<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
OUTLOOK SPORTS TECHNOLOGY, INC.
(Name of Small Business Issuer in its Charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3949 65-0648808
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification Number)
Code Number)
</TABLE>
------------------------
4400 NORTH FEDERAL HIGHWAY, SUITE 410
BOCA RATON, FLORIDA 33431
(561) 750-7528
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
JIM DODRILL
PRESIDENT
4400 NORTH FEDERAL HIGHWAY, SUITE 410
BOCA RATON, FLORIDA 33431
(561) 750-7528
(Address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
PETER ROSENBLUM, ESQ.
DAVE BROADWIN, ESQ.
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 832-1000
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value (2)................. 2,875,000 $6.00 $17,250,000 --
Redeemable Common Stock Purchase Warrants (3).... 2,327,500 $0.125 $290,938 --
Common Stock issuable upon exercise of Redeemable
Common Stock Purchase Warrants................. 2,377,500 $6.90 $16,404,751 --
Representative's Warrant......................... 250,000 $0.01 $2,500 --
Common Stock issuable upon exercise of
Representative's Warrant....................... 250,000 $7.20 $1,800,000 --
Total............................................ 9,175,000 $35,748,189 $10,546
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
(2) Includes 375,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(3) Includes 75,000 Warrants subject to the Underwriters' over-allotment option
and 50,000 Warrants issuable upon exercise of the Representative's Warrant.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The Company has not yet engaged an underwriter for this Offering. However,
the Company is in negotiations to do so. Therefore, the Company has provided for
an underwriting on terms and conditions that the Company expects it will
negotiate with an underwriter. These terms include an over-allotment option of
15%, representative's warrants of 10%, lock-ups for management and other usual
and customary terms and conditions for underwritings of this type.
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 CAPTION IN PROSPECTUS
-------------------------------------------------------------- ---------------------------------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front Cover Page
of Prospectus................................................. Facing Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus....... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors.......................... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds............................................... Use of Proceeds
5. Determination of Offering Price............................... Risk Factors; Underwriting
6. Dilution...................................................... Risk Factors; Dilution
7. Selling Security Holders...................................... Principal and Selling Shareholders
8. Plan of Distribution.......................................... Outside Front and Outside Back Cover Pages of
Prospectus; Underwriting
9. Legal Proceedings............................................. Business
10. Directors, Executive Officers, Promoters and Control
Persons....................................................... Management
11. Security Ownership of Certain Beneficial Owners and
Management.................................................... Principal and Selling Shareholders
12. Description of Securities..................................... Description of Securities
13. Interest of Named Experts and Counsel.........................
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities....................................
15. Organization Within last Five Years........................... Certain Transactions
16. Description of Business....................................... Prospectus Summary; Business
17. Management's Discussion and Analysis or Plan of Operation..... Management's Discussion and Analysis of
Financial Condition and Results of Operations
18. Description of Property.......................................
19. Certain Relationships and Related Transactions................ Certain Transactions
20. Market for Common Equity and Related Stockholder Matters...... Outside Front Cover Page of and Prospectus
Dividend Policy; Description of Securities;
Shares Eligible for Future Sale
21. Executive Compensation........................................ Management
22. Financial Statements.......................................... Financial Statements
23. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure...................................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
OUTLOOK SPORTS TECHNOLOGY, INC.
2,500,000 SHARES OF COMMON STOCK AND
500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Outlook Sports Technology, Inc., a Delaware corporation (the "Company"),
hereby offers 2,500,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), and 500,000 Redeemable Common Stock Purchase Warrants (the
"Warrants"). The shares of Common Stock and the Warrants offered hereby
(sometimes hereinafter collectively referred to as the "Securities") may be
purchased separately. It is currently estimated that the initial offering price
per share of the Common Stock will be between $5.00 and $7.00 and that the
initial offering price per Warrant will be $.125. Each Warrant is transferable
immediately upon issuance and entitles the holder thereof to purchase one share
of Common Stock at a price of $6.90 per share (assuming an initial offering
price of $6.00 per share), during the two-year period commencing on the first
anniversary of the effective date of this offering (the "First Exercise Date").
The Warrants are redeemable by the Company at a redemption price of $.125 per
Warrant, at any time after the First Exercise Date, upon 30 days prior written
notice to the holders thereof, if the average closing price of the Common Stock
equals or exceeds $7.50 per share for 10 consecutive trading days ending on the
date prior to the date of the notice of redemption. Concurrently herewith the
Company is registering for resale 1,752,500 Warrants (the "Selling Warrantholder
Warrants") held by 44 existing Warrantholders (the "Selling Warrantholders").
The Selling Warrantholders have agreed not to sell any Selling Warrantholder
Warrants for a period of one year following the effective date of this Offering.
Thereafter the Selling Warrantholder Warrants may be sold without any lock-up
restrictions. The Company will not receive any of the proceeds of the sales of
the Selling Warrantholder Warrants. See "Description of Securities."
Prior to this offering (the "Offering") there has been no public market for
the Common Stock or Warrants and there can be no assurance that any such market
will develop. The initial public offering price of the shares of Common Stock,
the Warrants and the exercise price and other terms of the Warrants have been
determined by negotiations between the Company and , as
representative of the Underwriters (the "Representative"). See Underwriting. The
Company has applied to include the Common Stock and the Warrants for listing on
the NASDAQ Stock Market's SmallCap Market under the symbols TGRA and TGRAW,
respectively.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER THE
CAPTION "RISK FACTORS" WHICH APPEAR BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY(2)
<S> <C> <C> <C>
Per Share of Common Stock................................ $ $
Per Warrant.............................................. $ $
Total (3).......................................... $ $
</TABLE>
(1) Does not reflect additional compensation to be received by
(the "Representative") in the form of: (i) a non-
accountable expense allowance equal to % of the gross proceeds of this
Offering or $ ($ if the Underwriter's over allotment option
described in footnote 3 is exercised in full), and (ii) an option to
purchase up to 250,000 shares of Common Stock and 50,000 Warrants at 120% of
the initial public offering price (the "Representative's Warrants"),
exercisable for a period of four years, commencing one year after the
effective date of the Registration Statement of which this Prospectus is a
part. The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at approximately $ , including the Representative's non-accountable
expense allowance (assuming no exercise of the Underwriters' over-allotment
option).
(3) The Company has granted the Underwriters an option, exercisable within 45
days of the date hereof, to purchase up to an additional 375,000 shares of
Common Stock and 75,000 Warrants, exercisable within 45 days of the date
hereof, solely to cover over-allotments, if any. If the Underwriters' over
allotment option is exercisable in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholder will be $ , $ , $ , and $ , respectively.
See "Underwriting."
The Securities offered by this Prospectus are being offered by the
Underwriters on a "firm commitment" basis subject to prior sale, when, as if
accepted by the Underwriters, approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer without notice and reject any
order in whole or part. It is expected that delivery of the certificates
representing the Securities will be made in , on or about
, 1998.
The Date of this Prospectus is , 1998
<PAGE>
"OUTSIDE" OF GATE FOLD
On this page appears a photograph of the Tegra driver featuring its
Invisible Inset Hosel.
INSIDE OF GATE FOLD LEFT
On this page appear several photographs including one of the Company's Tegra
Retail Environment displaying the Company's golf equipment, apparel and
accessories, one of Ian Woosnam with Tegra golf clubs and golf bag and one of
Glen Day using the Tegra driver.
INSIDE GATE FOLD RIGHT
On this page appear two photographs including one of the Tegra iron
featuring its Invisible Inset Hosel and one showing four golfers using and/or
wearing Tegra products.
INSIDE BACK COVER
Red background with Tegra logo.
<PAGE>
NOTICE TO CALIFORNIA INVESTORS
Each purchaser of Common Stock in California must meet one of the following
suitability standards: (i) a liquid net worth (excluding home, furnishings and
automobiles) of $250,000 or more and gross annual income during 1997, and
estimated during 1998, of $65,000 or more from all sources; or (ii) a liquid net
worth (excluding home, furnishings and automobiles) of $500,000 or more. Each
California resident purchasing Common Stock offered hereby will be required to
execute a representation that it comes within one of the aforementioned
categories.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OR
WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
The Company intends to furnish to its security holders annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.
The Company uses and has applied to register in the United States the
following marks: TEGRA-TM-, TEGRA T (and design)-TM-, T (and design)-TM-, GOLF
FIRST-TM-, INVISIBLE INSET HOSEL-TM-, and NEMESIS-TM-. Other trademarks referred
to in this Prospectus are not owned by the Company and the Company makes no
claim of association with respect to those marks or their owners.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD BE READ IN
CONJUNCTION WITH THE MORE DETAILED INFORMATION, AND THE FINANCIAL STATEMENTS AND
NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO GIVE
RETROACTIVE EFFECT TO A NUMBER OF STOCK SPLITS AND REVERSE STOCK SPLITS AS
DESCRIBED IN NOTE 6 TO THE COMPANY'S FINANCIAL STATEMENTS INCLUDED ELSEWHERE
HEREIN AND ASSUMES (I) THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION HAS NOT BEEN
EXERCISED, AND (II) THAT THE UNDERWRITERS' WARRANTS HAVE NOT BEEN EXERCISED.
EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER MATERIALLY
FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION" AND "BUSINESS."
THE COMPANY
The Company is a designer, marketer and manufacturer of premium quality golf
equipment, apparel and accessories under the Tegra brand name. Tegra products
represent a wide range of technologically innovative, premium-priced men's golf
clubs, apparel and accessories that are sold in off-course golf specialty and
on-course pro shops. Tegra golf clubs incorporate the Company's patent-pending
Invisible Inset Hosel (the cylindrical chamber in which the shaft is attached to
the club head), a feature designed to increase the accuracy and distance of golf
shots, and were introduced into the US market in October 1997. In the spring of
1998, the Company began installing dedicated Tegra Retail Environments ("TREs")
in select golf stores across the country and shipping a Tegra men's apparel
line. TREs are defined spaces in golf shops which house the Company's equipment,
apparel and accessories in an integrated, branded selling environment. The
Company has installed 58 TREs in golf stores in 55 cities. The Company is in the
process of opening additional TREs and expects to install up to 40 new TREs by
year end. Tegra products are now available in over 100 golf shops nationwide and
the Company expects they will be available in 400 golf shops by year end.
The Company's business strategy is to establish itself as a leading
designer, marketer and manufacturer of premium golf equipment, apparel and
accessories by providing a complete range of products at the premium-priced
segment of the golf market. The Company is implementing this strategy by: (1)
creating products with proprietary, visibly distinct technology and design such
as the Company's patent-pending Invisible Inset Hosel to differentiate the
Company from its competitors while pricing such products competitively and (2)
raising consumer demand for and awareness of the Company's products through
innovative marketing programs such as TREs as well as traditional advertising,
endorsements from professional golfers and use of infomercials.
The Company was founded as Hippo, Inc. in 1996 and contemporaneously
acquired a license from Hippo Holdings, Ltd. to sell value-priced HiPPO-TM-
brand golf equipment, apparel and accessories in the United States. The
Company's initial strategy was to sell value priced golf clubs that were
presently available under the HiPPO-TM- brand and to simultaneously develop a
premium-priced golf club brand because that segment of the golf market comprises
approximately 70% of golf equipment sales and offers higher margins to
manufacturers. This development effort resulted in the Tegra line of
premium-priced golf equipment. The Company has since discontinued the
distribution of value priced golf equipment to pursue opportunities offered by
its Tegra products. On May 4, 1998, the Company sold its license to sell
HiPPO-TM- products in the U.S. back to Hippo Holdings, Ltd. along with all
existing HiPPO-TM- inventory, marketing materials and related liabilities. In
return, the Company received a cash payment from Hippo Holdings, Ltd. of
approximately $359,000. In addition Hippo Holdings, Ltd. returned to the Company
50,000 shares of the Company's Common Stock and assumed outstanding liabilities
and commitments of the Company in excess of $1,000,000.
INDUSTRY OVERVIEW. According to the National Golf Foundation ("NGF"), in
1997, wholesale sales of golf equipment in the U.S. were approximately $3.9
billion. In addition, wholesale sales of golf clubs are estimated to have
increased at an annual compound growth rate of approximately 10.9% over the
5-year
4
<PAGE>
period from 1992 to 1997. The Company believes that a number of trends are
likely to further increase the demand for golf products generally. These trends
include: (i) the large numbers of golfers entering their 40s and 50s, the age
when most golfers begin to play more often and increase their spending on the
sport; (ii) growth in the number of golf courses; (iii) increasing interest in
golf from women, junior and minority golfers; (iv) the large population who are
beginning to enter their 20s, the age when golfers generally take up the sport;
and (v) the rapid evolution of golf club designs and materials.
PRODUCTS. Tegra golf clubs which incorporate the Company's patent-pending
Invisible Inset Hosel are an evolution from current golf club technology. The
Company's design moves or insets the shaft as close to the center of the club
head as is permitted under USGA rules. As a result, the club head will rotate to
the target faster than conventional designs, making it easier to square the club
at impact and enabling the golfer to hit longer and straighter shots. The
Company believes that the Company's Invisible Inset Hosel technology could be as
significant to the golf industry as perimeter weighting, graphite shafts or
oversize metal woods.
The Company has conducted player testing on its woods and irons and the
Company believes such testing shows its Tegra technology promotes straighter and
longer golf shots than other leading premium-priced golf clubs. "Iron Byron"
testing (robotic testing designed to repeat identical swings so different clubs
can be compared under controlled conditions) of Tegra clubs has confirmed that
both the woods and irons provide greater carry, roll and overall distance than
certain leading premium-priced clubs while simultaneously increasing accuracy.
Additional mechanical testing which has been recorded using high speed video
shows that the Invisible Inset Hosel design produces a squarer club face at
impact than other leading premium-priced clubs.
The Company has also developed a line of Tegra men's apparel. The Company's
apparel collection emphasizes quality, comfort and style and is intended to
enhance a golfer's on-course performance. The Company is developing a full range
of golf accessories which it plans to introduce to the U.S. market by Spring
1999. The Company has already begun selling headwear featuring ergonomic
closures and intends to introduce items such as golf bags, umbrellas and towels.
One of the Company's strategies is to deliver products which can achieve
superior retail margin in order to incentivize retailers to sell more Tegra
product. The Company estimates that retailers on average achieve 20% gross
margin on sales from premium golf equipment. By pricing appropriately, the
Company believes it is able to offer retailers products that can achieve
superior margin. The Company expects that, on average, Tegra golf clubs will
allow retailers to achieve 40% gross margin, while Tegra apparel will allow
retailers to achieve in excess of 50% gross margin.
MARKETING. By creating TREs, the Company has adapted a marketing model used
by marketers of many leading brands of consumer products, who use in-store shops
to increase sales and brand awareness. TREs are defined spaces in golf shops,
which occupy from 50 to 150 square feet and consist of flooring, fixtures,
graphics and point-of-purchase materials. Within a TRE, the Company markets its
Tegra golf clubs, apparel and accessories in an integrated, branded environment
designed to convey the image of the Company as innovative in golf club
technology and distinctive in design.
The Company's advertising focuses on the Company's visibly distinct
technology and its performance benefits. The Company has produced and plans to
air a series of Tegra golf tips which feature Tegra tour players Ian Woosnam and
Glen Day. In addition, the Company is presently evaluating the possibility of
producing an infomercial. The Company's goal is to test market this type of
advertising in the fourth quarter of 1998.
Tegra products are currently endorsed by five touring professionals
including Ian Woosnam and Glen Day. Mr. Woosnam and Mr. Day each began endorsing
Tegra products on January 1, 1998, although Mr. Woosnam does not yet have an
endorsement contract. Mr. Woosnam competes using Tegra golf clubs, carrying a
Tegra bag and wearing Tegra headwear and apparel. The Company is currently
negotiating with Mr. Woosnam for him to endorse Tegra products through December
31, 2006. Mr. Woosnam has won more than 40 tournaments worldwide, including the
1991 Master's Tournament. Mr. Day has agreed to compete using Tegra golf
equipment, carrying Tegra golf bags and accessories and wearing Tegra apparel
and headwear. Since beginning his association with Tegra, Mr. Day has had three
top three finishes on the United States PGA Tour.
The Company's executive offices are located at 4400 North Federal Highway,
Suite 410, Boca Raton, Florida 33431. The Company's telephone number is (561)
750-7528.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.............. 2,500,000 shares of Common Stock and 500,000 Warrants. See
"Description of Securities."
Warrants........................ Each Warrant entitles the holder thereof to purchase one
share of Common Stock at a price of $6.90 per share
(assuming an initial offering price of $6.00 per share)
during the two year period commencing on the first
anniversary of the effective date of this Offering (the
"First Exercise Date"). The Warrants are redeemable by the
Company at a redemption price of $0.125 per Warrant, at
any time after the First Exercise Date, upon 30 days prior
written notice to the holders thereof, if the average
closing price of the Common Stock equal or exceeds $7.50
per share, for 10 consecutive trading days ending on the
day prior to the date of the Notice of redemption. See
"Description of Securities."
Securities Outstanding Prior to
the Offering.................. 2,516,770 shares of Common Stock
Securities Outstanding
Subsequent to the Offering
(1)........................... 5,016,770 shares of Common Stock and 500,000 Warrants.
Use of Proceeds by the Company.. The net proceeds of this Offering will be used for
repayment of indebtedness, the purchase of inventory, the
payment of marketing and advertising expenses and working
capital and other corporate purposes. See "Use of
Proceeds."
NASDAQ Symbols.................. Common Stock--TGRA; Warrants--TGRAW
</TABLE>
- ------------------------
(1) Does not include (i) the 500,000 shares of Common Stock issuable upon the
exercise of the Warrants offered hereby, (ii) the 375,000 shares of Common
Stock and 75,000 Warrants issuable upon the exercise of the Underwriters'
over-allotment option, (iii) the 75,000 shares of Common Stock issuable upon
exercise of the Warrants included in the Underwriters' over-allotment
option, (iv) the 250,000 shares of Common Stock and 50,000 Warrants issuable
upon exercise of the Representative's Warrants (or the 50,000 shares of
Common Stock issuable upon exercise of the Warrants included therein), (v)
1,477,627 shares of Common Stock issuable upon the exercise of stock options
and warrants outstanding on the date hereof or (vi) up to 1,752,500 Warrants
issuable upon the exercise by certain bridge investors of the right to elect
payment in Warrants of amounts due them in connection with the Company's
bridge financing (the "Bridge Warrants") or 1,752,500 shares of Common Stock
issuable upon exercise of such Bridge Warrants. See "Management -- Stock
Option Plan," "Description of Securities" and "Underwriting."
RISK FACTORS
There can be no assurance that the Company will be able to achieve its
business goals or ever achieve profitability. See "Risk Factors -- Precarious
Financial Condition", "-- Ability to Continue as a Going Concern," and "--
History of Losses: Anticipation of Future Losses." The Company is substantially
dependent on the efforts of its founders and principal officers who have no
proven record of success in designing, marketing or manufacturing retail
products. See "Risk Factors -- Lack of Experience of Management."
6
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data, insofar as it relates to the period
February 8, 1996 (inception) to January 31, 1997 and the year ended January 31,
1998, has been derived from the Company's audited financial statements,
including the balance sheets at January 31, 1997 and 1998 and the related
statements of operations, of changes in shareholders' deficit and of cash flows
for the periods then ended, and notes thereto appearing elsewhere herein. The
data for the three months ended April 30, 1997 and 1998 has been derived from
unaudited financial statements also appearing herein and which, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. The summary financial data should be read in conjunction with
the "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's financial
statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 8,
1996 FOR THE FOR THE THREE MONTHS
(INCEPTION) TO YEAR ENDED ENDED APRIL 30,
JANUARY 31, JANUARY 31, --------------------------
1997 1998 1997 1998
--------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $ -- $ 741,120 $ 16,575 $ 310,768
Total costs and expenses............................. $ 2,375,708 $ 5,190,123 $ 664,981 $ 1,913,854
Loss from operations................................. $ (2,375,708) $ (4,449,003) $ (702,284) $ (1,603,086)
Interest expense..................................... $ (2,844) $ (244,648) $ (29,847) $ (144,727)
Net loss............................................. $ (2,378,552) $ (4,693,651) $ (732,131) $ (1,747,813)
Basic and diluted net loss per share (1)............. $ (3.24) $ (2.21) $ (0.81) $ (0.73)
Weighted average number of shares outstanding........ 734,330 2,120,460 905,130 2,401,814
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1998
-----------------------------
AS ADJUSTED
ACTUAL (2)
------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets...................................... $ 26,850 $ 650,792 $ 1,211,970 $ 9,026,220
Working (deficit) capital........................... $ (1,306,705) $ (5,056,682) $ (6,756,178) $ 6,300,072
Total assets........................................ $ 227,347 $ 1,005,055 $ 1,805,463 $ 9,619,713
Total liabilities................................... $ 1,373,555 $ 5,747,474 $ 8,008,148 $ 2,766,148
Total shareholders' (deficit) equity................ $ (1,146,208) $ (4,742,419) $ (6,202,685) $ 6,853,565
</TABLE>
- ------------------------
(1) Due to the Company's losses from continuing operations, the Company's
diluted loss per share is the same as that of basic loss per share.
(2) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock and
500,000 Warrants offered hereby at assumed initial public offering prices of
$6.00 per Share and $0.125 per Warrant, respectively, and the application of
the net proceeds therefrom. See "Use of Proceeds." No effect has been given
to the exercise of (i) the Warrants, (ii) the Underwriter's over-allotment
option (iii) the Representative's Warrants (or the Warrants included
therein) or (iv) the Bridge Warrants. See "Underwriting."
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SUBSTANTIAL DILUTION, AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD
CONSIDER CAREFULLY THE FOLLOWING FACTORS AS WELL AS OTHER INFORMATION IN THIS
PROSPECTUS, INCLUDING THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS
HEREIN, PRIOR TO PURCHASING THE SECURITIES.
PRECARIOUS FINANCIAL CONDITION
For the year ended January 31, 1998, the Company incurred net losses of
$4,693,651, and for the three months ended April 30, 1998, the Company incurred
net losses of $1,747,813. As of April 30, 1998, the Company had $28,475 in cash
and an accumulated deficit of $8,820,016. The Company's current liabilities, as
of such date, aggregated approximately $7,968,148 and exceeded the Company's
current assets by approximately $6,756,178. The Company expects its cash needs
subsequent to repayment of bridge loan debt for the next twelve months to be
approximately $4,400,000. The Company does not presently have adequate cash from
operations to meet these needs. In order to meet its needs for cash to fund its
operations, the Company must obtain additional financing. The Company has been,
although it is not presently, in default under a number of its arrangements,
agreements and instruments with creditors. If this Offering is not successful or
if the Company is unable to obtain significant additional financing, it may be
obligated to seek protection from its creditors under the bankruptcy laws and
the stockholders may lose their investment. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources"; and the financial statements and notes thereto included
elsewhere in this Prospectus.
ABILITY TO CONTINUE AS A GOING CONCERN
The Company's independent certified public accountants have issued their
report dated June 9, 1998 on the financial statements of the Company as of
January 31, 1998 and for the year then ended, which includes an explanatory
paragraph expressing substantial doubt about the Company's ability to continue
as a going concern. Among the reasons cited by the independent certified public
accountants as raising substantial doubt as to the Company's ability to continue
as a going concern are the following: the Company has suffered recurring losses
and negative cash flows from operations through January 31, 1998, has a
shareholders' deficit and working capital deficiency as of January 31, 1998, and
is dependent on raising additional financing in order to fund its existing level
of operations. These factors raise substantial doubt about the Company's ability
to continue as a going concern. If this Offering is not successful or if the
Company is unable to secure significant additional financing, it may be obliged
to seek protection under the bankruptcy laws and the stockholders may lose their
investment. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources"; and the financial
statements and notes thereto included elsewhere in this Prospectus.
HISTORY OF LOSSES; ANTICIPATION OF FUTURE LOSSES
The Company has incurred operating losses since its inception and had an
accumulated deficit of $8,820,016 as of April 30, 1998. The Company incurred a
net loss of $4,693,651 for the twelve months ended January 31, 1998, as compared
with a net loss of $2,378,552 for the period ended January 31, 1997. The Company
incurred a net loss of $1,747,813 for the three months ended April 30, 1998, as
compared with a net loss of $732,131 for the three months ended April 30, 1997.
Such losses have resulted principally from expenses incurred from general and
administrative costs, research and development and marketing costs incurred
during the Company's development efforts. The continued development of the
Company's business will require the commitment of substantial resources to
establish sales and marketing capabilities. The amount of net losses and the
time required by the Company to reach sustained profitability are highly
uncertain, and to achieve profitability the Company must, among other things,
successfully establish sales and marketing capabilities by itself or with third
parties. There is no assurance that the Company will ever
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generate substantial revenues from its products or achieve profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
LACK OF EXPERIENCE OF MANAGEMENT
The Company is substantially dependent on the efforts of its founders and
principal officers. The Company was founded in 1996 and has only recently
entered the market for premium-priced golf products. Management has no proven
record of success in designing, marketing or manufacturing retail products. In
addition, as the current employees are insufficient to cover the anticipated
operations of the Company beyond the near term, the Company is seeking to hire
additional personnel principally in sales and marketing. No assurance can be
given that the Company will be successful in recruiting and retaining such
personnel. The golf market is a highly competitive market for personnel and new
personnel could be costly in terms of cash compensation or equity necessary to
attract them to the Company or may not be available to the Company on any terms.
The Company currently has no employment contracts or non-competition agreements
with any of its founders or principal officers.
DEPENDENCE ON OFFERING PROCEEDS
The Company's capital requirements have been and will continue to be
significant. The Company is dependent on and intends to use a substantial
portion of the proceeds of this Offering to fund purchases of inventory and
implement its marketing strategies. The Company also plans to use approximately
$6,045,000 of the proceeds of this Offering to repay indebtedness. See "Use of
Proceeds." The Company anticipates, based on currently proposed plans and
assumptions relating to its operations, that the proceeds of this Offering,
together with cash flow from operations, will be sufficient to satisfy its
contemplated cash requirements for the next 18 months. In the event that the
Company's plans change, its assumptions change or prove to be inaccurate or if
the proceeds of this Offering or cash flows otherwise prove to be insufficient
to fund operations (due to unanticipated expenses, delays, problems,
difficulties or otherwise), the Company will be required to minimize cash
expenditures and/or obtain additional financing in order to support its plan of
operations. The Company has no current arrangements with respect to, or sources
of, additional financing and there can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
LIMITED HISTORY
The Company has a limited operating and financial history for potential
investors to consider in assessing the advisability of an investment in the
Company. The Company must, therefore, be considered to be subject to all of the
risks inherent in the establishment of a new business enterprise, including the
absence of any significant operating history, any significant revenues, losses
from continuing operations and the presence of outstanding payables and
significant commitments, along with the uncertainties of the development and
marketing of new products. The Company's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by new businesses
in a highly competitive industry. To date the Company has achieved limited sales
and during the year ended January 31, 1998 the Company incurred losses of
$4,693,651 on revenues of $741,120. To address these risks, the Company must,
among other things, successfully increase the scope of its operations, respond
to competitive and technological developments, continue to attract, retain and
motivate qualified personnel and continue to develop and obtain market
acceptance of its products. There can be no assurance that the Company will be
successful in addressing these risks and challenges. See "-- Lack of Experience
of Management."
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LITIGATION
The Company has received a letter from Tatsuya Saito requesting that the
Company review its TEGRA line of clubs in view of a patent issued to him on July
12, 1994 (the "Saito Patent"). The Saito Patent covers certain aspects of a club
head and hosel, including the positioning of the hosel inset relative to the
club head. The Company has referred this request to independent outside patent
counsel. The Company does not believe that the TEGRA line of clubs infringes any
of the claims of the Saito Patent; however, there can be no assurance that a
court will not conclude that one or more of the Company's products does not
infringe the Saito Patent, or any other patent. If Mr. Saito is successful in
asserting his patent, it could require the Company to alter or withdraw existing
products, delay or prevent the introduction of new products, or force the
Company to pay damages if the products have been introduced. See "--
Intellectual Property" and "Business -- Legal Proceedings."
The Company has received a letter from Vardon Golf Company, Inc. ("Vardon")
asserting that the Company's TEGRA woods and irons infringe one of the claims of
its patent issued on April 12, 1994 (the "Vardon Patent"). The Vardon Patent
includes claims directed to a number of aspects of a golf club head and hosel,
including claims directed to an extended radius of gyration, which includes an
aspect of the club head extending behind the hosel. Vardon filed a complaint in
the Northern District of Illinois, Eastern Division, on May 13, 1998, in which
Vardon alleges that six companies have manufactured, sold, offered to sell and
distributed in the United States, specifically in the Northern District of
Illinois, wood-type and iron golf club products that are covered by at least one
claim of the Vardon Patent and a related design patent. The Company does not
believe that the TEGRA line of clubs infringes any of the claims of these
patents and the Company is in the process of preparing a response to the
complaint; however, there can be no assurance that a court will not conclude
that the Company does not infringe one or the other of these patents, or both.
If Vardon is successful in asserting its patent, it could require the Company to
alter or withdraw existing products, delay or prevent the introduction of new
products, or force the Company to pay damages if the products have been
introduced. See "-- Intellectual Property" and "Business -- Legal Proceedings."
DEPENDENCE ON PRODUCT INTRODUCTION
The Company believes that the introduction of new, innovative golf clubs
will be crucial to its future success. The Company has just begun to sell
products to retailers but there can be no assurance that the Company's newly
developed products will be accepted by consumers or preferred by consumers over
other companies' products. There can also be no assurance that the Company will
successfully develop new products. New models and basic design changes are
frequently introduced into the golf club market but often meet with consumer
rejection. Failure by the Company to identify and develop products that achieve
widespread market acceptance would adversely affect the Company's future growth
and profitability. Additionally, successful technologies, designs and product
concepts are likely to be copied by competitors. Accordingly, the Company's
operating results could fluctuate as a result of the amount, timing and market
acceptance of new product introductions by the Company or its competitors.
In addition the Company plans to introduce new apparel and accessories. The
Company has only recently begun to sell some of these products to retailers.
There can be no assurance that the Company's apparel and accessories will be
accepted by consumers. There can also be no assurance that the Company will be
able to design or sell new apparel and accessories in the future. Failure of the
Company's current and planned apparel and accessories would adversely affect the
Company's future growth and profitability.
POTENTIAL CHANGES IN USGA REGULATIONS
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
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designers of new clubs to assure compliance with USGA Rules. The Company has
received an authorization letter from the USGA stating that the Tegra irons and
titanium metal woods conform with USGA Rules. Although the Company believes that
all future clubs designed by the Company will conform with USGA Rules, no
assurance can be given that any new products will receive confirmation of such.
In the past, the USGA has made changes in the rules and regulations governing
golf equipment. No assurance can be given that it will not do so in the future,
any such action by the USGA which changes the rules regarding golf equipment
could have a material adverse effect on the Company.
INTELLECTUAL PROPERTY
TRADEMARKS. The Company has applied in the United States for registration
of the following marks: TEGRA, TEGRA T (and design), T (and design), GOLF FIRST,
INVISIBLE INSET HOSEL, and NEMESIS. The Company has only applied to register the
mark TEGRA outside the U.S., and has only sought to register that mark in
Canada, the United Kingdom, Japan and Taiwan. The Company has received notices
of allowance from the U.S. Patent and Trademark Office ("PTO") for the marks
TEGRA, TEGRA T (and design), T (and design), and NEMESIS. While the Company has
undertaken U.S. trademark searches through standard trademark search channels
for some of the marks for which the Company seeks registration and the search
results reveal that these marks appear to be available for use and registration
in the U.S. in connection with golf clubs and some golf accessories and golf
related apparel, no assurance can be given that such searches uncovered all
existing or potentially conflicting marks. Outside the U.S., the Company has not
undertaken any trademark searches to determine whether any of these marks is
available for use or registration in connection with golf clubs, golf
accessories or golf related apparel.
