor, make any alterations, additions or improvements in, to
or about the premises.
Section X
Prohibition Against Activities Increasing Fire Insurance Rates
Lessee shall not do or suffer anything to be done on the
premises which will cause an increase in the rate of fire insurance
on the building.
Section XI
Accumulation of Waste of Refuse Matter
Lessee shall not permit the accumulation of waste or refuse
matter on the leased premises or anywhere in or near the building.
Section XII
Abandonment
Lessee shall not, without first obtaining the written consent
of the lessor, abandon the premises, or allow the premises to
become vacant or deserted.
Section XIII
Assignment of Sublease
Lessee shall not, without first obtaining the written consent
of the lessor, assign, mortgage, pledge or encumber this km, in
whole or in part, or sublet the premises or any part of such
premises. This covenant shall be binding upon the legal
representatives of lessee, and upon every person to whom lessee's
interest under this lease passes by operation of law, but shall not
apply to an assignment or subletting to the parent or subsidiary of
a corporate lessee or to a transfer of the leasehold interest
occasioned by a consolidation or merger involving such lessee.
Section XIV
Compliance with Rules and Regulations
Lessee shall observe and comply with the rules and regulations
set forth below, which are made part of this agreement, and with
such further reasonable rules and regulations as lessor may 'be, on
written notice to the lessee, for the safety, care, and cleanliness
of the building and the present comfort, quiet and convenience of
other occupants of the building.
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Section XV
Utilities and Insurance
Lessor shall pay for an heat, air conditioning, water, sewer,
electricity, gas, real estate taxes, outside maintenance and
disposal which are furnished to the building. Lessee shall be
responsible for any telephone charges for lessees operations at
Premises. Lessee shall obtain comprehensive liability insurance
and personal property insurance protection from an insurance
company licensed to do business in Illinois, naming lessor as an
additional insured, and in the limits of not less than
$1,000,000.00 for personal injury, bodily injury, sickness disease
or death or damage to or destruction of property (including loss of
use thereof) for any one occurrence. Lessee shall furnish on
demand by Lessor a certificate evidencing such insurance, which
will allow for 30 days' prior written notice to Lessor of any
termination or change in such coverage.
Section XVI
Damages to Building
If the building is damaged by fire or any other cause to such
extent that the cost of restoration as reasonably estimated by
lessor, will equal or exceed fifty percent (50%) of the replacement
value of the building (exclusive of foundations) just prior to the
occurrence of the damage, then lessor may, no later than the 30th
day following the damage, give lessee a notice of election to
terminate this lease, or if the cost of restoration will equal or
exceed fifty percent (50%) of such replacement value and if the
premises shall not be reasonably usable for the purposes for which
they are leased under this agreement, then lessee may, no later
than the 30th day following the damage, give lessor a notice of
election to terminate this lease. In event of either such election
this lease shall be deemed to terminate on the 30th day after the
giving of such notice, and lessee shall surrender possession of the
premises within a reasonable time thereafter, and the rent, and any
additional rent, shall be apportioned as of the date of the
surrender and any rent paid for any period beyond such date shall
be repaid to lessee.
In any case in which use of the premises is affected by any
damage to the building, there shall be either an abatement or an
equitable reduction in rent depending on the period for which and
the extent to which the premises are not reasonably usable for the
purpose for which they are leased under this agreement. The words
"restoration" and "restore" as used in this Section XVII shall
include repairs. If the damage results from the fault of the
lessee, or lessee's agents, servants, visitors or licensees, lessee
shall not be entitled to any abatement or reduction of rent, except
to the extent, if any, that lessor receives the proceeds of rent
insurance in lieu of such rent.
Section XVII
Waivers of Subrogation
Lessor and lessee each hereby waive any and all rights of
recovery against the other or against the directors, officers,
shareholders, partners, employees, agents and representatives of
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the other, on account of loss or damage of such waiving party or
its property, or the property of others under its control, to the
extent that such loss or damage is insured against under any fire
and extended coverage insurance policy which either may have in
force at the time of such loss or damage. Lessee shall, upon
obtaining the policies of insurance required under this Lease, give
notice to its insurance carrier(s) that the foregoing mutual waiver
of subrogation is contained in this Lease. The waivers set forth
herein shall be required to the extent that same are available from
each party's insurer without additional premium; if an extra charge
is incurred to obtain such waiver, it shall be paid by the party in
whose favor the waiver runs within fifteen (I 5) days after written
notice from the other party.
Section XVIII
Eminent Domain
If the cost of restoration as estimated by lessor shall amount
to less than fifty percent (50%) of the replacement value. of the
building, or if, despite the cost, lessor does not elect to
terminate this Lease, lessor shall restore the building and the
premises with reasonable promptness, subject to delays beyond
lessor's control and delays in the making of insurance adjustments
between lessor and its insurance carrier, and lessee shall have no
right to terminate this lease except as herein provided. Lessor
need not restore fixtures and improvements owned by lessee.
If the premises or any part of the premises or any estate
therein, or any other part of the building materially affecting
lessee's use of the premises, be taken by eminent domain, this
lease shall terminate on the date when title vests pursuant to such
taking. The rent, and any additional rent, shall be apportioned as
of the termination date and any rent paid for any period beyond
such date shall be repaid to lessee. Lessee shall not be entitled
to any part of the award for such taking or any payment
in lieu of such payment, but lessee may file a claim for any taking
of fixtures and improvements owned by lessee, and for moving
expenses.
Section XIX
Lessor's Remedies on Default
If lessee defaults in the payment of rent, or any additional
rent, or defaults in the performance of any of the other covenants
or conditions of this agreement, lessor may give lessee notice of
such default and if lessee does not cure any rent, or additional
rent, default within ten (10) days, or other default within thirty
(30) days, after the giving of such notice ( or if such other
default is of such nature that it cannot be completely cured within
such period, if lessee does not commence such curing within such
(30) days and thereafter proceed with reasonable diligence and in
good faith to cure such default), then lessor may terminate this
lease on not less than thirty (30) days' notice to lessee. On the
date specified in the notice the term of this lease shall terminate
and lessee shall remain liable as provided below. If this lease
shall have been so terminated by lessor, lessor may at any time
thereafter resume possession of the premises by any lawful means
and remove lessee or other occupants and their effects.
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Section XX
Deficiency
In any case where lessor has recovered possession of the
premises by reason of lessee's default, lessor may, at lessor's
option, occupy the premises or cause the premises to be
redecorated, altered, divided, consolidated with other adjoining
premises, or otherwise changed or prepared for reletting, and may
relet the premises or any part of the premises as agent of lessee
or otherwise, for a term or terms to expire prior to, at the same
time as, or subsequent to, the original expiration date of this
lease, at lessor's optionor and receive the rent therefor. Rent so
received shall be applied first to the payment of such expenses as
lessor may have insured in connection with the recovery of
possession redecorating, altering, dividing, consolidating with
other adjoining premises, or other-wise changing or preparing for
reletting, and the reletting, including brokerage and reasonable
attorneys' fees, and then to the payment of damages in amounts
equal to the rent under this agreement and to the cost and expenses
of performance of the other covenants of lessee as herein provided.
Lessee agrees, in any such case, whether or not lessor has relet,
to pay to lessor damages equal to the rent and other sums herein
agreed to be paid by lessee, less the net proceeds of the
reletting, if any, and the damages shall be payable by lessee on
the several rent days above specified. In reletting the premises,
lessor may grant rent concessions, and lessee shall not be credited
with such concessions. No such reletting shall constitute a
surrender and acceptance or be deemed evidence of a surrender and
acceptance. If lessor elects, pursuant to this agreement, actually
to occupy and use the premises or any part of the premises during
any part of the balance of the term as originally fixed or since
extended, there shall be allowed against lessee's obligation for
rent or damages as herein defined, during the period of lessor's
occupancy, the reasonable value of such occupancy, not to exceed in
any event the rent herein reserved and such occupancy shall not be
construed as a relief of lessee's liability under this agreement.
Lessee hereby waives all right of redemption to which lessee
or any person claiming under lessee might be entitled by any law
now or hereafter in force. Lessor's remedies under this agreement
are in addition to any remedy allowed by law. Lessor shall be
entitled to recover reasonable attorney's fees and costs in the
enforcement of any provision of this Lease against lessee.
Section XXI
Effect of Failure to Insist on Strict Compliance with Conditions
The failure of either party to insist on strict performance of
any covenant or condition of this agreement, or to exercise any
option herein contained, shall not be construed as a waiver of such
covenant, condition, or option in any other instance. This Lease
cannot be changed or terminated orally.
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Section XXII
Collection of Rent from Any Occupant
If the premises are sublet or occupied by anyone other than
lessee and lessee is in default under this agreement, or if this
lease is assigned by lessee, lessor may collect rent from the
assignee, subtenant, or occupant, and apply the net amount
collected to the rent herein reserved. No such collection shall be
deemed a waiver of the covenant herein against assignment and
subletting, or the acceptance of such assignee, subtenant, or
occupant as lessee, or a release of lessee from further performance
of the covenants herein contained.
Section XXIII
Subordination of Lease
This lease shall be subject and subordinate to all underlying
leases and to mortgages and trust deeds which may now or hereafter
affect such leases or the real property of which the premises form
a part, and also to all renewals, modifications, consolidations,
and replacements of the underlying leases and mortgages and trust
deeds. Although no instrument or act on the part of lessee shall
be necessary to effectuate such subordination, lessee will
nevertheless, execute and deliver such further instruments
confirming such subordination of this lease as may be desired by
the holders of the mortgages and trust deeds or by any of the
lessors under such underlying leases. Lessee hereby appoints
lessor attorney in fact, irrevocably, to execute and deliver any
such instrument for lessee. If any underlying lease to which this
lease is subject terminates, lessee shall, on timely request,
attorn to the owner of the reversion.
Section XXIV
Lessor's Right to Cure Lessee's Breach
If lessee breaches any covenant or condition of this lease,
lessor may, on reasonable notice to lessee (except that no notice
need be given in case of emergency), cure such breach at the
expense of lessee and the reasonable amount of all expenses,
including attorneys' fees, incurred by lessor in so doing (whether
paid by lessor or not) shall be deemed additional rent payable on
demand.
Section XXV
Mechanics' Lien
Lessee shall within 10 days after notice from lessor discharge
any mechanics' liens for materials or labor claimed to have been
furnished to the premises on lessee's behalf
Section XXVI
Notices
Any notice by either party to the other shall be in writing
and shad be deemed to have been duly given only if delivered
personally or sent by registered or certified mail in an addressed
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postpaid envelope; if to lessee, at the above described building;
if to lessor, at lessor's address as set forth above; or, to
either, at such other address as lessee or lessor, respectively,
may designate in writing. Notice shall be deemed to have been duly
given, if delivered personally, upon delivery, and if mailed,
upon the 3rd day after the mailing of such notice.
Section XXVII
Lessor's Right to Inspection, Repair, and Maintenance
Lessor may enter the premises at any reasonable time, upon
adequate notice to lessee (except that no notice need be given in
case of emergency) for the purpose of inspection or the making of
such repairs, replacements, or additions in, to, on or about the
premises or the building, as lessor deems necessary or desirable.
Lessee shall have no claim or cause of action against lessor by
reason of such entry except as provided in Section XXXIII of this
agreement.
Section XXVIII
Interruption of Services or Use
Interruption or curtailment of any service maintained in the
building, if caused by strikes, mechanical difficulties, or any
causes beyond lessor's control whether similar or dissimilar to
those enumerated, shall not entitle lessee to any claim against
lessor or to any abatement in rent, and shall not constitute
constructive or partial eviction, unless lessor fails to take such
measures as may be reasonable in the circumstances to restore the
service without undue delay. If the premises are rendered
untenantable in whole or in part, for a period of 30 business days,
by the making of repairs, replacements, or additions, other than
those made with lessee's consent or caused by misuse or neglect by
lessee or lessee's agents, servants, visitors, or licensees, there
shall be a proportionate abatement of rent during the period of
such untenantability.
Section XXIX
Conditions of Lessor's Liability
Lessee shall not be entitled to claim a constructive eviction
from the premises unless lessee shall have first notified lessor in
writing of the condition or conditions giving rise to such
eviction, and, if the complaints be justified, unless lessor shall
have failed within a reasonable time after receipt of such notice
to remedy such conditions.
Section XXX
Lessor's Right to Show Premises
Lessor may show the premises to prospective purchasers and
mortgagees and, during the 3 months prior to termination of this
lease, to prospective tenants, during business hours upon
reasonable notice to lessee.
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Section XXXI
Effect of Other Representations
No representations or promises shall be binding on the parties
to this agreement except those representations and promises
contained herein or in sum future writing signed by the party
making such representations or promises.
Section XXXII
Peaceful Enjoyment
Lessor covenants that if, and so long as, lessee pays the
rent, and any additional rent as herein provided, and performs the
covenants of this lease, lessee shall peaceably and quietly have,
hold, and enjoy the premises for the term herein mentioned, subject
to the provisions of this lease.