No assurances can be given that any or all of the Company's applications for
these trademark registrations will be granted. Additionally, no assurances can
be given that any issued trademark registrations will give the Company exclusive
rights to use the marks with respect to all of the goods or services the Company
may propose to sell. The Company does not plan to introduce any product which is
covered by any third party U.S. or foreign trademark, registration or trademark
rights known to the Company. To date, there have been no interruptions in the
Company's business as the result of any claim of infringement. However, no
assurance can be given that the Company will not be adversely affected by the
assertion of intellectual property rights belonging to others. The effects of
such assertions could include requiring the Company to alter or withdraw
existing trademarks or products delaying or preventing the introduction of
products, or forcing the Company to pay damages if the products have been
introduced.
PATENTS. The Company has filed an application for a United States patent
claiming certain elements of the Company's Tegra line of inset woods and irons,
and the Company has filed a Patent Cooperation Treaty patent application,
designating all countries, that is based on such United States patent
application. Based on the results of a patent search conducted by outside patent
counsel, the Company is of the view that various aspects of the Tegra line of
woods and irons may be patentable, but no assurance can be given that any of the
foregoing patent applications or any future application for a utility or design
patent will be granted by the U.S. PTO or any other PTO or, if a patent issues,
as to the scope of any patent that might issue, or that any such patent will
prevent misappropriation or duplication of the Company's products or similar
products by competitors, or that the Company will have the rights or resources
to commercialize products on the basis of any new patents. There can be no
assurance that any issued patents will provide the Company with significant
competitive advantages, or that challenges will not be instituted against the
validity or enforceability of any patents owned by the Company or, if
instituted, that such challenges will not be successful. The cost of litigation
to uphold the validity of a patent and prevent infringement can be very
substantial and could be beyond the Company's financial means, even if the
Company could otherwise prevail in such litigation. Furthermore, there can be no
assurance that others will not independently develop similar designs or
technologies, duplicate the Company's designs and technologies or design around
the patented aspects of the Company's technology.
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There are numerous patents granted with respect to golf technology, and the
Company cannot provide any assurances that any particular product of the Company
will not infringe any issued patent or any patent that issues in the future from
an application that is currently pending with any of the PTOs, or will not
infringe any other right of any third party. To date, there have been no
interruptions in the Company's business as the result of any claim of patent
infringement. However, no assurance can be given that the Company will not be
adversely affected by the assertion of intellectual property rights belonging to
others. The Company has not obtained an opinion from its patent counsel that the
Company's products do not infringe on the rights of others. The effects of
assertion of patent rights of third parties could include requiring the Company
to alter or withdraw existing products, delaying or preventing the introduction
of products, or forcing the Company to pay damages if the products have been
introduced. See "-- Litigation" and "Business -- Legal Proceedings."
GLOBAL ESTABLISHMENT OF TEGRA-TM- BRAND
The Company's business strategy includes the global use of the TEGRA brand
name. Successfully implementing this strategy requires that the Company create
recognition of the TEGRA brand, which is new to the golf industry and establish
trademark rights in the TEGRA and TEGRA T (and design) marks. Implementing this
strategy requires the commitment of substantial financial resources. There can
be no assurance that the proceeds of this Offering will be sufficient to
implement this strategy or that the Company will be able to obtain any
additional financing on acceptable terms or at all.
RISK OF RETAILERS' REFUSAL TO PLACE OR MAINTAIN TEGRA RETAIL ENVIRONMENTS
A significant component of the Company's corporate strategy is the
installation of TREs within stores of the Company's targeted Tegra retailers.
There can be no assurance, however, that such retailers will be willing to place
the TREs in their stores, or that, if such TREs are installed, their performance
will meet the Company's expectations. Moreover, there can be no assurance that,
if such TREs are installed, the retailers will agree to keep such TREs in place.
The Company's failure to persuade such retailers to place or keep TREs in their
stores, or the failure of such TREs to perform up to their expectations, would
have a material adverse effect on the Company's business.
COMPETITION
The Company will face intense competition for customers because the golf
equipment and apparel industry is highly competitive and is characterized by the
frequent introduction of new products. The Company's competitors consist of
several well established domestic and foreign companies, the substantial
majority of which have significantly greater financial resources than the
Company, longer operating histories in the golf industry, well established
reputations, and marketing, distribution and service networks, larger product
lines than the Company, and greater management and technical resources.
Accordingly, many of these competitors will have greater financial resources to
devote to areas such as advertising, marketing and club development, and
consequently the cost of entry into the golf market is higher than in many
markets. A manufacturer'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. Additionally, the apparel industry is
driven by, among other factors, fashion considerations and no assurance can be
given that the Company's designs will be accepted by consumers or preferred by
consumers over other companies' products.
SOURCES OF SUPPLY
As is the case with most golf club manufacturers, the Company will import
club heads and other components from companies in Asia, including companies
located in mainland China. In the event that the Company should fail to
establish adequate sources of supply, lose its sources of supply for these
materials and components, or experience delays in receiving delivery from such
sources, the Company would sustain
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shortages of materials and components and incur delays in meeting delivery
deadlines. The Company would also experience such difficulties in the event that
any supplier was unable or unwilling to meet the Company's requirements. Any of
these occurrences could have a material adverse effect on the Company's
operating results. Additionally, the Company faces certain risks associated with
importing goods from other countries such as the risk of currency fluctuations,
government imposed quotas, work stoppages, political instability and the
difficulty in enforcing contracts.
The Company relies on a limited number of suppliers for a significant
portion of the component parts used in the manufacture of its golf clubs. The
Company could in the future experience shortages of components or periods of
increased price pressures, which could have a material adverse effect on the
Company's business, operating results or financial condition. In addition,
failure to obtain adequate supplies or fulfill customer orders on a timely basis
could have a material adverse effect on the Company's business, operating
results or financial condition.
SEASONALITY; DISCRETIONARY CONSUMER SPENDING
Golf is generally regarded as a warm weather sport and accordingly, sales of
golf equipment reflect a seasonality of market demand and have historically been
strongest in the first and second quarters of each year with the weakest sales
occurring during the fourth quarter. Due to the seasonality of the industry,
results from any one or more quarters are not necessarily indicative of annual
results or continuing trends. Additionally, quarterly results may vary from year
to year due to the timing of new product introductions by both the Company and
its competitors, advertising expenditures, promotional periods; competitive
pressures resulting in lower than expected average selling prices; and the
volume of orders that are received and that can be fulfilled in a quarter.
Additionally, due to the outdoor nature of the sport, golf sales are influenced
by the weather and inclement or unseasonable weather conditions can adversely
effect the Company's operating results. In addition, sales of golf clubs are
dependent on discretionary consumer spending, which may be affected by general
economic conditions. A decrease in consumer spending generally could result in
decreased spending on golf equipment, which could have a material adverse effect
on the Company's business, operating results and financial condition. Any one or
more of the above factors could result in the Company failing to achieve its
expectations as to future sales or net income.
Because in the short term most operating expenses are relatively fixed, the
Company may be unable to adjust spending sufficiently in a timely manner to
compensate in the event of any unexpected sales shortfall. Any such failure by
the Company could materially adversely affect quarterly results of operations.
If technological advances by competitors or other competitive factors require
the Company to invest significantly greater resources than anticipated in
research and development or sales and marketing efforts, the Company's business,
operating results or financial condition could be materially adversely affected.
Accordingly, the Company believes that comparisons of its results of operations
on a period to period basis should not be relied upon as an indication of future
performance. Additionally, the results on any quarter are not indicative of
results to be expected for a full fiscal year. Fluctuations in operating results
or any of the numerous other factors discussed above or below may result in
certain future quarters in the Company's results of operations may be below the
expectations of public market analysts or investors. In these events, the market
price of the Common Stock and Warrants would be materially adversely affected.
RESPONSIBILITY FOR MARKDOWNS
In the apparel industry, the prices of products that are not sold by
retailers in a timely manner are often marked down. It is customary in the
industry for the seller of such products to share markdown costs with the
retailers and the Company anticipates that it will share such costs with, to the
extent they are incurred by, its major customers in order to maintain its
relationships with such customers.
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POTENTIAL ACQUISITIONS
The Company may in the future utilize a portion of the net proceeds of the
Offering to pursue acquisitions of complementary services or businesses. Future
acquisitions may result in potentially dilutive issuances of equity securities,
the incurrence of additional debt, the write-off of costs, and the amortization
of expenses related to goodwill and other intangible assets, all of which could
have a material adverse effect on the Company's business, operating results and
financial condition. Future acquisitions would involve numerous additional
risks, including difficulties in the assimilation of the operations, services
and personnel of the acquired company, the diversion of management's attention
from other business concerns, entering markets in which the Company has little
or no direct prior experience and the potential loss of key employees of the
acquired company. The Company has not consummated any acquisitions and currently
has no agreements or understandings with regard to any acquisitions.
Shareholders will not vote on any potential acquisitions (unless required by
NASDAQ regulations or applicable law) nor have the opportunity to review any
potential acquisition candidate. See "-- Representative's Influence Over
Potential Future Capital Financing."
LISTING AND MAINTENANCE CRITERIA FOR NASDAQ SYSTEM; "PENNY STOCK" REGULATIONS.
The National Association of Securities Dealers, Inc. (the "NASD"), which
administers Nasdaq, requires, among other things, for a company's securities to
be listed on the Nasdaq SmallCap Market, that the Company have at least
$4,000,000 in total assets and a $5,000,000 market value of the public float.
Further, initial listing requires three market makers and a minimum bid price of
$4.00 per share. Continued inclusion in the Nasdaq SmallCap Market currently
requires two market makers and a minimum bid price of $1.00 per share and a
market value of the public float of at least $1,000,000 among other
requirements. If the Company fails to maintain the Nasdaq minimum threshold
requirements, it would lose Nasdaq listing and trading, if any, in the
securities would be conducted in the over-the-counter market known as the NASD
OTC Electronic Bulletin Board, or more commonly referred to as "pink sheets." As
a result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's Common Stock.
The Commission has adopted regulations which generally define "penny stock"
to be any equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. If the Common Stock and Warrants are accepted for quotation
on Nasdaq, they will initially be exempt from the definition of "penny stock."
If the Common Stock and Warrants are later removed from listing by Nasdaq and
are traded at a price below $5.00, the Common Stock and Warrants may become
subject to rules that impose additional sales practice requirements on
broker-dealers who sell such Common Stock and Warrants to persons other than
established customers and institutional accredited investors. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
prepared by the Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities, and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the "penny stock" rules may restrict the ability of broker-dealers
to sell the Common Stock and Warrants and may affect the ability of purchasers
in this Offering to sell the Common Stock and Warrants in the secondary market.
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REPRESENTATIVE'S INFLUENCE OVER POTENTIAL FUTURE CAPITAL FINANCING
The Company has agreed that for a period of 60 months from the date of this
Prospectus, it will not sell or otherwise dispose of any securities (with the
exception of the shares of Common Stock issued upon exercise of currently
outstanding options or warrants, and options granted under the Company's 1996
Incentive and Non-qualified Stock Option Plan or the Company's 1998 Incentive
and Non-qualified Stock Option Plan) without the Representative's prior written
consent. The Company has also agreed that, for a period of 60 months from the
date of this Prospectus, it will not sell or issue any securities pursuant to
Regulation S under the Securities Act nor any preferred stock without the
Representative's prior written consent. These agreements represent significant
potential restrictions on the Company's ability to raise capital or consummate
any merger or acquisition through the sale or issuance of the Company's
securities. Should the Company need to raise capital or complete a merger or
acquisition transaction through the sale or issuance of its securities within
the applicable time frame of these agreements, the refusal of the Representative
to grant its consent would have a material adverse effect on the Company. The
Representative has informed the Company that these agreements are for the
purpose of encouraging the Company not to issue additional securities on terms
that would be dilutive to investors who participate in this Offering, although
there can be no assurance that additional sales of securities will not occur
that may have dilutive effects. The Representative has further advised the
Company that in determining whether consent will be granted the Representative
will consider on a case-by-case basis, in addition to the potential dilution to
existing shareholders, a number of factors, including the Company's current need
for additional financing, the purposes for which the financing is sought, the
cost and availability of alternative sources of non-equity financing and, in the
case of a proposed acquisition, the type of business to be acquired, its
relation to the Company's current business and the existence of alternative
methods of financing the transaction. See "Underwriting."
PAYMENTS TO AFFILIATES
The Company plans to use approximately $765,000 from the proceeds of the
Offering to repay outstanding loans to certain stockholders. These shareholders
currently hold Common Stock of the Company as well as options and/or warrants to
purchase additional shares in the following amounts and exercise prices. Paul H.
Berger, the co-founder, Chairman of the Board of Directors, and Chief Executive
Officer of the Company, will receive approximately $152,500. He currently owns
1,430,120 shares of the Common Stock of the Company and has options to purchase
19,577 shares at the exercise price of $0.225 per share. Jim G. Dodrill II, the
co-founder, President, General Counsel, and a Director of the Company, will
receive $102,500. He currently owns 184,833 shares of the Common Stock of the
Company and has options to purchase 336,510 shares at an average exercise price
of $1.76 per share. Stanley Berger, father of Paul Berger and a member of the
Company's Advisory Board, will receive $510,00. He currently owns none of the
Common Stock of the Company, but has warrants to purchase 108,002 shares at an
average exercise price of $1.73 and an option to purchase 4,444 shares at the
exercise price of $2.75 per shares. See "Use of Proceeds" and "Certain
Transactions."
CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Upon completion of this Offering, Messrs. Berger and Dodrill will own
approximately 36.7% of the outstanding Common Stock of the Company, assuming no
exercise of options or warrants. Although no voting arrangement exists among
them, the Company's principal stockholders and current management will, as a
practical matter, be able to control the outcome of most matters submitted for
shareholder approval including the election of directors and amendments to the
Company's Certificate of Incorporation and otherwise direct the affairs of the
Company. See "Principal Shareholders."
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FUTURE SALES OF COMMON STOCK PURSUANT TO RULE 144
The 2,516,770 shares of Common Stock issued prior to this Offering are
"restricted securities" as that term is defined by Rule 144 under the Securities
Act, and in the future, may be sold in compliance with Rule 144 or pursuant to
an effective registration statement. The 1,449,697 shares owned by Mr. Berger
and the 521,343 shares owned by Mr. Dodrill are subject to the provisions of
lock-up agreements between Messrs. Berger and Dodrill and the Representative.
Ordinarily, under Rule 144, a person who has beneficially owned restricted
securities for a period of one year may, every three months, sell in brokerage
transactions an amount that does not exceed the greater of (i) 1% of the
outstanding number of shares of a particular class of such securities or (ii)
the average weekly trading volume in such securities on all national exchanges
and/or reported through the automated quotation system of a registered
securities association during the four weeks prior to the filing of a notice of
sale by a securities holder. In the future, sales of restricted stock pursuant
to Rule 144 may have an adverse effect on the market price of the Company's
Common Stock should a public trading market develop for such shares.
In addition to the restrictions under Rule 144, the shares of Common Stock
owned by each officer, director and 5% stockholder of the Company upon
completion of the Offering or hereafter acquired by either of them will be
subject to a lock-up period of 24 months from the date of this Prospectus. On
each of the second and third anniversaries of this Prospectus, 25% of their
shares will be released from this restriction. On the fourth anniversary of this
Prospectus all remaining shares will be released from this restriction. See
"Shares Available for Future Sale."
Prior to this Offering, there has been no market for the Common Stock. The
Company can make no prediction as to the effect, if any, that sales of shares of
Common Stock, or the availability of such shares for sale, will have on the
market price of Common Stock prevailing from time to time. Nevertheless, sales
of substantial amounts of Common Stock in the public market could adversely
affect prevailing market prices.
SUBSTANTIAL SHARES OF COMMON STOCK RESERVED FOR ISSUANCE PURSUANT TO STOCK
OPTION PLAN
The Company has reserved 1,150,000 and 800,000 shares of Common Stock for
issuance to employees, officers, directors, and consultants pursuant to option
exercises under the Company's 1996 Incentive and Non-qualified Stock Option Plan
and the Company's 1998 Incentive and Non-qualified Stock Option Plan,
respectively. To date, the Company has granted options to purchase a total of
808,688 shares of Common Stock, at prices ranging from $0.225 to $9.20 per
share. The existence of these options may be perceived as an overhang on the
market and therefor may prove to be a hindrance to the Company's future equity
financing. Sales in the public market of substantial amounts of Common Stock, or
the perception that such sales could occur, could depress prevailing market
prices for the Common Stock. See "Management -- Stock Option Plans," "Certain
Transactions" and "Underwriting."
POSSIBLE ISSUANCE OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of up to
5,000,000 shares of preferred stock, $0.01 par value per share ("Preferred
Stock"), with designations, rights, and preferences determined from time to time
by its Board of Directors. Accordingly, the Company's Board of Directors is
empowered, without stockholder approval, to issue Preferred Stock with
dividends, liquidation, conversion, voting, or other rights that could adversely
affect the voting power or other rights of the holders of Common Stock. In the
event of issuance, the Preferred Stock could be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. See "-- Representative's Influence Over Potential Future
Capital Financing" and "Description of Securities."
16
<PAGE>
SUBSTANTIAL DILUTION; DISPROPORTIONATE CONSIDERATION PAID BY NEW SHAREHOLDERS
Based upon the net tangible book value of the Company at April 30, 1998,
investors in this Offering will suffer an immediate and substantial dilution of
their investment of approximately $4.62 or 77% in net tangible book value per
share. The cash consideration paid by new investors in this Offering is 86.25%
of the total consideration paid for the securities of the Company that will be
outstanding after this Offering. To the extent outstanding options or warrants
to purchase the Company's Common Stock are exercised, there will be further
dilution. See "Dilution."
LACK OF PRIOR MARKET FOR THE COMMON STOCK OR WARRANTS
Prior to this Offering, there has been no public trading market for the
Common Stock or Warrants and there can be no assurances that a public trading
market for the Common Stock or Warrants will develop or, if developed, will be
sustained. Although the Company has applied to list the Common Stock and
Warrants on the NASDAQ SmallCap Market, there can be no assurance that a regular
trading market will develop for the Common Stock or Warrants offered hereby, or,
if developed, that it will be maintained. If for any reason the Company fails to
maintain sufficient qualifications for continued listing on the NASDAQ SmallCap
Market or a public trading market does not develop, purchasers of the Common
Stock or Warrants may have difficulty selling their Common Stock or Warrants
should they desire to do so.
ARBITRARY DETERMINATION OF OFFERING PRICE AND WARRANT EXERCISE PRICE
The initial public offering price of the Common Stock and the Warrants and
the Warrant exercise price have been determined by negotiations between the
Company and the Representative and do not necessarily bear any relationship to
the Company's assets, net worth or results of operations, or any other
established criteria of value. The offering price set forth on the cover page of
this Prospectus should not be considered an indication of the actual value of
the Common Stock and Warrants offered hereby. After completion of this offering,
such price may vary as a result of market conditions and other factors. See
"Description of Securities" and "Underwriting."
IMPACT ON MARKET OF WARRANT EXERCISE
In the event of the exercise of a substantial number of Warrants and the
Warrant exercise price within a reasonably short period of time after the right
to exercise commences, the resulting increase in the amount of Common Stock of
the Company in the trading market could materially adversely affect the market
price of the Common Stock. See "Description of Securities -- Warrants."
ADJUSTMENTS TO WARRANT EXERCISE PRICE AND EXERCISE DATE
The Company, in it sole discretion, may reduce the exercise price of the
Warrants and/or extend the time within which the Warrants may first be
exercised. Further, in the event the Company issues certain securities or makes
certain distributions to shareholders, the exercise price of the Warrants may be
reduced. Any such price reductions (assuming exercise of the Warrants) will
provide less money for the Company and possibly materially adversely affect the
market price of the Common Stock and Warrants.
REDEMPTION OF REDEEMABLE WARRANTS
The Warrants are subject to redemption by the Company, at any time after the
First Exercise Date, at a price of $0.125 per Warrant upon 30 days prior written
notice to the holders thereof, if the average closing bid price for the Common
Stock equals or exceeds $7.50 per share for ten consecutive trading days. In the
event that the Warrants are called for redemption by the Company, holders
thereof will have 30 days during which they may exercise their rights to
purchase shares of Common Stock. In the event a current prospectus is not
available, the Warrants may not be exercised and the Company will be precluded
from redeeming the Warrants. If holders of the Warrants elect not to exercise
them upon notice of redemption
17
<PAGE>
thereof, and the Warrants are subsequently redeemed prior to exercise, the
holders thereof would lose the benefit of the difference, if any, between the
market price of the underlying Common Stock as of such date and the exercise
price of such Warrants, as well as any possible future price appreciation in the
Common Stock. As a result of an exercise of the Warrants, existing shareholders
would be diluted and the market price of the common Stock may be adversely
affected. If holders of the Warrants fail to exercise their rights under the
Warrants prior to the date set for redemption, then they will be entitled to
receive only the redemption price, $0.125 per Warrant. See "Description of
Securities -- Warrants."
POSSIBLE RESTRICTIONS ON MARKET MAKING ACTIVITIES IN THE COMMON STOCK AND
WARRANTS
Although they have no legal obligation to do so, the Underwriters from time
to time may act as market makers and otherwise effect transactions in the Common
Stock and Warrants. Unless granted an exemption by the Securities and Exchange
Commission (the "Commission") from Rule 103 of Regulation M under the Exchange
Act, the Underwriters will be prohibited from engaging in any market making
activities or solicited brokerage activities with respect to the Common Stock
and Warrants for the period from five business days prior to any solicitation of
the exercise of any Warrant or five business days prior to the exercise of any
Warrant based on a prior solicitation until the later of the termination of such
solicitation activity or the termination (by waiver or otherwise) of any right
the Underwriters may have to receive such a fee for the exercise of the Warrants
following such solicitation. As a result, the Underwriters may be unable to
continue to provide a market for the Common Stock and Warrants during certain
periods while the Warrants are exercisable. The prices and liquidity of the
Common Stock and Warrants may be materially and adversely affected by the
cessation of the Underwriters market making activities. In addition, there is no
assurance that the Underwriters will continue to be market makers in the Common
Stock and Warrants. The prices and liquidity of the Common Stock and Warrants
may be affected significantly by the degree, if any, of the Underwriters'
participation in the market. The Underwriters may voluntarily discontinue such
participation at any time. Further, the market for, and liquidity of, the Common
Stock and Warrants may be adversely affected by the fact that a significant
amount of the Common Stock and Warrants may be sold to customers of the
Underwriters. See "Underwriting."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN CONNECTION WITH THE
EXERCISE OF THE WARRANTS.
The Company will be able to issue shares of its Common Stock upon the
exercise of the Warrants only if (i) there is a current prospectus relating to
the Common Stock issuable upon exercise of the Warrants under an effective
registration statement filed with the Commission and (ii) such Common Stock is
then qualified for sale or exempt therefrom under applicable state securities
laws of the jurisdictions in which the various holders of Warrants reside.
Although the Company will undertake to use its best efforts to maintain the
effectiveness of a current prospectus covering the Common Stock subject to the
Warrants offered hereby, there can be no assurance that the Company will be
successful in doing so. After a registration statement becomes effective, it may
require continuous updating by the filing of post-effective amendments. A
post-effective amendment is required (i) when, for a prospectus that is used
more than nine months after the effective date of the registration statement,
the information contained therein (including the audited financial statements)
is as of a date more than 16 months prior to the use of the prospectus, (ii)
when facts or events have occurred which represent a fundamental change in the
information contained in the registration statement, or (iii) when any material
change occurs in the information relating to the plan of distribution of the
securities registered by such registration statement. The Company anticipates
that this Registration Statement will remain effective for at least nine months
following the date of this Prospectus, assuming a post-effective amendment is
not filed by the Company. The Company intends to qualify the sale of the Common
Stock and Warrants in a limited number of states, although certain exemptions
under certain state securities laws may permit the Warrants to be transferred to
purchasers in states other than those in which the Warrants were initially
qualified. The Company will be prevented, however, from issuing Common Stock
upon exercise of the Warrants in those states where exemptions are unavailable
and the Company has failed to qualify the Common Stock upon exercise of the
18
<PAGE>
Warrants. The Company may decide not to seek, or may not be able to obtain,
qualification of the issuance of such Common Stock in all of the states in which
the ultimate purchasers of the Warrants reside. In such a case, the Warrants of
those purchasers will expire and have no value if such Warrants cannot be
exercised or sold. Accordingly, the market for the Warrants may be limited
because of the foregoing requirements. See "Description of Securities."
REPRESENTATIVE'S WARRANTS
In connection with the Offering, the Company will sell to the
Representative, for nominal consideration, warrants to purchase an aggregate of
250,000 shares of Common Stock and 50,000 Warrants. The Representative's
Warrants will be exercisable for a period of four years, commencing one year
after the effective date of the Registration Statement of which this Prospectus
is a part, at an exercise price of 120% of the initial public offering price of
the Common Stock and Warrants. The holder of the Representative's Warrants will
have the opportunity to profit from a rise in the market price of the
Securities, if any, without assuming the risk of ownership. The Company may find
it more difficult to raise additional equity capital if it should be needed for
the business of the Company while the Representative's Warrants are outstanding.
At any time when the holder thereof might be expected to exercise them, the
Company would probably be able to obtain additional capital on terms more
favorable than those provided by the Representative's Warrants.
The Representative has demand and "piggyback" registration rights with
respect to the Common Stock owned by the Representative, the Representative's
Warrants and the Common Stock and Warrants issuable upon exercise of the
Representative's Warrants. Any future exercise of these registration rights may
cause the Company to incur substantial expense and could impair the Company's
ability to raise capital through the public sale of its securities. See
"Dilution," "Shares Eligible for Future Sale" and "Underwriting."
NO DIVIDENDS ANTICIPATED
The Company has never paid any dividends. It expects that it will retain its
earnings, if any, for the foreseeable future to finance its operations and will
not pay dividends to investors.
LIMITED LIABILITY OF DIRECTORS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation eliminated personal liability of a director to the
Company and its stockholders for monetary damages for breach of fiduciary duty
as a director, except in certain circumstances. Accordingly, stockholders may
have limited rights to recover money damages against the Company's directors for
breach of fiduciary duty.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
of Common Stock and Warrants offered by the Company hereby are estimated at
approximately $13,056,250, based on an assumed initial public offering prices of
$6.00 per shares of Common Stock and $0.125 per Warrant (approximately
$15,089,688 if the Underwriters' over-allotment option is exercised in full).
The Company expects such net proceeds (assuming no exercise of the Underwriters'
over-allotment option) to be utilized in approximately the manner set forth in
the following table:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------ -------------- -------------------------
<S> <C> <C>
Repayment of existing bridge debt(1).................................... $ 6,045,000 46.30%
Purchase of Inventory................................................... 1,950,000 14.94
Advertising and Marketing............................................... 1,750,000 13.40
Purchase of Fixed Assets................................................ 200,000 1.53
Working capital and general corporate purposes.......................... 3,111,250 23.83
-------------- ------
Total............................................................... $ 13,056,250 100.00%
-------------- ------
-------------- ------
</TABLE>
- ------------------------
(1) Includes $803,000 of net indebtedness incurred after April 30, 1998 and
$255,000 of advances from officers. Of the $6,045,000, approximately
$765,000 will be used to repay affiliates of the Company. See "Certain
Transactions."
A portion of the net proceeds may be used for acquisitions. Although the
Company is engaged from time to time in discussions relating to possible
acquisitions, the Company presently has no agreements, understandings or
commitments with respect to any acquisitions. The foregoing represents the
Company's current estimate of its allocation of the net proceeds of this
Offering based upon the current status of its business operations, its current
plans, and current economic and industry conditions. Future events, as well as
changes in economic or competitive conditions or the Company's business and the
results of the Company's sales and marketing activities, may make different uses
of funds necessary or desirable. The Company will require the consent of the
Representative to engage in any such transations. See "Risk Factors --
Representative's Influence Over Potential Future Capital Financing."
If the Underwriters exercise the over-allotment option in full, the Company
will realize additional net proceeds of approximately $2,033,438, which will be
added to the Company's working capital.
The Company believes that the proceeds of this Offering, together with cash
flow from operations, will be sufficient to satisfy its contemplated cash
requirements for the next 18 months. The Company's financial requirements will
depend upon, among other things, the growth rate of the Company's business, the
amount of cash flow generated by operations and the company's ability to borrow
funds to produce inventory or for working capital purposes. Should the Company
require additional debt or equity financing to support its operations, there can
be no assurance that such additional financing will be available to the Company
on commercially reasonable terms, or at all.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short term
certificates of deposit, money market funds or other short-term interest bearing
investments.
The Company anticipates that the proceeds, if any, received from any
exercise of the Warrants or the Underwriters' Warrants (or the Warrants included
therein) will be utilized for working capital and other corporate purposes.
20
<PAGE>
DILUTION
The difference between the initial public offering price per share of Common
Stock and the pro forma net tangible book value per share of Common Stock after
this Offering constitutes the dilution to investors in this Offering. Net
tangible book value per share is determined by dividing the net tangible book
value of the Company (total assets less intangible assets and liabilities) by
the total number of shares of Common Stock outstanding.
At April 30, 1998 the net tangible deficit of the Company was ($6,221,985),
or approximately ($2.55) per share. After giving effect to the sale by the
Company of the 2,500,000 shares of Common Stock in this Offering (at an assumed
offering price of $6.00 per share) and the 500,000 Warrants in this Offering (at
an assumed offering price of $.125 per Warrant) and the Company's use of the
estimated net proceeds therefrom as set forth under "Use of Proceeds," the pro
forma net tangible book value of the Common Stock at April 30, 1998 would have
been $6,834,265 or approximately $1.38 per share. This represents an immediate
pro forma increase in net tangible book value of $3.93 per share to the
Company's present shareholders and an immediate pro forma dilution of $4.62 per
share to the purchasers of shares of Common Stock in this Offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price (per share of Common
Stock)(1)................................................ $ 6.00
Net tangible deficit per share at April 30, 1998........... $ (2.55)
Increase per share attributable to shares offered hereby... $ 3.93
---------
Pro forma net tangible book value per share after the
Offering................................................. $ 1.38
---------
Dilution of net tangible book value per share to purchasers
in this Offering (2)..................................... $ 4.62
---------
---------
</TABLE>
- ------------------------
(1) Represents the assumed initial public offering price per share of Common
Stock before deduction of the underwriting discount and estimated expenses
of the Offering.
(2) Assuming no exercise of Warrants or the Underwriters' over-allotment option.
See "Description of Securities" and "Underwriting."