Section XXXIII
Lessee's Certification as to Force and Effect of Lease
Lessee shall from time to time, upon not less than 3 days'
prior written request by lessor, execute, acknowledge and deliver
to lessor a written statement certifying that the lease is
unmodified in full force and effect, or that the lease is in full
force and effect as modified and listing the instruments of
modification; the dates to which the rents and other charges have
been paid; and, whether or not to the best of lessee's knowledge
lessor is in default under this lease and, if so, specifying the
nature of the default. It is intended that any such statement
delivered pursuant to this Section may be relied upon by a
prospective purchaser of lessor's interest or mortgagee of lessor's
interest or assignee of any mortgage upon lessor's interest in the
building.
Section XXXIV
Waiver of Jury Trial
To the extent such waiver is permitted by law, the parties
waive trial by jury in any action or proceeding brought in
connection with this lease or the premises.
Section XXXV
Indemnification
Lessor shall not be liable and lessee hereby waives all claims
against lessor for any damage to any property or any injury to any
person in or about the Premises or other portions of the Building
by or from any cause whatsoever, including without Stations rain or
water leakage of any character from the roof, windows, walls,
basement, pipes, pluming works or appliances, of the Building not
being in good condition or repair, gas, fire, oil electricity,
theft, or by the acts or omissions of other tenants of the
Building; except that lessor will indemnify and hold lessee
harmless from such claims to the extent caused by the gross
negligence or willful act of lessor, or its agents, employees or
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contractors. Lessee shall hold lessor harmless from and defend
lessor against any and all claims, liability or costs (including
court costs and attorneys' fees) for any damage to any property or
any injury to any person occurring in, on or about the Premises or
other portions of the Building when such injury or damage shall be
caused by or arise from, in part or in whole, (a) the act, neglect,
fault or omission to meet the standards imposed by any duty with
respect to the injury or damage, by Lessee, its agents, servants,
employees or invitees; (b) the conduct or management of any work or
thing whatsoever done by lessee in or about the Premises or from
transactions of lessee concerning the Premises; or (c) any breach
or default on or part of lessee in the performance of any covenant
or agreement on the part of lessee to be performed pursuant to this
Lease. The provisions of this Section shall survive the
termination of this Lease with respect to any claims or liability
arising prior to such termination.
Section XXXVI
Section Headings
The Section headings in this lease are intended for
convenience only and shall not be taken into consideration in any
construction or interpretation of this lease or any of its
provisions.
Section XXXVII
Binding Effect on Successors and Assigns
The provisions of this lease shall apply to, bind, and inure
to the benefit of lessor and lessee, and their respective heirs,
successors, legal representatives, and assigns. It is understood
that the term "lessor" is used in this lease mans only the owner,
a mortgagee in possession, or a term lessee of the building, so
that in the event of any sale of the building or any lease of the
building, or if a mortgagee shall take possession of the premises,
the lessor named herein shall be entirely freed and relieved of all
covenants and obligations of lessor subsequently accruing under
this agreement it shall be deemed without further agreement that
the purchaser, the term lessee of the building, or the mortgagee in
possession has assumed and agreed to carry out any and all
covenants and obligations of the lessor under this agreement.
Section XXXVIII
Rules and Regulations
1 . No sign, advertisement or notice shall be inscribed,
painted or affixed on any part of the outside or inside of
Building, except on the glass of the doors and windows of the
Premises and on the directory board, and then only of such color,
size, style and material as shall be first specified by the lessor
in , endorsed on this lease. No showcase shall be placed in front
of Building by lessee, without the written consent of lessor
endorsed on this lease. The lessor reserves the right to remove
all other signs and showcases without notice to the Lessee, at the
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expense of the lessee. At the expiration of the term Lessee is to
remove all his signs from such windows, doors and directory board.
2. Lessee shall not put up or operate any steam engine,
boiler, machinery or stove upon the Premises, or carry on any
mechanical business on Premises, or use or store inflammable fluids
in Premises without the written consent of the lessor first had and
endorsed on this Lease, and all stoves which may be allowed in the
Premises shall be placed and set up according to the city
ordinance.
3. No additional locks shall be placed upon any doors of
Premises without the written consent of the lessor first had and
endorsed upon this Lease; and the lessee will not permit any
duplicate keys to be made (all necessary keys to be furnished by
lessor) and upon the termination of this lease, lessee will
surrender all keys of Premises and Building.
4. AR safes shall be carried into Premises at such times and
in such a manner as shall be specified by the lessor; -the lessor
shall in all cases retain the power to prescribe the proper
position of such safes, and any damage done to the Building by
taking in or putting out a safe, or from overloading the floor with
any safe, shall be paid by the lessee.
5. No person or persons other than the janitor of this
Building shall be employed by lessee for the purpose of taking
charge of Premises without the written consent of lessor first had
and endorsed upon this Lease. Any person or persons so employed by
lessee (with the written consent of the lessor) must be subject to
and under the control and direction of the janitor of the Building
in all things in the Building and outside of the Premises. The
agent and janitor of the Building shall at all times keep a pass
key and be allowed admittance to the Premises, to cover any
emergency of fire, or required examination that may arise.
6. The Premises leased shall not be used for the purpose of
lodging or sleeping rooms or for any immoral or illegal purpose.
7. The rent of an office will include occupancy of office,
water to lessor's standard fixtures, heat and elevator service
during reasonable working hours; but lessor shall not be liable for
any damages from the stoppage of water, heat or elevator service.
8. If lessee desires facsimile or telephonic connections,
the lessor will direct the electric@ as to where and how the wires
are to be introduced, and without such written directions endorsed
on this lease no boring or cutting for wires will be permitted.
9. If lessee desires Venetian or other awnings or shades
over and outside of the windows, to be erected at the lessee's
expense, they must be of such shape, color, material and make as
may be prescribed by the lessor in writing on this Lease.
10. The light through the transoms opening into the hall
shall not be obstructed by the lessee. Birds, dogs or other shall
not be allowed in the Building. All tenants and occupants must
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observe strict care not to leave their windows open when it rains
or snows, and for any default or carelessness in these respects, or
any of them, shall make good all injuries sustained by other
tenants, and also all damage to the Building resulting from such
default or carelessness.
11. No packages, merchandise or other effects shall be
allowed to remain in the halls at any time.
12. The lessor reserves the right to make such other and
further reasonable rules and regulations as in his judgment may
from time to time be needful for the safety, care and cleanliness
of the Premises and for the preservation of good order therein.
13. It is understood and agreed between the lessee and the
lessor that no assent or consent to change in or waiver of any part
of this lease has been or can be made unless done in writing and
endorsed hereon by the lessor; and in such case it shall operate
only for the time and purpose in this lease expressly stated.
Dated December 31, 1997
LESSEE: LESSOR:
McHENRY METALS GOLF CORPORATION FLEMING & CO., P.C.
By: /s/ Theodore Aroney By: /s/ Henry J. Fleming, Jr.
Its V.P. Finance Its President
[Handwritten addendums]
EXIT PROVISION
Lessee can terminate the lease by notifying lessor in writing.
Lessee would be required to pay three months advance rent at
highest rent shown ($1,900 per month) upon termination.
SUBLEASE PROVISION
Lessee has the option to sublease with the approval of lessor. If
this is accepted, lessee agrees to pay rent at the highest rate
shown ($1,900 per month) effective with the sublease arrangement.
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MCHENRY METALS GOLF CORP.
STOCK OPTION PLAN
McHenry Metals Golf Corp., a corporation organized and
existing under the laws of the State of Nevada (hereinafter
referred to as the "Company"), hereby adopts the following Stock
Option Plan for certain of its employees and outside consultants:
1. Purpose.
This Stock Option Plan (herein referred to as the "Plan") is
intended to advance the interests of the Company by providing
employees and outside consultants having substantial
responsibility for the direction and management of the Company or
its subsidiaries with an opportunity to acquire a proprietary
interest in the Company and an additional incentive to promote
its success and to encourage them to remain in the employ of the
Company. The Plan is intended to permit stock options granted to
employees under the Plan to qualify as incentive stock options,
herein referred to as "Incentive Stock Options", under Section
422 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). All options granted under the plan
which are not intended to qualify as Incentive Stock Options
shall herein be referred to as "Non-Statutory Options". All
options granted under the Plan, including Incentive Stock
Options, and Non-Statutory Options are referred to as "Options".
2. Administration of Plan.
The Plan shall be administered by a Stock Option Committee
(the "Committee") of two directors of the Company who shall be
appointed by its Board of Directors. The Committee may adopt
rules and regulations from time to time for carrying out the
Plan. The interpretation and construction of any provision of the
Plan by the Committee shall be final and conclusive. The
Committee may consult with counsel, who may be counsel to the
Company, and shall not incur any liability for any action taken
in good faith in reliance upon the advice of counsel.
3. Eligibility.
All employees of the Company and all outside consultants
providing services to the Company shall be eligible to have
options granted to them. The Committee shall grant Options only
to employees of the Company and Company outside consultants of
the Company who perform services of major importance in the
management, operation and development of the business of the
Company, and it shall determine the number of shares to be
allocated to each Option. The Company shall effect the grant of
Options under the Plan in accordance with determinations made by
the Committee pursuant to the provisions of the Plan by execution
and delivery of written instruments in a form approved by the
Committee. All persons to whom Incentive Stock Options are
granted must be employees of the Company.
4. Stock.
The Company has authorized the Committee to appropriate and
to grant Options for and to issue and sell for the purpose of the
Plan an aggregate of 2,295,000 shares of the common stock of the
Company. Options to purchase any shares issued pursuant to the
Plan that, for any reason expire or are terminated unexercised
may be reissued under the Plan. The Company shall not be
required to issue or deliver any certificate for shares of its
stock purchased upon the exercise of any part of an Option before
(i) completion of any registration or other qualification of such
shares under any state or federal law or ruling or regulation of
any governmental regulatory body that the Company shall, in its
sole discretion, determine is necessary or advisable, or (ii) the
Board of Directors shall have been advised by counsel that the
issuance of such shares is exempted from any such registration
or qualification of such shares. In this regard the Committee
shall be able to require the execution of an "investment letter"
in standard form prior to the issuance of any shares purchased
upon the exercise of any part of an Option. Before the granting
of any Option hereunder, Optionee must agree that no share of
stock transferred to him pursuant to this Plan may be disposed of
by him within two (2) years from the date of the granting of the
Option nor within one (1) year after the transfer of such share
to said Optionee or such Option will not be qualified as an
Incentive Stock Option.
5. Tax Character of Options.
The Committee shall have discretion to designate whether
Options shall be Incentive Stock Options or Non-Statutory
Options. Subject to the limitations described in Sections 4,11,
16 and 17, all Options granted to employees of Company shall be
Incentive Stock Options, unless the Committee determines
otherwise.
6. Price.
Except as to Options to which the provisions of paragraph 16
and 17 apply, the purchase price of each share of stock covered
by an Option granted hereunder shall be equal to the fair market
value per share of the Company's common stock on the date the
Option is granted. As to Options to which the provisions of
paragraph 16 apply the purchase price of each share of stock
covered by such Option granted hereunder shall be at least one
hundred ten percent (110%) of the fair market value per share of
the Company's common stock on the date the Option is granted. If
the stock is traded in the over-the-counter market, such fair
market value shall be deemed to be the mean between the asked and
the bid prices on such day as reported by NASDAQ. If the stock
is traded on an exchange, such fair market value shall be deemed
to be the mean of the high and low prices at which it is quoted
or traded on such day on the exchange on which it generally has
the greatest trading volume. If the stock is not traded on
either an over-the-counter market or on an exchange, the fair
market value shall be set by the Committee in good faith based
upon all relevant facts and circumstances pursuant to any and all
regulations issued by the Internal Revenue Service.
7. Duration and Exercise of Options.
A. Except as to Options to which the provisions of
paragraph 16 and 17 hereof apply, the Option period shall be ten
(10) years or less from the date the Option is granted, and as to
Options to which the provisions of paragraph 16 apply, the Option
period shall be five (5) years or less from the date the Option
is granted, except that either such period shall be reduced with
respect to any Option as outlined below in the event of death or
termination of employment or retirement of the Optionee; provided
that the Committee may, in the case of merger, consolidation,
dissolution or liquidation, accelerate the expiration date and
the dates on which any part of the Option shall be exercisable
for all of the shares covered thereby, but the effectiveness of
such acceleration, and any exercise of the Option pursuant
thereto in excess of the number of shares for which it would have
been exercisable in the absence of such acceleration, shall be
conditioned upon the consummation of the merger, consolidation,
dissolution or liquidation.
B. The exercise of any Option and delivery of the optioned
shares shall be contingent upon receipt by the Company of the
full purchase price in cash.
C. No Incentive Stock Option may be exercised more than
thirty (30) days after termination of employment of the Optionee
except as hereinafter provided.
D. Except as otherwise provided herein, or unless otherwise
determined by the Committee, every Option granted hereunder
shall, upon its grant, be immediately exercisable. The Committee
shall have the right to set any vesting schedule or delay of
exercisability it deems appropriate.
E. Incentive Stock Options granted under the Plan may be
exercised, if otherwise timely, (i) within three (3) months after
retirement, other than retirement by reason of disability, of the
Optionee at or after the age of sixty-five (65) years, if such
retirement occurs on or after one year following the grant of any
Incentive Stock Option hereunder, and (ii) within three (3)
months after retirement occurring at any age by reason of
disability. In any such case, the Incentive Stock Option may not
be exercised for more than the number of shares, if any, as to
which it was exercisable by the Optionee immediately before such
retirement; provided that if such retirement was by reason of
disability, said Option shall in any case be exercisable for at
least fifty percent (50%) of the shares covered thereby; and
provided further that if such retirement occurred when or after
the Optionee attained the age of sixty-five (65) years, said
Option shall be exercisable for all of the shares covered
thereby.
F. If an Optionee shall die while employed by the Company
or within three (3) months after retirement, such Incentive Stock
Option may be exercised (to the extent that the Optionee would
have been entitled to do so at the date of this death) by the
legatees, personal representative or distributees of the Optionee
during the balance of the term thereof or within one year of the
date of the Optionee's death, whichever is shorter.
G. If Optionee is at the time of exercise, a person who is
regularly required to report his ownership and changes of
ownership of the common stock of the Company to the Securities
and Exchange Commission and is subject to short swing profit
liability under the provisions of Section 16(b) of the Securities
Exchange Act of 1934 as the same, or any replacement rule, now
exists, or may, from time to time, be amended, then the Optionee
may only exercise Options and Release Rights during the period
beginning on the third business day and ending on the twelfth
business day following the release for publication of quarterly
or annual summary statements of sales and earnings. This
condition shall be deemed to be satisfied if the specified
financial data appears (i) on a wire service, (ii) in a
financial news service, (iii) in a newspaper of general
circulation, or (iv) is otherwise made publicly available, and
shall remain in effect so long as it does not violate the law or
any rule or regulation adopted by appropriate governmental
authority.
H. Options may be exercised in whole or in part, but only
with respect to whole shares of stock. The Committee shall have
the right to set any minimum amount on the number of shares which
must be exercised at any one time as it deems appropriate.
8. Non-transferability of Options.
An Incentive Stock Option, by its terms, shall not be
transferable otherwise than by will or by the laws of descent and
distribution, and an Incentive Stock Option may be exercised
during the lifetime of the Optionee only by him.
9. Effect of Stock Dividends, etc.
The Committee shall make appropriate adjustments in the
price of the shares and the number allotted or subject to
allotment if there are any changes in the common stock of the
Company by reason of stock dividends, stock splits, reverse stock
splits, recapitalizations, mergers or consolidations.
10. Reorganization.
If (a) the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, (b)
all or substantially all of the property is acquired by another
corporation, or (c) the Company is reorganized, then the Company,
or the corporation assuming the obligations of the Company, shall
by action of its Board of Directors either:
(i) make equitable provisions so that the excess of
the aggregate fair market value of the shares subject to the
Stock Options over the option price of such shares
immediately after the merger, consolidation or
reorganization of the Company, is equivalent to the excess
of the aggregate fair market value of the shares subject to
such Stock Options over the option price of such shares
immediately before such merger, consolidation or
reorganization of the Company, or
(ii) give written notice to the employee that the
Options shall be terminated if they are not exercised within
a prescribed period after the date of such notice.
11. Limitations on Incentive Stock Options.
Notwithstanding anything in this Plan to the contrary, the
aggregate fair market value (determined at the time of grant) of
stock for which an employee may exercise Incentive Stock Options
under all plans of the Company shall not exceed $100,000 per
calendar year. If any employee shall have the right to exercise
any Options in excess of $100,000 during any calendar year, the
options in excess of $100,000 shall be deemed not to be Incentive
Stock Options.
12. Expiration and Termination of the Plan.
Options may be granted under the Plan at any time until the
Plan is terminated by the Board of Directors of the Company or
until such earlier date when termination of the Plan shall be
required by applicable law. If not sooner terminated, the Plan
shall terminate automatically on that date which is ten years
from the earlier of the date on which the Plan was originally
approved by the shareholders of the Company or the date on which
this Plan was adopted.<PAGE>
13. Amendments.
The Board of Directors of the Company may from time to time
make such changes in and additions to the Plan as it may deem
proper; provided that no change shall be made that increases
(except pursuant to Section 9) the total number of shares covered
by the Plan or effects any change in who may receive Options
under the Plan or materially increases the benefits accruing to
Optionees hereunder unless such change is authorized by the
holders of the common stock of the Company. Notwithstanding the
foregoing, the Board of Directors of the Company may amend the
Plan, without stockholder approval, to the extent necessary to
cause Incentive Stock Options granted under the Plan to meet the
requirements of Section 422 of the Internal Revenue Code.
14. Interpretation.
The terms of this Plan concerning Incentive Stock Options
are subject to all present and future regulations and rulings of
the Secretary of the Treasury or his delegate relating to the
qualification of Incentive Stock Options under Section 422 of the
Internal Revenue Code. If any provision of the Plan conflicts
with any such regulation or ruling, then that provision of the
Plan shall be void and of no effect.
15. Effective Date of the Plan.
This Plan shall not become effective until adopted by the
Board of Directors, Company and shall not be effective unless it
is approved by the stockholders of the Company within twelve (12)
months from the date of such adoption.
<PAGE>
16. Ten Percent or Greater Shareholders.
Anything to the contrary contained herein notwithstanding,
no Incentive Stock Option shall be granted hereunder to any
individual, if at the time such Incentive Stock Option is
granted, such individual owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of Company or its parent or subsidiary corporations,
unless at the time such option is granted the option price is at
least one hundred ten percent (110%) of the fair market value of
the stock subject to the option and such option by its terms is
not exercisable after the expiration of five (5) years or less
from the date of such option is granted. Any option which does
not comply with the terms of this paragraph shall be deemed not
to be an Incentive Stock Option.
17. Non-Statutory Options
The Committee shall have the right to determine, subject to
approval of the Board of Directors, the rights and terms of all
Non-Statutory Options, including price, duration, transferability
and limitations on exercise.
MCHENRY METALS GOLF CORP.
By:
Gary V. Adams, President
T60(d)stkoptpl.mmg
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of April 2, 1997,
by and between McHenry Metals Golf Corp, a Nevada corporation and McHenry
Metals, Inc., an Illinois corporation, herein collectively referred to as
"McHenry" and Gary V. Adams, herein referred to as "Adams".
ARTICLE 1. TERM OF EMPLOYMENT
Section 1.01. McHenry hereby employs Adams and Adams hereby accepts
employment with McHenry for a period of three years beginning on April 2, 1997
and terminating on April 1, 2000.
Section 1.02. This agreement shall be renewed automatically for
succeeding terms
of one year unless either party gives notice to the other at least sixty (60)
days prior to the expiration of any term of his or its intention not to renew.
Section 1.03. As used herein, the phrase "employment term" refers to
the entire period of employment of Adams by McHenry hereunder, whether for the
periods provided above, or whether terminated earlier as hereinafter provided
or extended by mutual agreement between the parties.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.01. Adams shall serve as the President and Chairman of the
Board of Directors of McHenry. In his capacity as President of McHenry, Adams
shall do and perform all services, acts, or things necessary or advisable to
manage and conduct the business of McHenry, subject at all times to the
policies set by McHenry's Board of Directors, and to the consent of the Board
or the Executive Committee of the Board when required by the terms of this
contract.
Section 2.02. Adams shall not, without specific approval of McHenry's
Board of Directors or Executive Committee, do or contract to do any of the
following:
(1) Borrow on behalf of McHenry;
(2) Purchase capital equipment for amounts in excess of the
amounts budgeted for expenditure by the Board of Directors or Executive
Committee.
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(3) Commit McHenry to the expenditure of more than $1,000 in the
development and sale of new products.
Section 2.03(a). Adams shall devote his entire productive time,
ability, and attention to the business of McHenry during the term of this
contract.
(b) Adams shall not engage in any other business duties or
pursuits whatsoever, or directly or indirectly render any services of a
business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of McHenry's Board of Directors or Executive Committee. However, the
expenditure of reasonable amounts of time for Fraternity of Golf or
educational, charitable, or professional activities shall not be deemed a
breach of this agreement if those activities do not materially interfere with
the services required under this agreement and shall not require the prior
written consent of Employer's Board of Directors or Executive Committee.
(c) This agreement shall not be interpreted to prohibit Adams
from making passive personal investments or conducting private business
affairs if those activities do not materially interfere with the services
required under this agreement. However, Adams shall not directly or
indirectly acquire, hold, or retain any interest in any business competing
with or similar in nature to the business of McHenry.
Section 2.04. During the term of this contract, Adams shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officers, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of McHenry.
Section 2.05. Adams hereby represents and agrees that the services to
be performed under the terms of this contract are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Adams therefore expressly agrees that McHenry,
in addition to any other rights or remedies that McHenry may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this contract by Adams.
Section 2.06(a). The parties acknowledge and agree that during the term
of this agreement and in the course of the discharge of his duties hereunder,
Adams shall have access to and become acquainted with information concerning
the operation and processes of McHenry including without limitation,
financial, personnel, sales, scientific, and other information that is owned
by McHenry and regularly used in the operation of McHenry's business, and that
such information constitutes McHenry's trade secrets.
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(b) Adams specifically agrees that he shall not misuse,
misappropriate, or disclose any such trade secrets, directly or indirectly, to
any other person or use them in any way, either during the term of this
agreement or at any other time thereafter, except as is required in the course
of his employment hereunder.
(c) Adams acknowledges and agrees that the sale or unauthorized
use or disclosure of any of McHenry's trade secrets obtained by Adams during
the course of his employment under this agreement, including information
concerning McHenry's current or any future and proposed work, services, or
products, the facts that any such work, services, or products are planned,
under consideration, or in production, as well as any descriptions thereof,
constitute unfair competition. Employee promises and agrees not to engage in
any unfair competition with McHenry, either during the term of this agreement
or at any other time thereafter.
(d) Adams further agrees that all files, records, documents,
drawings, specifications, equipment, and similar items relating to McHenry's
business, whether prepared by Adams or others, are and shall remain
exclusively the property of McHenry and that they shall be removed from the
premises of McHenry.
Section 2.07.(a). Adams promises and agrees that he will promptly and
fully inform McHenry of and disclose to McHenry all inventions, designs,
improvements, and discoveries that he makes during the term of this agreement,
whether individually or jointly in collaboration with others, which pertain or
relate to the business of McHenry or to any experimental work carried on by
McHenry, whether or not conceived during regular working hours.
(b) Adams shall make full disclosure to McHenry immediately after
creating any invention, making any discovery, or developing or improving any
processes, methods, formulas, machines, or devices, and shall thereafter keep
McHenry fully informed at all times of all progress in connection therewith.
Section 2.08.(a). Adams agrees that any and all intellectual
properties, including, but not limited to, all ideas, concepts, themes,
inventions, designs, improvements, and discoveries conceived, developed, or
written by Adams, either individually or jointly in collaboration with others,
pursuant to this agreement, shall belong to and be the sole and exclusive
property of McHenry.
(b) Adams further agrees to submit any dispute regarding whether
any intellectual property was conceived, developed, or written pursuant to
this agreement to a review process pursuant to McHenry's rules and policies.
(c) Adams further agrees that all rights in all intellectual
properties prepared by him pursuant to this agreement, including patent
rights, trademarks and copyrights applicable to any of the intellectual
properties described hereinabove, shall belong
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<PAGE>
exclusively to McHenry, shall
constitute "works made for hire," and shall be assigned promptly by Adams to
McHenry. Adams further agrees to assist McHenry in obtaining patents on all
such inventions, designs, improvements, and discoveries that are patentable or
copyright registration on all such works of creation that are copyrightable,
and shall execute all documents and do all things necessary to obtain patent
or copyright registration, vest McHenry with full and exclusive title, and
protect against infringement by others.
(d) Adams further agrees that all files, records, documents,
drawings, specifications, equipment, and similar items relating to McHenry's
business, whether prepared by Adams or others, are and shall remain
exclusively the property of McHenry and that they shall not be removed from
the premises of McHenry.
Section 2.09(a). McHenry shall have the right to use the name of Adams
as part of the trade name or trademark of McHenry if it should be deemed
advisable to do so. Any trade name or trademark, of which the name of Adams
is a part, that is adopted by McHenry during the employment of Adams may be
used thereafter by McHenry for as long as McHenry deems advisable.
(b) Adams shall not, without the prior written consent of
McHenry, either during the term of this agreement or at any time thereafter,
use or permit the use of his name in the trade name or trademark of any other
enterprise if that other enterprise is engaged in a business similar in any
respect to that conducted by McHenry, unless that trade name or trademark
clearly indicates that the other enterprise is a separate entity entirely
distinct from and not to be confused with McHenry and unless that trade name
or trademark excludes any words or symbols stating or suggesting prior or
current affiliation or connection by that other enterprise or its employees
with McHenry.
ARTICLE 3. OBLIGATIONS OF EMPLOYER
Section 3.01. McHenry shall provide Adams with the compensation,
incentives, benefits, and business expense reimbursement specified herein.
Section 3.02. McHenry shall provide Adams with a private office,
stenographic help, office equipment, supplies, and other facilities and
services, suitable to Adams' position and adequate for the performance of his
duties.
Section 3.03. McHenry shall indemnify Adams for all losses sustained by
Adams in direct consequence of the discharge of his duties on McHenry's
behalf.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Section 4.01.(a). As compensation for the services to be performed
hereunder, Adams shall receive a salary at the rate of $120,000 per annum,
payable not less than once
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each month, on or before the 30th day of each month through August 31, 1997,
and thereafter at the rate of $150,000 per annum.