The following table sets forth on a pro forma basis as of April 30, 1998,
the number and percentage of shares of Common Stock issued, and the amount and
percentage of consideration and average price per share paid by existing
shareholders of the Company, and to be paid by purchasers pursuant to this
Offering (based upon an assumed initial public offering price of $6.00 per share
of Common Stock and before deducting the underwriting discount and estimated
expenses of this Offering):
<TABLE>
<CAPTION>
OWNERSHIP
---------------------- CONSIDERATION
NUMBER ------------------------- AVERAGE PRICE
OF SHARES PERCENT AMOUNT PERCENT PER SHARE
---------- ---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders.......................... 2,440,105 49.39% $ 2,390,416 13.75% $ 0.98
New Shareholders............................... 2,500,000 50.61% 15,000,000 86.25% $ 6.00
---------- ---------- ------------- ----------
Total.................................... 4,940,105 100.00% $ 17,390,416 100.00% $ 3.52
---------- ---------- ------------- ----------
---------- ---------- ------------- ----------
</TABLE>
The foregoing table gives effect to the sale of the shares of Common Stock
offered hereby and does not give effect to the exercise of the Underwriters'
over-allotment option, any Warrants or the Underwriters' Warrants.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of April
30, 1998 and as adjusted giving effect to the sale by the Company of the
2,500,000 shares of Common Stock and 500,000 Warrants offered hereby. The table
has not been adjusted to give effect to the exercise of the Underwriter's over-
allotment option, the exercise of the Warrants, or the exercise of the
Underwriters' Warrants. This table should be read in conjunction with the
Financial Statements, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
APRIL 30, 1998
-----------------------------
PRO FORMA AS
ACTUAL ADJUSTED(1)
------------- --------------
<S> <C> <C>
Cash............................................................................... $ 28,475 $ 7,842,725
------------- --------------
Advances from officers............................................................. 255,000 --
------------- --------------
Notes payable...................................................................... 5,158,672 171,672
------------- --------------
Shareholders' deficit:
Common Stock, par value $0.01 per share, (8,100,000 shares authorized, 2,440,105
shares issued and outstanding; as adjusted, 4,940,105 shares issued and
outstanding) (2)............................................................... 24,401 49,401
Additional paid-in capital....................................................... 2,592,930 15,524,180
Warrants......................................................................... -- 100,000
Accumulated deficit.............................................................. (8,820,016) (8,820,016)
------------- --------------
Total shareholders (deficit) equity.......................................... (6,202,685) 6,853,565
------------- --------------
Total capitalization......................................................... $ (760,538) $ 14,867,962
------------- --------------
------------- --------------
</TABLE>
- ------------------------
(1) Assumes (i) an initial public offering price of $6.00 per share and $ 0.125
per Warrant, (ii) deduction of underwriting commissions assumed to be 10%,
estimated offering expenses payable by the Company of $500,000 and repayment
of $4,987,000 of indebtedness and $255,000 of advances from officers, and
(iii) an estimated value of the Representative's Warrant of $37,500.
(2) Does not include (i) the 500,000 shares of Common Stock issuable upon the
exercise of the Warrants offered hereby, (ii) the 102,944 shares of Common
Stock and 75,000 Warrants issuable upon exercise of the Underwriters'
over-allotment option, (iii) the 75,000 shares of Common Stock issuable upon
exercise of the Warrants included in the Underwriters' over-allotment
option, (iv) the 250,000 shares of Common Stock and the 50,000 Warrants
issuable upon exercise of the Representative's Warrants (or the 50,000
shares of Common Stock issuable upon exercise of the Warrants included
therein), (v) 4,129,759 shares of Common Stock issuable upon the exercise of
stock options and warrants outstanding on the date hereof.
DIVIDEND POLICY
The Company intends to retain any future earnings for the operation and
expansion of its business and does not anticipate paying any cash dividends in
the foreseeable future. Any future determination as to the payment of cash
dividends will depend upon a number of factors, including the Company's
earnings, capital requirements, financial condition and other factors considered
relevant by the Company's Board of Directors.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data, insofar as it relates to the period
February 8, 1996 (inception) to January 31, 1998 and the year ended January 31,
1998, has been derived from the Company's financial statements, including the
balance sheets at January 31, 1997 and 1998 and the related statements of
operations, of changes in shareholders' deficit and of cash flows for the
periods then ended, and notes thereto appearing elsewhere herein. The data for
the three months ended April 30, 1997 and 1998 has been derived from unaudited
financial statements also appearing herein and which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. The summary financial data should be read in conjunction with
the "Selected Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's financial
statements and notes thereto appearing elsewhere herein. The results of
operations for the three months ended April 30, 1998 are not necessarily
indicative of future results.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 8,
1996 FOR THE YEAR FOR THE THREE MONTHS ENDED
(INCEPTION) TO ENDED APRIL 30,
JANUARY 31, JANUARY 31, --------------------------
1997 1998 1997 1998
--------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.............................................. $ -- $ 741,120 $ 16,575 $ 310,768
Costs of sales....................................... -- 859,317 13,939 240,218
Research and development............................. 650,805 451,019 50,992 62,028
Stock-based compensation............................. 473,894 210,130 53,878 --
Selling, general and administrative expenses......... 1,251,009 3,669,657 600,050 1,611,608
Total costs and expenses............................. 2,375,708 5,190,123 718,859 1,913,854
Loss from operations................................. (2,375,708) (4,449,003) (702,284) (1,603,086)
Interest expense..................................... (2,844) (244,648) (29,847) (144,727)
Net loss............................................. $ (2,378,552) $ (4,693,651) $ (732,131) $ (1,747,813)
Basic and diluted loss per share of Common Stock..... $ (3.24) $ (2.21) $ (0.81) $ (0.73)
Weighted average number of common shares outstanding
(1)................................................ 734,330 2,120,460 905,130 2,401,814
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 30, 1998
---------------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED(2)
------------- ------------
BALANCE SHEET DATA:
Current assets....................................................................... $ 1,211,970 $ 9,026,220
Working (deficit) capital............................................................ $ (6,756,178) $ 6,300,072
Total assets......................................................................... $ 1,805,463 $ 9,619,713
Total liabilities.................................................................... $ 8,008,148 $ 2,766,148
Stockholders' (deficit) equity....................................................... $ (6,202,685) $ 6,853,565
</TABLE>
- ------------------------
(1) Adjusted to give retroactive effect to a number of stock splits and reverse
stock splits as described in Note 6 to the Company's Financial Statements
included elsewhere in this Prospectus.
(2) Adjusted to reflect the sale of the 2,500,000 shares of Common Stock and
500,000 Warrants offered by the Company hereby at an assumed public offering
price of $6.00 per share and $.125 per Warrant and the initial application
of the estimated net proceeds to the Company as described under "Use of
Proceeds."
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the Company's financial condition as of and for
the fiscal year ended January 31, 1998 and for the period from February 8, 1996
(inception) through January 31, 1997 and for the Company's results of operations
for the three month periods ended April 30, 1998 and 1997 should be read in
conjunction with the Company's financial statements and notes thereto included
elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Sales during the year ended January 31, 1998 totaled $741,120. There were no
sales during the period February 8, 1996 (inception) to January 31, 1997. Of the
sales during the year ended January 31, 1998, $588,514 were generated by sales
of HiPPO products and $152,606 by sales of Tegra products.
Sales during the quarter ended April 30, 1998 totaled $310,768 compared to
sales of $16,575 during the same period in 1997. Of the sales during the quarter
ended April 30, 1998, $24,220 were generated by sales of HiPPO products and
$286,548 by sales of Tegra products. The sales recognized during the quarter
ended April 30, 1997 represent apparel samples sold to the HiPPO licensor, Hippo
Holdings, Ltd.
The Company introduced the HiPPO line in July of 1997 and the Tegra line in
October of 1997. Sales during both the year ended January 31, 1998 and the
quarter ended April 30, 1998 were negatively impacted because the Company was
not able to purchase inventory to fill customer orders as a result of the
Company's inadequate working capital and lack of open terms with its vendors.
The Company believes that the absence of sufficient working capital has
historically prevented the Company from taking full advantage of demand for its
products. Likewise, the Company believes that the lack of open terms with its
vendors contributed to preventing the Company from meeting this demand.
In May of 1998 the Company sold its license to sell HiPPO products in the
U.S. back to Hippo Holdings, Ltd. along with all existing HiPPO inventory,
marketing materials and related liabilities. In return, the Company received a
cash payment from Hippo Holdings, Ltd. of approximately $359,000. In addition
Hippo Holdings, Ltd. returned to the Company 50,000 shares of the Company's
Common Stock and assumed commitments of the Company in excess of $1,000,000.
Accordingly, the Company has ceased selling HiPPO products and does not expect
to receive revenue on a going forward basis from such brand.
Costs of sales during the year ended January 31, 1998 totaled $859,317. Of
this amount, approximately $89,343 reflects costs associated with air freighting
goods from manufacturing facilities, which are in Asia, to the Company's
warehouse in Miami, Florida. Cost of sales during the quarter ended April 30,
1998 totaled $240,218. Of this amount, $13,887 reflects costs associated with
air freighting goods to the Company's warehouse in Miami, Florida. The cost of
air freight was necessitated by the Company's marginal working capital position
which limited the Company's ability to place orders as far in advance as would
otherwise be desirable or to maintain inventory to support demand. The Company's
shortage of working capital required the Company to attempt to shorten lead
times involved in production and shipping of goods in order to deliver product
as quickly as possible to its customers. Other incremental delivery costs of
$47,787 also adversely impacted cost of sales for the year ending January 31,
1998. Additional production cost variances of $52,218 in material and assembly
charges attributed to smaller production runs and manufacturing carrying charges
than the Company expects would have been the case if it were in a better working
capital position also adversely impacted cost of sales for the year ending
January 31, 1998. Costs of sales in comparison to sales for the year ended
January 31, 1998 was negatively impacted by the liquidation of apparel for
$85,356 with a cost of $151,089.
Research and development costs totaled $451,019 for the year ended January
31, 1998 as compared to $650,805 for the period ended January 31, 1997. This 31%
decrease resulted from reduced spending associated with final development of
Tegra golf equipment.
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Research and development costs totaled $62,028 for the quarter ended April
30, 1998 as compared to $50,992 for the quarter ended April 30, 1997. This 22%
increase is attributed primarily to timing in recognition of research and
development costs. The Company expects that its research and development costs
will continue to decline for the rest of fiscal year 1998, but may increase
thereafter as the Company undertakes new projects.
During the year ended January 31, 1998 the Company incurred a royalty
expense of $16,681 to Hippo Holdings, Ltd. in connection with sales of HiPPO
products. Because all such sales have been terminated, the Company will no
longer have any royalty expenses to Hippo Holdings, Ltd.
Selling, general and administrative expenses totaled $3,669,657 for the year
ended January 31, 1998 as compared to $1,251,009 for the period ended January
31, 1997. This increase resulted primarily from increased advertising and
promotion spending and development costs and growth in employment and related
costs.
Selling, general and administrative expenses totaled $1,611,608 for the
quarter ended April 30, 1998 as compared to $600,050 for the quarter ended April
30, 1997. This 269% increase resulted primarily from increased payroll and
related expenses, advertising and promotion, travel, professional fees and
facilities, supplies and services.
FORECAST
The Company has installed 58 TREs in 55 cities. The Company is in the
process of opening additional accounts and installing additional TREs. The
Company expects to open up to 40 new TREs by year end and have products
available in 400 stores by year end. The Company expects sales of Tegra products
to increase as existing and potential retailers and consumers gain familiarity
with the Tegra brand and the benefits offered by the Company's product lines and
as additional accounts are opened and TREs are installed. The Company plans to
use $1,750,000 of the proceeds from the Offering for marketing and advertising
efforts. See "Use of Proceeds."
The Company anticipates that its cost of goods sold will decrease with
increased volume of purchasing and lower costs associated with shipping product
as the Company's working capital position improves.
The Company anticipates that within the 12 months subsequent to the closing
of the Offering it will hire an additional 35 people. Of these 35 people, 20 are
expected to be hired for sales positions. These individuals will primarily be
territory managers responsible for sales to specific accounts within a defined
geographic region. The Company also anticipates that 5 of these 35 people will
work in customer service and the remaining 10 in support, administrative and
distribution positions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity has historically consisted of
sales of equity securities and high yield debt borrowings. During the year ended
January 31, 1998 the Company borrowed $1,870,500 from unaffiliated individuals
at interest rates ranging from 9.4% to 24% and with a weighted average rate of
13.4%. Additionally, the Company borrowed $765,000 from individuals who either
are officers of the Company or are affiliated with or related to officers of the
Company. These borrowings will be repaid from the proceeds of this Offering. See
"Use of Proceeds" and "Certain Transactions."
At January 31, 1998, the Company was in default of the terms of certain
12.5% and 15% unsecured notes payable to private investors which were due during
September 1997. During February 1998, the Company obtained a specific waiver to
extend the maturity of the then outstanding unsecured notes payable through the
earlier of September 1998 or within 5 days after an initial public offering of
the Company's common stock generating in excess of $7.5 million of gross
proceeds.
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The Company has developed and implemented strategies to meet ongoing and
future liquidity needs. These strategies include (i) obtaining funds from a
private placement of securities of the Company which was completed in June,
1998; (ii) an initial public offering of the Company's Common Stock and (iii)
arranging for working capital financing on inventory and receivables to assist
in cash flow. The management of the Company believes that these actions along
with a tighter control on overall costs will allow the Company to meet its
liquidity needs for the next 18 months.
Pursuant to the terms of a factoring agreement, the Company assigns
substantially all of its accounts receivable to a factor with recourse. The
Company is able to borrow up to 75% of eligible accounts receivable, as defined,
up to a maximum amount of $1 million. Advances from the factor incur interest at
24% per annum. Receivables assigned to the factor with payment terms of less
than or equal to 60 days are subject to a charge of 1.5% of the face amount of
the receivable, while receivables with payment terms of greater than 60 days are
subject to a charge of 2% of the face amount of the receivable. The advances
from the factor are secured by all the Company's assets. During the year ended
January 31, 1998, the Company incurred interest and factoring charges of $10,059
and $7,739, respectively. The factoring agreement was for an initial term of six
months and automatically renews for successive six month periods thereafter,
unless cancelled by the Company or the factor. At January 31, 1998, the Company
had received advances of approximately $115,000 in excess of those permitted
under the factoring agreement, resulting in the Company being in default of such
agreement. As a result of the default, the factor had the right to terminate the
agreement and demand payment of the funds advanced. Subsequent to year end, the
Company has reduced the amounts outstanding under the factoring agreement and is
within the borrowing base of such agreement.
The Company has held discussions with a purchase order financing institution
regarding opening a purchase order financing arrangement. The Company has
received a commitment from this institution to enter such an arrangement
conditioned on the Company reducing its accounts payable to within current
reasonable terms. The closing of this Offering will allow the Company to reduce
accounts payable to a point where the Company expects to be able to enter into
such purchase order financing arrangement. See "Use of Proceeds."
One of the Company's most significant commitments is to Ian Woosnam as a
worldwide spokesperson for the Tegra brand. As of June 30, 1998, the Company
owes Mr. Woosnam approximately $475,000 for services rendered since January 1,
1998. If the Company is able to successfully negotiate an endorsement contract
with Mr. Woosnam, the Company expects to pay Mr. Woosnam approximately
$1,150,000 annually during the term of the agreement. The Company currently
expects the term of the agreement to be nine years. See "Business -- Marketing
- -- Endorsements."
SEASONALITY
The business of the Company is subject to seasonal fluctuations.
Historically, companies in the golf industry have seen their greatest sales in
the first half of the calendar year, and the business of the Company is
particularly dependent on sales during these months. Nevertheless, the Company
believes that, in the near term, its sales may not reflect this seasonality
because the opening of new accounts during the second half of 1998 will outweigh
seasonal effects, which the Company expects may increase its sales during this
period.
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BUSINESS
GENERAL
The Company is a designer, marketer and manufacturer of premium quality golf
equipment, apparel and accessories under the Tegra brand name. Tegra products
represent a wide range of technologically innovative, premium-priced men's golf
clubs, apparel and accessories that are sold in off-course golf specialty and
on-course pro shops. Tegra golf clubs incorporate the Company's patent-pending
Invisible Inset Hosel (the cylindrical chamber in which the shaft is attached to
the club head), a feature designed to increase the accuracy and distance of golf
shots, and were introduced into the US market in October 1997. In the spring of
1998, the Company began installing dedicated Tegra Retail Environments ("TREs")
in select golf stores across the country and shipping a Tegra men's apparel
line. TREs are defined spaces in golf shops which house the Company's equipment,
apparel and accessories in an integrated, branded selling environment. The
Company has installed 58 TREs in golf stores in 55 cities. The Company is in the
process of opening additional TREs and expects to install up to 40 new TREs by
year end. Tegra products are now available in over 100 golf shops nationwide and
the Company expects they will be available in 400 golf shops by year end. In
addition, the Company expects to have products available in 1,000 stores by
Spring, 1999. Ian Woosnam began endorsing Tegra products on January 1, 1998. The
Company is currently negotiating an agreement with Mr. Woosnam for him to
continue his endorsement. In January, 1998, the Company entered into an
endorsement contract with Glen Day who was ranked in the top ten on the money
list in the U.S. PGA Tour as of June 22, 1998.
GOLF INDUSTRY OVERVIEW
According to the National Golf Foundation ("NGF"), there are approximately
48 million golfers worldwide, including approximately 25 million in the U.S. In
1997, golfers in the U.S. played an estimated 547 million rounds of golf and,
according to the National Sporting Goods Association, are estimated to have
spent $5.8 billion on golf equipment, apparel and accessories. Of the 25 million
U.S. golfers, about 5.2 million, characterized by the NGF as "avid golfers,"
play over 25 rounds of golf per year. The Company believes that avid golfers are
the first to seek out performance-oriented golf equipment and generally drive
golf club product trends.
According to the NFG in 1997, wholesale sales of golf equipment in the U.S.
were approximately $3.9 billion. In addition, wholesale sales of golf clubs
increased at an annual compound growth rate of approximately 10.9% over the
5-year period from 1992 to 1997. The Company believes that sales of golf clubs
will continue to grow in the future due to a number of factors including:
FAVORABLE POPULATION TRENDS. The Company believes that the aging of Baby
Boomers (those born between 1946 and 1964) and the emergence of the Baby
Boomers' children (those born between 1977 and 1995) are likely to increase the
demand for golf products generally. As golfers age, they tend to play golf more
often and spend more money on the sport, particularly in the over-50 age group.
Accordingly, because a majority of Baby Boomers are entering their 40s and 50s,
the Company expects interest in and spending on golf to increase. Further,
because Baby Boomers' children are beginning to enter their 20s, the age most
golfers begin to play the sport, the Company believes they will further increase
their participation in and spending on golf.
INCREASING AVAILABILITY OF GOLF FACILITIES. According to the NGF,
approximately 350 new golf courses will open in the U.S. annually between 1998
and the year 2000. The Company believes that these additional facilities will
make golf more accessible and convenient, leading to a further increase in golf
participation rates.
INCREASING INTEREST FROM NON-TRADITIONAL GOLFERS. The Company believes that
golf has become increasingly attractive to segments of the population that have
not historically been well-represented among golfers. Most notably, Tiger Woods
has made golf more appealing to junior and minority golfers.
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According to the NGF, the total number of beginning and junior golfers increased
by over 40% in 1997 compared to the previous year. In addition, the success of
the Ladies Professional Golf Association (the "LPGA") Tour and such female
golfers as Annika Sorenstam have increased the appeal of the sport to women.
NEW PRODUCT INNOVATIONS. In recent years, the golf equipment industry has
made significant advances in product designs and technologies to enhance
golfers' performance and overall enjoyment of the game. The Company believes
that this rapid evolution of golf clubs accelerates the rate at which golfers
purchase new or additional clubs.
COMPANY HISTORY
The Company was founded as Hippo, Inc. in February 1996, with the goal of
becoming a leading U.S. golf equipment and apparel manufacturer. To that end the
Company entered into a licensing agreement with Hippo Holdings, Ltd, a leading
manufacturer of value-priced golf equipment in Europe, to manufacture, market
and distribute the HiPPO brand of golf equipment in the United States and
Canada. The Company began shipments of HiPPO products in July of 1997 and for
the ten month period ending April 30, 1998 sold approximately $500,000 in HiPPO
clubs. The Company has since discontinued the distribution of value-priced golf
equipment to pursue opportunities in the premium-priced end of the market
offered by Tegra products.
In June of 1996, the Company initiated a significant research and
development project to develop new, visibly distinct technology for its golf
clubs with which to enter the premium-priced segment of the U.S. golf market.
The premium-priced segment of the golf market captures the largest portion of
consumer spending with approximately 70% of consumer dollars being spent on
premium clubs. In addition, manufacturers margins on premium clubs are
significantly higher than value priced equipment and average above 45% margin.
This research led to the Company's development of its patent-pending Invisible
Inset Hosel and bullet shaped driver technology. These new technologies have
become the key technological elements of the Tegra brand of golf equipment. To
improve its margins and profits, the Company changed its strategy and added the
Tegra brand of premium golf equipment and accessories at the premium-priced
segment of the market.
In January, 1998 the Company changed its name to Outlook Sports Technology,
Inc. Management believes that this name better reflects the attitude and spirit
of the Company, as a forward thinking and technologically advanced sporting
goods manufacturer, than its prior name.
In April, 1998 the Company was approached by Hippo Holdings, Ltd. to
reacquire the rights to the HiPPO brand in the United States and Canada. On May
4, 1998 the Company sold its license to sell HiPPO-TM- products in the U.S. back
to Hippo Holdings, Ltd. along with all existing HiPPO-TM- inventory, marketing
materials and related liabilities. In return, the Company received a cash
payment from Hippo Holdings, Ltd. of approximately $359,000. In addition Hippo
Holdings, Ltd. returned to the Company 50,000 shares of the Company's Common
Stock and assumed outstanding liabilities and commitments of the Company in
excess of $1,000,000.
COMPANY PRODUCTS
TEGRA GOLF CLUBS. Tegra woods and irons with the Company's patent-pending
Invisible Inset Hosel are an evolution from current club technology. The Company
has worked with Chou Golf Design Labs, Inc. to develop the Tegra line of golf
clubs. The Company's design moves or insets the shaft as close to the center of
the club head as permitted under current USGA rules. As a result, the club head
will rotate to the target faster than conventional designs, making it easier to
square the club at impact and enabling the golfer to hit straighter and longer
shots. This technology has been designed to be visibly distinct to the consumer
at all times except while the club is being used. The Company's purpose in
making the technology "invisible" to golfers while hitting the shot is to
enhance the golfers ability to aim the club when
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addressing the ball. The Company believes that the Company's Invisible Inset
Hosel technology could be as significant to the golf industry as perimeter
weighting, graphite shafts or oversize metal woods.
In addition, the Company designed the Tegra woods with a "bullet" shape in
which the widest part of the club is the club's face or hitting area. This
"bullet" shape contrasts with conventional club designs, in which the club head
widens out from the face of the club resulting in the widest part of the club
head being half an inch or more behind the face. The club's bullet shape
provides a larger hitting area and sweet spot than would be achieved in a club
having the same volume but a conventional design. An additional result of the
bullet shape is that more weight in the club is distributed directly behind the
hitting area than with conventional designs.
Tegra irons incorporate the same patent-pending Invisible Inset Hosel
technology as Tegra woods. The inset is as beneficial in Tegra irons as it is in
Tegra woods. The Company believes that squaring the club to the target at impact
makes Tegra iron shots more accurate than conventional designs. Tegra irons
feature an oversize head design, with weighting around the perimeter and behind
the sweet spot designed to maximize forgiveness on mis-hits and to provide a
better feel on center hits, and the Invisible Inset Hosel which has been
elevated to reduce club head twisting in longer grass.
The Company presently manufactures Tegra men's right handed titanium woods
and 17-4 stainless steel irons. The Company produces a full range of titanium
drivers (6 DEG., 8 DEG., 9 DEG., 10 DEG. and 11 DEG.) and titanium fairway woods
(#3, #5, #7 and #9) with graphite shafts and irons with options of steel or
graphite shafts. Each shaft is available in various flexes to accommodate
golfers of all ages and ability levels. The Company plans to introduce
left-handed woods in the fourth quarter of 1998 and left-handed irons in the
Spring of 1999.
The Company has conducted player testing on its woods and irons and the
Company believes such testing shows its Tegra technology promotes straighter and
longer golf shots than other leading premium-priced golf clubs. "Iron Byron"
testing (robotic testing designed to repeat identical swings so different clubs
can be compared under controlled conditions) of Tegra clubs has confirmed that
both the woods and irons provide greater carry, roll and overall distance than
certain leading premium-priced clubs while simultaneously increasing accuracy.
Additional mechanical testing which has recently been recorded using high speed
video shows that the Invisible Inset Hosel design produces a squarer club face
at impact than other leading premium-priced clubs, resulting in straighter and
longer shots.
The Company's Invisible Inset Hosel technology is visibly distinct to the
consumer except while the club is being used. In the golf industry, where many
products look alike, some technological features are difficult to distinguish.
Since many manufacturers make similar performance claims, consumers can become
confused and have difficulty distinguishing products. The visibility of the
technology is extremely important to identifying the product and communicating
its benefits in a believable way and therefore adds to the Company's marketing
effort. The Company believes that past performance of golf club sales shows that
golf clubs which have had visibly distinct technology have seen far greater
sales growth than equipment with new but non-visibly distinct technology. In
1967, Ping became a leader in the irons category when it introduced the first
cavity backed (perimeter weighted) irons, a technology that was visibly distinct
from other irons available at the time. In 1979, Taylor Made became a leader in
the driver category when it introduced the first "metal wood" with an investment
cast steel club head replacing the traditional persimmon wood head. In 1991,
Callaway Golf became a leader in the driver category when it introduced the
first oversized metal wood. Each of these products was not only an evolution of
existing technology but its technology was visibly distinct to the consumer. As
a more recent example, in 1994, Taylor Made introduced the Burner Bubble Shaft.
This shaft incorporates a geometrical "bubble" highlighted with copper paint to
emphasize its visible difference from conventional shafts. In the second quarter
of 1995, Taylor Made's sales nearly tripled from 1994, achieving a 30% share of
the premium driver market. The Company believes that a key factor to the success
of these products is that the technology was visibly distinct to the consumer.
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The Company is currently sourcing all of its golf club components from
contract manufacturing facilities. The Company's golf club heads are currently
made in Asia. True Temper Sports, a division of Black & Decker ("True Temper"),
the world's largest shaft manufacturer, is currently producing the Company's
steel and graphite shafts domestically. Golf Pride, a division of the Eaton
Corporation, the world's largest grip manufacturer, produces the grips
domestically. Joe Powell Golf, Inc. ("Powell"), one of the golf industry's
leading golf equipment assembly companies, assembles the Tegra clubs
domestically. The Company spent approximately $451,019 in 1997 and $650,905 in
1996 in connection with research and development.
APPAREL. In addition to golf clubs, the Company presently designs and
manufacturers a line of men's apparel. The Tegra apparel range consists of men's
shirts and outerwear which emphasize performance, comfort and style and are
suitable for wear on or off the course. The Company expects that Tegra men's
shirts will retail from $37-$54, while outerwear will retail from $80-$125 for a
jacket and $200 for a rain-suit. The Company's apparel designs are intended to
enhance the Tegra image of a technologically advanced and fashionable line of
apparel.
The Company's men's collection is divided into three groupings: solid color
shirts, fashion shirts, and technical pieces (shirts, rainwear and other
outerwear incorporating innovative fabrics, zippers, and other features). The
foundation of the apparel collection is the Company's line of core solids. The
Company's solids are produced from 97% cotton-3% Lycra-Registered Trademark-
which fabric has the benefits of moveability and durability. Tegra's fashion
collection incorporates Tegra's colors (red, black and white) to reinforce the
Company's brand image. Technical pieces are constructed from innovative fabric
combinations which include cotton and polyester microfiber materials to keep
golfers cool and dry in the heat. These shirts are designed to accentuate the
athleticism of the golfer and may include such details as zippered plackets,
Johnny (i.e. V-neck) collars and reinforced sleeve and shoulder seams.
Tegra outerwear is designed to perform in a variety of climatic conditions.
A collection of technical fabrics such as Air-Tech-TM-, a waterproof-breathable
nylon, and Micro Fleece, a brushed Polyester fabric which provides breathable
insulation have been incorporated to help keep the golfer comfortable when
playing in inclement weather.
ACCESSORIES. The Company currently offers a variety of golf caps and full
size staff bags. The Company plans to offer a full line of accessories,
including bags, umbrellas, towels and caps. The Company anticipates offering a
range of golf bags, including stand, light-weight carry and full size staff
bags. The
Company expects its golf bags, umbrellas, and towels to be available in March,
1999. See "Risk Factors -- Dependence on Product Introduction."
MARKETING
GENERAL. The Company's target consumer is the avid amateur golfer. To reach
this consumer the Company is developing and installing TREs in golf shops
throughout the country, creating a distinctive advertising campaign for the
Tegra brand, attempting to obtain endorsements from touring professionals, such
as Ian Woosnam, and pursuing other traditional forms of marketing. See "Risk
Factors -- Dependence on Product Introduction."
TEGRA RETAIL ENVIRONMENTS. The Company has adapted a marketing model used
by marketers of many leading brands of consumer products who use in-store shops
to increase sales and brand awareness. TREs are advanced retail selling systems
designed to increase sales and brand awareness by selling Tegra golf clubs,
apparel and accessories in a dedicated in-store area. Within the TRE the Company
markets its Tegra golf clubs, apparel and accessories in an integrated, branded
environment designed to convey the image of the Company as innovative in golf
club technology and distinctive in design. The Company expects that TREs will
promote Tegra products as visually distinctive and technologically advanced and
will encourage customers to purchase the Company's accessories and apparel as
well as its golf clubs. These types of in-
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store environments have been successfully used to promote many other products
such as designer clothing and personal computers.
TREs occupy from 50 to 150 square feet in specialty golf shops, and consist
of flooring, fixtures, graphics and point-of-purchase materials. The TREs
display Tegra clubs, clothing and apparel in a unified environment. The Company
has developed proprietary fixtures which it uses to define the Tegra area within
a store. These fixtures vary from a free standing display which can hold a
complete set of irons and individual clubs, to a display which houses 18 woods,
and a variety of apparel fixtures which display anywhere from 24 to 148 apparel
pieces. A typical TRE is comprised of a wood and iron display as well as a
clothing presentation. The Company's aim is to establish TREs in 1,000
off-course golf shops within three years. The Company has installed 58 TREs to
date and expects to install up to 40 additional TREs by the end of 1998. Two of
the nation's largest off-course golf speciality retail chains (Edwin Watts Golf
Shops and World Wide Golf Enterprises which owns Roger Dunn Golf Shops, Golf
Mart and Van's Pro Shops) have installed TREs in some of their locations and are
presently selling Tegra products. The Company believes that a major point of
differentiation from its competitors will be its emphasis on retail environments
and in-store presentations. To the Company's knowledge, no other golf company is
presently manufacturing clubs, bags, apparel and accessories and providing the
retailer with fixturing to accommodate these items. See "Risk Factors -- Risk of
Retailers' Refusal to Place or Maintain Tegra Retail Environments."
ADVERTISING. The Company has completed a distinctive advertising campaign
for the Tegra brand in an effort to create consumer awareness of and demand for
Tegra products. The initial Tegra advertising campaign, entitled "Golf First,"
focused on the Company's visibly distinct technology, and was designed to build
brand awareness and name recognition for Tegra and position the Tegra brand as
the golf equipment choice for avid golfers. The Company intends to continue to
use advertising to build an image for the Tegra brand and to separate itself
from other golf companies. The Company believes the breadth of the its product
line, in particular its apparel line, should greatly enhance the Company's
ability to create this image.
The Company has produced and plans to air a series of Tegra golf tips on the
Golf Channel. These spots, which feature tour players Ian Woosnam and Glen Day,
are designed to heighten awareness of Tegra products while providing enjoyable
golf tips for the consumer. Peter Kessler, host of GOLF ACADEMY LIVE, wears
Tegra clothing on the show, which airs in prime time two nights per week. GOLF
ACADEMY LIVE is one of the highest rated shows on the Golf Channel.