(b). Adams shall receive such annual increases in salary as
may be determined by McHenry's Board of Directors or Executive Committee.
Section 4.02. Adams may at any time relinquish the position of
President of McHenry and retain the position of Chairman of the Board of
Directors of McHenry. At such time, the salary of Adams shall be subject to
renegotiation and Adams' obligations shall be redetermined as mutually agreed
between Adams and McHenry; provided, however, Adams' rights to and rights to
exercise the stock options granted pursuant to Article 5 of this Agreement
shall not be affected thereby.
Section 4.03. (a). In addition to all other compensation payable to
Adams, McHenry will pay to Adams a royalty upon the sale or license of "metal
woods" designed by Adams or by Adams individually or in collaboration with
others during the term of this Agreement, excluding any royalty or any such
"metal woods" developed pursuant to any license agreement between McHenry and
Wilson Sporting Goods Co., as follows:
(b). One dollar ($1.00) on each unit of such "metal woods"
sold by McHenry during the term of this Agreement, for the first five hundred
thousand (500,000) units sales; $.50 for the next five hundred thousand
(500,000) units sales; and $.25 for all such sales in excess of one million
(1,000,000) units sales.
(c). In the event McHenry shall license the manufacture or
assembly and sale of such metal woods by others, McHenry will pay to Adams a
royalty for each such sale by any such licensee in the amount and included in
the royalty set forth above.
(d). All question of whether, when, how, and to whom
licenses shall be generated, shall be determined in the sole discretion of
McHenry.
(e). All such royalties shall be paid quarterly in arrears,
thirty (30) days after the end of each calendar quarter, based on sales
collections and shall exclude returns, and such "metal woods" supplied for
demonstration or promotional purposes.
(f). This royalty will not be assigned by Adams and any
such assignment or assignment to such payments, by operation of law or
otherwise, except to Adams' estate, or heirs at law, shall be void and of no
effect whatsoever.
ARTICLE 5. STOCK OPTION
Section 5.01.(a). McHenry hereby grants Adams an option to purchase
600,000 shares of McHenry's common stock at a purchase price of $.50 per
share. This option may be exercised in whole or in part, but may only be
exercised in lots of 100,000 shares or
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more. Adams shall not have any of the
rights of, nor be treated as, a shareholder with respect to the shares subject
to this option until he has exercised the option and has become the
shareholder of record of those shares.
(b) This option may only be exercised by Adams during the term of
his employment hereunder. However, in the event that the employment term is
terminated, Adams shall retain the right to exercise any unused portion of the
option until three (3) months after such termination.
ARTICLE 6. EMPLOYEE BENEFITS
Section 6.01. Adams shall be entitled to 15 days vacation time each
year without loss of compensation. Adams may be absent from his employment
for vacation only at such times as McHenry's Board of Directors or Executive
Committee shall determine from time to time. In the event that Adams is
unable for any reason to take the total amount of vacation time authorized
herein during any year, he may accrue that time and add it to vacation time
for any following year or may receive a cash payment therefor in an amount
equal to the amount of annual salary attributable to that period of time or
shall be deemed to have waived any entitlement to vacation time for that year.
Section 6.02. Adams shall be entitled to 15 days per year as sick leave
with full pay. Sick leave may be accumulated up to a total of 60 days.
Section 6.03. McHenry agrees to include Adams in the coverage of its
medical, major medical, hospital, dental, and eye care insurance when obtained
by McHenry subject to eligibility.
ARTICLE 7. BUSINESS EXPENSES
Section 7.01.(a) McHenry shall promptly reimburse Adams for all
reasonable business expenses incurred by Adams in connection with the business
of McHenry.
(b) Each such expenditure shall be reimbursable only if it is of
a nature qualifying it as a proper deduction on the federal and state income
tax return of McHenry.
(c) Each such expenditure shall be reimbursable only if Adams
furnishes to McHenry adequate records and other documentary evidence required
by federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of each such expenditure as an income tax
deduction.
Section 7.02. In the event that any expenses paid for Adams or any
reimbursement of expenses paid to Adams shall, on audit or other examination
of McHenry's income tax returns, be determined not to be allowable deductions
from McHenry's gross income, and in the further event that this determination
shall be acceded to by McHenry or made final
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<PAGE>
by the appropriate federal or
state taxing authority or a final judgment of a court of competent
jurisdiction, and no appeal is taken from the judgment or the applicable
period for filing notice of appeal has expired, Adams shall repay to McHenry
the full amount of the disallowed expenses.
Section 7.03. McHenry shall provide to Adams, at the expense of
McHenry, a driver/personal assistant. Such driver shall be in lieu of all
expenses for use of Adams' automobile incurred in connection with the business
of McHenry. Adams shall obtain and maintain at his expense, an automobile
liability insurance policy which shall name McHenry as an additional insured.
ARTICLE 8. TERMINATION OF EMPLOYMENT
Section 8.01.(a) McHenry reserves the right to terminate this agreement
if Adams wilfully breaches or habitually neglects the duties which he is
required to perform under the terms of this agreement; or commits such acts of
dishonesty, fraud, misrepresentation or other acts of moral turpitude as would
prevent the effective performance of his duties.
(b) McHenry may at its option terminate this agreement for the
reasons stated in this Section by giving written notice of termination to
Adams without prejudice to any other remedy to which McHenry may entitled
either at law, in equity, or under this agreement.
(c) The notice of termination required by this section shall
specify the ground for the termination and shall be supported by a statement
of all relevant facts.
(d) Termination under this section shall be considered "for
cause" for the purposes of this agreement.
Section 8.02.(a) This agreement shall be terminated upon the death of
Adams.
(b) McHenry reserves the right to terminate this agreement not
less than three months after Adams suffers any physical or mental disability
that would prevent the performance of his duties under this agreement. Such a
termination shall be effected by giving 10 days' written notice of termination
to Adams.
(c) Termination under this section shall not be considered "for
cause" for the purposes of this agreement.
Section 8.03.(a) This agreement shall be terminated by any voluntary or
involuntary dissolution of McHenry resulting from either a merger or
consolidation in which McHenry is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of
McHenry.
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(b) Termination under this section shall not be considered "for
cause" for the purposes of this agreement.
Section 8.04. Notwithstanding any provision of this agreement, if
McHenry terminates this agreement without cause, it shall pay Adams an amount
equal to three (3) months' salary at the then current rate of compensation.
ARTICLE 9. GENERAL PROVISIONS
Section 9.01. Any notices to be given hereunder by either party to the
other shall be in writing and may be transmitted by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notice shall be addressed to the parties at the addresses appearing in
the introductory paragraph of this agreement, but each party may change that
address by written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of the date of actual receipt;
mailed notices shall be deemed communicated as of the date of mailing.
Section 9.02.(a) Any controversy between McHenry and Adams involving
the construction or application of any of the terms, provisions, or conditions
of this agreement shall on the written request of either party served on the
other be submitted to arbitration. Arbitration shall comply with and be
governed by the provisions of the California Arbitration Act.
(b) McHenry and Adams shall each appoint one person to hear and
determine the dispute. If the two persons so appointed are unable to agree,
then those persons shall select a third impartial arbitrator whose decision
shall be final and conclusive upon both parties.
(c) The cost of arbitration shall be borne by the losing party
or in such proportions as the arbitrators decide.
Section 9.03. If any action at law or in equity is necessary to enforce
or interpret the terms of this agreement, the prevailing party shall be
entitled to reasonable attorney fees,
costs, and necessary disbursements in addition to any other relief to which
that party may be entitled. This provision shall be construed as applicable
to the entire contract.
Section 9.04. This agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Adams by McHenry and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this agreement acknowledges that no representation,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this agreement shall be valid or binding on either party.
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Section 9.05. Any modification of this agreement will be effective only
if it is in writing and signed by the party to be charged.
Section 9.06. The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement
by the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
Section 9.07. If any provision in this agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect.
Section 9.08. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Executed at Carlsbad, California, a of the day and year first above
appearing.
EMPLOYER EMPLOYEE
McHENRY METALS, INC.
/s/Theodore Aroney /s/Gary V. Adams
By: __________________________________ ______________________________
GARY V. ADAMS
McHENRY METALS GOLF CORP.
/s/Theodore Aroney
By: __________________________________
9
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of April 1, 1997,
by and between McHenry Metals Golf Corp, a Nevada corporation and McHenry
Metals, Inc., an Illinois corporation, herein collectively referred to as
"McHenry" and Bradley J. Wilhite, herein referred to as "Wilhite".
ARTICLE 1. TERM OF EMPLOYMENT
Section 1.01 McHenry hereby employs Wilhite and Wilhite hereby
accepts employment with McHenry for a period of one year beginning on May 1,
1997 and terminating on April 30, 1998.
Section 1.02 This agreement shall be renewed automatically for
succeeding terms of one year unless either party gives notice to the other at
least sixty (60) days prior to the expiration of any term of his or its
intention not to renew.
Section 1.03 As used herein, the phrase "employment term" refers to
the entire period of employment of Wilhite by McHenry hereunder, whether for
the periods provided above, or whether terminated earlier as hereinafter
provided or extended by mutual agreement between the parties.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.01 Wilhite shall serve as Executive Vice President and as a
member of the Board of Directors of McHenry. In his capacity as Executive
Vice President of McHenry, Wilhite shall do and perform all services, acts, or
things necessary or advisable to fulfill the duties of a corporate executive
vice president, subject at all times to the policies set by McHenry's Board of
Directors, and to the consent of the Board or the Executive Committee of the
Board when required by the terms of this contract.
Section 2.02 Wilhite shall not, without specific approval of
McHenry's Board of Directors or Executive Committee, do or contract to do any
of the following:
(1) Borrow on behalf of McHenry;
(2) Purchase capital equipment for amounts in excess
of the amounts budgeted for expenditure by the
Board of Directors or Executive Committee.
Section 2.03 (a) Wilhite shall devote his entire productive time,
ability, and attention to the business of McHenry during the term of this
contract.
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(b) Wilhite shall not engage in any other business
duties or pursuits whatsoever, or directly or indirectly render any services
of a business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of McHenry's Board of Directors or Executive Committee. However, the
expenditure of reasonable amounts of time for educational, charitable, or
professional activities shall not be deemed a breach of this agreement if
those activities do not materially interfere with the services required under
this agreement and shall not require the prior written consent of Employer's
Board of Directors or Executive Committee.
(c) This agreement shall not be interpreted to
prohibit Wilhite from making passive personal investments or conducting
private business affairs if those activities do not materially interfere with
the services required under this agreement. However, Wilhite shall not
directly or indirectly acquire, hold, or retain any interest in any business
competing with or similar in nature to the business of McHenry.
Section 2.04 During the term of this contract, Wilhite shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officers, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of McHenry.
Section 2.05 Wilhite hereby represents and agrees that the services
to be performed under the terms of this contract are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Wilhite therefore expressly agrees that McHenry,
in addition to any other rights or remedies that McHenry may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this contract by Wilhite.
Section 2.06 (a) The parties acknowledge and agree that during
the term of this agreement and in the course of the discharge of his duties
hereunder, Wilhite shall have access to and become acquainted with information
concerning the operation and processes of McHenry including without
limitation, financial, personnel, sales, scientific, and other information
that is owned by McHenry and regularly used in the operation of McHenry's
business, and that such information constitutes McHenry's trade secrets.
(b) Wilhite specifically agrees that he shall not
misuse, misappropriate, or disclose any such trade secrets, directly or
indirectly, to any other person or use them in any way, either during the term
of this agreement or at any other time thereafter, except as is required in
the course of his employment hereunder.
(c) Wilhite acknowledges and agrees that the sale or
unauthorized use or disclosure of any of McHenry's trade secrets obtained by
Wilhite during the course
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of his employment under this agreement, including information concerning
McHenry's current or any future and proposed work, services, or products, the
facts that any such work, services, or products are planned, under
consideration, or in production, as well as any descriptions thereof,
constitute unfair competition. Employee promises and agrees not to engage in
any unfair competition with McHenry, either during the term of this agreement
or at any other time thereafter.
(d) Wilhite further agrees that all files, records,
documents, drawings, specifications, equipment, and similar items relating to
McHenry's business, whether prepared by Wilhite or others, are and shall
remain exclusively the property of McHenry and that they shall not be removed
from the premises of McHenry.
ARTICLE 3. OBLIGATIONS OF EMPLOYER
Section 3.01 McHenry shall provide Wilhite with the compensation,
incentives, benefits, and business expense reimbursement specified herein.
Section 3.02 McHenry shall provide Wilhite with a private office,
stenographic help, office equipment, supplies, and other facilities and
services, suitable to Wilhite's position and adequate for the performance of
his duties.
Section 3.03 McHenry shall indemnify Wilhite for all losses sustained
by Wilhite in direct consequence of the discharge of his duties on McHenry's
behalf.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Section 4.01 (a) As compensation for the services to be performed
hereunder, Wilhite shall receive a salary of $5,000 per month for the months
of May and June 1997, and thereafter at the rate of $94,800 per annum, payable
not less than once each month, on or before the 30th day of each month.