The Company is presently investigating direct marketing Tegra drivers to
consumers through a long format infomercial. Several golf equipment companies
have found long format infomercials to be extremely successful and profitable.
The Company believes that the unique technological features incorporated in the
Tegra driver and the visibility of these features give it the potential to be a
successful direct marketed product.
ENDORSEMENTS
Ian Woosnam. Mr. Woosnam began competing using Tegra clubs in October, 1997
and began endorsing Tegra products on January 1, 1998, although he does not yet
have an endorsement contract. The Company is currently negotiating with Ian
Woosnam to enter into an endorsement agreement for the Tegra brand. The Company
expects to enter into a contract with Ian Woosnam pursuant to which he will
continue to endorse Tegra products through December 31, 2006. Under the terms of
the proposed agreement, Mr. Woosnam will endorse Tegra worldwide, wear Tegra
clothing and headgear, play Tegra clubs and carry a Tegra bag and accessories.
The Company also believes that Mr. Woosnam will agree to play a minimum of eight
of his approximately 25 annual tournaments per year in the United States. Mr.
Woosnam held a top ten Sony Ranking from the end of 1987 through the summer of
1994, and has over forty career victories world-wide, including the Master's
Tournament in 1991 and is one of the top
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ranked golfers in Europe. Mr. Woosnam is a global personality as he annually
plays in approximately 25 tournaments worldwide. Mr. Woosnam customarily plays
in the four majors, including the three U.S. majors (the Masters, the U.S. Open
and the PGA Championship) which traditionally receive the highest television
viewership for golf tournaments. Mr. Woosnam's European Tour events can be seen
in the U.S. on the Golf Channel. Additionally, the Company expects to secure
publicity appearances and photo shoot days from Mr. Woosnam. The Company
believes that Mr. Woosnam's visibility and extensive knowledge of golf will
enhance the Company's brand identity and capabilities.
Glen Day. In January, 1998 the Company entered into a three-year endorsement
contract with US PGA Tour Member Glen Day. Under the endorsement agreement, Mr.
Day will endorse Tegra worldwide, wear Tegra clothing and headgear, carry a
Tegra bag and accessories and, in 1999 and 2000, use the Tegra driver and irons
in all PGA Tour events. As of June 22, 1998, Mr. Day has had four top ten
finishes on the U.S. PGA tour, including a second at both the Tournament Players
Championship and the MCI Classic and a third at the Freeport-McDermott Classic.
As of June 22, 1998, Mr. Day was ranked in the top ten on the PGA Tour money
list. Prior to becoming a Tegra tour player, Mr. Day had been on the US PGA Tour
for four years and he has consistently placed between 45th and 98th on the Tour
Money List.
Other Professional Endorsers. The Company is currently negotiating
endorsement contracts with PGA and Nike Tour professionals Charlie Rymer, John
Maginnes and Gene Sauers. Mr. Rymer has been a professional golfer since 1991.
Mr. Rymer's contract is expected to be for a period of three years. Under the
contract, he would wear Tegra clothing, play Tegra clubs and carry a Tegra bag.
Mr. Maginnes has been a professional golfer on the PGA and Nike Tours since
1994. The Company anticipates that he will enter into a two-year contract to
wear Tegra apparel on tour. Mr. Sauers has been a professional golfer for
fourteen years and had two PGA Tour victories including the 1986 Bank of Boston
Classic and the 1989 Hawaiian Open. Mr. Sauers won the Nike South Carolina
Classic in May of this year. The Company anticipates that Mr. Sauers will enter
into a two-year contract to wear Tegra apparel on tour.
PERFORMANCE ACCOUNT PROGRAM. The Company intends to institute a Performance
Account Program ("PAP") as part of its distribution strategy. The Company plans
to grant each participant in the PAP program priority status for off-course
retail distribution of Tegra products in a specific territory. The Company
expects to require these selected retailers to purchase at least $250,000 of
merchandise per year in each territory for which they are granted priority
status. The Company also plans to require such retailers to install TREs in each
of their retail locations. Two of the nation's largest off-course golf specialty
retail chains (Edwin Watts Golf Shop and Worldwide Golf Enterprises (which owns
Roger Dunn Golf Shops, Golf Mart and Van's Pro Shops)) have installed TREs and
are presently selling Tegra products. The Company expects these retailers to be
the first participants in its PAP program. See "Risk Factors -- Risk of
Retailers' Refusal to Place or Maintain Tegra Retail Environments."
RETAIL PRICING. One of the Company's sales strategies is to deliver
products which can achieve superior retail margin in order to incentivize
retailers to sell more Tegra product. The Company estimates that retailers on
average achieve 20% gross margin on sales from premium golf equipment. By
pricing appropriately, the Company believes it will be able to offer retailers
products that can achieve superior margin. The Company expects that, on average,
Tegra golf clubs will allow retailers to achieve 40% gross margin, while Tegra
apparel allow retailers to achieve in excess of 50% gross margin.
CATALOGUE SALES. Tegra products are available in the Edwin Watts golf
catalog, one of the country's leading golf catalogues. The Company and Edwin
Watts Golf Shops are presently working on a joint national advertising campaign
to promote the Tegra driver by mail order through Edwin Watts Golf Shops.
PATENTS
Where appropriate, the Company seeks patent protection. The Company has
filed patent applications covering various aspects of its TEGRA line of inset
woods and irons. The Company filed a United States
32
<PAGE>
provisional patent application on December 31, 1996, entitled INSET HOSEL GOLF
CLUB. The Company subsequently filed a full United States patent application and
a Patent Cooperation Treaty patent application based on the United States
provisional patent application, claiming priority as of the December 31, 1996
date. The Patent Cooperation Treaty Application designated all states. Based on
the results of a patent search obtained by outside patent counsel, the Company
is of the view that various aspects of the TEGRA line of woods and irons may be
patentable. The patent applications include sixty-eight claims of varying scope
and construction, including claims directed to golf clubs having an inset hosel
wherein the fact that the hosel is inset and is hidden from the golfer, as well
as claims directed to methods of making such a golf club. Other claims are
directed to other features or combinations of features of the Tegra golf clubs.
The Company has not received a substantive office action on the merits from the
United States Patent and Trademark Office.
The Company intends to seek further patents on its technology, if
appropriate. However, there can be no assurance that patents will issue from any
of the Company's pending or any future applications or that any claimed allowed
from such applications will be of sufficient scope of strength, or be issued in
all countries where the Company's products can be sold, to provide meaningful
protection or any commercial advantage to the Company. See "Risk
Factors--Intellectual Property."
COMPETITION
The Company competes with a number of established golf club manufacturers,
many of which have greater financial and other resources than the Company. The
Company's competitors include Callaway Golf Company, Adidas-Salomon AG (Taylor
Made) and Fortune Brands, Inc. (Titleist and Cobra). The Company competes
primarily on the basis of performance, brand name recognition, quality and
price. The Company believes that its ability to establish its brand and market
its products through its distributors is important to its ability to compete.
See "Risk Factors -- Competition."
The golf club industry is generally characterized by rapid and widespread
imitation of popular technologies, designs and product concepts. The Company
expects that one or more competitors may introduce products similar to its Tegra
clubs. The buying decisions of many purchasers of golf clubs are often the
result of highly subjective preferences which can be influenced by many factors,
including, among others, advertising media, promotions and product endorsements.
The Company may face competition from manufacturers introducing other new or
innovative products or successfully promoting golf clubs that achieve market
acceptance. The failure to compete successfully in the future could result in a
material deterioration of customer loyalty and could have a material adverse
effect on the Company's business, operating results or financial condition. See
"Risk Factors -- Competition."
In addition, the Company competes with a number of more well-established
designers of golf apparel, including Nike, Reebok, Greg Norman, and Tommy
Hilfiger. Because the Company competes primarily on the basis of brand name
recognition, quality, comfort, and fashion considerations, the Company believes
that its ability to establish its brand and market its apparel is important to
its ability to compete. The subjective nature of apparel-buying decisions could
result in a lack of acceptance in the market of the Company's apparel and
accessories. Failure of the Company's current and planned apparel and
accessories would adversely affect the Company's future growth and
profitability. See "Risk Factors -- Competition."
PROPERTIES
The Company's corporate headquarters are located in a 2,650 square foot
facility in Boca Raton, Florida. This facility accommodates the Company's
corporate, administrative, marketing and sales personnel. The lease expires
November 30, 1998.
Additionally, the Company's apparel division is headquartered in a 2,250
square foot facility in New York, New York. The facility accommodates the
Company's apparel design sourcing and quality assurance personnel. The Company
is currently leasing this facility on a month-to-month basis.
33
<PAGE>
EMPLOYEES
At June 3, 1998, the Company had 15 full-time employees, of whom 14 were
involved in executive, managerial, supervisory and sales capacities, and one
served in a clerical capacity. None of the Company's employees is covered by a
collective bargaining agreement or is a member of a union. The Company considers
its relationship with its employees to be good.
LEGAL PROCEEDINGS
The Company has received a letter from Tatsuya Saito requesting that the
Company review its Tegra line of clubs in view of a patent issued to him on July
12, 1994 (the "Saito Patent"). The Saito Patent covers certain aspects of a club
head and hosel, including the positioning of the hosel inset relative to the
club head. The Company has referred this request to independent outside patent
counsel. The Company does not believe that the Tegra line of clubs infringes any
of the claims of the Saito Patent; however, there can be no assurance that a
court will find that one or more of the Company's products does not infringe the
Saito Patent, or any other patent. If Tatsuya Saito is successful in asserting
its patent, it could require the Company to alter or withdraw existing products,
delay or prevent the introduction of new products, or force the Company to pay
damages if the products have been introduced. See "Risk Factors -- Litigation."
The Company has received a letter from Vardon Golf Company, Inc. ("Vardon")
asserting that the Company's Tegra woods and irons infringe one of the claims of
its patent issued on April 12, 1994 (the "Vardon Patent"). The Vardon Patent
includes claims directed to a number of aspects of a golf club head and hosel,
including claims directed to an extended radius of gyration, which includes an
aspect of the club head extending behind the hosel. Vardon filed a complaint in
the Northern District of Illinois, Eastern Division, on May 13, 1998, in which
Vardon alleges that six golf club manufacturers, including the Company, have
manufactured, sold, offered to sell and distributed in the United States,
specifically in the Northern District of Illinois, wood-type and iron golf clubs
that are covered by at least one claim of the Vardon Patent and a related design
patent. The Company does not believe that the Tegra line of clubs infringes any
of the claims of these patents and the Company is in the process of preparing a
response to the complaint; however, there can be no assurance that a court will
find that the Company does not infringe one or the other of these patents, or
both. If Vardon is successful in asserting its patent, it could require the
Company to alter or withdraw existing products, delay or prevent the
introduction of new products, or force the Company to pay damages if the
products have been introduced. See "Risk Factors -- Litigation."
34
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions with the
Company as of the date of this Prospectus of all of the officers and directors
of the Company. Also set forth below is information as to the principal
occupation and background for each person in the table.
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Paul H. Berger....................................... 30 Chairman of the Board and Chief Executive Officer
Jim G. Dodrill II.................................... 32 President, General Counsel and Director
Gary M. Treater...................................... 42 Executive Vice President
Everette C. Hinson................................... 49 Vice President Finance
Neal J. Cohen........................................ 41 Vice President Apparel Operations
David K. Stern....................................... 34 Vice President Marketing
James J. Henley...................................... 30 Apparel Design Director
</TABLE>
MR. BERGER co-founded the Company with Mr. Dodrill and has served as the
Chairman of the Board and Chief Executive Officer of the Company since the
Company's inception. From 1994 to 1995, Mr. Berger was the Special Projects
Manager for Designs, Inc. ("Designs"), of which his father is the Chairman of
the Board. Mr. Berger assisted in repositioning Designs from a single brand
apparel chain to a multi-brand operation and in the acquisition by Designs of
Boston Trading Ltd., a high quality men's and women's apparel manufacturer. From
1993 to 1994, Mr. Berger served as an attorney with Designs. Mr. Berger is a
graduate of the George Washington University and the University of Miami School
of Law. Mr. Berger is licensed to practice law in the Commonwealth of
Massachusetts and the State of Florida.
MR. DODRILL co-founded the Company with Mr. Berger and has served as
President, General Counsel and a director of the Company since the Company's
inception. From 1993 to 1996, Mr. Dodrill was an associate at the law firm of
Latham & Watkins, practicing in the corporate area with an emphasis on
securities offerings, acquisitions, finance and general corporate
representation. From 1988 to 1990, Mr. Dodrill worked for Davis Polk & Wardwell
conducting research and coordinating administrative efforts regarding corporate
reorganization and recapitalization transactions and mergers and acquisitions.
Mr. Dodrill graduated from Brown University and the University of Miami School
of Law, MAGNA CUM LAUDE. Mr. Dodrill is licensed to practice law in the State of
New York.
MR. TREATER has served as the Company's Executive Vice President since
January, 1997, after having served as Vice President of Golf Operations for the
Company from June 1996 through December 1996. From 1994 to 1996, Mr. Treater
served as President of Gary Player Golf Equipment Inc., where he was responsible
for relocating the company from South Africa to the U.S. and for development of
the Player product line. From 1989 to 1994, Mr. Treater served as the General
Manager of the Golf Club & Golf Products Divisions at the Ben Hogan Company. For
the four years prior to that, Mr. Treater was the Senior Vice President at the
National Golf Foundation.
MR. HINSON has served as the Company's Vice President of Finance since May,
1997. From 1987 to 1997, Mr. Hinson served as Controller and Vice President of
Finance, responsible for the accounting, treasury, credit, MIS and human
resources departments, at Dunlop Maxfli Sports Corporation, a multi-division
sporting goods manufacturer with annual sales in excess of $125 million. From
1980 to 1987, Mr. Hinson served as Corporate Controller and in various
controllership and operations positions at Elscint, Inc., a manufacturer and
distributor of medical diagnostic equipment with annual sales in excess of $100
million.
MR. COHEN has served as the Company's Vice President of Apparel Operations
since June 1996. From 1989 to 1996, Mr. Cohen was Vice President of Operations
for Benetton Sportsystem Active, where he was
35
<PAGE>
responsible for managing the global sourcing of all brands, implementing final
quality assurance auditing procedures and managing customer service, and
traffic, warehousing and distribution of product. From 1980 to 1985 Mr. Cohen
served as the Quality/Production Manager for Adidas U.S.A.
MR. STERN has served as the Company's Vice President of Marketing since
March, 1998. From 1997 to February, 1998, Mr. Stern served on the Company's
Advisory Board. From 1997 to 1998, Mr. Stern served as Director of Marketing for
Thermolase, a publicly traded company which owns and runs spa facilities across
the U.S. From 1987 to 1997, Mr. Stern was Vice President of Marketing at
Maddocks and Company.
MR. HENLEY has served as the Company's Apparel Design Director since June
1996. From 1995 to June, 1996, Mr. Henley served as the Apparel Designer for the
Tommy Golf line at Tommy Hilfiger, Inc. From 1992 to 1994, Mr. Henley served as
the designer for all product categories for Duck Head Apparel Co.
The Company currently has two directors, Mr. Paul Berger and Mr. Jim
Dodrill. The Company's Board of Directors is divided into three classes, with
one class of directors elected each year at the annual meeting of stockholders
for a three-year term of office. All directors of one class hold their positions
until the annual meeting of stockholders at which the terms of directors in such
class expire and until their respective successors are elected and qualified.
Mr. Jim Dodrill serves in the class whose term expires in 1999; Mr. Paul Berger
serves in the class whose term expires in 2000. The Company intends to appoint
one of the individuals named below under the caption "New Directors" to serve in
the class whose term expires in the year 2000 and the Company intends to appoint
one of the individuals under the caption "New Directors" to serve in the class
whose term expires in the year 2001. Executive officers of the Company are
elected annually by the Board of Directors and serve at the discretion of the
Board of Directors or until their successors are duly elected and qualified.
None of the Company's executive officers has entered into an employment
agreement with the Company. See "Risk Factors -- Lack of Experience of
Management."
NEW DIRECTORS
The Company has agreed with the Representative that, within days after
the completion of this Offering, the Company will increase to five the number of
individuals serving on the Company's Board of Directors, at least two of whom
will be independent directors. The Company has also agreed that, for a period of
following the completion of the Offering, it will use its best efforts to
cause the election to its Board of Directors, one designee of the
Representative, provided that such designee is reasonably acceptable to and
approved by the Company.
Set forth below are the names, ages and certain background information of
the two individuals the Company intends to appoint to its Board of Directors,
each of whom has agreed to serve. The Company anticipates that the new directors
will also serve on the Audit Committee and the Compensation Committee.
MR. HASKELL has agreed to serve on the Company's Board of Directors. Mr.
Haskell has over twenty-one years of media and marketing experience, including
having served for the past eight years as the Director of Business Development
at TBWA Chiat/Day.
MR. SNIDER has agreed to serve on the Company's Board of Directors. Mr.
Snider has been a professional golfer for twenty-five years and is currently the
Head Golf Professional at Chenal Country Club. Mr. Snider's students include
PGA, LPGA and Nike Tour players as well as amateur golfers of all skill levels.
COMPENSATION OF DIRECTORS
The Company's directors will be reimbursed for any out-of-pocket expenses
incurred by them for attendance at meetings of the Board of Directors or
committees thereof. The Board of Directors intends
36
<PAGE>
to establish and form a Compensation Committee and Audit Committee upon
completion of this Offering. The Board of Directors also intends to compensate
Directors who are not employees of the Company $1,000 per month and to grant
each Director who is not an employee of the Company options to purchase 12,000
shares of Common Stock each year, with a per share exercise price equal to the
then fair market value of the Common Stock.
ADVISORY BOARD
Since the Company's formation, it has operated under the guidance of a
Senior Advisory Board. The Senior Advisory Board serves as a resource for
management and has no power or authority to direct the affairs of the Company.
The following are members of that Board:
STANLEY BERGER. Mr. Berger is Chairman of the Board of Directors of
Designs, Inc., based in Needham, Massachusetts. Mr. Berger co-founded Designs in
1977. Under his leadership, the company has grown to be one of the largest
global retailers of Levi Strauss & Co. products with sales in excess of $
million in 1997. Mr. Berger is the father of Paul Berger.
STEVEN FIREMAN. Mr. Fireman served in the senior management of Reebok, Inc.
for five years, including his last two years serving as President of Reebok's
Casual Division (which included Reebok's Golf Division). At Reebok, Mr. Fireman
launched the Greg Norman apparel line and Reebok's line of golf footwear.
RIC JARRETT. Mr. Jarrett has twenty years of experience in the golf
industry. As the former owner, President and Chief Executive Officer of Tiger
Shark Golf, Inc., a multi-national golf equipment manufacturer, Mr. Jarrett has
extensive experience in areas ranging from product design to creation of
marketing and sales strategies. Mr. Jarrett is currently the President and Chief
Executive Officer of Absolute Sports, Inc.
DOUG RUDISCH. Mr. Rudisch is with Brookside Capital, a limited partnership
formed by Bain Capital, Inc. to make strategic equity investments in public
companies. Prior to joining Brookside, Mr. Rudisch was an associate at Bain
Capital, where he was responsible for structuring, analyzing and executing
private equity transactions and management buy outs. Prior to joining Bain
Capital, Mr. Rudisch worked with the Boston Consulting Group, a strategic
consulting firm. Mr. Rudisch graduated MAGNA CUM LAUDE from the Wharton School
of Business.
WILLIAM TAYLOR. Mr. Taylor was Vice President of Customer Relations at Levi
Strauss & Co. Mr. Taylor was an executive at Levi Strauss for more than 20
years. Before joining Levi Strauss, Mr. Taylor was an Assistant Coach of the
Dallas Cowboys.
37
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation received by the Company's
Chief Executive Officer and each other executive officer whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended January 31, 1998
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
(FISCAL YEAR 1998)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES
----------------------- OTHER ANNUAL UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (1) (2)
- --------------------------------------------------- ---------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Paul H. Berger..................................... $ 125,000 -- $ 7,800 --
Chairman of the Board and Chief
Executive Officer
James G. Dodrill II................................ 32,721 -- 7,800 (3)
President, General Counsel and Director
Gary M. Treater.................................... 153,912 -- 6,039 13,000
Executive Vice President
Neal J. Cohen...................................... 135,600 -- 6,444 10,000
Vice President Apparel Operations
Everette C. Hinson................................. 77,263 -- -- 18,333
Vice President Finance
James J. Henley.................................... 120,000 -- 5,400 7,000
</TABLE>
- ------------------------
(1) Other Annual Compensation consists of life insurance premiums paid by the
Company on behalf of the Named Executive Officer. See "--Benefit Plans--MONY
Plan."
(2) See "Option Grants in Last Fiscal Year," below.
(3) In March, 1998, Mr. Dodrill received options to purchase 166,666 shares of
Common Stock at $3.00 per share in lieu of approximately $95,000 of salary
for 1997.
BENEFIT PLANS
STOCK OPTION PLANS. The 1996 Incentive and Non-Qualified Stock Option Plan
(the "1996 Plan") was adopted by the Board of Directors and the shareholders.
Under the 1996 Plan, 1,150,000 shares of Common Stock have been reserved for
issuance upon exercise of options designated as either (i) incentive stock
options ("ISOs") under the Internal Revenue Code (the "Code"), or (ii)
non-qualified options. ISOs may be granted under the 1996 Plan to employees and
officers of the Company. Non-qualified options may be granted to consultants,
directors and other persons who render services to the Company or any subsidiary
corporation of the Company (whether or not they are employees).
The 1998 Incentive and Non-Qualified Stock Option Plan (the "1998 Plan" and
collectively with the 1996 Plan, the "Plans") was adopted by the Board of
Directors and the shareholders of the Company in June, 1998. Under the 1998
Plan, 800,000 shares of Common Stock have been reserved for issuance upon
exercise of options designated as either (i) incentive stock options ("ISOs")
under the Internal Revenue Code (the "Code"), or (ii) non-qualified options.
ISOs may be granted under the 1998 Plan to employees and officers of the
Company. Non-qualified options may be granted to consultants and other persons
who render services to the Company or any subsidiary corporation of the Company
(whether or not they are employees), and to all directors of the Company.
The purpose of the Plans is to provide additional incentive to officers and
other employees of the Company as well as other persons providing services to
the Company by affording them an opportunity to acquire or increase their
proprietary interest in the Company through the acquisition of shares of its
Common Stock. The Board of Directors is responsible for administering the Plans.
The 1998 Plan may also be administered by a committee consisting of at least two
disinterested directors. The Board, within the limitations of the Plans, may
determine the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate
38
<PAGE>
of exercise of each option, the option purchase price per share and the manner
of exercise, the time, manner and form of payment upon exercise of an option,
and whether restrictions such as repurchase rights by the Company are to be
imposed on shares subject to options. ISOs granted under the Plans may not be
granted at a price less than the fair market value of the Common Stock on the
date of grant (or 110% of fair market value in the case of persons holding 10%
or more of the voting power of all classes of stock of the Company). The
aggregate fair market value at the time of grant of shares for which ISOs
granted to any person are exercisable for the first time by any person during
any calendar year may not exceed $100,000. Options under the Plans may not be
granted more than 10 years after its effective date. Options granted to date
have seven (7) year terms. The term of each ISO granted under the Plans will
expire not more than ten years from the date of grant (or five (5) years in the
case of persons holding 10% or more of the voting power of all classes of stock
of the Company). Options granted under the Plans are not transferable during an
optionee's lifetime but are transferable at death by will or under the laws of
descent and distribution. In addition to the options summarized below, a total
of ISOs and non-qualified options to purchase 326,819 shares of Common Stock
have been granted to other employees and advisors of the Company.
The following table sets forth as to each Named Executive Officer (a) the
total number of shares subject to options granted during the fiscal year ended
January 31, 1998, (b) exercise price of such options, (c) the percentage such
grants represent of the total option grants to employees in the fiscal year
ended January 31, 1998, and (d) the expiration date of such option grants.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES SUBJECT TOTAL OPTIONS
TO EXERCISE GRANTED TO
NAME OPTION GRANTS PRICE EMPLOYEES EXPIRATION DATE
- ----------------------------------------- ---------------- ------------- --------------- -----------------------
<S> <C> <C> <C> <C>
Gary Treater............................. 4,000 $ 6.00 .8% December 31, 2004
9,000 $ 6.00 1.8 January 30, 2005
Everette Hinson.......................... 8,333 $ 0.75 1.7 May 5, 2004
3,000 $ 6.00 .6 December 31, 2004
7,000 $ 6.00 1.4 January 30, 2005
Neal Cohen............................... 3,000 $ 6.00 .6 December 31, 2004
7,000 $ 6.00 1.4 January 30, 2005
James Henley............................. 5,000 $ 6.00 1.0 December 31, 2004
2,000 $ 6.00 .4 January 30, 2005
</TABLE>
MONY PLAN. The MONY Plan is a flexible premium variable life insurance
policy that the Company has provided as a benefit since August 15, 1996 to the
following employees: Paul Berger, Jim Dodrill, Gary Treater, Neal Cohen and
James Henley. Pursuant to the MONY Plan, an individual (or his successors) may,
subject to certain conditions, receive up to $500,000 at his death. In the
alternative, the individual may choose to receive a lesser payment after a
certain number of years in service, the amount of such payment to vary with
length of service, among other factors. The Company pays monthly premiums
ranging from $450 to $650 for the MONY Plan. The Company has the discretion to
increase the benefit amounts provided to MONY Plan beneficiaries and to
terminate the MONY Plan at will.
39
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock immediately prior to this
Offering, and as adjusted to reflect the sale of the shares of Common Stock
offered by the Company by (i) each person known by the Company to beneficially
own more than five percent of the Common Stock, (ii) each director and the
Company's Chief Executive Officer, and (iii) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the address
of each beneficial owner of five percent of such Common Stock is the same as the
Company. See "Management."
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING (1)
- ----------------------------------------------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C>
Paul Berger (2)............................................ 1,449,697 38.29% 28.89%
Jim Dodrill (3)............................................ 521,343 13.77% 10.39%
Synergy Group International, Inc........................... 200,000 7.9% 3.98%
4725 East Sunrise Drive, Suite 228
Tucson, AZ 85718
All directors and executive officers of the Company as a
group (7 persons) (4).................................... 2,011,563 53.114% 40.09%
</TABLE>
- ------------------------
(1) Assumes that all Securities offered in this Offering are purchased but that
the Underwriters' over-allotment option is not exercised.
(2) Includes 19,577 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days of the date of this Prospectus.
(3) Includes 336,510 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of the date of this Prospectus.
(4) Includes 388,833 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days of the date of this Prospectus.
CONCURRENT REGISTRATION
The following table sets forth certain information with respect to persons
for whom the Company is registering Bridge Warrants for resale to the public.
The Company will not receive any proceeds from the sale of such Bridge Warrants.
The Bridge Warrants are not being underwritten by the Underwriters.
<TABLE>
<CAPTION>
WARRANTS PERCENTAGE
WARRANTS OWNED OF WARRANTS
OWNED BEFORE WARRANTS OFFERED AFTER OWNED
NAME OFFERING HEREBY OFFERING AFTER OFFERING
- -------------------------------------------------- ------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
John G. Costino................................... 212,500 212,500 0 0%
Afzal Ahmad....................................... 150,000 150,000 0 0
Gary E. Markman................................... 125,000 125,000 0 0
James S. Mulholland, Jr........................... 125,000 125,000 0 0
David Hungerford.................................. 87,500 87,500 0 0
Kal Zeff.......................................... 75,000 75,000 0 0
Martin C. Watz.................................... 75,000 75,000 0 0
Eugene D. Crittenden, Jr.......................... 50,000 50,000 0 0
Kelly Joseph Flynn................................ 50,000 50,000 0 0
Ronald Gagnon..................................... 50,000 50,000 0 0
Douglas H. Symons................................. 50,000 50,000 0 0
Robert Hurley..................................... 50,000 50,000 0 0
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
WARRANTS PERCENTAGE
WARRANTS OWNED OF WARRANTS
OWNED BEFORE WARRANTS OFFERED AFTER OWNED
NAME OFFERING HEREBY OFFERING AFTER OFFERING
- -------------------------------------------------- ------------- ---------------- ------------- --------------
Dr. Riyaz Jinnah.................................. 37,500 37,500 0 0%
<S> <C> <C> <C> <C>
Ronald J. Berk.................................... 25,000 25,000 0 0
Communication Enterprises, Inc.................... 25,000 25,000 0 0
Gilbert X. Dementis............................... 25,000 25,000 0 0
Richard Grant..................................... 25,000 25,000 0 0
Andrew A. Holder.................................. 25,000 25,000 0 0
Edward M. Kalinowski, Sr.......................... 25,000 25,000 0 0
L G Trust......................................... 25,000 25,000 0 0
Martin R. Lesh.................................... 25,000 25,000 0 0
Meca, Inc......................................... 25,000 25,000 0 0
Pafco General Insurance Co........................ 25,000 25,000 0 0
Joe Y. Pitts, Jr.................................. 25,000 25,000 0 0
Roy Roberts....................................... 25,000 25,000 0 0
Benjamin Russell.................................. 25,000 25,000 0 0
Kenneth J. Santiamo............................... 25,000 25,000 0 0
Superior Insurance Company........................ 25,000 25,000 0 0
Alex Theriot, Jr.................................. 25,000 25,000 0 0
Jane P. Trudeau................................... 25,000 25,000 0 0
Mark Wiener....................................... 25,000 25,000 0 0
Mike and Dana Eberts.............................. 15,000 15,000 0 0
Tyrone and Evelyn Adams........................... 12,500 12,500 0 0
Joel Benowitz..................................... 12,500 12,500 0 0
Milton Chwasky Retirement Trust................... 12,500 12,500 0 0
Jay L. Kobrin..................................... 12,500 12,500 0 0
Lee Harrison Corbin............................... 12,500 12,500 0 0
M. Jenkins Cromwell, Jr........................... 12,500 12,500 0 0
Nelson Garjian.................................... 12,500 12,500 0 0
Esther Golub...................................... 12,500 12,500 0 0
Integrated Capital Corp........................... 12,500 12,500 0 0
Paul J. Kuehn..................................... 12,500 12,500 0 0
H. Barry Robins................................... 12,500 12,500 0 0
Milan Tyburec..................................... 12,500 12,500 0 0
</TABLE>
There are no material relationships between any of the selling
warrantholders and the Company. Each selling warrantholder has agreed to lock-up
provisions pursuant to which the warrantholders have agreed not to sell any
Bridge Warrants for a period of one year following the effective date of this
Offering. Commencing one year from the effective date of this Offering, each
selling warrantholder may sell without any lock-up restrictions.
41
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS INVOLVING PAUL BERGER
Between August 21, 1996 and January 23, 1998, Paul Berger, Chairman of the
Board of Directors and Chief Executive Officer of the Company, made a number of
advances to the Company. On August 21, 1996, Mr. Berger advanced $10,000 to the
Company and received a note with a term of six years, earning 7.5% interest
annually and an option to purchase 19,577 shares of the Common Stock of the
Company at a price of $0.225 per share. In addition, Mr. Berger made four
advances to the Company using proceeds from sales of his own stock to other
individuals (some of whom were affiliates of the Company) at lower prices than
contemporaneous sales of stock by the Company to third-party investors. On
October 17, 1997, Mr. Berger advanced $50,000 to the Company after selling
100,000 shares of his stock to Synergy Group International, Inc. at the price of
$0.50 per share. On October 28, 1997, Mr. Berger advanced $50,000 to the Company
after selling 100,000 shares of his stock to Carol Dodrill, Jim Dodrill's
mother, and Bill Powell at the price of $0.50 per share. On November 11, 1997,
Mr. Berger advanced $2,500 to the Company after selling 3,333 shares of his
stock to Rodger Berman at the price of $0.75 per share. On January 23, 1998, Mr.