(b) Wilhite shall receive such annual increases in
salary as may be determined by McHenry's Board of Directors or Executive
Committee.
ARTICLE 5. STOCK BONUS
Section 5.01 As additional compensation, McHenry will issue to
Wilhite, as of the effective date of this Agreement, One Hundred Thousand
(100,000) shares of the common stock of McHenry.
Section 5.02 All shares issued to Wilhite pursuant to this provision
shall be subject to restriction, in addition to those imposed by Rule 144 of
the Rules of the Securities and Exchange Commission, that McHenry shall have
the right and option, but not the obligation, to repurchase such shares should
Wilhite resign or terminate his employment, except by his death, be terminated
for cause, give notice not to renew such employment, or be in breach of any
covenant herein.
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(a) If during the period ending January 1, 1999, all
of such shares; and
(b) If during the period ending January 1, 2000,
50,000 of such shares.
Section 5.03 The repurchase price of such shares shall be $.10 per
share.
Section 5.04 The shares certificate or certificates shall bear a
legend referring to this Agreement which shall bind any transferee of such
shares subject to this Agreement in addition to all other restrictions or
limitations. Upon transfer of any such shares, McHenry shall remove such
legend as to shares no longer subject to this Agreement.
Section 5.05 McHenry shall give written notice of exercise of this
right and option within thirty (30) days of any such termination or material
breach to Wilhite or any such holder of such shares then subject to this
Agreement and within thirty (30) days
thereafter such holder shall tender such shares subject to this Agreement as
of the date of such notice to McHenry's transfer agent conditioned upon
payment of the re-purchase price.
Section 5.06 In the event such shares are not tendered within such
period, then McHenry shall place a stop order on any further transfers of such
shares subject to this Agreement, and all rights and privileges of the holder
of such shares shall terminate.
Section 5.07 The provisions of this Agreement shall bind and inure to
the benefit of the parties, their permissible assigns, heirs and successors.
In the event that such shares are acquired in any merger or stock exchange,
the provisions hereof shall apply to any such shares on a prorata basis issued
in exchange for McHenry's shares then subject to this Agreement.
ARTICLE 6. EMPLOYEE BENEFITS
Section 6.01 Wilhite shall be entitled to 10 vacation days each
year accrued prorata bimonthly in accordance with McHenry's Employee Policy
Manual. Wilhite may be absent from his employment for vacation only at such
times as McHenry's Executive Committee shall determine from time to time. In
the event Wilhite is unable for any reason to take the total amount of
vacation time authorized during any year, he may accrue that time and carry
unused time forward to the next benefit year, provided that the total amount
of accrued and unused vacation benefits shall not exceed a total of 15 days at
any time. Vacation compensation shall be paid at his base rate at the time
taken. No vacation pay will be paid for unused vacation time while employed.
Upon termination of employment he will be paid for any unused vacation time
accrued through the last day of employment.
Section 6.02 Wilhite shall be entitled to 5 days per year as sick
leave accrued prorata monthly compensated at his base pay rate in accordance
with McHenry's Employee Policy Manual. Unused sick leave shall not be
accumulated beyond 5 days. Sick leave benefits will not be paid if not used.
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Section 6.03 McHenry agrees to include Wilhite in the coverage of
its medical, major medical, hospital, dental, and eye care insurance when
obtained by McHenry subject to eligibility.
ARTICLE 7. BUSINESS EXPENSES
Section 7.01 (a) McHenry shall promptly reimburse Wilhite for all
reasonable business expenses incurred by Wilhite in connection with the
business of McHenry.
(b) Each such expenditure shall be reimbursable only
if it is of a nature qualifying it as a proper deduction on the federal and
state income tax return of McHenry.
(c) Each such expenditure shall be reimbursable only
if Wilhite furnishes to McHenry adequate records and other documentary
evidence required by federal and state statutes and regulations issued by the
appropriate taxing authorities for the substantiation of each such expenditure
as an income tax deduction.
Section 7.02 In the event that any expenses paid for Wilhite or any
reimbursement of expenses paid to Wilhite shall, on audit or other examination
of McHenry's income tax returns, be determined not to be allowable deductions
from McHenry's gross income, and in the further event that this determination
shall be acceded to by McHenry or made final by the appropriate federal or
state taxing authority or a final judgment of a court of competent
jurisdiction, and no appeal is taken from the judgment or the applicable
period for filing notice of appeal has expired, Wilhite shall repay to McHenry
the full amount of the disallowed expenses.
Section 7.03 In order to reimburse Wilhite for his ordinary
automobile expenses, McHenry shall pay to Wilhite the sum of $400 per month as
an automobile expense payable monthly. Wilhite shall be responsible for all
reporting requirements.
ARTICLE 8. TERMINATION OF EMPLOYMENT
Section 8.01 (a) McHenry reserves the right to terminate this
agreement if Wilhite wilfully breaches or habitually neglects the duties which
he is required to perform under the terms of this agreement; or commits such
acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude
as would prevent the effective performance of his duties.
(b) McHenry may at its option terminate this
agreement for the reasons stated in this Section by giving written notice of
termination to Wilhite without prejudice to any other remedy to which McHenry
may entitled either at law, in equity, or under this agreement.
(c) The notice of termination required by this
section shall specify the ground for the termination and shall be supported by
a statement of all relevant facts.
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(d) Termination under this section shall be
considered "for cause" for the purposes of this agreement.
Section 8.02 (a) This agreement shall be terminated upon the
death of Wilhite.
(b) McHenry reserves the right to terminate this
agreement not less than three months after Wilhite suffers any physical or
mental disability that would prevent the performance of his duties under this
agreement. Such a termination shall be effected by giving 10 days' written
notice of termination to Wilhite.
(c) Termination under this section shall not be
considered "for cause" for the purposes of this agreement.
Section 8.03 (a) This agreement shall be terminated by any
voluntary or involuntary dissolution of McHenry resulting from either a merger
or consolidation in which McHenry is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of
McHenry.
(b) Termination under this section shall not be
considered "for cause" for the purposes of this agreement.
Section 8.04 Notwithstanding any provision of this agreement, if
McHenry terminates this agreement without cause, it shall pay Wilhite an
amount equal to three (3) months' salary at the then current rate of
compensation.
ARTICLE 9. GENERAL PROVISIONS
Section 9.01 Any notices to be given hereunder by either party to the
other shall be in writing and may be transmitted by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notice shall be addressed to the parties at the addresses appearing in
the introductory paragraph of this agreement, but each party may change that
address by written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of the date of actual receipt;
mailed notices shall be deemed communicated as of the date of mailing.
Section 9.02 (a) Any controversy between McHenry and Wilhite
involving the construction or application of any of the terms, provisions, or
conditions of this agreement shall on the written request of either party
served on the other be submitted to arbitration. Arbitration shall comply
with and be governed by the provisions of the California Arbitration Act.
(b) McHenry and Wilhite shall each appoint one
person to hear and determine the dispute. If the two persons so appointed are
unable to agree, then those persons shall select a third impartial arbitrator
whose decision shall be final and conclusive upon both parties.
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(c) The cost of arbitration shall be borne by the
losing party or in such proportions as the arbitrators decide.
Section 9.03 If any action at law or in equity is necessary to
enforce or interpret the terms of this agreement, the prevailing party shall
be entitled to reasonable attorney fees, costs, and necessary disbursements in
addition to any other relief to which that party may be entitled. This
provision shall be construed as applicable to the entire contract.
Section 9.04 This agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Wilhite by McHenry and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this agreement acknowledges that no representation,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this agreement shall be valid or binding on either party.
Section 9.05 Any modification of this agreement will be effective
only if it is in writing and signed by the party to be charged.
Section 9.06 The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement
by the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
Section 9.07 If any provision in this agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect.
Section 9.08 This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Executed at Carlsbad, California, as of the day and year first above
appearing.
EMPLOYER EMPLOYEE
McHENRY METALS, INC.
/s/ Gary V. Adams /s/ Bradley J. Wilhite
By: __________________________________ ______________________________
BRADLEY J. WILHITE
McHENRY METALS GOLF CORP. ______________________________
Street
/s/ Gary V. Adams
By: __________________________________ ______________________________
City/State/Zip
7
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of April 1, 1997,
by and between McHenry Metals Golf Corp, a Nevada corporation and McHenry
Metals, Inc., an Illinois corporation, herein collectively referred to as
"McHenry" and Mario Cesario, herein referred to as "Cesario".
ARTICLE 1. TERM OF EMPLOYMENT
Section 1.01 McHenry hereby employs Cesario and Cesario hereby
accepts employment with McHenry for an initial period commencing on April 15,
1997 and terminating on December 31, 1998.
Section 1.02 This agreement shall be renewed automatically for
succeeding terms of one year unless either party gives notice to the other at
least sixty (60) days prior to the expiration of any term of his or its
intention not to renew.
Section 1.03 As used herein, the phrase "employment term" refers to
the entire period of employment of Cesario by McHenry hereunder, whether for
the periods provided above, or whether terminated earlier as hereinafter
provided or extended by mutual agreement between the parties.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.01 Cesario shall serve as Director of Research and
Development of McHenry to design, develop, invent, improve methods, and
devices relating to the manufacturing and development of golf clubs, golf club
shafts, grips, and related components as well as systems for fabrication
thereof.
Section 2.02 (a) Cesario shall devote his entire productive time,
ability, and attention to the business of McHenry during the term of this
contract.
(b) Cesario shall not engage in any other business
duties or pursuits whatsoever, or directly or indirectly render any services
of a business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of McHenry's Board of Directors or Executive Committee. However, the
expenditure of reasonable amounts of time for educational, charitable, or
professional activities shall not be deemed a breach of this agreement if
those activities do not materially interfere with the services required under
this agreement and shall not require the prior written consent of Employer's
Board of Directors or Executive Committee.
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(c) This agreement shall not be interpreted to prohibit
Cesario from making passive personal investments or conducting private
business affairs if those activities do not materially interfere with the
services required under this agreement. However, Cesario shall not directly
or indirectly acquire, hold, or retain any interest in any business competing
with or similar in nature to the business of McHenry.
Section 2.03 During the term of this contract, Cesario shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officers, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of McHenry.
Provided, however, Cesario may continue to have his name and/or likeness on an
infomercial for "King Kong" woods for a period of twenty-four (24) months from
the date hereof, provided further no such activities uses any of Cesario's
time nor refers in any manner to McHenry.
Section 2.04 Cesario hereby represents and agrees that the services
to be performed under the terms of this contract are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Cesario therefore expressly agrees that McHenry,
in addition to any other rights or remedies that McHenry may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this contract by Cesario.
Section 2.05 (a) The parties acknowledge and agree that during
the term of this agreement and in the course of the discharge of his duties
hereunder, Cesario shall have access to and become acquainted with information
concerning the operation and processes of McHenry including without
limitation, financial, personnel, technical, patent, sales, scientific, and
other information that is owned by McHenry and regularly used in the operation
of McHenry's business, and that such information constitutes McHenry's trade
secrets.
(b) Cesario specifically agrees that he shall not
misuse, misappropriate, or disclose any such trade secrets, directly or
indirectly, to any other person or use them in any way, either during the term
of this agreement or at any other time thereafter, except as is required in
the course of his employment hereunder.
(c) Cesario acknowledges and agrees that the sale or
unauthorized use or disclosure of any of McHenry's trade secrets obtained by
Cesario during the course of his employment under this agreement, including
information concerning McHenry's current or any future and proposed work,
services, or products, the facts that any such work, services, or products are
planned, under consideration, or in production, as well as any descriptions
thereof, constitute unfair competition. Cesario promises and agrees not to
engage in any unfair competition with McHenry, either during the term of this
agreement or at any other time thereafter.
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(d) Cesario further agrees that all files, records,
documents, drawings, specifications, equipment, and similar items relating to
McHenry's business, whether prepared by Cesario or others, are and shall
remain exclusively the property of McHenry and that they shall not be removed
from the premises of McHenry.
Section 2.06 (a) Cesario promises and agrees that he will
promptly and fully inform McHenry of and disclose to McHenry all inventions,
designs, improvements, and discoveries that he makes during the term of this
agreement, whether individually or jointly in collaboration with others, which
pertain or relate to the business of McHenry or to any experimental work
carried on by McHenry, whether or not conceived during regular working hours.
(b) Cesario shall make full disclosure to McHenry
immediately after creating any invention, making any discovery, or developing
or improving any processes, methods, formulas, machines, or devices, and shall
thereafter keep McHenry fully informed at all times of all progress in
connection therewith.
Section 2.07 (a) Cesario agrees that any and all intellectual
properties, including, but not limited to, all ideas, concepts, themes,
inventions, designs, improvements, and discoveries conceived, developed, or
written by Cesario, either individually or jointly in collaboration with
others, pursuant to this agreement, shall belong to and be the sole and
exclusive property of McHenry.
(b) Cesario further agrees to submit any dispute regarding
whether any intellectual property was conceived, developed, or written
pursuant to this agreement to a review process pursuant to McHenry's rules and
policies.