Berger advanced $50,000 to the Company after selling 50,000 shares of his stock
to Andrew Holder and Marc Roberts at the price of $1.00 per share. These four
transactions were contemporaneous with the Company's sale of its Common Stock at
$2.10 per share. Mr. Berger received notes from the Company for all four
advances with an annual interest rate of 12.5%. All four notes, aggregating
$152,500 plus interest, are to be repaid out of the proceeds of this Offering.
See "Underwriting."
TRANSACTIONS INVOLVING JIM DODRILL
Between September 5, 1996 and January 23, 1998, Jim Dodrill, President and
General Counsel of the Company, made a number of advances to the Company. On
September 5, 1996, Mr. Dodrill advanced $30,000 to the Company and received a
note with a term of six years, earning 7.5% interest annually and an option to
purchase 58,731 shares of the Common Stock of the Company at a price of $0.225
per share. In addition, Mr. Dodrill made three advances to the Company using
proceeds from sales of his own stock to other individuals at lower prices than
contemporaneous sales of stock by the Company to third-party investors. On
October 17, 1997, Mr. Dodrill advanced $50,000 to the Company after selling
100,000 shares of his stock to Synergy Group International, Inc. at the price of
$0.50 per share. On November 11, 1997, Mr. Dodrill advanced $2,500 to the
Company after selling 3,333 shares of his stock to Rodger Berman at the price of
$0.75 per share. On January 23, 1998, Mr. Dodrill advanced $50,000 to the
Company after selling 50,000 shares of his stock to Andrew Holder and Marc
Roberts at the price of $1.00 per share. These three transactions were
contemporaneous with the Company's sale of its Common Stock at $2.10 per share.
Mr. Dodrill received notes from the Company for all three advances with an
annual interest rate of 12.5%. All three notes, aggregating $102,500 plus
interest, are to be repaid out of the proceeds of this Offering. See
"Underwriting."
TRANSACTIONS INVOLVING STANLEY BERGER
Between August 13, 1996 and January 16, 1998, Stanley Berger, Paul Berger's
father, made a number of advances to the Company. The following table summarizes
the loans made. For each loan, Mr. Berger received a note with the loan amount
and interest rate set forth in the table. In addition, for all but the two
repaid loans and one loan on October 1, 1997, Mr. Berger also received a warrant
to purchase the number
42
<PAGE>
of shares set forth in the table and at the exercise price set forth in the
table. All of these notes, aggregating $510,000 plus interest, are to be repaid
out of the proceeds of the Offering. See "Underwriting."
<TABLE>
<CAPTION>
NUMBER OF
SHARES
PURCHASABLE
INTEREST UPON EXERCISE WARRANT
DATE AMOUNT OF LOAN RATE OF WARRANT EXERCISE PRICE
- -------------------------------------------------------- --------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
August 13, 1996(1)...................................... $ 35,000 -- -- --
September 26, 1996...................................... $ 40,000 12.5% 4,400 $ 1.13
October 8, 1996......................................... $ 25,000 12.5% 2,750 $ 1.13
April 30, 1997.......................................... $ 25,000 12.5% 3,437 $ 0.75
May 27, 1997............................................ $ 50,000 15% 27,708 $ 0.75
June 19, 1997........................................... $ 50,000 15% 27,708 $ 0.75
July 3, 1997............................................ $ 30,000 12.5% 6,000 $ 2.10
July 10, 1997........................................... $ 15,000 12.5% 3,000 $ 2.10
August 27, 1997(1)...................................... $ 50,000 -- -- --
September 12, 1997...................................... $ 50,000 12.5% 8,333 $ 2.10
October 1, 1997(2)...................................... $ 25,000 12.5% -- --
October 14, 1997........................................ $ 50,000 12.5% 8,333 $ 2.10
November 14, 1997....................................... $ 50,000 12.5% 8,333 $ 2.10
November 28, 1997....................................... $ 30,000 12.5% 2,400 $ 2.10
December 3, 1997........................................ $ 20,000 12.5% 1,600 $ 2.10
January 16, 1998........................................ $ 50,000 12.5% 4,000 $ 4.00
Total............................................... $ 595,000 108,002
</TABLE>
- ------------------------
(1) This Note was repaid.
(2) For this loan, Mr. Berger received a security interest in all of the
Company's accounts receivable.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred
Stock, par value $0.01 per share. As of the date of this Prospectus, 2,516,770
shares of Common Stock were issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share. The holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of legally available funds. Upon
liquidation, dissolution or winding up of the Company, the holders of the Common
Stock are entitled to share ratably in all assets of the Company which are
legally available for distribution, after payment of or provisions for all debts
and liabilities. Holders of Common Stock have no preemptive, subscription, or
redemption rights. The shares of Common Stock offered hereby will be, when and
if issued, fully paid and non-assessable. The Company has agreed that for a
period of 60 months from the date of this Offering it will not sell or issue any
securities (with certain limited exceptions) without the Representative's prior
written consent. See "Risk Factors -- Representative's Influence Over Potential
Future Capital Financing."
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by law, without further stockholder approval, to issue from time to time up to
an aggregate of 5,000,000 shares of Preferred Stock in one or more series. Each
such series of Preferred Stock shall have such number of shares, designations,
43
<PAGE>
preferences, voting powers, qualifications and special or relative rights or
privileges, which may include, among others, dividend rights, voting rights,
redemption and sinking fund provisions, liquidation preferences and conversion
rights, as shall be determined by the Board of Directors in a resolution or
resolutions providing for the issuance of such series. Any such series of
Preferred Stock, if so determined by the Board of Directors, may have full
voting rights with the Common Stock or superior or limited voting rights, and
may be convertible into Common Stock or another security of the Company.
The Company has granted to the Board of Directors the authority to issue
Preferred Stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
issuance of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any shares of Preferred
Stock. See "Description of Securities--Certain Effects of Authorized but
Unissued Stock." The Company has agreed that for a period of 60 months from the
date of this Offering it will not sell or issue any securities (with certain
limited exceptions) without the Representative's prior written consent. See
"Risk Factors -- Representative's Influence Over Potential Future Capital
Financing."
WARRANTS
Each Warrant entitles the holder thereof to purchase one share of Common
Stock at a price of $6.90 per share (assuming an initial offering price of $6.00
per share) for a period of two years commencing on the first anniversary of the
effective date of this Offering (the "First Exercise Date"). Each Warrant is
redeemable by the Company at a redemption price of $0.125 per Warrant at any
time after the First Exercise Date, upon 30 days prior written notice to holders
thereof, if the average closing bid price of the Common Stock, as reported on
the principal exchange on which the Common Stock is traded, equals or exceeds
$7.50 per share for 10 consecutive trading days ending on the day prior to the
date of the notice of redemption.
Pursuant to applicable federal and state securities laws, in the event a
current prospectus is not available, the Warrants may not be exercised by the
holders thereof and the Company will be precluded from redeeming the Warrants.
There can be no assurance that the Company will not be prevented by financial or
other considerations from maintaining a current prospectus. Any Warrant holder
who does not exercise prior to the redemption date, as set forth in the
Company's notice of redemption, will forfeit the right to purchase the Common
Stock underlying the Warrants, and after the redemption date or upon conclusion
of the exercise period, any outstanding Warrants will become void and be of no
further force or effect, unless extended by the Board of Directors of the
Company. See "Underwriting" for the terms of the Warrants issuable pursuant to
the Underwriters' Warrants.
The number of shares of Common Stock that may be purchased is subject to
adjustment upon the occurrence of certain events, including a dividend
distribution to the Company's shareholders or a subdivision, combination or
reclassification of the outstanding shares of Common Stock. Further, the Warrant
exercise price is subject to adjustment in the event the Company issues
additional stock or rights to acquire stock at a price per share that is less
that the current market price per share of Common Stock on the record date
established for the issuance of additional stock or rights to acquire stock. The
term "current market price" is defined as the average of the daily closing
prices for the 20 consecutive trading days ending three days prior to the record
date. However, the Warrant exercise price will not be adjusted in the case of
the Underwriter's Warrants (or the Warrants included therein) or any other
options or warrants outstanding as of the date of this Offering. The Warrant
exercise price is also subject to adjustment in the event of a consolidation or
merger where a distribution by the Company is made to its shareholders of the
Company's assets or evidences of indebtedness (other cash or stock dividends) or
pursuant to certain subscription rights or other rights to acquire Common Stock.
44
<PAGE>
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 then in effect. Also, the
Company may reduce the exercise price of the Warrants for limited periods or
through the end of the exercise period if deemed appropriate by the Board of
Directors. Any extension of the term and/or reduction of the exercise price of
the Warrants will be subject to compliance with Rule 13e-4 under the Exchange
Act including the filing of a Schedule 13E-4. Notice of any extension of the
exercise period and/or reduction of the exercise price will be given to the
Warrant holders. The Company does not presently contemplate any extension of the
exercise period nor does it contemplate any reduction in the exercise price of
the Warrants. The Warrants are also subject to price adjustment upon the
occurrence of certain events including subdivisions or combinations of the
Common Stock.
The Warrants will be issued pursuant to the terms and conditions of a
Warrant Agreement between the Company and .
DELAWARE LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
As a result of the foregoing provisions, the acquisition of the Company by
means of a tender offer, a proxy contest or otherwise and the removal of
incumbent officers and directors could be made more difficult. These provisions
are expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
the Company to negotiate with the Company first. The Company believes that the
benefits of increased protection of the Company's potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure the Company outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The authorized but unissued shares of Common Stock and Preferred Stock are
available for future issuance without shareholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans.
The existence of authorized but unissued and unreserved Common Stock and
Preferred Stock may enable the Board of Directors to issue shares to persons
friendly to current management which could render more difficult or discourage
an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger, or otherwise, and thereby protect the continuity of the Company's
management. The Company has agreed that for a period of 60 months from the date
of this Offering it will not sell or issue any securities (with certain limited
exceptions) without the Representative's prior written consent. See "Risk
Factors -- Representative's Influence Over Potential Future Capital Financing."
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock and the Warrants is
.
45
<PAGE>
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 5,016,770
shares of Common Stock (5,391,770 if the Underwriters' over-allotment option is
exercised in full). All of the shares of Common Stock offered hereby will be
freely tradeable by persons other than "affiliates" of the Company without
restriction or further registration under the Securities Act.
The remaining 2,516,770 shares (the "Restricted Shares") held by officers,
directors, employees, consultants and other stockholders of the Company were
sold by the Company in reliance on exemptions from the registration requirements
of the Securities Act and are "restricted securities" within the meaning of Rule
144 promulgated under the Securities Act. Subject to the restrictions imposed on
substantially all of the Restricted Shares by the lock-up agreements referred to
below, approximately 2,516,770 of the Restricted Shares will be eligible for
resale in the public market as of the date of this Prospectus (the "Effective
Date") in reliance on Rule 144(k) under the Securities Act and approximately an
additional 263,903 of the Restricted Shares will become eligible for resale in
reliance on Rules 144 and 701 ninety days after the Effective Date.
Persons who are deemed affiliates of the Company are generally entitled
under Rule 144 as currently in effect to sell within any three-month period a
number of shares that does not exceed 1% of the number of shares of the Common
Stock then outstanding or the average weekly trading volume of Common Stock
during the four calendar weeks preceding the making of a filing with the
Securities and Exchange Commission (the "Commission") with respect to such sale.
Such sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. The Company is unable to estimate accurately the number of
shares of Common Stock that ultimately may be sold under Rule 144 because the
number of shares will depend in part on the market price for the Common Stock,
the personal circumstances of the sellers and other factors. In addition to the
restrictions under Rule 144, Paul Berger the Company's Chief Executive Officer
and Jim Dodrill, the Company's President, have agreed, subject to certain
limitations, not to sell any of the 1,614,953 shares of Common Stock, presently
owned by them, or hereafter acquired by them, for a period of 24 months after
the date of this Prospectus without the prior consent of the Representative. On
each of the second and third anniversaries of this Prospectus, 25% of their
shares will be released from this restriction. On the fourth anniversary of this
Prospectus all remaining shares will be released from this restriction. See
"Underwriting."
46
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Company has agreed to sell to the Underwriters, and
the Underwriters, severally and not jointly, have agreed to purchase from the
Company, on a "firm commitment" basis, if any are purchased, the number of
shares of Common Stock and Warrants (exclusive of shares of Common Stock and
Warrants issuable upon exercise of the Underwriters' over-allotment option) set
forth opposite their respective names below:
<TABLE>
<CAPTION>
SHARES OF
UNDERWRITERS COMMON STOCK WARRANTS
- --------------------------------------------------------------------------------------- --------------------- -----------------
<S> <C> <C>
Total
</TABLE>
The Company has agreed to sell the shares of Common Stock and Warrants to
the Underwriters at a discount of percent ( %) of the initial public
offering price thereof. The Underwriters will offer the shares of Common Stock
and Warrants to the public at $ . per share of Common Stock and $0.125
per Warrant as set forth on the cover page of this Prospectus and may allow to
certain dealers who are National Association off Securities Dealers, Inc.
("NASD") members concessions not to exceed $ . per share of Common Stock
and $ . per Warrant, of which not in excess of $
. per share of Common Stock and $ . per Warrant may be re-allowed to
other dealers who are members of the NASD. After the initial public offering,
the public offering price, concession and re-allowances may be changed by the
Underwriters.
Prior to this offering, there has not been any public market for the Common
Stock or the Warrants. The initial public offering prices of the shares of
Common Stock and the Warrants and the exercise price and other terms of the
Warrants were determined by negotiations between the Company and the
Representative and do not necessarily relate to the assets, book value or
results of operations of the Company and the Representative and do not
necessarily relate to the assets, book value or results of operations of the
Company or any other established criteria of value.
The Company has granted an option to the Underwriters, exercisable during
the 45-day period from the date of this Prospectus, to purchase in the aggregate
up to a maximum of 250,000 additional shares of Common Stock and 375,000
Warrants and the Selling Stockholders have granted an option to the Underwriters
to purchase 125,000 shares of Common Stock, in each case at the prices set forth
on the cover page of this Prospectus, minus the underwriting discount. The
Underwriters' over-allotment option is exercisable upon the same terms and
conditions as are applicable to the sale of the shares of Common Stock and
Warrants offered hereby.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to officers, directors or persons controlling the Company, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy and is therefore unenforceable.
The Company has agreed to pay certain blue sky legal fees of the
Underwriters and to pay to the Underwriters at the closing of the Offering a
non-accountable expense allowance of % of the aggregate offering price of the
shares of Common Stock and Warrants offered hereby (including any shares of
Common Stock and Warrants purchased purchasing pursuant to the Underwriters'
over-allotment option).
47
<PAGE>
The Company has agreed to sell to the Representative or its respective
designees, for an aggregate purchase price of $ , an option (the
"Representative's Warrant") to purchase up to an aggregate of , shares of
Common Stock and , Warrants exercisable at 120% (providing for a purchase
price per share at 120% of the initial public offering price of the Common Stock
underlying the Warrants) of the initial public offering price of the Securities.
The Underwriters' Warrant shall be exercisable during a four-year period
commencing one year after the effective date of the Registration Statement of
which this Prospectus is a part. The Underwriters' Warrant may not be assigned,
transferred, sold or hypothecated by the Underwriters until 12 months from the
date of this Prospectus, except to officers or partners of the Underwriters, to
a successor to the Underwriters, to a purchaser of substantially all of the
assets of the Underwriters, or by operation of law. Any profits realized by the
Underwriters upon the sale of the Common Stock and Warrants (or the underlying
Securities) issuable upon exercise of the Underwriters' Warrants may be deemed
to be additional underwriting compensation. The exercise price of the Warrants
issuable upon exercise of the Underwriters' Warrants during the period of
exercisability shall be $ per Warrant. The exercise of the Warrants subject to
the Underwriters' Warrants and the number of shares of Common Stock covered
thereby are subject to adjustment in certain events to prevent dilution. For the
life of the Underwriters' Warrant, the holders thereof are given, at a normal
cost, the opportunity to profit from a rise in the market price of the
Securities with a resulting dilution in the interest off other shareholders. The
Company may find it more difficult to raise capital for its business if the need
should arise while the Underwriters' Warrant is outstanding. At any time when
the holders of the Underwriters' Warrant might be expected to exercise it, the
Company would probably be able to obtain additional capital on more favorable
terms.
The Company has agreed with the Underwriters that the Company will pay to
the Underwriters a warrant solicitation fee (the "Warrant Solicitation Fee")
equal to % of the exercise price of the Warrants exercised beginning one year
from the date of this Prospectus and to the extent not inconsistent with the
guidelines of the NASD and the rules and regulations of the Commission
(including NASD Notice to Members 81-38). Such Warrant Solicitation Fee will be
paid to the Underwriters if (a) the market price of the Common Stock on the date
that any Warrant is exercised is greater than the exercise price of the Warrant;
(b) the exercise of such warrant was solicited by the Underwriters; (c ) prior
specific written approval for exercise is received from the customer if the
Warrant is held in a discretionary account; (d) disclosure of this compensation
agreement is made prior to or upon the exercise of such Warrant; (e)
solicitation of the exercise is not in violation of Rule 103 of Regulation M of
the Exchange Act; (f) the Underwriter provided bona fide services in exchange
for the Warrant Solicitation Fee; and (g) the Underwriter has been specifically
designated in writing by the holders of the Warrants as the broker. In addition,
unless granted and exemption by the Commission from Rule 103 of Regulation M
under the Exchange Act, the Underwriters will be prohibited from engaging in any
market making activities or solicited brokerage activities with respect to the
Securities for a specified period (generally five business days) prior to any
solicitation of the exercise of any Warrant or prior to the exercise of any
Warrant based on a prior solicitation until the later of the termination by
waiver or otherwise) of any right the Underwriters may have to receive such a
fee for the exercise of the Warrants following such solicitation. As a result,
the Underwriters may be unable to continue to provide a market for the
Securities during certain periods while the Warrants are exercisable.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales of shares of Common Stock or Warrants offered hereby to
any accounts over which they exercise discretionary authority.
The Underwriters have been given certain "piggyback" and demand registration
right with respect to the Common Stock underlying the Underwriters' Warrants for
a period of four years commencing one year from the date of this Prospectus. The
exercise of any such registration rights by the Underwriters may result in
dilution to the interest of the Company's shareholders, hinder efforts by the
Company to arrange future financing of the Company and/or have an adverse effect
on the market price of the Securities.
48
<PAGE>
The Company has agreed that for a period of months commencing from the
date of this Prospectus, it will not issue or sell, directly or indirectly, any
shares of its capital stock, or sell or grant options, warrants or rights to
purchase any shares of its capital stock, without the written consent of the
Representative, except for issuances pursuant to (I) the public offering of the
Company's securities as described herein, (ii) the exercise of the Warrants and
the Underwriters' Warrants, and the Common Stock issuable thereunder, (iii)
outstanding convertible securities or contractual obligations disclosed in this
Prospectus, (iv) the grant of options and the issuance of shares issued upon
exercise of options to be granted under the Plan, and (v) an acquisition, merger
or similar transaction provided that the acquirer of such capital stock does not
receive, and will not be entitled to demand, registered securities during such
24-month period. In addition, Messrs. Berger and Dodrill have agreed with the
Representative in writing not to sell, assign, or transfer any of their shares
of the Company's securities for a period of months from the date of this
Prospectus, subject to certain conditions. See "Shares Available for Future
Sale."
The Company has agreed that, for a period of years following the
completion of this Offering, it will use its best efforts to cause the election
too its Board of Directors one designee of the Representative, provided that
such designee is reasonably acceptable to and approved by the Company.
Alternatively, the Representative may appoint an observer to attend all meetings
of the Board of Directors during such period. As of this date, no person has
been identified by the Representative for election as a director or for
appointment as a observer.
LEGAL MATTERS
The validity of the Common Stock and Warrants being offered hereby will be
passed upon for the Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
Certain matters are being passed upon for the Underwriters by .
EXPERTS
The financial statements as of January 31, 1998 and 1997 and for the year
ended January 31, 1998 and the period February 8, 1996 (inception) to January
31, 1997 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent certified public accountants, given
on the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Commission through the Electronic Data
Gathering and Retrieval ("EDGAR") system a registration statement on Form SB-2
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act with respect to the Securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in such Registration Statement, certain parts of which have been omitted
in accordance with the rules and regulation of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. For further
information, reference is made to such registration statement, including the
exhibits thereto, which may be inspected without charge at the Commission's
principal office at 450 Fifth Street, N. W., Room 1024, Washington D. C. 20549;
and at the following Regional Offices of the Commission, except that copies of
the exhibits may not be available at certain of the Regional Offices: Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and New York Regional Office 7 World Trade Center, Suite 1300, New York, NY
10048. Copies of all or any part of such material may be obtained from the
Commission at 450 Fifth Street, N. W. Room 1024, Washington, D.C. 20549, upon
payment of certain fees prescribed by the Commission. The Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports,
proxy, information statements, and registration statements and other information
filed with the Commission through the EDGAR system.
49
<PAGE>
The Company is not presently a reporting company and does not file reports
or other information with the Commission. However, on the effective date of the
Registration Statement, the Company will become a reporting company. Further,
the Company will register its Common Stock and Warrants under the Exchange Act.
Accordingly, the Company will become subject to the additional reporting
requirements of the Exchange Act and in accordance therewith will file reports,
proxy statements and other information with the Commission. In addition, after
the completion of this Offering, the Company intends to furnish its shareholders
with annual reports containing audited financial statements and such interim
reports, in each case as it may determine to furnish or as may be required by
law.
50
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Balance Sheets at January 31, 1997, January 31, 1998 and April 30, 1998 (unaudited)... F-3
Statements of Operations for the period February 8, 1996 (inception) to January 31,
1997, for the year ended January 31, 1998 and for the three months ended April 30,
1997 and 1998 (unaudited)............................................................ F-4
Statement of Changes in Shareholders' Deficit......................................... F-5
Statements of Cash Flows for the period February 8, 1996 (inception) to January 31,
1997, for the year ended January 31, 1998 and for the three months ended April 30,
1997 and 1998 (unaudited)............................................................ F-6
Notes to Financial Statements, January 31, 1998....................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Outlook Sports Technology, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in shareholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Outlook Sports
Technology, Inc. (formerly Hippo, Inc.) at January 31, 1998 and 1997, and the
results of its operations and its cash flows for the year ended January 31, 1998
and for the period February 8, 1996 (inception) to January 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and negative
cash flows from operations through January 31, 1998, has a shareholders' deficit
and working capital deficiency as of January 31, 1998, and is dependent on
raising additional financing in order to fund its existing level of operations.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Price Waterhouse LLP
Miami, Florida
June 9, 1998
F-2
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JANUARY 31,
---------------------- APRIL 30,
1997 1998 1998
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Cash................................................... $ 19,041 $ 1,367 $ 28,475
Accounts receivable, net of allowance for doubtful
accounts of $35,000.................................. -- 167,700 315,745
Inventory.............................................. -- 417,058 637,477
Prepaid expenses....................................... -- 12,854 127,141
Deposits and other current assets...................... 7,809 51,813 103,132
---------- ---------- ----------
Total current assets............................... 26,850 650,792 1,211,970
Prepaid royalties...................................... 150,000 133,319 133,319
Property and equipment, net............................ 31,197 201,644 440,874
License................................................ 19,300 19,300 19,300
---------- ---------- ----------
$ 227,347 $1,005,055 $1,805,463
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable..................................... $ 495,413 $1,962,657 $1,336,599
Accrued expenses..................................... 134,482 824,179 1,257,877
Advances from officers............................... 588,660 255,000 255,000
Notes payable, current portion....................... 115,000 2,665,638 5,118,672
---------- ---------- ----------
Total current liabilities.......................... 1,333,555 5,707,474 7,968,148
Notes payable, long term............................... 40,000 40,000 40,000
---------- ---------- ----------
1,373,555 5,747,474 8,008,148
---------- ---------- ----------
Commitments and contingencies.......................... -- -- --
---------- ---------- ----------
Shareholders' deficit:
Common stock; $.01 par value, 8,100,000 shares
authorized; 1,118,488 and 2,324,071 shares issued
and outstanding in 1997 and 1998, respectively, and
2,440,105 at April 30, 1998 (unaudited)............ 11,185 23,241 24,401
Additional paid in capital........................... 1,221,159 2,306,543 2,592,930
Accumulated deficit.................................. (2,378,552) (7,072,203) (8,820,016)
---------- ---------- ----------
Total shareholders' deficit........................ (1,146,208) (4,742,419) (6,202,685)
---------- ---------- ----------
$ 227,347 $1,005,055 $1,805,463
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD
FEBRUARY 8,
1996
(INCEPTION) FOR THE THREE MONTHS ENDED
TO YEAR ENDED APRIL 30,
JANUARY 31, JANUARY 31, --------------------------
1997 1998 1997 1998
------------- ------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue................................................ $ -- $ 741,120 $ 16,575 $ 310,768
------------- ------------- ----------- -------------
Operating expenses:
Costs of sales....................................... -- 859,317 13,939 240,218
Research and development............................. 650,805 451,019 50,992 62,028
Stock-based compensation............................. 473,894 210,130 53,878 --
Selling, general and administrative expenses......... 1,251,009 3,669,657 600,050 1,611,608
------------- ------------- ----------- -------------
Total costs and expenses........................... 2,375,708 5,190,123 718,859 1,913,854
------------- ------------- ----------- -------------
Loss from operations................................... (2,375,708) (4,449,003) (702,284) (1,603,086)
Interest expense....................................... (2,844) (244,648) (29,847) (144,727)
------------- ------------- ----------- -------------
Net loss............................................... $(2,378,552) $ (4,693,651) $ (732,131) $ (1,747,813)
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
Basic and diluted loss per share....................... $ (3.24) $ (2.21) $ (0.81) $ (0.73)
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
Weighted average common shares outstanding............. 734,330 2,120,460 905,130 2,401,814
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL TOTAL
PAR PAID IN ACCUMULATED SHAREHOLDERS'
SHARES VALUE CAPITAL DEFICIT DEFICIT
---------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, February 8, 1996..................... -- $ -- $ -- $ -- $ --
Issuance of common stock...................... 1,068,488 10,685 1,128,074 -- 1,138,759
Stock option compensation..................... -- -- 73,785 -- 73,785
Acquisition of license........................ 50,000 500 19,300 -- 19,800
Net loss...................................... -- -- -- (2,378,552) (2,378,552)
---------- --------- ------------ ------------- -------------
Balance, January 31, 1997..................... 1,118,488 11,185 1,221,159 (2,378,552) (1,146,208)
Issuance of common stock...................... 1,205,583 12,056 932,218 -- 944,274
Stock option compensation..................... -- -- 153,166 -- 153,166
Net loss...................................... -- -- -- (4,693,651) (4,693,651)
---------- --------- ------------ ------------- -------------
Balance, January 31, 1998..................... 2,324,071 23,241 2,306,543 (7,072,203) (4,742,419)
Issuance of common stock for payment of
services (unaudited)........................ 116,034 1,160 286,387 -- 287,547
Net loss (unaudited).......................... -- -- -- (1,747,813) (1,747,813)
---------- --------- ------------ ------------- -------------
Balance, April 30, 1998 (unaudited)........... 2,440,105 $ 24,401 $ 2,592,930 $ (8,820,016) $(6,202,685)
---------- --------- ------------ ------------- -------------
---------- --------- ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD
FEBRUARY 8,
1996
(INCEPTION) FOR THE THREE MONTHS ENDED
TO YEAR ENDED APRIL 30,
JANUARY 31, JANUARY 31, ---------------------------
1997 1998 1997 1998
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Operating activities:
Net loss.................................................. $(2,378,552) $ (4,693,651) $ (732,131) $ (1,747,813)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.......................................... 3,355 8,100 1,967 37,350
Stock-based compensation.............................. 473,894 210,130 53,878 --
Changes in operating assets and liabilities:
Increase in accounts receivable..................... -- (167,700) (16,183) (148,045)
Increase in inventory............................... -- (417,058) -- (220,420)
Increase in prepaid expenses........................ -- (12,854) (12,976) (46,787)
Increase in deposits and other current assets....... (7,809) (44,004) (2,977) (51,319)
(Increase) decrease in prepaid royalties............ (150,000) 16,681 -- --
Increase (decrease) in accounts payable and accrued
expenses.......................................... 629,895 2,156,941 (138,957) 27,687
------------- ------------- ------------ -------------
Net cash used in operating activities....................... (1,429,217) (2,943,415) (847,379) (2,149,347)
------------- ------------- ------------ -------------
Investing activities:
Capital expenditures...................................... (34,552) (178,547) (2,245) (276,579)
------------- ------------- ------------ -------------
Net cash used in investing activities....................... (34,552) (178,547) (2,245) (276,579)
------------- ------------- ------------ -------------
Financing activities:
Proceeds from line of credit.............................. -- 35,000 -- --
Advances from officers.................................... 588,660 255,000 -- --
Proceeds from issuance of unsecured notes payable......... 190,000 2,265,500 925,000 2,705,000
Proceeds (payments) from (to) factor...................... -- 280,138 -- (183,466)
Repayment of unsecured notes payable...................... (35,000) (30,000) -- (68,500)
Proceeds from exercise of stock options and sale of common
stock................................................... 739,150 298,650 97,501 --
------------- ------------- ------------ -------------
Net cash provided by financing activities................... 1,482,810 3,104,288 1,022,501 2,453,034
------------- ------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents........ 19,041 (17,674) 172,877 27,108
------------- ------------- ------------ -------------
Cash and cash equivalents, beginning of period.............. -- 19,041 19,041 1,367
------------- ------------- ------------ -------------
Cash and cash equivalents, end of period.................... $ 19,041 $ 1,367 $ 191,918 $ 28,475
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ -- $ 1,868 $ -- $ 31,489
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In March 1998, the Company issued 104,784 shares of its common stock to a
professional golfer as consideration for $220,047 owed to such golfer.
Additionally, the Company issued in March, 1998 11,500 shares of its common
stock valued at $67,500 in connection with endorsement contracts expiring in
March, 1999.
During February 1997, the Company issued 1,024,800 shares of its common stock in
exchange for the forgiveness of $588,660 of advances due to the Company's Chief
Executive Officer.
During 1996, the Company issued 50,000 shares of its common stock valued at
approximately $19,800 in exchange for certain marketing rights.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
Outlook Sports Technology, Inc. (the Company) was incorporated on February
8, 1996 in the State of Delaware. The Company is a designer and marketer and,
through the use of contracted parties, a manufacturer of golf equipment, apparel
and accessories under the TEGRA-TM- brand name. TEGRA-TM- golf clubs incorporate
the Company's patent-pending Invisible Inset Hosel-TM-.
The Company initially entered the U.S. golf market under a license agreement
with Hippo Holdings, Ltd. ("Hippo Holdings"), a British golf equipment
manufacturer and distributor. Under the terms of the licensing agreement, the
Company acquired the rights, in perpetuity, to market and sell HiPPO-TM- brand
products in the U.S. and Canada for 50,000 shares of the Company's common stock,
and prepaid $150,000 of royalties. In May 1998, the Company sold this license
back to Hippo Holdings. (See Note 9.)