(c) Cesario further agrees that all rights in all
intellectual properties prepared by him pursuant to this agreement, including
patent rights, trademarks and copyrights applicable to any of the intellectual
properties described hereinabove, shall belong exclusively to McHenry, shall
constitute "works made for hire," and shall be assigned promptly by Cesario to
McHenry. Cesario further agrees to assist McHenry in obtaining patents on all
such inventions, designs, improvements, and discoveries that are patentable or
copyright registration on all such works of creation that are copyrightable,
and shall execute all documents and do all things necessary to obtain patent
or copyright registration, vest McHenry with full and exclusive title, and
protect against infringement by others.
(d) Cesario further agrees that all files, records,
documents, drawings, specifications, equipment, and similar items relating to
McHenry's business, whether prepared by Cesario or others, are and shall
remain exclusively the property of McHenry and that they shall not be removed
from the premises of McHenry.
Section 2.08 (a) McHenry shall have the right to use the name of
Cesario as part of the trade name or trademark of McHenry if it should be
deemed advisable to do so. Any
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trade name or trademark, of which the name of
Cesario is a part, that is adopted by McHenry during the employment of Cesario
may be used thereafter by McHenry for as long as McHenry deems advisable.
(b) Cesario shall not, without the prior written consent
of McHenry, either during the term of this agreement or at any time
thereafter, use or permit the use of his name in the trade name or trademark
of any other enterprise if that other enterprise is engaged in a business
similar in any respect to that conducted by McHenry, unless that trade name or
trademark clearly indicates that the other enterprise is a separate entity
entirely distinct from and not to be confused with McHenry and unless that
trade name or trademark excludes any words or symbols stating or suggesting
prior or current affiliation or connection by that other enterprise or its
employees with McHenry.
ARTICLE 3. OBLIGATIONS OF EMPLOYER
Section 3.01 McHenry shall provide Cesario with the compensation,
incentives, benefits, and business expense reimbursement specified herein.
Section 3.02 McHenry shall provide Cesario with a private office,
stenographic help, office equipment, supplies, and other shop facilities and
services, suitable to Cesario's position and adequate for the performance of
his duties.
Section 3.03 McHenry shall indemnify Cesario for all losses
sustained by Cesario in direct consequence of the discharge of his duties on
McHenry's behalf.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Section 4.01 (a) As compensation for the services to be performed
hereunder, Cesario shall receive a salary at the rate of $65,000 per annum,
payable not less than once
each month, on or before the 30th day of each month.
(b) Cesario shall receive such annual increases in salary
as may be determined by McHenry's Board of Directors or Executive Committee.
Section 4.02 (a) In addition to all other compensation payable to
Cesario, McHenry will pay to Cesario a royalty upon the sale or license of
"metal woods" golf clubs designed by Cesario or by Cesario individually or in
collaboration with others during the term of this Agreement.
(b) One dollar ($1.00) on each such golf club sold by
McHenry during the term of this Agreement, for the first five hundred thousand
(500,000) sales; $.50 for the next five hundred thousand (500,000) sales; and
$.25 for all such sales in excess of one million (1,000,000) sales. For the
purposes hereof "unit" shall mean: each driver or fairway wood.
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(c) In the event McHenry shall license the manufacture or
assembly and sale of such golf clubs by others, McHenry will pay to Cesario a
royalty for each such sale by any such licensee in the amount and included in
the royalty set forth above.
(d) All question of whether, when, how, and to whom
licenses shall be generated, shall be determined in the sole discretion of
McHenry.
(e) All such royalties shall be paid quarterly in arrears,
commencing April 15, 1998, and continuing on the 15th day of each quarter
thereafter, based on sales collections and shall exclude returns, and such
golf clubs supplied for demonstration or promotional purposes.
(f) This royalty will not be assigned by Cesario and any
such assignment or assignment to such payments, by operation of law or
otherwise, except to Cesario's estate, or heirs at law, shall be void and of
no effect whatsoever.
Section 4.03 (a) As additional compensation, McHenry will issue
to Cesario, as of the effective date of this Agreement, Sixty Thousand
(60,000) shares of the common stock of McHenry.
(b) All shares issued to Cesario pursuant to this
provision shall be subject to restriction, in addition to those imposed by
Rule 144 of the Rules of the Securities and Exchange Commission, that McHenry
shall have the right and option, but not the obligation, to repurchase such
shares should Cesario resign or terminate his employment, except by his death,
be terminated for cause, give notice not to renew such employment, or be in
breach of any covenant herein.
(i) If during the period one (1) year from the date
hereof, all of such shares;
(ii) If during the period two (2) years from the date
hereof, 40,000 of such shares; and
(iii) If during the period three (3) years from the
date hereof, 20,000 shares.
(c) The repurchase price of such shares shall be $.10 per
share.
(d) The shares certificate or certificates shall bear a
legend referring to this Agreement which shall bind any transferee of such
shares subject to this Agreement in addition to all other restrictions or
limitations. Upon transfer of any such shares, McHenry shall remove such
legend as to shares no longer subject to this Agreement.
(e) McHenry shall give written notice of exercise of this
right and option within thirty (30) days of any such termination or material
breach to Cesario or any such holder of such shares then subject to this
Agreement and within thirty (30) days
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thereafter such holder shall tender such shares subject to this Agreement as
of the date of such notice to McHenry's transfer agent conditioned upon
payment of the re-purchase price.
(f) In the event such shares are not tendered within such
period, then McHenry shall place a stop order on any further transfers of such
shares subject to this Agreement, and all rights and privileges of the holder
of such shares shall terminate.
(g) The provisions of this Agreement shall bind and inure
to the benefit of the parties, their permissible assigns, heirs and
successors. In the event that such shares are acquired in any merger or stock
exchange, the provisions hereof shall apply to any such shares on a prorata
basis issued in exchange for McHenry's shares then subject to this Agreement.
ARTICLE 5. EMPLOYEE BENEFITS
Section 5.01 Cesario shall be entitled to 10 vacation days each
year accrued prorata bimonthly in accordance with McHenry's Employee Policy
Manual. Cesario may be absent from his employment for vacation only at such
times as McHenry's Executive Committee shall determine from time to time. In
the event Cesario is unable for any reason to take the total amount of
vacation time authorized during any year, he may accrue that time and carry
unused time forward to the next benefit year, provided that the total amount
of accrued and unused vacation benefits shall not exceed a total of 15 days at
any time. Vacation compensation shall be paid at his base rate at the time
taken. No vacation pay will be paid for unused vacation time while employed.
Upon termination of employment he will be paid for any unused vacation time
accrued through the last day of employment.
Section 5.02 Cesario shall be entitled to 5 days per year as sick
leave accrued prorata monthly compensated at his base pay rate in accordance
with McHenry's Employee Policy Manual. Unused sick leave shall not be
accumulated beyond 5 days. Sick leave benefits will not be paid if not used.
Section 5.03 McHenry agrees to include Cesario in the coverage of
its medical, major medical, hospital, dental, and eye care insurance when
obtained by McHenry subject to eligibility.
ARTICLE 6. BUSINESS EXPENSES
Section 6.01 (a) McHenry shall promptly reimburse Cesario for all
reasonable business expenses incurred by Cesario in connection with the
business of McHenry.
(b) Each such expenditure shall be reimbursable only if it
is of a nature qualifying it as a proper deduction on the federal and state
income tax return of McHenry.
(c) Each such expenditure shall be reimbursable only if
Cesario furnishes to McHenry adequate records and other documentary evidence
required by federal and state statutes and regulations issued by the
appropriate taxing authorities for the substantiation of each such expenditure
as an income tax deduction.
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Section 6.02 In the event that any expenses paid for Cesario or any
reimbursement of expenses paid to Cesario shall, on audit or other examination
of McHenry's income tax returns, be determined not to be allowable deductions
from McHenry's gross income, and in the further event that this determination
shall be acceded to by McHenry or made final by the appropriate federal or
state taxing authority or a final judgment of a court of competent
jurisdiction, and no appeal is taken from the judgment or the applicable
period for filing notice of appeal has expired, Cesario shall repay to McHenry
the full amount of the disallowed expenses.
Section 6.03 In order to reimburse Cesario for his ordinary
automobile expenses, McHenry shall pay to Cesario the sum of $600 per month as
a automobile expense payable monthly. Cesario shall be responsible for all
reporting requirements.
ARTICLE 7. TERMINATION OF EMPLOYMENT
Section 7.01 (a) McHenry reserves the right to terminate this
agreement if Cesario wilfully breaches or habitually neglects the duties which
he is required to perform under the terms of this agreement; or commits such
acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude
as would prevent the effective performance of his duties.
(b) McHenry may at its option terminate this agreement for
the reasons stated in this Section by giving written notice of termination to
Cesario without prejudice to any other remedy to which McHenry may entitled
either at law, in equity, or under this agreement.
(c) The notice of termination required by this section
shall specify the ground for the termination and shall be supported by a
statement of all relevant facts.
(d) Termination under this section shall be considered
"for cause" for the purposes of this agreement.
Section 7.02 (a) This agreement shall be terminated upon the
death of Cesario.
(b) McHenry reserves the right to terminate this agreement
not less than three months after Cesario suffers any physical or mental
disability that would prevent the performance of his duties under this
agreement. Such a termination shall be effected by giving 10 days' written
notice of termination to Cesario.
(c) Termination under this section shall not be considered
"for cause" for the purposes of this agreement.
Section 7.03 (a) This agreement shall be terminated by any
voluntary or involuntary dissolution of McHenry resulting from either a merger
or consolidation in which
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McHenry is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of
McHenry.
(b) Termination under this section shall not be considered
"for cause" for the purposes of this agreement.
Section 7.04 Notwithstanding any provision of this agreement, if
McHenry terminates this agreement without cause, it shall pay Cesario an
amount equal to three (3) months' salary at the then current rate of
compensation.
Section 7.05 Notwithstanding any provision of this agreement, if
McHenry terminates this agreement without cause or shall give notice of its
intention not to renew as provided in Section 1.02, or is terminated pursuant
to Section 7.02(a), (b), or 7.03(a), then McHenry shall continue to pay to
Cesario, heirs or personal representative, for a period of one (1) year after
the effective date thereof, such royalties which may come due pursuant to
Section 4.02 of this agreement.
ARTICLE 8. GENERAL PROVISIONS
Section 8.01 Any notices to be given hereunder by either party to
the other shall be in writing and may be transmitted by personal delivery or
by mail, registered or certified, postage prepaid with return receipt
requested. Mailed notice shall be addressed to the parties at the addresses
appearing in the introductory paragraph of this agreement, but each party may
change that address by written notice in accordance with this section.
Notices delivered personally shall be deemed communicated as of the date of
actual receipt; mailed notices shall be deemed communicated as of the date of
mailing.
Section 8.02 (a) Any controversy between McHenry and Cesario
involving the construction or application of any of the terms, provisions, or
conditions of this agreement shall on the written request of either party
served on the other be submitted to arbitration. Arbitration shall comply
with and be governed by the provisions of the California Arbitration Act.
(b) McHenry and Cesario shall each appoint one person to
hear and determine the dispute. If the two persons so appointed are unable to
agree, then those persons shall select a third impartial arbitrator whose
decision shall be final and conclusive upon both parties.
(c) The cost of arbitration shall be borne by the losing
party or in such proportions as the arbitrators decide.
Section 8.03 If any action at law or in equity is necessary to
enforce or interpret the terms of this agreement, the prevailing party shall
be entitled to reasonable attorney fees, costs, and necessary disbursements in
addition to any other relief to which that party may be entitled. This
provision shall be construed as applicable to the entire contract.
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Section 8.04 This agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Cesario by McHenry and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this agreement acknowledges that no representation,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this agreement shall be valid or binding on either party.
Section 8.05 Any modification of this agreement will be effective
only if it is in writing and signed by the party to be charged.
Section 8.06 The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement
by the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
Section 8.07 If any provision in this agreement is held by a court
of competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect.
Section 8.08 This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Executed at Carlsbad, California, as of the day and year first above
appearing.
McHENRY CESARIO
McHENRY METALS, INC.
/s/ Bradley J. Wilhite /s/ Mario Cesario
By: __________________________________ ______________________________
MARIO CESARIO
233 Anita Ct.
Redlands, CA 92373
9
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of April 1, 1997,
by and between McHenry Metals Golf Corp, a Nevada corporation and McHenry
Metals, Inc., an Illinois corporation, herein collectively referred to as
"McHenry" and Thomas D. Grimley, herein referred to as "Grimley".
ARTICLE 1. TERM OF EMPLOYMENT
Section 1.01 McHenry hereby employs Grimley and Grimley hereby
accepts employment with McHenry for a period of one year beginning on April
15, 1997 and terminating on April 1, 1998.
Section 1.02 This agreement shall be renewed automatically for
succeeding terms of one year unless either party gives notice to the other at
least sixty (60) days prior to the expiration of any term of his or its
intention not to renew.
Section 1.03 As used herein, the phrase "employment term" refers to
the entire period of employment of Grimley by McHenry hereunder, whether for
the periods provided above, or whether terminated earlier as hereinafter
provided or extended by mutual agreement between the parties.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.01 Grimley shall serve as Comptroller and Chief Financial
Officer. In his capacity as Comptroller and Chief Financial Officer of
McHenry, Grimley shall do and perform all services, acts, or things necessary
or advisable to fulfill the duties of a corporate comptroller, including
carefully and accurately causing to be prepared books of accounts, balance
sheets, and operating statements, and examination and reporting of
expenditures of McHenry, subject at all times to the policies set by McHenry's
Board of Directors, and to the consent of the Board or the Executive Committee
of the Board when required by the terms of this contract.
Section 2.02 (a) Grimley shall devote his entire productive time,
ability, and attention to the business of McHenry during the term of this
contract.
(b) Grimley shall not engage in any other business
duties or pursuits whatsoever, or directly or indirectly render any services
of a business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of McHenry's Board of Directors or Executive Committee. However, the
expenditure of reasonable amounts of time for educational, charitable, or
professional activities shall not be deemed a breach of this agreement if
those activities do not materially interfere with the services required under
this agreement and
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shall not require the prior written consent of Employer's Board of Directors
or Executive Committee.
(c) This agreement shall not be interpreted to
prohibit Grimley from making passive personal investments or conducting
private business affairs if those activities do not materially interfere with
the services required under this agreement. However, Grimley shall not
directly or indirectly acquire, hold, or retain any interest in any business
competing with or similar in nature to the business of McHenry.
Section 2.03 During the term of this contract, Grimley shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officers, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of McHenry.
Section 2.04 Grimley hereby represents and agrees that the services
to be performed under the terms of this contract are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Grimley therefore expressly agrees that McHenry,
in addition to any other rights or remedies that McHenry may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this contract by Grimley.
Section 2.05 (a) The parties acknowledge and agree that during
the term of this agreement and in the course of the discharge of his duties
hereunder, Grimley shall have access to and become acquainted with information
concerning the operation and processes of McHenry including without
limitation, financial, personnel, sales, scientific, and other information
that is owned by McHenry and regularly used in the operation of McHenry's
business, and that such information constitutes McHenry's trade secrets.
(b) Grimley specifically agrees that he shall not
misuse, misappropriate, or disclose any such trade secrets, directly or
indirectly, to any other person or use them in any way, either during the term
of this agreement or at any other time thereafter, except as is required in
the course of his employment hereunder.
(c) Grimley acknowledges and agrees that the sale or
unauthorized use or disclosure of any of McHenry's trade secrets obtained by
Grimley during the course of his employment under this agreement, including
information concerning McHenry's current or any future and proposed work,
services, or products, the facts that any such work, services, or products are
planned, under consideration, or in production, as well as any descriptions
thereof, constitute unfair competition. Employee promises and agrees not to
engage in any unfair competition with McHenry, either during the term of this
agreement or at any other time thereafter.
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<PAGE>
(d) Grimley further agrees that all files, records,
documents, drawings, specifications, equipment, and similar items relating to
McHenry's business, whether prepared by Grimley or others, are and shall
remain exclusively the property of McHenry and that they shall not be removed
from the premises of McHenry.
ARTICLE 3. OBLIGATIONS OF EMPLOYER
Section 3.01 McHenry shall provide Grimley with the compensation,
incentives, benefits, and business expense reimbursement specified herein.
Section 3.02 McHenry shall provide Grimley with a private office,
stenographic help, office equipment, supplies, and other facilities and
services, suitable to Grimley's position and adequate for the performance of
his duties.
Section 3.03 McHenry shall indemnify Grimley for all losses sustained
by Grimley in direct consequence of the discharge of his duties on McHenry's
behalf.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Section 4.01 (a) As compensation for the services to be performed
hereunder, Grimley shall receive a salary at the rate of $52,000 per annum,
payable not less than once
each month, on or before the 30th day of each month.
(b) Grimley shall receive such annual increases in
salary as may be determined by McHenry's Board of Directors or Executive
Committee.
ARTICLE 5. STOCK BONUS
Section 5.01 As additional compensation, McHenry will issue to
Grimley, as of the effective date of this Agreement, Fifty Thousand (50,000)
shares of the common stock of McHenry.
Section 5.02 All shares issued to Grimley pursuant to this provision
shall be subject to restriction, in addition to those imposed by Rule 144 of
the Rules of the Securities and Exchange Commission, that McHenry shall have
the right and option, but not the obligation, to repurchase such shares should
Grimley resign or terminate his employment, except by his death, be terminated
for cause, give notice not to renew such employment, or be in breach of any
covenant herein.
(a) If during the period ending September 30, 1997,
all of such shares; and
(b) If during the period ending March 31, 1998,
25,000 of such shares.
Section 5.03 The repurchase price of such shares shall be $.10 per
share.
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Section 5.04 The shares certificate or certificates shall bear a
legend referring to this Agreement which shall bind any transferee of such
shares subject to this Agreement in addition to all other restrictions or
limitations. Upon transfer of any such shares, McHenry shall remove such
legend as to shares no longer subject to this Agreement.
Section 5.05 McHenry shall give written notice of exercise of this
right and option within thirty (30) days of any such termination or material
breach to Grimley or any such holder of such shares then subject to this
Agreement and within thirty (30) days
thereafter such holder shall tender such shares subject to this Agreement as
of the date of such notice to McHenry's transfer agent conditioned upon
payment of the re-purchase price.
Section 5.06 In the event such shares are not tendered within such
period, then McHenry shall place a stop order on any further transfers of such
shares subject to this Agreement, and all rights and privileges of the holder
of such shares shall terminate.
Section 5.07 The provisions of this Agreement shall bind and inure to
the benefit of the parties, their permissible assigns, heirs and successors.
In the event that such shares are acquired in any merger or stock exchange,
the provisions hereof shall apply to any such shares on a prorata basis issued
in exchange for McHenry's shares then subject to this Agreement.
ARTICLE 6. EMPLOYEE BENEFITS
Section 6.01 Grimley shall be entitled to 10 vacation days each year
accrued prorata bimonthly in accordance with McHenry's Employee Policy Manual.
Grimley may be absent from his employment for vacation only at such times as
McHenry's Executive Committee shall determine from time to time. In the event
Grimley is unable for any reason to take the total amount of vacation time
authorized during any year, he may accrue that time and carry unused time
forward to the next benefit year, provided that the total amount of accrued
and unused vacation benefits shall not exceed a total of 15 days at any time.
Vacation compensation shall be paid at his base rate at the time taken. No
vacation pay will be paid for unused vacation time while employed. Upon
termination of employment he will be paid for any unused vacation time accrued
through the last day of employment.
Section 6.02 Grimley shall be entitled to 5 days per year as sick
leave accrued prorata monthly compensated at his base pay rate in accordance
with McHenry's Employee Policy Manual. Unused sick leave shall not be
accumulated beyond 5 days. Sick leave benefits will not be paid if not used.
Section 6.03 McHenry agrees to include Grimley in the coverage of its
medical, major medical, hospital, dental, and eye care insurance when obtained
by McHenry subject to eligibility.
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ARTICLE 7. BUSINESS EXPENSES
Section 7.01 (a) McHenry shall promptly reimburse Grimley for all
reasonable business expenses incurred by Grimley in connection with the
business of McHenry.
(b) Each such expenditure shall be reimbursable only
if it is of a nature qualifying it as a proper deduction on the federal and
state income tax return of McHenry.
(c) Each such expenditure shall be reimbursable only
if Grimley furnishes to McHenry adequate records and other documentary
evidence required by federal and state statutes and regulations issued by the
appropriate taxing authorities for the substantiation of each such expenditure
as an income tax deduction.
Section 7.02 In the event that any expenses paid for Grimley or any
reimbursement of expenses paid to Grimley shall, on audit or other examination
of McHenry's income tax returns, be determined not to be allowable deductions
from McHenry's gross income, and in the further event that this determination
shall be acceded to by McHenry or made final by the appropriate federal or
state taxing authority or a final judgment of a court of competent
jurisdiction, and no appeal is taken from the judgment or the applicable
period for filing notice of appeal has expired, Grimley shall repay to McHenry
the full amount of the disallowed expenses.
ARTICLE 8. TERMINATION OF EMPLOYMENT
Section 8.01 (a) McHenry reserves the right to terminate this
agreement if Grimley wilfully breaches or habitually neglects the duties which
he is required to perform under the terms of this agreement; or commits such
acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude
as would prevent the effective performance of his duties.
(b) McHenry may at its option terminate this
agreement for the reasons stated in this Section by giving written notice of
termination to Grimley without prejudice to any other remedy to which McHenry
may entitled either at law, in equity, or under this agreement.
(c) The notice of termination required by this
section shall specify the ground for the termination and shall be supported by
a statement of all relevant facts.
(d) Termination under this section shall be
considered "for cause" for the purposes of this agreement.
Section 8.02 (a) This agreement shall be terminated upon the
death of Grimley.
(b) McHenry reserves the right to terminate this
agreement not less than three months after Grimley suffers any physical or
mental disability that would
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prevent the performance of his duties under this agreement. Such a
termination shall be effected by giving 10 days' written notice of termination
to Grimley.
(c) Termination under this section shall not be
considered "for cause" for the purposes of this agreement.
Section 8.03 (a) This agreement shall be terminated by any
voluntary or involuntary dissolution of McHenry resulting from either a merger
or consolidation in which McHenry is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of
McHenry.
(b) Termination under this section shall not be
considered "for cause" for the purposes of this agreement.
Section 8.04 Notwithstanding any provision of this agreement, if
McHenry terminates this agreement without cause, it shall pay Grimley an
amount equal to three (3) months' salary at the then current rate of
compensation.
ARTICLE 9. GENERAL PROVISIONS
Section 9.01 Any notices to be given hereunder by either party to the
other shall be in writing and may be transmitted by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notice shall be addressed to the parties at the addresses appearing in
the introductory paragraph of this agreement, but each party may change that
address by written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of the date of actual receipt;
mailed notices shall be deemed communicated as of the date of mailing.
Section 9.02 (a) Any controversy between McHenry and Grimley
involving the construction or application of any of the terms, provisions, or
conditions of this agreement shall on the written request of either party
served on the other be submitted to arbitration. Arbitration shall comply
with and be governed by the provisions of the California Arbitration Act.
(b) McHenry and Grimley shall each appoint one
person to hear and determine the dispute. If the two persons so appointed are
unable to agree, then those persons shall select a third impartial arbitrator
whose decision shall be final and conclusive upon both parties.
(c) The cost of arbitration shall be borne by the
losing party or in such proportions as the arbitrators decide.
Section 9.03 If any action at law or in equity is necessary to
enforce or interpret the terms of this agreement, the prevailing party shall
be entitled to reasonable attorney
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fees, costs, and necessary disbursements in addition to any other relief to
which that party may be entitled. This provision shall be construed as
applicable to the entire contract.
Section 9.04 This agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Grimley by McHenry and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this agreement acknowledges that no representation,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this agreement shall be valid or binding on either party.
Section 9.05 Any modification of this agreement will be effective
only if it is in writing and signed by the party to be charged.
Section 9.06 The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement
by the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
Section 9.07 If any provision in this agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect.
Section 9.08 This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Executed at Carlsbad, California, as of the day and year first above
appearing.
EMPLOYER EMPLOYEE
McHENRY METALS, INC.
/s/ Gary V. Adams /s/ Thomas D. Grimley
By: __________________________________ ______________________________
THOMAS D. GRIMLEY
1945 Camino Vida Roble
McHENRY METALS GOLF CORP. Carlsbad, CA 92008
/s/ Gary V. Adams
By: __________________________________
7
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of May 1, 1997, by
and between McHenry Metals, Inc., an Illinois corporation, herein referred to
as "McHenry" and Harry Edward Langert, herein referred to as "Langert".
ARTICLE 1. TERM OF EMPLOYMENT
Section 1.01 McHenry hereby employs Langert and Langert hereby
accepts employment with McHenry for a period of one year beginning on May 1,
1997 and terminating on April 30, 1998.
Section 1.02 This agreement shall be renewed automatically for
succeeding terms of one year unless either party gives notice to the other at
least sixty (60) days prior to the expiration of any term of his or its
intention not to renew.
Section 1.03 As used herein, the phrase "employment term" refers to
the entire period of employment of Langert by McHenry hereunder, whether for
the periods provided above, or whether terminated earlier as hereinafter
provided or extended by mutual agreement between the parties.
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
Section 2.01 Langert shall serve as Senior Vice President of Sales
for McHenry. In his capacity, Langert shall do and perform all services,
acts, or things necessary or advisable to fulfill such duties as shall be
determined by the Executive Committee of McHenry consistent with his
professional skills and abilities, including development and implementation of
domestic and "inside" sales programs, recruitment and training of personnel,
production and supervision of sales forecasts, budgets, and programs in
regards thereto, subject at all times to policies set by McHenry's Board of
Directors or Executive Committee.
Section 2.02 (a) Langert shall devote his entire productive time,
ability, and attention to the business of McHenry during the term of this
contract.
(b) Langert shall not engage in any other business
duties or pursuits whatsoever, or directly or indirectly render any services
of a business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of McHenry's Board of Directors or Executive Committee. However, the
expenditure of reasonable amounts of time for educational, charitable, or
professional activities shall not be deemed a breach of this agreement if
those activities do not materially interfere with the services required under
this agreement and shall not require the prior written consent of Employer's
Board of Directors or Executive Committee.