Since its inception in 1996 to January 31, 1998, the Company has incurred
recurring losses, has not generated cash from its operating activities and is
dependent on raising additional financing in order to fund its existing level of
operations. Additionally, at January 31, 1998, the Company's current liabilities
exceeded its current assets by approximately $5,057,000, and the Company had an
accumulated deficit of approximately $4,742,000. These factors, among others,
raise substantial doubt about the Company's ability to continue as a going
concern. These financial statements do not reflect any adjustments that might
result from the outcome of this uncertainty.
In connection with the above, the Company's management intends to execute an
initial public offering under which the Company expects to sell shares of its
common stock as well as warrants to acquire shares of common stock. Proceeds
from the offering are expected to be used to repay the Company's outstanding
notes payable (see Note 5) and fund inventory purchases and ongoing operations.
There can be no assurance that such offering will be successful. If the offering
is not successful, management will seek alternative financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies followed by the Company in the
preparation of the accompanying financial statements is presented below.
ACCOUNTING ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial data of the Company is unaudited. Certain information
and footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted. In the opinion of management, the interim financial statements
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results of the Company's operations for
the interim periods presented. The results of operations for the three month
period ended April 30, 1998 are not necessarily indicative of the results for
the full year.
F-7
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH
The Company considers those short term, highly liquid investments with
original maturities of three months or less as cash.
INVENTORY
Inventory, which is primarily comprised of clubs and component parts, is
stated at the lower of cost or market with cost determined using the first-in,
first-out (FIFO) method. Component parts consist primarily of golf club heads,
shafts and grips.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight line method over the estimated useful lives of the assets. Significant
additions and improvements are capitalized and costs for maintenance and repairs
are expensed as incurred.
LICENSE
The license to market HIPPO-TM- brand golf products in the U.S. and Canada
is recorded at the estimated fair value of 50,000 shares issued in May 1996 as
consideration for such license (see Note 9).
LONG LIVED ASSETS
The Company reviews long lived assets and identifiable intangibles for
recoverability and reserves for impairment whenever events or changes in
circumstances indicate, based on estimated future cash flows, the carrying
amount of the assets will not be fully recoverable.
REVENUE RECOGNITION
Revenue from the sale of non consignment products is recognized at the time
title to such products passes to the customer. Revenue from the sale of products
delivered on consignment is recognized at the time such products are sold by the
customer.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, which relate primarily to the design of the
TEGRA-TM- brand name products, are expensed as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense consists of
media advertising as well as brochure, production and direct mail costs.
Advertising expense approximated $1,033,000 for the year ended January 31, 1998.
F-8
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company records deferred income taxes using the liability method. Under
the liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and income tax bases of the Company's assets and liabilities. An
allowance is recorded, based upon currently available information, when it is
more likely than not that any or all of a deferred tax asset will not be
realized. The provision for income taxes includes taxes currently payable, if
any, plus the net change during the year in deferred tax assets and liabilities
recorded by the Company.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation to its employees using the
intrinsic value method, which requires the recognition of compensation expense
over the vesting period of the options when the exercise price of the stock
option granted is less than the fair value of the underlying common stock.
Additionally, the Company provides pro forma disclosure of net loss and loss per
share as if the fair value method had been applied in measuring compensation
expense for stock options granted. Stock-based compensation related to options
granted to non-employees is recognized using the fair value method.
LOSS PER SHARE
The computation of loss per share of common stock is computed by dividing
net loss for the period by the weighted average number of shares outstanding
during that period. The weighted average number of shares outstanding for the
period February 8, 1996 (inception) to January 31, 1997 and the year ended
January 31, 1998 excludes approximately 274,000 and 1,179,000 respectively, of
antidilutive stock options and warrants.
Because the Company is incurring losses, the effect of stock options and
warrants is antidilutive. Accordingly, the Company's presentation of diluted
earnings per share is the same as that of basic earnings per share.
Assuming the Company's contemplated public offering and the related payment
of the unsecured notes payable to private investors had taken place on February
1, 1997, the Company would have net loss per share of $1.64 for the year ended
January 31, 1998 and $0.49 for the unaudited period February 1, 1998, to April
30, 1998. Such supplemental net loss per share is based on the number of shares
of common stock used in the calculation of net loss per share plus the number of
shares required to be sold by the Company to fund the repayment of the unsecured
notes payable after giving effect to the interest savings of approximately
$237,000 and $140,000 for the periods ended January 31, 1998, and April 30,
1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and notes payable approximated fair value because of the short maturity of these
instruments. The Company routinely assesses the financial strength of its
customers and records an allowance for doubtful accounts when it determines that
collection of a particular amount is unlikely.
F-9
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
3. INVENTORY
Inventory at January 31, 1998 consists of the following:
<TABLE>
<CAPTION>
Components parts.................................................. $ 126,340
<S> <C>
Clubs............................................................. 278,715
Apparel, golf accessories and other............................... 12,003
---------
$ 417,058
---------
---------
</TABLE>
At January 31, 1998, the Company had inventory of approximately $134,000 on
consignment at various customer locations. The consigned inventory did not
include any HIPPO-TM- brand products.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JANUARY 31, ESTIMATED
--------------------- USEFUL LIVES
1997 1998 (IN YEARS)
--------- ---------- ---------------
<S> <C> <C> <C>
Furniture and fixtures................................... $ -- $ 169,215 3
Equipment................................................ 34,552 43,884 3
--------- ----------
34,552 213,099
Accumulated depreciation................................. (3,355) (11,455)
--------- ----------
$ 31,197 $ 201,644
--------- ----------
--------- ----------
</TABLE>
The Company recorded depreciation expense related to its property and
equipment of $3,355 and $8,100 for the period ended January 31, 1997 and the
year ended January 31, 1998, respectively.
F-10
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
5. NOTES PAYABLE
The Company's notes payable are as follows:
<TABLE>
<CAPTION>
JANUARY 31,
-------------------------- APRIL 30,
1997 1998 1998
----------- ------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Unsecured notes payable to private investors, due September 1998 (see
below)............................................................... $ -- $ 50,000 $ 3,055,000
Unsecured notes payable to private investors, due September 1998,
interest at 12.5%.................................................... 115,000 1,705,000 1,360,000
Unsecured notes payable to private investors, due September 1998,
interest at 15%...................................................... -- 525,000 525,000
Unsecured notes payable to private investors, due September 1998,
interest at 24%...................................................... -- 70,500 47,000
Unsecured line of credit, interest at the bank's prime rate plus 2%
(10.5% at January 31, 1998), guaranteed by the Company's President
and Chief Executive Officer, due on demand........................... -- 35,000 35,000
Long term unsecured notes payable to the Company's President and Chief
Executive Officer, interest at 7.5%, due by September 2002........... 40,000 40,000 40,000
Advances from factor, interest at 24%, due on demand................... -- 280,138 96,672
----------- ------------- -------------
155,000 2,705,638 5,158,672
Current portion........................................................ (115,000) (2,665,638) (5,118,672)
----------- ------------- -------------
$ 40,000 $ 40,000 $ 40,000
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
In January 1998, as part of a proposed $3,500,000 debt offering, the Company
issued a $50,000 note payable maturing at the earlier of September 1998 or
within 5 days after an initial public offering of the Company's common stock
generating in excess of $7 million of gross proceeds. Under the terms of the
debt financing, the holder of the $50,000 note payable has the option to receive
interest in the amount of $3,125 or warrants to purchase 25,000 shares of the
Company's common stock at a price per share equal that to be offered in
connection with the offering of warrants under the Company's planned initial
public offering, which management expects to be 115% of the per share initial
public offering price.
Under the terms of the original issuance of 12.5% unsecured notes payable to
private investors, the notes were due at the earlier of September 30, 1997, or
an initial public offering of the Company's common stock. Additionally, the
Company issued $275,000 of such notes during or subsequent to September 1997
which had a maturity of September 1998 or within 5 days of an initial public
offering, if earlier. The 12.5% debt included 231,400 warrants to purchase the
Company's common stock at prices ranging from $0.75 to $3.99 per share.
Under the original terms of the 15% unsecured notes payable to private
investors, the notes were due at the earlier of September 30, 1997, or an
initial public offering of the Company's common stock. The terms of the debt
included 232,750 warrants to purchase the Company's common stock at $0.75 per
share.
F-11
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
5. NOTES PAYABLE (CONTINUED)
At January 31, 1998, the Company was in default of the terms of the 12.5%
and 15% unsecured notes payable to private investors which were due during
September 1997. During February 1998, the Company obtained a specific waiver to
extend the maturity of the then outstanding unsecured notes payable through the
earlier of September 1998 or within 5 days after an initial public offering of
the Company's common stock generating in excess of $7.5 million of gross
proceeds.
As a result of the extension of the maturity of the 15% and certain of the
Company's 12.5% unsecured notes payable to September 1998, the Company issued to
the holders of such unsecured notes, warrants to purchase 85,000 shares of the
Company's common stock at $0.75 per share, warrants to purchase 98,333 shares of
the Company's common stock at $3.00 per share and warrants to purchase 31,666
shares of the Company's common stock at $2.10 per share. The warrants were
exercisable in full at the time of their issuance and expire on the dates of
expiration of the warrants issued under the terms of the original debt.
The Company's management believes that at the time of their issuance, the
warrants issued in connection with the Company's unsecured notes payable had no
value due to the financial condition of the Company as explained in Note 1.
Accordingly, no portion of the proceeds from the issuance of the notes was
allocated to the warrants nor was any value assigned to warrants issued in
connection with the extension of the maturity of certain unsecured notes as
described above.
In February and May 1998 the Company repaid an aggregate of $68,500 and
$47,000, respectively, of unsecured notes payable to private investors
representing notes bearing interest at 12.5% and 24%.
Pursuant to the terms of a factoring agreement, the Company assigns
substantially all of its accounts receivable to a factor with recourse. The
Company is able to borrow up to 75% of eligible accounts receivable, as defined,
up to a maximum amount of $1 million. Advances from the factor bear interest at
24% per annum. Receivables assigned to the factor with payment terms less than
or equal to 60 days are subject to a charge of 1.5% of the face amount of the
receivable, while receivables with payment terms greater than 60 days are
subject to a charge of 2% of the face amount of the receivable. The advances
from the factor are secured by all of the Company's assets. During the year
ended January 31, 1998, the Company incurred interest and factoring charges of
$10,059 and $7,739, respectively. The factoring agreement was for an initial
term of six months and automatically renews for successive six month periods
thereafter, unless cancelled by the Company or the factor.
At January 31, 1998, the Company had received advances of approximately
$115,000 in excess of those permitted under the factoring agreement, resulting
in the Company being in default of such agreement. As a result of the default,
the factor had the right to terminate the agreement and demand payment of the
funds advanced. Subsequent to year end, the Company has reduced the amounts
outstanding under the factoring agreement and is within the borrowing base of
such agreement.
During the period February to June 1998, the Company obtained debt financing
amounting to approximately $3.4 million (amounts outstanding at January 31, 1998
and April 30, 1998 were $50,000 and $3,055,000, respectively). This debt matures
at the earlier of September 1998, or within 5 days of an initial public offering
of the Company's common stock generating in excess of $7 million of gross
proceeds. Under the terms of the debt financing, each holder of a $50,000 note
payable has the option to receive interest in the amount of $3,125 or warrants
to purchase 25,000 shares of the Company's common stock at a price per share
equal to that to be offered in connection with the offering of warrants under
the Company's intended initial public offering, which management expects to be
115% of the per share initial
F-12
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
5. NOTES PAYABLE (CONTINUED)
public offering price. Approximately $45,000 of interest expense was recorded
related to this debt for the three month period ended April 30, 1998.
At January 31, 1998, the Company had accrued interest under its unsecured
notes payable in the aggregate amount of approximately $237,000.
At January 31, 1998, $410,000 and $100,000 of the 12.5% and 15% unsecured
notes payable, respectively, were held by a related party. Accrued interest and
interest expense of approximately $34,000 and $31,000, respectively, was
recorded in regards to these unsecured notes payable as of and for the year
ended January 31, 1998.
6. SHAREHOLDERS' DEFICIT
STOCK SPLITS
In August 1996, the Company increased the number of authorized shares of
common stock from 250,000 to 6,500,000 and simultaneously effected a 15-for-1
stock split. In February 1997, the Company increased the number of authorized
shares of common stock from 6,500,000 to 10,881,000 and simultaneously effected
a 3-for-2 reverse stock split. In July 1997, the Company increased the number of
authorized shares of common stock from 10,881,000 to 24,300,000. On January 31,
1998, the Company decreased the authorized shares to 8,100,000 and
simultaneously effected a 3-for-1 reverse stock split.
All references to the number of common shares and per share amounts
elsewhere in the financial statements and related footnotes have been restated
to reflect the effect of all stock splits for all periods presented.
COMMON STOCK
During February 1997, the Company's Chief Executive Officer was issued
approximately 1,025,000 shares of the Company's common stock in return for the
forgiveness of $588,660 in advances to the Company at various dates during 1996
and 1997. The Company recorded approximately $57,000 of compensation expense in
connection with the issuance of such shares based on the fair market value of
the shares as determined by an independent valuation. Also, during the year
ended January 31, 1998, the Company sold approximately 181,000 shares of its
common stock for $299,000, of which 4,833 shares were sold to a related party.
F-13
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
6. SHAREHOLDERS' DEFICIT (CONTINUED)
In May 1996, the Company issued 50,000 shares of its common stock to Hippo
Holdings in exchange for the perpetual rights to market and sell HiPPO-TM- brand
products in the U.S. and Canada. These shares were valued by the Company's Board
of Directors at $19,800, the estimated fair value, and their issuance recorded
as an intangible asset in the accompanying balance sheets at January 31, 1997
and 1998 (see Note 9).
At various dates during the period ended January 31, 1997, the Company's
President and Chief Executive Officer purchased approximately 992,000 shares of
the Company's common stock for $529,000. In connection with the sale of such
shares to the Company's Chief Executive Officer, the Company recorded
compensation expense of approximately $400,000 for the period ended January 31,
1997 based on fair market value of shares issued to other investors during the
particular time frame.
Additionally, during the period ended January 31, 1997, the Company issued,
to third parties, approximately 77,000 shares of its common stock for $210,000.
COMMON STOCK WARRANTS
In connection with the issuance of its unsecured notes payable to private
investors, the Company issued warrants to purchase shares of its common stock as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
WARRANTS PRICE
--------- -----------
<S> <C> <C>
Warrants issued in connection with $65,000 of notes payable at 12.5%........................ 7,150 $ 1.13
--------- -----
BALANCE AT JANUARY 31, 1997................................................................. 7,150 1.13
Warrants issued in connection with $975,000 of notes payable at 12.5%....................... 107,250 0.75
Warrants issued in connection with $525,000 of notes payable at 15%......................... 232,750 0.75
Warrants issued in connection with $420,000 of notes payable at 12.5%....................... 84,000 2.10
Warrants issued in connection with other notes payable...................................... 33,000 2.33
--------- -----
BALANCE AT JANUARY 31, 1998................................................................. 464,150 $ 1.75
--------- -----
--------- -----
</TABLE>
The Company believes, based on an independent valuation, that the above
warrants had an insignificant fair market value at the time of their issuance.
The above warrants do not include 25,000 warrants issuable at the election of a
debt holder in connection with a $50,000 note payable issued by the Company in
January 1998 (see Note 5).
COMMON STOCK OPTIONS
On September 4, 1996, the Company adopted an Incentive Stock Plan (the
"Plan") allowing the Company to issue 500,000 incentive stock options to
employees and non-qualified options to either employees or consultants. The
total number of shares with respect to which options may be granted was
increased to 1.1 million on January 24, 1997.
F-14
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
6. SHAREHOLDERS' DEFICIT (CONTINUED)
The Company has issued various stock options to employees and consultants.
The options' vesting period varies from full vesting upon issuance of options to
vesting over a three year period. A summary of the Company's stock options
activity is as follows:
<TABLE>
<CAPTION>
OPTIONS
----------------------
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
--------- -----------
<S> <C> <C>
Balance, February 8, 1996................................................................... -- $ --
Granted..................................................................................... 267,531 0.82
--------- -----
Balance, January 31, 1997................................................................... 267,531 0.82
Granted..................................................................................... 448,880 3.04
--------- -----
Balance, January 31, 1998................................................................... 716,411 $ 2.21
--------- -----
--------- -----
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
OUTSTANDING EXERCISABLE AVERAGE
----------- ----------- EXERCISE
EXERCISE PRICE RANGE SHARES SHARES PRICE
- ----------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
$0.225....................................................................... 85,476 85,476 $ 0.225
0.72-0.75................................................................... 169,161 125,204 $ 0.729
2.10-3.00................................................................... 384,068 286,624 $ 2.550
6.00........................................................................ 77,166 24,000 $ 6.000
----------- -----------
716,411 520,749 $ 2.210
----------- -----------
----------- -----------
</TABLE>
The Company generally grants options at exercise prices equal to the
estimated market value of the Company's common stock at the date of the grant.
The Company recognized approximately $74,000 and $153,000 of stock-based
compensation expense during the periods ended January 31, 1997 and 1998,
respectively, relating to options granted at exercise prices below the estimated
fair market value of the Company's common stock at the date of grant. Had
compensation costs for the Company's stock option grants to employees been
determined using the fair value method, the Company's loss and loss per share
for the year ended January 31, 1998 would not have been significantly different
from the amounts recorded.
Fair market value information for the Company's stock warrants and options
for the period February 8, 1996 (inception) to January 31, 1997 and the year
ended January 31, 1998 was estimated using the Black-Scholes option pricing
model assuming risk free rates of 5.6% to 6.5%, no dividend yield, expected
terms of 3 years, and no significant volatility.
7. INCOME TAXES
The Company is subject to federal and state income taxes but has not
incurred a liability for such taxes due to losses incurred. The Company had
deferred tax assets of approximately $812,000 and $2,414,000 at January 31, 1997
and 1998, respectively, resulting primarily from net operating loss
carryforwards. The deferred tax assets have been fully offset by a valuation
allowance resulting from the uncertainty surrounding the future realization of
the net operating loss carryforwards. These carryforwards are
F-15
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
7. INCOME TAXES (CONTINUED)
available to offset future taxable income, if any, through 2013. Limitations on
the utilization of the Company's net operating tax loss carryforwards could
result in the event of certain changes in the Company's ownership.
8. COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment under noncancelable operating
lease arrangements. Rent expense for the period February 8, 1996 (inception) to
January 31, 1997 and for the year ended January 31, 1998 was approximately
$46,000 and $101,000, respectively.
Minimum future rental payments on non-cancelable operating leases with
remaining lease terms of one or more years are as follows at January 31, 1998:
<TABLE>
<S> <C>
JANUARY 31,
1999.............................................................. $ 93,883
2000.............................................................. 36,951
2001.............................................................. 3,953
2002.............................................................. 549
---------
Total minimum future rental payments.............................. $ 135,336
---------
---------
</TABLE>
The Company has entered into an endorsement contract with a professional
golfer for endorsement of the TEGRA-TM- brand. Under the terms of the contract,
the professional golfer will wear TEGRA-TM- headwear and apparel, play TEGRA-TM-
clubs and carry a TEGRA-TM- bag and accessories in professional competitions and
in any golf related activities worldwide.
Total minimum annual payments under the endorsement contract are as follows:
<TABLE>
<S> <C>
JANUARY 31,
1999........................................................... $ 147,500
2000........................................................... 152,500
2001........................................................... 120,000
----------
Total minimum future endorsement contract commitments.......... $ 420,000
----------
----------
</TABLE>
The Company has commitments under employment and design consulting contracts
expiring through November 1999. The terms of the present design consulting
contract entered into in October 1996, as amended in April 1997, include a
monthly retainer and royalty payments based on a percentage of cost of sales of
the designed products. The designer also received 6,666 options at $0.75 per
share which vest 3,333 each at December 31, 1997 and at December 31, 1998, upon
final performance of the contract. In connection with these options, no amount
was recorded as compensation expense as the Company's management believes these
options had an insignificant fair market value at the time of issuance based on
F-16
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1998
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
an independent appraisal. The Company is currently negotiating an extension of
the design consulting contract. Total minimum annual payments under these
contracts are as follows:
<TABLE>
<S> <C>
JANUARY 31,
1999.............................................................. $ 192,500
2000.............................................................. 46,667
---------
Total minimum future employment and design consulting contract
commitments..................................................... $ 239,167
---------
---------
</TABLE>
The Company entered into an agreement with Hippo Holdings under which the
Company was to pay a percentage of the endorsement fee paid by Hippo Holdings to
a professional golfer. In connection therewith, the Company accrued
approximately $220,000 during the year ended January 31, 1998. This agreement
was terminated upon the sale back to Hippo Holdings of its license (see Note 9).
As of January 31, 1998, the Company had entered into purchase agreements
with various suppliers for components and finished goods for both TEGRA-TM- and
HiPPO-TM- brand products, approximating $1.3 million (see Note 9).
The Company is a defendant in a lawsuit alleging patent infringement and,
additionally, has received a request that the Company review its TEGRA-TM- line
of clubs in view of a patent issued to a third party relating to golf club
design. The Company believes that its TEGRA-TM- brand golf clubs do not infringe
the patents which are the subject of the lawsuit or the review request. However,
no assurance can be given that the Company's product does not infringe such
patents, or any other golf club related patent. Further, the Company cannot
currently estimate the effect of an adverse decision in connection with these
matters on the Company's financial condition or results of operations.
9. SUBSEQUENT EVENTS
In March 1998, the Company issued 104,784 shares to a professional golfer as
consideration for $220,047 owed to such golfer under the Company's endorsement
arrangement with Hippo Holdings. The Company is currently negotiating an
endorsement contract with this professional golfer for the Company's TEGRA-TM-
brand products.
In May 1998, the Company sold its license to sell HiPPO-TM- products in the
U.S. back to Hippo Holdings along with all existing HiPPO-TM- brand inventory of
approximately $62,000, prepaid royalties of approximately $133,000, and the
assumption of liabilities in the amount of approximately $225,000. The Company
received a cash payment of approximately $359,000. A gain of approximately
$389,000 will be recorded in connection with this transaction. In addition,
Hippo Holdings returned to the Company the 50,000 shares of common stock it had
received upon entering the license agreement; no gain or loss will be recorded
in connection with the return of the stock. Furthermore, Hippo Holdings assumed
the Company's then outstanding purchase commitments in the amount of
approximately $1,172,000 related to the HiPPO-TM- brand of products. Sales of
HiPPO-TM- brand products for the year ended January 31, 1998, and the three
months ended April 30, 1998, were approximately $589,000 and $24,000,
respectively.
On April 29, 1998, the Company entered into an agreement with a financial
advisor to obtain financial and investment services through January 22, 2000.
The consideration provided for in the agreement was 125,000 shares of the
Company's common stock.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 8
Use of Proceeds................................. 20
Dilution........................................ 21
Capitalization.................................. 22
Dividend Policy................................. 22
Selected Financial Data......................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 24
Business........................................ 27
Management...................................... 35
Principal Shareholders.......................... 40
Concurrent Registration......................... 40
Certain Transactions............................ 42
Description of Securities....................... 43
Shares Available for Future Sale................ 46
Underwriting.................................... 47
Legal Matters................................... 49
Experts......................................... 49
Available Information........................... 49
Index to Financial Statements................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 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 AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,500,000 SHARES OF
COMMON STOCK
AND
500,000 REDEEMABLE
COMMON STOCK PURCHASE
WARRANTS
OUTLOOK SPORTS TECHNOLOGY, INC.
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to the Delaware General Corporation Law ("Delaware Law")
whereby officers and directors of the Company are to be indemnified against
certain liabilities. The Certificate of Incorporation also limits to the fullest
extent permitted by Delaware Law a director's liability to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
including gross negligence, except liability for (i) breach of the director's
duty of loyalty, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) the unlawful
payment of a dividend or unlawful stock purchase or redemption, and (iv) any
transaction from which the director derives an improper personal benefit.
Delaware Law does not permit a corporation to eliminate a director's duty of
care and this provision of the Company's Certificate of Incorporation has no
effect on the availability of equitable remedies, such as injunction or
rescission, based upon a director's beach of the duty of care.
Article SEVENTH of the Company's Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), provides that no director of the Company
shall be personally liable for any monetary damages for any breach of fiduciary
duty as a director, except to the extent that the Delaware General Corporation
Law prohibits the elimination or limitation of liability of directors for breach
of fiduciary duty.
Article EIGHTH of the Certificate of Incorporation provides that a director
or officer of the Company shall be indemnified by the Company against (a) all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement incurred in connection with any litigation or other legal proceeding
(other than an action by or in the right of the Company) brought against him or
her by virtue of his or her position as a director or officer of the Company if
he or she acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful and (b) all expenses (including attorneys' fees) and
amounts paid in settlement incurred in connection with any action by or in the
right of the Company brought against him or her by virtue of his or her position
as a director or officer of the Company if he or she acted in good faith and in
a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Company, except that no indemnification shall be made with
respect to any matter as to which such person shall have been adjudged to be
liable to the Company, unless a court determines that, despite such adjudication
but in view of all of the circumstances, he or she is entitled to
indemnification of such expenses. Notwithstanding the foregoing, to the extent
that a director or officer has been successful, on the merits or otherwise,
including the dismissal of an action without prejudice, he or she is required to
be indemnified by the Company against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his or her request, provided that he or she undertakes to repay the
amount advanced if it is ultimately determined that he or she is not entitled to
indemnification for such expenses.
Indemnification is required to be made unless the Company determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by the Company that the director or officer
did not meet the applicable standard of conduct required for indemnification, or
if the Company fails to make an indemnification payment within sixty days after
such payment is claimed by such person, such person is permitted to petition the
court to make an independent determination as to whether such person is entitled
to indemnification. As a condition precedent to the right of indemnification,
the director or officer must give the Company notice of the action for which
indemnity is sought and the Company has the right to participate in such action
or assume the defense thereof.
II-1
<PAGE>
Article EIGHTH of the Certificate of Incorporation further provides that the
indemnification provided therein is not exclusive, and provides that in the
event that the Delaware General Corporation Law is amended to expand the
indemnification permitted to directors or officers the Company must indemnify
those persons to the fullest extent permitted by such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he or she is or is threatened
to be made a party by reason of such position, if such person shall have acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe his or her conduct
was unlawful; provided that, in the case of actions brought by or in the right
of the corporation, no indemnification shall be made with respect to any matter
as to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
The Company maintains a directors' and officers' insurance policy that
covers certain liabilities of directors and officers of the Company. The Company
maintains a general liability insurance policy that covers certain liabilities
of directors and officers of the Company arising out of claims based on acts or
omissions in their capacities as directors or officers.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
An itemized statement of expenses in connection with the issuance and
distribution of the securities to be registered, other than underwriting
discounts and commissions, appears below. All amounts are estimates, except for
the SEC registration fee, the NASD filing fee and the NASDAQ SmallCap Market
listing fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................................. $ 12,097
NASD Filing Fee................................................................... 4,040
NASDAQ SmallCap Market Listing Fee................................................ 10,000
Blue Sky Qualification Fees and Expenses.......................................... 30,000
Accounting Fees and Expenses...................................................... 100,000
Legal Fees and Expenses........................................................... 250,000
Transfer Agent Fees............................................................... 6,000
Printing and Engraving Expenses................................................... 50,000
Miscellaneous Expenses............................................................ 37,863
---------
TOTAL............................................................................. $ 500,000
---------
---------
</TABLE>
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished with regard to all securities sold by
the Company within the past three years which were not registered under the
Securities Act. The share numbers set forth below have been adjusted to reflect
a number of stock splits. In August 1996, the Company increased the number of
authorized shares of Common Stock from 250,000 to 6,500,000 and simultaneously
effected a 15-for-1 stock split. In February 1997, the Company increased the
number of authorized shares of Common Stock from 6,500,000 to 10,881,000 and
simultaneously effected a 3-for-2 reverse stock split. In July 1997, the Company
increased the number of authorized shares of Common Stock from 10,881,000 to
24,300,000. On January 31, 1998, the Company decreased the number of authorized
shares to 8,100,000 and simultaneously effected a 3-for-1 reverse stock split.
II-2
<PAGE>
The issuances described in this Item 26 were made in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering. None of the
foregoing transactions involved a distribution or public offering.
ISSUANCES OF COMMON STOCK
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PURCHASE PRICE DATE SOLD
- ------------------------------------------------------- ----------------- -------------- ----------------------
<S> <C> <C> <C>
Paul Berger............................................ 333,333 $ 132,000 May 13, 1996
117,630 95,000 June 21, 1996
207,690 170,000 August 19, 1996
1,024,800 588,660 February 27, 1997
Jim Dodrill............................................ 333,333 132,000 May 31, 1996
4,833 10,150 April 22, 1997
Greg Cohen............................................. 76,502 210,000 September 4, 1996
David Staudinger....................................... 6,666 14,000 July 25, 1997
Walter Maupay.......................................... 16,666 35,000 July 31, 1997
Walter & Gina McDonough................................ 3,333 7,000 August 1, 1997
DDJ Hackworthy Ltd Pp.................................. 47,619 100,000 August 11, 1997
David Stern............................................ 8,333 17,500 August 18, 1997
Ian Woosnam(1)......................................... 104,784 220,047 October 1, 1997
Synergy Group International(2)......................... 200,000 100,000 October 17, 1997
Carol Dodrill/Bill Powell(3)........................... 100,000 50,000 October 28, 1997
Paul Fairchild......................................... 33,333 70,000 October 30, 1997
Rodger Berman(2)....................................... 6,666 5,000 November 10, 1997
Frank Maddocks......................................... 60,000 45,000 November 11, 1997
Glen Day............................................... 10,000 (4) January 1, 1998
Dan Snider............................................. 1,250 (4) January 1, 1998
Arthur Chou............................................ 1,666 (4) January 1, 1998
Andrew Holder/Marc Roberts(2).......................... 100,000 100,000 January 23, 1998
Argent Securities, Inc................................. 125,000 (4) January 23, 1998
Total............................................
</TABLE>
- ------------------------
(1) Purchase price was paid by the individual forgoing payments due under a
contract with Company in amounts equal to the purchase price.
(2) These individuals purchased stock from Paul Berger and Jim Dodrill.
(3) These individuals purchased stock from Paul Berger.
(4) Issued in connection with a services contract.
II-3
<PAGE>
DEBT SECURITIES AND WARRANTS
From February, 1997 through July 1, 1998, the Company issued unregistered
debt securities and warrants to a number of individuals pursuant to five private
placements and to Stanley Berger in connection with certain advances to the
Company. The issuances made in connection with these transactions were made in
reliance on Section 4(2) of the Securities Act. The following summary of these
transactions reflects the effect of all stock splits of the Company's Common
Stock. The summary also reflects a 25% increase in the number of shares of
Common Stock that may be purchased by each investor in the offerings described
under (a) and (b) below, which increase was granted by the Company in return for
an extension of the payment date for each Note.
(a) In February through April, 1997, the Company sold through a private
placement a total of 9.75 Units (or portions of a Unit) to fourteen individuals,
each Unit consisting of a non-transferable promissory note in the amount of
$100,000, earning 12.5% interest annually, and a warrant to purchase 13,570
shares of the Common Stock of the Company. The warrants are convertible into
shares of Common Stock at $0.75 per share and terminate after five years.
(b) In May through June, 1997, the Company sold through a private placement
a total of 10.5 Units (or portions of a Unit) to ten individuals (all of whom
had participated in the first private placement), each Unit consisting of a
non-transferable promissory note in the amount of $50,000, earning 15% interest
annually, and a warrant to purchase 27,708 shares of the Common Stock of the
Company. The warrants are convertible into shares of Common Stock at $0.75 per
share and terminate after five years.
(c) In July, 1997, the Company sold through a private placement a total of
six Units (or portions of a Unit) to three individuals, each Unit consisting of
a non-transferable promissory note in the amount of $75,000, earning 12.5%
interest annually, and a warrant to purchase 15,000 shares of the Common Stock
of the Company. The warrants are convertible into shares of Common Stock at
$2.10 per share and terminate after five years. One investor in this offering
received warrants to purchase an additional 98,333 shares of common stock at
$3.00 per share, and one investor received warrants to purchase an additional
31,666 shares of common stock at $2.10 per share.
(d) In January through June, 1998, the Company sold through a private
placement a total of 70.1 Units (or portions of a Unit) to 43 individuals (four
of whom had participated in the first private placement), each Unit consisting
of a non-transferable promissory note in the amount of $50,000 and an option to
receive an additional $3,125 in cash or a warrant to purchase 25,000 shares of
the Common Stock of the Company. The warrants are convertible into shares of
Common Stock at $6.90 per share and terminate after three years. The Company
will register the warrants contemporaneously with registration of this Offering.
Argent Securities, Inc. acted as placement agent in the private placement and
received compensation of $522,500 consisting of a 10% commission and certain
other fees.
(e) On July 1, 1998, the Company sold through a private placement a total of
one Unit to a single individual, which Unit consisted of a non-transferable
promissory note in the amount of $400,000 and a warrant to purchase 533,333
shares of the Common Stock of the Company. The warrant is convertible into
shares of Common Stock at $7.50 per share and terminates after three years.
(f) In September, 1996 through January, 1998, the Company issued a total of
ten non-transferable promissory notes, totaling $340,000 and warrants to
purchase a total of 67,857 shares of the Common Stock of the Company. The
warrants are convertible into shares of Common Stock at exercise prices ranging
from $0.75 per share to $4.00 per share and terminate after five years.
II-4
<PAGE>
ITEM 27: EXHIBITS
<TABLE>
<C> <S>
*1.1 Form of Representative's Warrant
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 By-Laws of the Company
4.1 Specimen certificate for the Common Stock of the Company
4.2 Specimen certificate for the Warrants of the Company
*5.1 Opinion of Foley, Hoag & Eliot LLP
10.1 Employment Agreement with William Barthold, dated January 16, 1996
10.2 Employment Agreement with Daniel Snider, dated January 16, 1998
10.3 Business Note and Security Agreement, dated June 19, 1997, with Barnett Bank, N.A.
10.4 Revolving Accounts Receivable Funding Agreement between the Company and Gibraltar
Financial Corporation, dated November 25, 1997
10.5 Amendment to Revolving Accounts Receivable Funding Agreement, dated November 25,
1997
10.6 Gibraltar Financial Corporation Demand Note, dated November 25, 1997
10.7 Form of Promissory Note signed by the Company in favor of Paul Berger, Jim Dodrill
and Stanley Berger for all advances made by them to the Company
10.8 Security Agreement with Stanley Berger, dated October 1, 1997
10.9 Subordination Agreement with Stanley Berger, dated December 3, 1997
10.10 Option, dated January 24, 1997, received by Paul Berger as consideration for an
advance made by him to the Company
10.11 Option, dated September 5, 1996, received by Jim Dodrill as consideration for an
advance made by him to the Company
10.12 Form of Warrant for the purchase of the Common Stock of the Company received by
Stanley Berger as consideration for advances made by him to the Company
10.13 Form of Promissory Note signed by the Company in favor of all participants in a
private financing between February 4, 1997 and April 30, 1997
10.14 Form of Warrant for the purchase of the Common Stock of the Company received by all
participants in a private financing between February 4, 1997 and April 30, 1997
10.15 Form of Promissory Note signed by the Company in favor of all participants in a
private financing between May 12, 1997 and June 30, 1997
10.16 Form of Warrant for the purchase of the Common Stock of the Company received by all
participants in a private financing between May 12, 1997 and June 30, 1997
10.17 Form of Promissory Note signed by the Company in favor of all participants in a
private financing in July, 1997
10.18 Form of Warrant for the purchase of the Common Stock of the Company received by all
participants in a private financing in July, 1997
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.19 Form of Consent to extension of payment date for all Notes executed by the Company
in all private financings
10.20 Form of Subscription Agreement signed by all investors in the Company
10.21 Lease Agreement, dated March 13, 1997, between the Company and Sanctuary of Boca,
Inc. (for office space in Boca Raton)
10.22 Amendment to Lease #1, dated August 1, 1997, between the Company and Sanctuary of
Boca, Inc.
10.23 Amendment to Lease #2, dated February 2, 1998, between the Company and Sanctuary of
Boca, Inc.
10.24 Sublease Agreement and Rider, dated December 1, 1996, between the Company and Tom
Rochon Associates (for office space in New York City) and Over-Lease Agreement
incorporated therein
10.25 Sublease Agreement and Rider, dated July 12, 1996, between the Company and Tom
Rochon Associates (for office space in New York City) and Over-Lease Agreement
incorporated therein
10.26 Research, Development and Consulting Contract, dated October 8, 1996, with Chou Golf
Design Labs, Inc.
10.27 Contract Amendment, dated May 4, 1997, to Research, Development and Consulting
Contract with Chou Golf Design Labs, Inc.
10.28 Endorsement Agreement, dated January 1, 1998, with Glen Day
10.29 1996 Incentive and Non-qualified Stock Option Plan
10.30 Form of Incentive Stock Option Agreement under 1996 Incentive and Non-qualified
Stock Option Plan
10.31 Form of Non-qualified Stock Option Agreement under 1996 Incentive and Non-Qualified
Stock Option Plan
10.32 1998 Incentive and Non-qualified Stock Option Plan
*10.33 Form of Incentive Stock Option Agreement under 1998 Incentive and Non-Qualified
Stock Option Plan
*10.34 Form of Non-qualified Stock Option Agreement under 1998 Incentive and Non-Qualified
Stock Option Plan
10.35 MONY Deferred Compensation Plan for managers of the Company
10.36 Settlement Agreement and Release, dated May 4, 1998, between the Company and Hippo
Holdings Ltd
21.1 Subsidiaries of the Company
23.1 Consent of Price Waterhouse
*23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page of this Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
II-6
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer 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 small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer 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.
(a) The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells, a post-effective
amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the plan
of distribution.
(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 such 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 termination of the offering.
(4) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the small business issuer under Rule 424(b)(1) or (4) of
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-7
<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 for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Boca Raton, The State of Florida, on July 7th, 1998.
OUTLOOK SPORTS TECHNOLOGY, INC.
By: /s/ PAUL H. BERGER
-----------------------------------------
Paul H. Berger
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
OF THE BOARD OF DIRECTORS
By: /s/ JIM G. DODRILL II
-----------------------------------------
Jim G. Dodrill II
PRESIDENT
By: /s/ EVERETTE C. HINSON
-----------------------------------------
Everette C. Hinson
VICE PRESIDENT FINANCE
II-8
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below hereby constitutes and appoints Jim G. Dodrill II, Paul H. Berger and
David A. Broadwin, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all pre- or post-effective
amendments to this Registration Statement, any subsequent Registration Statement
for the same offering which may be filed under Rule 462(b) under the Securities
Act (a "Rule 462(b) Registration Statement") and any and all pre- or
post-effective amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
which they, or any of them, may deem necessary or advisable to be done in
connection with this Registration Statement or any Rule 462(b) Registration
Statement, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or any substitute or substitutes for any or all of them,
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 was signed by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chief Executive Officer and
/s/ PAUL H. BERGER Chairman of the Board of
- ------------------------------ Directors (Principal July 7, 1998
Paul H. Berger Executive Officer)
/s/ JIM G. DODRILL II President, General Counsel
- ------------------------------ and Director July 7, 1998
Jim G. Dodrill II
/s/ EVERETTE C. HINSON Vice President Finance
- ------------------------------ (Principal Financial July 7, 1998
Everette C. Hinson Officer)
II-9
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OUTLOOK SPORTS TECHNOLOGY, INC.
The following Amended and Restated Certificate of Incorporation: (i)
amends and restates the provisions of the Certificate of Incorporation of
Outlook Sports Technology, Inc. (the "Corporation") originally filed with the
Secretary of State of the State of Delaware under the name Hippo, Inc. on
February 8, 1998, as amended to date; (ii) supersedes the Certificate of
Incorporation and all amendments thereto; and (iii) has been duly proposed by
the board of directors of the Corporation and duly adopted by the
stockholders of the Corporation in accordance with the provisions of Sections
228, 242 and 245 of the Delaware General Corporation Law.
FIRST: The name of this corporation (the "Corporation") is Outlook
Sports Technology, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801,
County of New Castle, and the name of its registered agent at such address is
The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware, including without
limitation the design, marketing and manufacture of golf equipment, apparel
and accessories.
FOURTH: The Corporation is authorized to issue two classes of
capital stock, one of which is designated as common stock, $.01 par value per
share ("Common Stock"), and the other of which is designated as preferred
stock, $.01 par value per share ("Preferred Stock"). The total number of
shares of both classes of capital stock that the Corporation shall have
authority to issue is 25,000,000 shares, consisting of 20,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock. The Preferred Stock may
be issued from time to time in one or more series as set forth in Section (b)
of this Article FOURTH. The following is a statement of the designations and
the powers, preferences and rights of, and the qualifications, limitations or
restrictions applicable to, each class of capital stock of the Corporation.
(a) COMMON STOCK
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(1) General. The voting, dividend and
liquidation rights of holders of Common Stock are subject to and qualified by
the rights of holders of Preferred Stock of any series as may be designated
in any resolution or resolutions providing for the issue of such series as
may be adopted by the board of directors as hereinafter provided.
(2) Voting. Holders of Common Stock are entitled
to one vote for each share held at all meetings of stockholders. The number
of authorized shares of Common Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the capital stock of the Corporation entitled
to vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware.
(3) Dividends. Dividends may be declared and paid
on Common Stock from funds lawfully available therefor, as and when
determined by the board of directors and subject to any preferential dividend
rights of any series of Preferred Stock then outstanding.
(4) Liquidation. Upon the dissolution or
liquidation of the Corporation, whether voluntary or involuntary, holders of
Common Stock will be entitled to receive all assets of the Corporation
available for distribution to stockholders of the Corporation, subject to any
preferential rights of any series of Preferred Stock then outstanding.
(b) PREFERRED STOCK
(1) Issuance. Preferred Stock may be issued
from time to time in one or more series, each of which series shall have such
terms as are set forth herein and in any resolution or resolutions providing
for the issue of such series as may be adopted by the board of directors as
hereinafter provided. Any shares of Preferred Stock that may be redeemed,
purchased or acquired by the Corporation may be reissued except as otherwise
expressly provided in this Certificate of Incorporation or provided by law.
(2) Single Class. Different series of Preferred
Stock shall not be construed to constitute different classes of capital stock
for the purposes of voting by classes unless expressly provided.
(3) Authority of Board. Authority is hereby
expressly granted to the board of directors to provide for the issuance of
Preferred Stock from time to time in one or more series, and in connection
with the creation of any such series, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights
thereof, and qualifications, limitations or restrictions applicable thereto,
as shall be stated and expressed in such resolutions, all to the full extent
now or hereafter permitted by the General Corporation Law of the State of
Delaware. Without limiting the generality of the foregoing, a resolution or
resolutions providing for issuance of any series of Preferred Stock may
provide for dividend rights, conversion rights,
2
<PAGE>
redemption privileges and liquidation preferences applicable to such series
and may provide that such series shall rank superior, equal or junior to the
Preferred Stock of any other series, in each case except as otherwise
expressly provided in this Certificate of Incorporation or as provided by
law. Except as otherwise provided in this Certificate of Incorporation, no
vote of holders of Common Stock or holders of Preferred Stock shall be a
prerequisite to the designation or issuance of any shares of any series of
Preferred Stock authorized by and complying with the conditions of this
Certificate of Incorporation.
FIFTH: Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose
or purposes stated in the notice of the general meeting.
SIXTH: The following provisions shall apply with respect to the
board of directors of the Corporation:
(a) NUMBER OF DIRECTORS
The number of directors shall be fixed from time to time by, or
in the manner provided in, the by-laws of the Corporation or any certificate
of designation with respect to a series of Preferred Stock, provided that in
no event shall the number of directors be less than two.
(b) ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless
otherwise provided in the by-laws of the Corporation.
(c) CLASSES OF DIRECTORS
The board of directors shall be divided into three classes,
consisting of Class I, Class II and Class III. No class of directors shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, except as otherwise may be provided from time
to time by the board of directors.
(d) TERMS OF OFFICE
Each director shall serve for a term ending on the date of the
third annual meeting following the annual meeting at which such director was
elected; provided, that each initial director in Class I shall serve for a
term ending on the date of the annual meeting of stockholders in 1999, each
initial director in Class II shall serve for a term ending on the date of the
annual meeting of stockholders in 2000 and each initial director in Class III
shall serve for a term ending
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<PAGE>
on the date of the annual meeting of stockholders in 2001 and provided
further that the term of each director shall be subject to the election and
qualification of a successor to such director and to the earlier death,
resignation or removal of such director.
(e) ALLOCATION OF DIRECTORS AMONG CLASSES UPON CHANGES
IN AUTHORIZED NUMBER OF DIRECTORS
In the event of any increase or decrease in the authorized number
of directors, (1) each director then serving shall continue as a director of
the class of which such director is a member and (2) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the board of directors among the three classes of directors so
as to ensure that no one class has more than one director more than any other
class. To the extent possible, consistent with the foregoing, any newly
created directorships shall be added to those classes whose terms of office
are to expire at the latest dates following such allocation and any newly
eliminated directorships shall be subtracted from those classes whose terms
of offices are to expire at the earliest dates following such allocation,
except as otherwise may be provided from time to time by the board of
directors.
(f) REMOVAL
Directors may be removed only for cause by the affirmative vote
of the holders of at least two-thirds of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote.
SEVENTH: No director shall be personally liable to the Corporation
or to any of its stockholders for monetary damages arising out of such
director's breach of fiduciary duty as a director of the Corporation, except
to the extent that the elimination or limitation of such liability is not
permitted by the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended. No amendment to or repeal of the
provisions of this Article SEVENTH shall deprive any director of the
Corporation of the benefit of the provisions of this Article SEVENTH with
respect to any act or failure to act of any director occurring prior to such
amendment or repeal.
EIGHTH: The following provisions shall apply with respect to the
indemnification of, and advancement of expenses to, certain parties as set
forth below:
(a) INDEMNIFICATION
(1) Proceedings Other than by or in the Right of
the Corporation. The Corporation shall indemnify each 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 (other than an action by or in the right of the
Corporation), by reason of the fact that such person is or was, or has agreed
to become, a director or officer of the
4
<PAGE>
Corporation, or is or was serving or has agreed to serve, at the request of
the Corporation, as a director, officer or trustee of, or in a similar
capacity with, another corporation (including any partially or wholly owned
subsidiary of the Corporation), partnership, joint venture, trust or other
enterprise (including any employee benefit plan) (each of such persons being
referred to as an "Indemnitee"), or by reason of any action alleged to have
been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in
connection with such action, suit or proceeding and any appeal therefrom, if
(A) the Indemnitee acted in good faith and in a manner the Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and (B) with respect to any criminal action or proceeding, the
Indemnitee had no reasonable cause to believe the Indemnitee's 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, shall not, of itself, create a presumption that the Indemnitee
did not act in good faith, did not act in a manner that the Indemnitee
reasonably believed to be in, or not opposed to, the best interests of the
Corporation or, with respect to any criminal action or proceeding, did not
have reasonable cause to believe that the Indemnitee's conduct was unlawful.
Notwithstanding anything to the contrary in this Article EIGHTH, except as
set forth in Section (c)(2) of this Article EIGHTH, the Corporation shall not
indemnify an Indemnitee seeking indemnification in connection with a
proceeding (or part thereof) initiated by the Indemnitee unless the
initiation thereof was approved by the board of directors of the Corporation.
(2) Proceedings by or in the Right of the
Corporation. The Corporation shall indemnify any Indemnitee 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 the Corporation's favor by reason of the fact that the Indemnitee
is or was, or has agreed to become, a director or officer of the Corporation,
or is or was serving as a director, officer or trustee of, or in a similar
capacity with, another corporation (including any partially or wholly owned
subsidiary of the Corporation), partnership, joint venture, trust or other
enterprise (including any employee benefit plan), or by reason of any action
alleged to have been taken or omitted in such capacity, against all expenses
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by the Indemnitee or on the Indemnitee's behalf in
connection with such action, suit or proceeding and any appeal therefrom, if
the Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue
or matter as to which the Indemnitee shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Court of Chancery of
Delaware shall determine upon application that, despite the adjudication of
such liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
(including attorneys' fees) that the Court of Chancery of the State of
Delaware shall deem proper.
(3) Expenses of Successful Indemnitee.
Notwithstanding any other
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<PAGE>
provision of this Article EIGHTH, to the extent that an Indemnitee has been
successful, on the merits or otherwise (including a disposition without
prejudice), in defense of any action, suit or proceeding referred to in
Section (a)(1) or (2) of this Article EIGHTH, or in defense of any claim,
issue or matter therein, or on appeal from any such action, suit or
proceeding, the Indemnitee shall be indemnified against all expenses
(including attorneys' fees) actually and reasonably incurred by the
Indemnitee or on the Indemnitee's behalf in connection therewith. Without
limiting the foregoing, if any action, suit or proceeding is disposed of, on
the merits or otherwise (including a disposition without prejudice), without
(A) the disposition being adverse to the Indemnitee, (B) an adjudication that
the Indemnitee was liable to the Corporation, (C) a plea of guilty or nolo
contendere by the Indemnitee, (D) an adjudication that the Indemnitee did not
act in good faith and in a manner the Indemnitee reasonably believed to be
in, or not opposed to, the best interests of the Corporation, and (E) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe the Indemnitee's conduct was unlawful, the
Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
(4) Partial Indemnification. If any Indemnitee
is entitled under any provision of this Section (a) to indemnification by the
Corporation for a portion, but not all, of the expenses (including attorneys'
fees), judgments, fines or amounts paid in settlement actually and reasonably
incurred by the Indemnitee or on the Indemnitee's behalf in any appeal
therefrom, the Corporation shall indemnify the Indemnitee for the portion of
such expenses (including attorneys' fees), judgments, fines or amounts paid
in settlement to which the Indemnitee is entitled.
(b) ADVANCEMENT OF EXPENSES
Subject to Section (c)(2) of this Article EIGHTH, in the event
that the Corporation does not assume a defense pursuant to Section (c)(1) of
this Article EIGHTH of any action, suit, proceeding or investigation of which
the Corporation receives notice under this Article EIGHTH, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom
shall be paid by the Corporation in advance of the final disposition of such
matter; provided, however, that the payment of such expenses incurred by an
Indemnitee in advance of the final deposition of such matter shall be made
only upon receipt of an undertaking by or on behalf of the Indemnitee to
repay all amounts so advanced in the event that it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH. Any such undertaking by an
Indemnitee shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
(c) PROCEDURES
(1) Notification and Defense of Claim. As a
condition precedent to any
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Indemnitee's right to be indemnified, the Indemnitee must promptly notify the
Corporation in writing of any action, suit, proceeding or investigation
involving the Indemnitee for which indemnity will or may be sought. With
respect to any action, suit, proceeding or investigation of which the
Corporation is so notified, the Corporation will be entitled to participate
therein at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to the Indemnitee; provided
that the Corporation shall not be entitled, without the consent of the
Indemnitee, to assume the defense of any claim brought by or in the right of
the Corporation or as to which counsel for the Indemnitee shall have
reasonably concluded that there may be a conflict of interest or position on
any significant issue between the Corporation and the Indemnitee in the
conduct of the defense of such claim. After notice from the Corporation to
the Indemnitee of its election so to assume such defense, the Corporation
shall not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with such claim, other
than as provided in this Paragraph (1). The Indemnitee shall have the right
to employ the Indemnitee's own counsel in connection with such claim, but the
fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of the
Indemnitee unless (A) the employment of counsel by the Indemnitee has been
authorized by the Corporation, (B) counsel to the Indemnitee has reasonably
concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct
of the defense of such action or (C) the Corporation has not in fact employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of counsel for the Indemnitee shall be at the expense of the
Corporation except as otherwise expressly provided by this Article EIGHTH.
(2) Requests and Payment. In order to obtain
indemnification or advancement of expenses pursuant to this Article EIGHTH,
an Indemnitee shall submit to the Corporation a written request therefor,
which request shall include documentation and information as is reasonably
available to the Indemnitee and is reasonably necessary to determine whether
and to what extent the Indemnitee is entitled to indemnification or
advancement of expenses. Any such indemnification or advancement of expenses
shall be made promptly, and in any event within sixty days after receipt by
the Corporation of the written request of the Indemnitee, unless with respect
to requests under Section (a)(1), (a)(2) or (b) of this Article EIGHTH, the
Corporation determines, by clear and convincing evidence, within such
sixty-day period, that any Indemnitee did not meet the applicable standard of
conduct set forth in Section (a)(1) or (a)(2) of this Article EIGHTH. Such
determination shall be made in each instance by (A) a majority vote of the
directors of the Corporation consisting of persons who are not at that time
parties to the action, suit or proceeding in question ("disinterested
directors"), even though less than a quorum, (B) a majority vote of a quorum
of the outstanding shares of capital stock of all classes entitled to vote
for directors, which quorum shall consist of stockholders who are not at that
time parties to the action, suit, proceeding or investigation in question,
(C) independent legal counsel (who may be regular legal counsel to the
Corporation), or (D) a court of competent jurisdiction.
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(3) Remedies. The right of an Indemnitee to
indemnification or advancement of expenses pursuant to this Article EIGHTH
shall be enforceable by the Indemnitee in any court of competent jurisdiction
if the Corporation denies, in whole or in part, a request of an Indemnitee in
accordance with the preceding Paragraph (2) or if no disposition thereof is
made within the sixty-day period referred to in the preceding Paragraph (2).
Unless otherwise provided by law, the burden of proving that an Indemnitee is
not entitled to indemnification or advancement of expenses pursuant to this
Article EIGHTH shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met any applicable standard of conduct, nor an actual
determination by the Corporation pursuant to the preceding Section (c)(2)
that the Indemnitee has not met such applicable standard of conduct, shall be
a defense to the action or create a presumption that the Indemnitee has not
met the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing the
Indemnitee's right to indemnification, in whole or in part, in any such
proceeding shall also be indemnified by the Corporation.
(d) RIGHTS NOT EXCLUSIVE
The right of an Indemnitee to indemnification and advancement of
expenses pursuant to this Article EIGHTH shall not be deemed exclusive of any
other rights to which the Indemnitee may be entitled under any law (common or
statutory), agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in the Indemnitee's official capacity and as to
action in any other capacity while holding office for the Corporation, and
shall continue as to an Indemnitee who has ceased to serve in the capacity
with respect to which the Indemnitee's right to indemnification or
advancement of expenses accrued, and shall inure to the benefit of the
estate, heirs, executors and administrators of the Indemnitee. Nothing
contained in this Article EIGHTH shall be deemed to prohibit, and the
Corporation is specifically authorized to enter into, agreements with
officers and directors providing indemnification rights and procedures
supplemental to those set forth in this Article EIGHTH. The Corporation may,
to the extent authorized from time to time by its board of directors, grant
indemnification rights to other employees or agents of the Corporation or
other persons serving the Corporation and such rights may be equivalent to,
or greater or less than, those set forth in this Article EIGHTH. In addition,
the Corporation may purchase and maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation (including any partially or wholly owned
subsidiary of the Corporation), partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by such a person in any such capacity, or arising
out of such person's status as such, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
(e) SUBSEQUENT EVENTS
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(1) Amendments of Article or Law. No amendment,
termination or repeal of this Article EIGHTH or of any relevant provisions of
the General Corporation Law of the State of Delaware or any other applicable
law shall affect or diminish in any way the rights of any Indemnitee to
indemnification under the provisions of this Article EIGHTH with respect to
any action, suit, proceeding or investigation arising out of or relating to
any actions, transactions or facts occurring prior to the effective date of
such amendment, termination or repeal. If the General Corporation Law of the
State of Delaware is amended after adoption of this Article EIGHTH to expand
further the indemnification permitted to any Indemnitee, then the Corporation
shall indemnify the Indemnitee to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended, without the need for
any further action with respect to this Article EIGHTH.
(2) Merger or Consolidation. If the Corporation is
merged into or consolidated with another corporation and the Corporation is
not the surviving corporation, the surviving corporation shall assume the
obligations of the Corporation under this Article EIGHTH with respect to any
action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or factors occurring prior to the date of such merger
or consolidation.
(f) INVALIDATION
If any or all of the provisions of this Article EIGHTH shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
in connection with any action, suit, proceeding or investigation, whether
civil, criminal or administrative, including an action by or in the right of
the Corporation, to the fullest extent permitted by any applicable provision
of this Article EIGHTH that shall not have been invalidated and to the
fullest extent permitted by the General Corporation Law of the State of
Delaware or any other applicable law.
(g) DEFINITIONS
Unless defined elsewhere in this Certificate of Incorporation,
any term used in this Article EIGHTH and defined in Section 145(h) or (i) of
the General Corporation Law of the State of Delaware shall have the meaning
ascribed to such term in such Section.
NINTH: In furtherance of and not in limitation of powers conferred
by statute, it is further provided that:
(a) AMENDMENT OF BY-LAWS
Subject to the limitations and exceptions, if any, contained in
the by-laws of the Corporation, the by-laws may be adopted, amended or
repealed by the board of directors.
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(b) LOCATION OF CORPORATE BOOKS
Subject to any applicable requirements of the General Corporation
Law of the State of Delaware, the books of the Corporation may be kept
outside the State of Delaware at such location or locations as may be
designated from time to time by the board of directors or in the by-laws of
the Corporation.
TENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them or between the Corporation
and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the Corporation
under Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
ELEVENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the General Corporation Law of the
State of Delaware and this Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
Notwithstanding any provision of law, any other provision of this Certificate
of Incorporation or any provision of the by-laws of the Corporation, the
affirmative vote of the holders of at least seventy-five percent of the
shares of capital stock of the Corporation issued and outstanding and
entitled to vote shall be required to amend or repeal, or to adopt any
provision inconsistent with, any provision of Article FIFTH, Article SIXTH or
this Article ELEVENTH.
IN WITNESS WHEREOF, the undersigned, being the duly elected and
acting President of Outlook Sports Technology, Inc., does hereby declare that
this Amended and Restated Certificate of Incorporation has been duly adopted
by the board of directors and the stockholders of this Corporation in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware. The undersigned does hereby affirm,
under the penalties of perjury, that this instrument is the act and deed of
the Corporation and the facts herein set forth are true and correct. I have
accordingly hereunto set my hand this day of June, 1998.
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OUTLOOK SPORTS TECHNOLOGY, INC.
By: _____________________________
Jim G. Dodrill II, President
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EXHIBIT 3.2
OUTLOOK SPORTS TECHNOLOGY, INC.
BY-LAWS
SECTION 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 Conflicts. In the event of any conflict between the provisions of
these by-laws and the provisions of the certificate of incorporation of Outlook
Sports Technology, Inc. (the "Corporation"), the provisions of the certificate
of incorporation shall govern.
1.2 References. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation of the Corporation and these by-laws, respectively, as are from
time to time in effect.
SECTION 2. OFFICES
2.1 Registered Office. The registered office of the Corporation shall
be as fixed in the certificate of incorporation of the Corporation.
2.2 Other Offices. The Corporation may also have offices at such other
places within or without the State of Delaware as the board of directors may
from time to time determine or the business of the Corporation may require.
SECTION 3. STOCKHOLDERS
3.1 Location of Meetings. All meetings of stockholders shall be held at
such places within or without the State of Delaware as shall be designated from
time to time by the board of directors or the Chief Executive Officer (or if
there is no Chief Executive Officer, the President) or, if not so designated, at
the principal office of the Corporation. Any adjourned session of any meeting
shall be held at the place designated in the vote of adjournment.
3.2 Annual Meeting. The annual meeting of stockholders shall be held at
10 a.m. on the second Wednesday in May in each year (unless that day shall be a
legal holiday at the location where the meeting is to be held, in which case the
meeting shall be held at 10 a.m. on the next succeeding day that is not a legal
holiday) or at such other time and date as shall be designated from time to time
by the board of directors or the President, at which the stockholders shall
elect a board of directors and transact such other business as may be required
by law or these by-laws or as may otherwise properly come before the meeting.
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3.3 Special Meeting in Place of Annual Meeting. If the election of
directors shall not be held on the day designated by these by-laws, the board of
directors shall cause the election to be held as soon thereafter as convenient.
To that end, if the annual meeting is not held on the day provided in Subsection
3.2 or if the election of directors is not held at the annual meeting, a special
meeting of the stockholders may be held in place of such omitted meeting or
election and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting. In
such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called,
and the purposes thereof shall be specified in the call, as provided in
Subsection 3.4.
3.4 Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding capital stock having not less than
the minimum number of votes necessary to take such action at a meeting at which
all shares entitled to vote thereon were voted. Prompt notice of all actions
taken in connection with such waiver of notice shall be given to all
stockholders not present or represented at such meeting. If mailed, notice shall
be deemed to have been given when the notice is deposited in the United States
mail, postage prepaid, directed to the stockholder at the stockholder's address
as it appears on the records of the Corporation. An affidavit of the mailing or
other means of giving any notice of any stockholders' meeting, executed by the
Secretary, any Assistant Secretary or any transfer agent of the Corporation
giving the notice, shall be prima facie evidence of the giving of such notice.
3.5 Other Special Meetings. Special meetings of the stockholders may be
called for any purpose or purposes by the Chairman of the Board, the Chief
Executive Officer (or if there is no Chief Executive Officer, the President),
the board of directors or at the request in writing of the holders of at least
ten percent of all capital stock of the Corporation issued and outstanding and
entitled to vote at such meeting. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
3.6 Notice of Special Meeting. Unless otherwise prescribed by law,
written notice of each special meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting. If mailed, notice shall be
deemed to have been given when the notice is deposited in the United States
mail, postage prepaid, directed to the stockholder at the stockholder's address
as it appears on the records of the Corporation. An affidavit of the mailing or
other means of giving any notice of any stockholders' meeting, executed by the
Secretary, any Assistant Secretary or any transfer
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agent of the Corporation giving the notice, shall be prima facie evidence of the
giving of such notice.
3.7 Stockholder List. The officer who has charge of the stock record
books of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered 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.
3.8 Quorum of Stockholders. The holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business except as
otherwise required by law, the certificate of incorporation or these by-laws.
Except as otherwise provided by law, no stockholder present at a meeting may
withhold shares owned by such stockholder from the quorum count by declaring
those shares to be absent from the meeting.