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(c) This agreement shall not be interpreted to
prohibit Langert from making passive personal investments or conducting
private business affairs if those activities do not materially interfere with
the services required under this agreement. However, Langert shall not
directly or indirectly acquire, hold, or retain any interest in any business
competing with or similar in nature to the business of McHenry.
Section 2.03 During the term of this contract, Langert shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officers, director, or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of McHenry.
Section 2.04 Langert hereby represents and agrees that the services
to be performed under the terms of this contract are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Langert therefore expressly agrees that McHenry,
in addition to any other rights or remedies that McHenry may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this contract by Langert.
Section 2.05 (a) The parties acknowledge and agree that during
the term of this agreement and in the course of the discharge of his duties
hereunder, Langert shall have access to and become acquainted with information
concerning the operation and processes of McHenry including without
limitation, financial, personnel, sales, scientific, and other information
that is owned by McHenry and regularly used in the operation of McHenry's
business, and that such information constitutes McHenry's trade secrets.
(b) Langert specifically agrees that he shall not
misuse, misappropriate, or disclose any such trade secrets, directly or
indirectly, to any other person or use them in any way, either during the term
of this agreement or at any other time thereafter, except as is required in
the course of his employment hereunder.
(c) Langert acknowledges and agrees that the sale or
unauthorized use or disclosure of any of McHenry's trade secrets obtained by
Langert during the course of his employment under this agreement, including
information concerning McHenry's current or any future and proposed work,
services, or products, the facts that any such work, services, or products are
planned, under consideration, or in production, as well as any descriptions
thereof, constitute unfair competition. Employee promises and agrees not to
engage in any unfair competition with McHenry, either during the term of this
agreement or at any other time thereafter.
(d) Langert further agrees that all files, records,
documents, drawings, specifications, equipment, and similar items relating to
McHenry's business, whether prepared by Langert or others, are and shall
remain exclusively the property of McHenry and that they shall not be removed
from the premises of McHenry.
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ARTICLE 3. OBLIGATIONS OF EMPLOYER
Section 3.01 McHenry shall provide Langert with the compensation,
incentives, benefits, and business expense reimbursement specified herein.
Section 3.02 McHenry shall provide Langert with a private office,
stenographic help, office equipment, supplies, and other facilities and
services, suitable to Langert's position and adequate for the performance of
his duties.
Section 3.03 McHenry shall indemnify Langert for all losses sustained
by Langert in direct consequence of the discharge of his duties on McHenry's
behalf.
ARTICLE 4. COMPENSATION OF EMPLOYEE
Section 4.01 (a) As compensation for his services to be performed
hereunder, Langert shall receive a salary at the rate of $5,000 until August
31, 1997, and thereafter at the rate of $8,500 per month, payable not less
than once each month, on or before the 30th day of each month.
(b) Langert shall receive such annual increases in
salary as may be determined by McHenry's Board of Directors or Executive
Committee.
Section 4.02 (a) As additional compensation for services
contemplated herein, Langert shall be entitled to a commission of two percent
(2%) of the net sales price of all merchandise sold under contracts procured
by him during the term of this Agreement on direct sales on corporate sales to
domestic companies not engaged in wholesale or retail sales of golf clubs, and
on direct sales to military installations, e.g. PX's and military operated
golf facilities.
(b) Langert shall not be entitled to commissions on
sales made under contracts procured by Langert which sales are made after
expiration of this Agreement or termination in any other manner.
ARTICLE 5. EMPLOYEE BENEFITS
Section 5.01 Langert shall be entitled to 10 vacation days each year
accrued prorata bimonthly in accordance with McHenry's Employee Policy Manual.
Langert may be absent from his employment for vacation only at such times as
McHenry's Senior Vice President shall determine from time to time. In the
event Langert is unable for any reason to take the total amount of vacation
time authorized during any year, he may accrue that time and carry unused time
forward to the next benefit year, provided that the total amount of accrued
and unused vacation benefits shall not exceed a total of 15 days at any time.
Vacation compensation shall be paid at his base rate at the time taken. No
vacation pay will be paid for unused vacation time while employed. Upon
termination of employment he will be paid for any unused vacation time accrued
through the last day of employment.
3
<PAGE>
Section 5.02 Langert shall be entitled to 5 days per year as sick
leave accrued prorata monthly compensated at his base pay rate in accordance
with McHenry's Employee Policy Manual. Unused sick leave shall not be
accumulated beyond 5 days. Sick leave benefits will not be paid if not used.
Section 5.03 McHenry agrees to include Langert in the coverage of its
medical, major medical, hospital, dental, and eye care insurance when obtained
by McHenry subject to eligibility.
ARTICLE 6. BUSINESS EXPENSES
Section 6.01 (a) McHenry shall promptly reimburse Langert for all
reasonable business expenses incurred by Langert in connection with the
business of McHenry.
(b) Each such expenditure shall be reimbursable only
if it is of a nature qualifying it as a proper deduction on the federal and
state income tax return of McHenry.
(c) Each such expenditure shall be reimbursable only
if Langert furnishes to McHenry adequate records and other documentary
evidence required by federal and state statutes and regulations issued by the
appropriate taxing authorities for the substantiation of each such expenditure
as an income tax deduction.
Section 6.02 In the event that any expenses paid for Langert or any
reimbursement of expenses paid to Langert shall, on audit or other examination
of McHenry's income tax returns, be determined not to be allowable deductions
from McHenry's gross income, and in the further event that this determination
shall be acceded to by McHenry or made final by the appropriate federal or
state taxing authority or a final judgment of a court of competent
jurisdiction, and no appeal is taken from the judgment or the applicable
period for filing notice of appeal has expired, Langert shall repay to McHenry
the full amount of the disallowed expenses.
ARTICLE 7. TERMINATION OF EMPLOYMENT
Section 7.01 (a) McHenry reserves the right to terminate this
agreement if Langert wilfully breaches or habitually neglects the duties which
he is required to perform under the terms of this agreement; or commits such
acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude
as would prevent the effective performance of his duties.
(b) McHenry may at its option terminate this
agreement for the reasons stated in this Section by giving written notice of
termination to Langert without prejudice to any other remedy to which McHenry
may entitled either at law, in equity, or under this agreement.
(c) The notice of termination required by this
section shall specify the ground for the termination and shall be supported by
a statement of all relevant facts.
4
<PAGE>
(d) Termination under this section shall be
considered "for cause" for the purposes of this agreement.
Section 7.02 (a) This agreement shall be terminated upon the
death of Langert.
(b) McHenry reserves the right to terminate this
agreement not less than three months after Langert suffers any physical or
mental disability that would prevent the performance of his duties under this
agreement. Such a termination shall be effected by giving 10 days' written
notice of termination to Langert.
(c) Termination under this section shall not be
considered "for cause" for the purposes of this agreement.
Section 7.03 (a) This agreement shall be terminated by any
voluntary or involuntary dissolution of McHenry resulting from either a merger
or consolidation in which McHenry is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of
McHenry.
(b) Termination under this section shall not be
considered "for cause" for the purposes of this agreement.
Section 7.04 Notwithstanding any provision of this agreement, if
McHenry terminates this agreement without cause, it shall pay Langert an
amount equal to three (3) months' salary at the then current rate of
compensation.
ARTICLE 8. GENERAL PROVISIONS
Section 8.01 Any notices to be given hereunder by either party to the
other shall be in writing and may be transmitted by personal delivery or by
mail, registered or certified, postage prepaid with return receipt requested.
Mailed notice shall be addressed to the parties at the addresses appearing in
the introductory paragraph of this agreement, but each party may change that
address by written notice in accordance with this section. Notices delivered
personally shall be deemed communicated as of the date of actual receipt;
mailed notices shall be deemed communicated as of the date of mailing.
Section 8.02 (a) Any controversy between McHenry and Langert
involving the construction or application of any of the terms, provisions, or
conditions of this agreement shall on the written request of either party
served on the other be submitted to arbitration. Arbitration shall comply
with and be governed by the provisions of the California Arbitration Act.
(b) McHenry and Langert shall each appoint one
person to hear and determine the dispute. If the two persons so appointed are
unable to agree, then those
persons shall select a third impartial arbitrator whose decision shall be
final and conclusive upon both parties.
(c) The cost of arbitration shall be borne by the
losing party or in such proportions as the arbitrators decide.
Section 8.03 If any action at law or in equity is necessary to
enforce or interpret the terms of this agreement, the prevailing party shall
be entitled to reasonable attorney fees, costs, and necessary disbursements in
addition to any other relief to which that party may be entitled. This
provision shall be construed as applicable to the entire contract.
5
<PAGE>
Section 8.04 This agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Langert by McHenry and contains all of the covenants and
agreements between the parties with respect to that employment in any manner
whatsoever. Each party to this agreement acknowledges that no representation,
inducements, promises, or agreements, orally or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not embodied
herein, and that no other agreement, statement, or promise not contained in
this agreement shall be valid or binding on either party.
Section 8.05 Any modification of this agreement will be effective
only if it is in writing and signed by the party to be charged.
Section 8.06 The failure of either party to insist on strict
compliance with any of the terms, covenants, or conditions of this agreement
by the other party shall not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
Section 8.07 If any provision in this agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect.
Section 8.08 This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Executed at Carlsbad, California, as of the day and year first above
appearing.
EMPLOYER EMPLOYEE
McHENRY METALS, INC.
/s/ Gary V. Adams /s/ Harry Edward Langert
By: __________________________________ ______________________________
HARRY EDWARD LANGERT
79045 Riverrock
La Quinta, CA 92253
6
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum is made to that certain Employment Agreement dated as of
May 1, 1997 (herein the "Agreement"), by and between McHenry Metals Golf
Corp. (hereinafter "McHenry"), and Harry Edward Langert (hereinafter
"Langert"), and all parties further agree as follows:
Section 2.01.1 Langert shall in addition serve as manager of international
sales for McHenry. In such capacity, Langert shall, subject to approval of
the Executive Committee of McHenry, recruit and appoint international
distributors and consistent with his professional skill and abilities, do and
perform all services, acts, or things necessary in connection therewith,
including development and implementation of international sales programs,
production and supervision of international sales forecasts, budgets, and
programs in regards thereto.
Section 2.02(b)(1) Consent is given to act as consultant to Jane Langert in
the sale and manufacturing of the "seemore" putter provided such activity does
not materially interfere with the service required under this Agreement.
Section 4.02(a)1 Notwithstanding the provisions of Section 4.02(a) of the
Agreement, Langert shall not be entitled to commissions in direct sales to
military installations.
Section 4.03 As additional compensation for services completed herein,
Langert shall be entitled to a commission of two (2) percent of the net sales
price sold through international distributors established by Langert during
the term of the Agreement. Such commissions shall not become due until
payment has been received from the respective distributors. Accrued
commissions, adjusted for returns, shall be paid quarterly thirty (30) days
after the end of each calendar quarter. Such commissions shall be limited in
each year of the term of this Agreement to an amount, together with all other
salary or cash bonuses paid to Langert in such year, shall not exceed
$200,000.
Section 4.03.1 International sales as used herein shall be deemed to be sales
to distributors or dealers located without the United States, its possessions,
and the provinces of Canada for sale or resale without the United States, its
possessions and the provinces of Canada. Such sales shall not include direct
sales of products by McHenry to golf professionals or for promotional
purposes.
Section 8.09 Except as expressly changed or modified hereby, the remaining
terms of the Agreement are hereby ratified and confirmed.
Executed at Carlsbad, California, this 5th day of March, 1998.
MCHENRY LANGERT
McHenry Metals Golf Corp.
/s/ Gary V. Adams /s/ Harry Edward Langert
By:___________________________ ______________________________
Harry Edward Langert
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the use in this Registration Statement of McHenry
Metals Golf Corp. and Subsidiary on Form SB-2 of our report dated
February 12, 1998 for the audited financial statements as of
December 31, 1997 and the period then ended and our report dated
April 29, 1998 for the unaudited financial statements as of March
31, 1998 and the three months then ended appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts"
in such Prospectus.
Clumeck, Stern, Phillips & Schenkelberg
May 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MCHENRY METALS GOLF CORP. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 921,094 5,212,694
<SECURITIES> 0 0
<RECEIVABLES> 0 1,280,188
<ALLOWANCES> 0 77,800
<INVENTORY> 109,704 1,366,194
<CURRENT-ASSETS> 1,141,281 7,957,029
<PP&E> 434,183 524,422
<DEPRECIATION> 32,814 71,677
<TOTAL-ASSETS> 1,575,417 8,446,926
<CURRENT-LIABILITIES> 458,475 2,643,447
<BONDS> 0 0
0 0
0 0
<COMMON> 8,791 10,994
<OTHER-SE> 1,071,271 5,760,795
<TOTAL-LIABILITY-AND-EQUITY> 1,575,417 8,446,926
<SALES> 0 1,238,489
<TOTAL-REVENUES> 0 1,238,489
<CGS> 0 748,268
<TOTAL-COSTS> 2,619,158 2,433,708
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 77,800
<INTEREST-EXPENSE> 619 0
<INCOME-PRETAX> (2,598,958) (1,188,038)
<INCOME-TAX> 800 1,625
<INCOME-CONTINUING> (2,599,758) (1,189,663)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,599,758) (1,189,663)
<EPS-PRIMARY> (.38) (.13)
<EPS-DILUTED> 0 0
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