3.9 Adjournment. Any meeting of stockholders may be adjourned from time
to time to any other time and place at which a meeting of stockholders may be
held under these by-laws, which time and place shall be announced at the
meeting, by a majority of votes cast upon the question, whether or not a quorum
is present, or, if no stockholder is present, by any officer entitled to preside
at or to act as secretary of such meeting. If a quorum shall be present or
represented at any adjourned meeting, any business may be transacted that might
have been transacted at the original meeting. If the adjournment is for less
than thirty days and the time and place of the adjourned meeting are announced
at the meeting at which adjournment is taken, it shall not be necessary to
notify any stockholder of the adjournment unless after the adjournment a new
record date is fixed for the adjourned meeting. If the adjournment is for more
than thirty days, the time and place of the adjourned meeting are not announced
at the meeting at which adjournment is taken, or a new record date is fixed for
the adjourned meeting after the adjournment, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
3.10 Proxy Representation. Any stockholder may authorize another person
or persons to act for such stockholder by proxy in all matters in which the
stockholder is entitled to participate, whether by waiving notice of any
meeting, objecting to or voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or the stockholder's attorney-in-fact. No proxy shall be voted or
acted upon after three years from its date unless such proxy provides for a
longer period. Except as provided by
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law, a revocable proxy shall be deemed revoked if the stockholder is present at
the meeting for which the proxy was given. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the Corporation
generally. The authorization of a proxy may but need not be limited to specified
action, provided, however, that if a proxy limits its authorization to a meeting
or meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.11 Inspectors. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Before entering
upon the discharge of the duties of inspector, each inspector shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of the inspector's ability. The
inspectors, if any, shall (a) determine the number of shares of capital stock
outstanding and the voting power of each, the shares of capital stock
represented at the meeting, the existence of a quorum and the validity and
effect of proxies, and (b) receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the meeting, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them.
3.12 Action by Vote. When a quorum is present at any meeting, whether
an original or adjourned session, a plurality of the votes properly cast for
election to any office shall elect to such office and a majority of the votes
(or if there are two or more classes of capital stock entitled to vote as
separate classes, then in the case of each such class, the holders of a majority
of the capital stock of that class) properly cast upon any question other than
an election to an office shall decide such question, except when a larger vote
is required by law, the certificate of incorporation or these by-laws. No ballot
shall be required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.13 Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the board of directors at a meeting of
stockholders may be made by the board of directors or by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Subsection 3.13. Such
nominations, other than those made by or on behalf of the board of directors,
shall be made by notice in writing delivered or mailed by first class United
State mail, postage prepaid, to the Secretary, and received not less than sixty
days nor more than ninety days prior to such meeting; provided, however, that if
less than seventy days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the
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Secretary not later than the close of business on the tenth day following the
date on which the notice of the meeting was mailed or such public disclosure was
made, whichever occurs first. Such notice shall set forth: (a) as to each
proposed nominee, (i) the name, age, business address and, if known, residence
address of each such nominee, (ii) the principal occupation or employment of
each such nominee, (iii) the number of shares of capital stock of the
Corporation beneficially owned by each such nominee, and (iv) any other
information concerning the nominee that must be disclosed as to nominees in
proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including such person's written consent to be named as a
nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice, (i) the name and address, as they appear on the Corporation's
books, of such stockholder and (ii) the number of shares of each class and
series of capital stock of the Corporation beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director. The chairman of
the meeting may, if the facts warrant, determine and declare at the meeting that
a nomination was not made in accordance with the foregoing procedure, and if the
chairman should so determine, the chairman shall so declare at the meeting and
the defective nomination shall be disregarded.
3.14 Notice of Business at Annual Meetings. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before an annual meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, if such business relates to the election of directors of the
Corporation, the procedures in Subsection 3.13 must be complied with, and if
such business relates to any other matter, the stockholder must have given
timely notice thereof in writing to the Secretary. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty days nor more than ninety days
prior to the meeting; provided, however, that in the event that less than
seventy days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth day following the
date on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the number
of shares of each class and series of capital stock of the Corporation
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Subsection 3.14 and except that
any stockholder proposal that complied with Rule
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14a-8 (or any successor provision) under the Securities Exchange Act of 1934, as
amended, and is to be included in the Corporation's proxy statement for an
annual meeting of stockholders shall be deemed to comply with the requirements
of this Subsection 3.14. The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Subsection
3.14, and if the chairman should so determine, the chairman shall so declare at
the meeting that any such business not properly brought before the meeting shall
not be transacted.
3.15 Organization. The Chairman of the Board or, in the absence
thereof, the Chief Executive Officer (or if there is no Chief Executive Officer,
the President) shall call meetings of stockholders to order and shall act as
chairman of such meeting, provided, however, that the board of directors may
appoint any stockholder to act as chairman of any meeting in the absence of the
Chairman of the Board. The Secretary shall act as secretary at all meetings of
the stockholders, but in the absence of the Secretary at any meeting of the
stockholders, the chairman may appoint any person to act as secretary of the
meeting.
3.16 Action Without Meetings. Stockholders may not take any
action by written consent in lieu of a meeting.
SECTION 4. DIRECTORS
4.1 Powers. The business of the Corporation shall be managed by or
under the direction of the board of directors, which shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.2 Number. The number of directors that shall constitute the board of
directors shall be determined by resolution of the board of directors, but in no
event shall be less than two. The number of directors may be decreased at any
time and from time to time by vote of a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Subsection 4.3 of these by-laws. Directors need not be stockholders.
4.3 Vacancies. Newly created directorships resulting from any increase
in the number of directors and other vacancies may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. When one or more directors shall resign from the board
of directors, effective at a future date, a majority of the directors then in
office, including those who have resigned, shall have power to fill such vacancy
or vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirements of law or of the
certificate of incorporation or of these by-laws as to the number of
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directors required for a quorum or for any vote or other actions. A director
elected to fill a vacancy shall be elected for the unexpired term of such
director's predecessor in office, and a director chosen to fill a position
resulting from an increase in the number of directors shall hold office until
the next election of the class for which such director shall have been chosen,
subject to the election and qualification of any such director's successor and
to any such director's earlier death, resignation or removal.
4.4 Classes of Directors. The board of directors shall be divided into
three classes, consisting of Class I, Class II and Class III. No class of
directors shall have more than one director more than any other class. If a
fraction is contained in the quotient arrived at by dividing the designated
number of directors by three, then, if such fraction is one-third, the extra
director shall be a member of Class I, and if such fraction is two-thirds, one
of the extra directors shall be a member of Class I and one of the extra
directors shall be a member of Class II, except as otherwise may be provided
from time to time by the board of directors.
4.5 Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided that each initial director in Class I shall serve
for a term ending on the date of the annual meeting of stockholders in 1999,
each initial director in Class II shall serve for a term ending on the date of
the annual meeting of stockholders in 2000 and each initial director in Class
III shall serve for a term ending on the date of the annual meeting of
stockholders in 2001 and provided further that the term of each director shall
be subject to the election and qualification of a successor to such director and
to the earlier death, resignation or removal of such director.
4.6 Committees. The board of directors may, by vote of a majority of
the whole board: (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the board of
directors in the management of the business and affairs of the Corporation,
including the power to authorize the seal of the Corporation to be affixed to
all papers that require it and the power and authority to declare dividends or
to authorize the issuance of capital stock; excepting, however, such powers that
by law, the certificate of incorporation or these by-laws the board is
prohibited from so delegating. In the absence or disqualification of any member
of a committee and such member's alternate, if any, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Except as the board of directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the board or such rules, its business shall be conducted as nearly as may be in
the same manner as is provided
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by these by-laws for the conduct of business by the board of directors. Each
committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
4.7 Regular Meetings. Regular meetings of the board of directors may be
held without call or notice at such times and at such places, within or without
the State of Delaware, as the board of directors may from time to time
determine, provided that any director who was absent when such determination was
made shall be given notice of the determination. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as an annual meeting of the stockholders.
4.8 Special Meetings. Special meetings of the board of directors may be
held at such times and at such places, within or without the State of Delaware,
designated in a notice of the meeting, when called by the Chairman of the Board
or the Chief Executive Officer (or if there is no Chief Executive Officer, the
President) or by any director, reasonable notice thereof being given to each
director by the Secretary, the officer or any of the directors calling the
meeting.
4.9 Notice. It shall be reasonable and sufficient notice to a director:
(a) to send notice by mail at least forty-eight hours, or by telegram, telex,
facsimile or hand at least twenty-four hours, before the meeting, or directed to
the director at the director's usual or last known business or residence
address; or (b) to give notice to the director in person or by telephone at
least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by the director
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to the director. Neither notice of a meeting nor
a waiver of a notice need specify the purposes of the meeting.
4.10 Quorum. Except as may be otherwise provided by law, the
certificate of incorporation or these by-laws, at any meeting of the board of
directors a majority of the directors then in office shall constitute a quorum.
A quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. In the event one or more of the
directors shall be disqualified to vote at any meeting, then the required quorum
shall be reduced by one for each such director so disqualified, subject to the
preceding sentence. Any meeting may be adjourned from time to time by a majority
of the directors present at the meeting, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.
4.11 Action by Vote. Except as may be otherwise provided by law, the
certificate of incorporation or these by-laws, when a quorum is present at any
meeting the vote of a majority of the directors present shall be the act of the
board of directors.
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4.12 Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting if all the members of the board or such committee, as
the case may be, consent to the action in writing, and the written consent is
filed with the records of the meetings of the board or such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
4.13 Participation in Meetings by Conference Telephone. Members
of the board of directors or of any committee thereof may participate in a
meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.14 Compensation. The board of directors shall have the authority to
fix from time to time the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and the performance of their responsibilities as directors and may be paid a
fixed sum for attendance at each meeting of the board of directors and/or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation or its parent or subsidiary corporations in any other
capacity and receiving compensation therefor. The board of directors may also
allow compensation for members of special or standing committees for service on
such committees.
4.15 Removal or Resignation of Directors. Directors may be removed only
for cause by the affirmative vote of the holders of at least two-third of the
shares of capital stock of the Corporation issued, outstanding and entitled to
vote. Any director may resign at any time by delivering a resignation in writing
to the Chief Executive Officer (or if there is no Chief Executive Officer, the
President) or the Secretary or to a meeting of the board of directors. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time and without in either case the necessity of its being accepted,
unless the resignation shall so state. No director resigning and (except where a
right to receive compensation shall be expressly provided in a duly authorized
written agreement with the Corporation) no director removed shall have any right
to receive compensation as such director for any period following the director's
resignation or removal, or any right to damages on account of such removal,
whether the director's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
SECTION 5. NOTICES
5.1 Form of Notice. Whenever, under the provisions of law, or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, such notice may be given by mail, addressed to
such director or stockholder, at the director's or stockholder's address as it
appears on the records of the Corporation, with postage thereon
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prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Unless written notice by mail is
required by law, written notice may also be given by telegram, cable, facsimile,
commercial delivery service, telex or similar means, addressed to such director
or stockholder at the address thereof as such address appears on the records of
the Corporation, in which case such notice shall be deemed to be given when
delivered into the control of the persons charged with effecting such
transmission, the transmission charge to be paid by the Corporation or the
person sending such notice and not by the addressee. Oral notice or other
in-hand delivery (in person or by telephone) shall be deemed given at the time
it is actually given.
5.2 Waiver of Notice. Whenever notice is required to be given under the
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the board of directors need be specified in any written waiver of
notice.
SECTION 6. OFFICERS AND AGENTS
6.1 Enumeration; Qualification. The officers of the Corporation shall
consist of a President, a Treasurer, a Secretary and such other officers, if
any, as the board of directors from time to time may in its discretion elect or
appoint, including a Chairman of the Board, a Chief Executive Officer, a Chief
Financial Officer, a General Counsel and one or more Vice Presidents, Assistant
Treasurers and Assistant Secretaries. Any officer may be, but none need be, a
director or stockholder. Any two or more offices may be held by the same person.
Any officer may be required by the board of directors to secure the faithful
performance of the officer's duties to the Corporation by giving bond in such
amount and with sureties or otherwise as the board of directors may determine.
6.2 Election. The board of directors shall choose a President, a
Secretary and a Treasurer at the first meeting of the board following each
annual meeting of stockholders. Other officers may be appointed by the board of
directors at such meeting, at any other meeting or by written consent. At any
time or from time to time, the directors may delegate to any officer their power
to elect or appoint any other officer or any agents.
6.3 Tenure. Except as otherwise provided by law, the certificate of
incorporation or these by-laws, each officer shall hold office until a successor
is elected and qualified, unless a shorter period shall have been specified in
the vote approving the officer's election or appointment, or until the officer
sooner dies, resigns or is removed. Each agent of the
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Corporation shall retain authority at the pleasure of the directors, or the
officer by whom the agent was appointed or by the officer who then holds agent
appointive power
6.4 Powers. Subject to law, the certificate of incorporation and these
by-laws, each officer shall have, in addition to the duties and powers herein
set forth, such duties and powers as
are commonly incident to the officer's office and such additional duties and
powers as the board of directors may from time to time designate.
6.5 President. If there is no Chief Executive Officer, the President of
the Corporation shall be the chief executive officer of the Corporation. The
President shall, when and in the absence of a Chairman of the Board, preside at
all meetings of the stockholders and at all meetings of the board of directors.
The President may sign all authorized contracts in the name of the Corporation,
shall have general charge and supervision of the business of the Corporation,
subject to the control of the board of directors and shall be the medium of
communication of the board of directors and any board committee of reports,
proposals and recommendations for their respective consideration or action. The
President may sign certificates representing capital stock of the Corporation as
provided in Subsection 7.1, and the President shall do and perform such other
duties as may be assigned from time to time by the board of directors. All
officers shall report to the President or according to the President's direction
in respect of any matters within the President's jurisdiction. The board of
directors may delegate from time to time certain or all of the aforesaid powers
and responsibilities to the Chief Executive Officer, if any.
6.6 Vice President. The Vice President, or if there shall be more than
one, the Vice Presidents in the order determined by the board of directors,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe. If a Vice President is designated as the chief operating officer of
the Corporation, then such Vice President shall be deemed to be the most senior
Vice President of the Corporation.
6.7 Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the stockholders and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or the Chief Executive Officer (or if there is no Chief Executive Officer, the
President), under whose supervision the Secretary shall be. The Secretary shall
keep in safe custody the seal of the Corporation and, when authorized by the
board of directors, affix the same to any instrument requiring it and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
(b) The Assistant Secretary, or if there be more than one, the
Assistant
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Secretaries in the order determined by the board of directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
6.8 Treasurer and Assistant Treasurers.
(a) If there is no Chief Financial Officer, the Treasurer
shall be the chief financial officer of the Corporation. The Treasurer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the board of directors. The Treasurer shall disburse funds of the Corporation
as may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer (or if there is
no Chief Executive Officer, the President) and the board of directors, at its
regular meetings, or when the board of directors so requires, an account of all
such officer's transactions as Treasurer and of the financial condition of the
Corporation. If required by the board of directors, the Treasurer shall give the
Corporation a bond (which shall be renewed as and when required) in such sum and
with such surety and sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of the Treasurer's office and for the
restoration of the Corporation, in case of the Treasurer's death, resignation or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation. The board of directors may delegate from time to
time certain or all of the aforesaid powers and responsibilities to the Chief
Financial Officer, if any.
(b) The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the board of directors,
shall in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
6.9 Resignation and Removal. Any officer may resign at any time by
delivering a resignation in writing to the Chief Executive Officer (or if there
is no Chief Executive Officer, the President), the Secretary or a meeting of the
board of directors. Such resignation shall be effective upon receipt unless
specified to be effective at some other time, and without in any case the
necessity of its being accepted unless the resignation shall so state. The board
of directors may, by a majority vote, at any time remove any officer either with
or without cause. The board of directors may at any time terminate or modify the
authority of any agent. No officer resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the Corporation) no officer removed shall have any right to any
compensation as such officer for any period following the officer's resignation
or removal, or any right to damages on account of such removal, whether the
officer's compensation be by the
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month or by the year or otherwise, unless in the case of a resignation, the
directors, or in the case of removal, the body acting on the removal, shall in
their or its discretion provide for compensation.
6.10 Vacancies. The board of directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of the President, the
Treasurer and the Secretary. Each such successor shall hold office for the
unexpired term of the predecessor and until a successor is elected and
qualified, or in each case until such officer sooner dies, resigns or is
removed.
SECTION 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the class
and series, if any, of the shares held by the stockholder, in such form as
shall, in conformity to law, the certificate of incorporation and the by-laws,
be prescribed from time to time by the board of directors. Such certificate
shall be signed by, or in the name of the Corporation by, (a) the Chief
Executive Officer, the President or a Vice President and (b) the Chief Financial
Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary. Any of the signatures on the certificate may be facsimiles. In case
an officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if the signatory were such
officer, transfer agent, or registrar at the time of its issue.
7.2 Stock Issuances. Unless otherwise voted by the stockholders and
subject to the provisions of the certificate of incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the Corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the board of directors in such manner, for such
consideration and on such terms as the board of directors may determine.
7.3 Stock Transfers. Subject to any restrictions with respect to the
transfer of shares of capital stock, shares of capital stock may be transferred
on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed, with necessary
transfer stamps affixed, and with such proof of the authenticity of signature as
the board of directors or the transfer agent of the Corporation may reasonably
require. Except as may be otherwise required by law, the certificate of
incorporation or these by-laws, the Corporation shall be entitled to treat the
record holder of capital stock as shown on its books as the owner of such
capital stock for all purposes, including the payment of dividends and the right
to receive notice and to vote or to give any consent with respect thereto and to
be held liable for such calls and assessments, if any, as may lawfully be made
thereon, regardless of any transfer, pledge or other disposition of such capital
stock until the shares have been properly transferred on the books of
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the Corporation. It shall be the duty of each stockholder to notify the
Corporation of the stockholder's post office address.
7.4 Lost, Stolen or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or such owner's legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
7.5 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed:
(a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
(b) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed; and
(c) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating to such purpose.
SECTION 8. GENERAL PROVISIONS
8.1 Fiscal Year. The fiscal year of the Corporation shall begin on the
first day of February in each calendar year and shall end on the last day of
January next following, unless otherwise determined by the board of directors.
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8.2 Seal. The board of directors may, by resolution, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
8.3 Dividends. Dividends upon the capital stock of the Corporation may
be declared by the board of directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, property or
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
8.4 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
8.5 Voting of Securities. Except as the directors may otherwise
designate, the Chief Executive Officer, the President, the Chief Financial
Officer, the Treasurer or the General Counsel may waive notice of, and act as,
or appoint any person or persons to act as, proxy or attorney-in-fact for the
Corporation (with or without power of substitution) at any meeting of
stockholders of any other corporation or organization of which the Corporation
holds securities.
8.6 Evidence of Authority. A certificate of the Secretary, an Assistant
Secretary or a temporary Secretary as to any action taken by the stockholders,
the board of directors or a committee thereof, or any officer or representative
of the Corporation shall be conclusive evidence of such action as to all persons
who rely on the certificate in good faith.
8.7 Interested Parties.
(a) No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of the Corporation's directors or officers are directors or officers or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board of directors or committee thereof that authorizes the contract or
transaction, or solely because the vote of any such person is counted for such
purpose, if:
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(1) the material facts as to the relationship or
interest of the director or officer and the contract or transaction are
disclosed or known to the board of directors or the committee, and the board or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors do not constitute a quorum;
(2) the material facts as to the relationship or
interest of the director or officer and the contract or transaction are
disclosed or known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or
(3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee thereof that authorizes the contract or transaction.
8.8 Construction; Definitions. Unless the context requires otherwise,
the general provisions, rules of construction and definitions in the General
Corporation Law of Delaware shall govern the construction of these by-laws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular and the term "person"
includes both a corporation and a natural person. The term "including" as used
herein shall not be construed so as to exclude any other thing not referred to
or described..
8.9 Provisions Additional to Provisions of Law. All restrictions,
limitations, requirements and other provisions of these by-laws shall be
construed, insofar as possible, as supplemental and additional to all provisions
of law applicable to the subject matter thereof and shall be fully complied with
in addition to such provisions of law unless such compliance shall be illegal.
8.10 Provisions Contrary to Provisions of Law. Any section, subsection,
subdivision, sentence, clause or phrase of these by-laws that, upon being
construed in the manner provided in Section 8.9 of these by-laws, shall be
contrary to or inconsistent with any applicable provision of law, shall not
apply so long as said provision of law shall remain in effect. Any such result
shall not affect the validity or applicability of any other portion of these
by-laws, it being hereby declared that these by-laws would have been adopted
irrespective of the fact that any one or more sections, subsections,
subdivisions, sentences, clauses or phrases of these by-laws is or are illegal.
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SECTION 9. AMENDMENT OF BY-LAWS
9.1 By Board of Directors. These by-laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
9.2 By Stockholders. These by-laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of capital stock of the Corporation issued, outstanding
and entitled to vote at any regular or special meeting of stockholders, provided
notice of such alteration, amendment, repeal or adoption of new by-laws shall
have been stated in the notice of such regular or special meeting.
Notwithstanding the foregoing or any other provision of law, the certificate of
incorporation or these by-laws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least seventy-five percent of the shares of the capital stock of the Corporation
issued, outstanding and entitled to vote shall be required to amend or repeal,
or to adopt any provision inconsistent with, Subsections 3.5, 3.13, 3.14 and
3.16, Section 4 or Section 9 of these by-laws.
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EXHIBIT 3.2
OUTLOOK SPORTS TECHNOLOGY, INC.
BY-LAWS
SECTION 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 Conflicts. In the event of any conflict between the provisions of
these by-laws and the provisions of the certificate of incorporation of Outlook
Sports Technology, Inc. (the "Corporation"), the provisions of the certificate
of incorporation shall govern.
1.2 References. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation of the Corporation and these by-laws, respectively, as are from
time to time in effect.
SECTION 2. OFFICES
2.1 Registered Office. The registered office of the Corporation shall
be as fixed in the certificate of incorporation of the Corporation.
2.2 Other Offices. The Corporation may also have offices at such other
places within or without the State of Delaware as the board of directors may
from time to time determine or the business of the Corporation may require.
SECTION 3. STOCKHOLDERS
3.1 Location of Meetings. All meetings of stockholders shall be held at
such places within or without the State of Delaware as shall be designated from
time to time by the board of directors or the Chief Executive Officer (or if
there is no Chief Executive Officer, the President) or, if not so designated, at
the principal office of the Corporation. Any adjourned session of any meeting
shall be held at the place designated in the vote of adjournment.
3.2 Annual Meeting. The annual meeting of stockholders shall be held at
10 a.m. on the second Wednesday in May in each year (unless that day shall be a
legal holiday at the location where the meeting is to be held, in which case the
meeting shall be held at 10 a.m. on the next succeeding day that is not a legal
holiday) or at such other time and date as shall be designated from time to time
by the board of directors or the President, at which the stockholders shall
elect a board of directors and transact such other business as may be required
by law or these by-laws or as may otherwise properly come before the meeting.
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3.3 Special Meeting in Place of Annual Meeting. If the election of
directors shall not be held on the day designated by these by-laws, the board of
directors shall cause the election to be held as soon thereafter as convenient.
To that end, if the annual meeting is not held on the day provided in Subsection
3.2 or if the election of directors is not held at the annual meeting, a special
meeting of the stockholders may be held in place of such omitted meeting or
election and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting. In
such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called,
and the purposes thereof shall be specified in the call, as provided in
Subsection 3.4.
3.4 Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding capital stock having not less than
the minimum number of votes necessary to take such action at a meeting at which
all shares entitled to vote thereon were voted. Prompt notice of all actions
taken in connection with such waiver of notice shall be given to all
stockholders not present or represented at such meeting. If mailed, notice shall
be deemed to have been given when the notice is deposited in the United States
mail, postage prepaid, directed to the stockholder at the stockholder's address
as it appears on the records of the Corporation. An affidavit of the mailing or
other means of giving any notice of any stockholders' meeting, executed by the
Secretary, any Assistant Secretary or any transfer agent of the Corporation
giving the notice, shall be prima facie evidence of the giving of such notice.
3.5 Other Special Meetings. Special meetings of the stockholders may be
called for any purpose or purposes by the Chairman of the Board, the Chief
Executive Officer (or if there is no Chief Executive Officer, the President),
the board of directors or at the request in writing of the holders of at least
ten percent of all capital stock of the Corporation issued and outstanding and
entitled to vote at such meeting. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
3.6 Notice of Special Meeting. Unless otherwise prescribed by law,
written notice of each special meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting. If mailed, notice shall be
deemed to have been given when the notice is deposited in the United States
mail, postage prepaid, directed to the stockholder at the stockholder's address
as it appears on the records of the Corporation. An affidavit of the mailing or
other means of giving any notice of any stockholders' meeting, executed by the
Secretary, any Assistant Secretary or any transfer
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agent of the Corporation giving the notice, shall be prima facie evidence of the
giving of such notice.
3.7 Stockholder List. The officer who has charge of the stock record
books of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered 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.
3.8 Quorum of Stockholders. The holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business except as
otherwise required by law, the certificate of incorporation or these by-laws.
Except as otherwise provided by law, no stockholder present at a meeting may
withhold shares owned by such stockholder from the quorum count by declaring
those shares to be absent from the meeting.
3.9 Adjournment. Any meeting of stockholders may be adjourned from time
to time to any other time and place at which a meeting of stockholders may be
held under these by-laws, which time and place shall be announced at the
meeting, by a majority of votes cast upon the question, whether or not a quorum
is present, or, if no stockholder is present, by any officer entitled to preside
at or to act as secretary of such meeting. If a quorum shall be present or
represented at any adjourned meeting, any business may be transacted that might
have been transacted at the original meeting. If the adjournment is for less
than thirty days and the time and place of the adjourned meeting are announced
at the meeting at which adjournment is taken, it shall not be necessary to
notify any stockholder of the adjournment unless after the adjournment a new
record date is fixed for the adjourned meeting. If the adjournment is for more
than thirty days, the time and place of the adjourned meeting are not announced
at the meeting at which adjournment is taken, or a new record date is fixed for
the adjourned meeting after the adjournment, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
3.10 Proxy Representation. Any stockholder may authorize another person
or persons to act for such stockholder by proxy in all matters in which the
stockholder is entitled to participate, whether by waiving notice of any
meeting, objecting to or voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or the stockholder's attorney-in-fact. No proxy shall be voted or
acted upon after three years from its date unless such proxy provides for a
longer period. Except as provided by
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law, a revocable proxy shall be deemed revoked if the stockholder is present at
the meeting for which the proxy was given. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the Corporation
generally. The authorization of a proxy may but need not be limited to specified
action, provided, however, that if a proxy limits its authorization to a meeting
or meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.11 Inspectors. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Before entering
upon the discharge of the duties of inspector, each inspector shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of the inspector's ability. The
inspectors, if any, shall (a) determine the number of shares of capital stock
outstanding and the voting power of each, the shares of capital stock
represented at the meeting, the existence of a quorum and the validity and
effect of proxies, and (b) receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the meeting, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them.
3.12 Action by Vote. When a quorum is present at any meeting, whether
an original or adjourned session, a plurality of the votes properly cast for
election to any office shall elect to such office and a majority of the votes
(or if there are two or more classes of capital stock entitled to vote as
separate classes, then in the case of each such class, the holders of a majority
of the capital stock of that class) properly cast upon any question other than
an election to an office shall decide such question, except when a larger vote
is required by law, the certificate of incorporation or these by-laws. No ballot
shall be required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.13 Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the board of directors at a meeting of
stockholders may be made by the board of directors or by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Subsection 3.13. Such
nominations, other than those made by or on behalf of the board of directors,
shall be made by notice in writing delivered or mailed by first class United
State mail, postage prepaid, to the Secretary, and received not less than sixty
days nor more than ninety days prior to such meeting; provided, however, that if
less than seventy days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the
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Secretary not later than the close of business on the tenth day following the
date on which the notice of the meeting was mailed or such public disclosure was
made, whichever occurs first. Such notice shall set forth: (a) as to each
proposed nominee, (i) the name, age, business address and, if known, residence
address of each such nominee, (ii) the principal occupation or employment of
each such nominee, (iii) the number of shares of capital stock of the
Corporation beneficially owned by each such nominee, and (iv) any other
information concerning the nominee that must be disclosed as to nominees in
proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including such person's written consent to be named as a
nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice, (i) the name and address, as they appear on the Corporation's
books, of such stockholder and (ii) the number of shares of each class and
series of capital stock of the Corporation beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director. The chairman of
the meeting may, if the facts warrant, determine and declare at the meeting that
a nomination was not made in accordance with the foregoing procedure, and if the
chairman should so determine, the chairman shall so declare at the meeting and
the defective nomination shall be disregarded.
3.14 Notice of Business at Annual Meetings. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before an annual meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, if such business relates to the election of directors of the
Corporation, the procedures in Subsection 3.13 must be complied with, and if
such business relates to any other matter, the stockholder must have given
timely notice thereof in writing to the Secretary. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty days nor more than ninety days
prior to the meeting; provided, however, that in the event that less than
seventy days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth day following the
date on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the number
of shares of each class and series of capital stock of the Corporation
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Subsection 3.14 and except that
any stockholder proposal that complied with Rule
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14a-8 (or any successor provision) under the Securities Exchange Act of 1934, as
amended, and is to be included in the Corporation's proxy statement for an
annual meeting of stockholders shall be deemed to comply with the requirements
of this Subsection 3.14. The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Subsection
3.14, and if the chairman should so determine, the chairman shall so declare at
the meeting that any such business not properly brought before the meeting shall
not be transacted.
3.15 Organization. The Chairman of the Board or, in the absence
thereof, the Chief Executive Officer (or if there is no Chief Executive Officer,
the President) shall call meetings of stockholders to order and shall act as
chairman of such meeting, provided, however, that the board of directors may
appoint any stockholder to act as chairman of any meeting in the absence of the
Chairman of the Board. The Secretary shall act as secretary at all meetings of
the stockholders, but in the absence of the Secretary at any meeting of the
stockholders, the chairman may appoint any person to act as secretary of the
meeting.
3.16 Action Without Meetings. Stockholders may not take any
action by written consent in lieu of a meeting.
SECTION 4. DIRECTORS
4.1 Powers. The business of the Corporation shall be managed by or
under the direction of the board of directors, which shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.2 Number. The number of directors that shall constitute the board of
directors shall be determined by resolution of the board of directors, but in no
event shall be less than two. The number of directors may be decreased at any
time and from time to time by vote of a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Subsection 4.3 of these by-laws. Directors need not be stockholders.
4.3 Vacancies. Newly created directorships resulting from any increase
in the number of directors and other vacancies may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. When one or more directors shall resign from the board
of directors, effective at a future date, a majority of the directors then in
office, including those who have resigned, shall have power to fill such vacancy
or vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirements of law or of the
certificate of incorporation or of these by-laws as to the number of
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directors required for a quorum or for any vote or other actions. A director
elected to fill a vacancy shall be elected for the unexpired term of such
director's predecessor in office, and a director chosen to fill a position
resulting from an increase in the number of directors shall hold office until
the next election of the class for which such director shall have been chosen,
subject to the election and qualification of any such director's successor and
to any such director's earlier death, resignation or removal.
4.4 Classes of Directors. The board of directors shall be divided into
three classes, consisting of Class I, Class II and Class III. No class of
directors shall have more than one director more than any other class. If a
fraction is contained in the quotient arrived at by dividing the designated
number of directors by three, then, if such fraction is one-third, the extra
director shall be a member of Class I, and if such fraction is two-thirds, one
of the extra directors shall be a member of Class I and one of the extra
directors shall be a member of Class II, except as otherwise may be provided
from time to time by the board of directors.
4.5 Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided that each initial director in Class I shall serve
for a term ending on the date of the annual meeting of stockholders in 1999,
each initial director in Class II shall serve for a term ending on the date of
the annual meeting of stockholders in 2000 and each initial director in Class
III shall serve for a term ending on the date of the annual meeting of
stockholders in 2001 and provided further that the term of each director shall
be subject to the election and qualification of a successor to such director and
to the earlier death, resignation or removal of such director.
4.6 Committees. The board of directors may, by vote of a majority of
the whole board: (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the board of
directors in the management of the business and affairs of the Corporation,
including the power to authorize the seal of the Corporation to be affixed to
all papers that require it and the power and authority to declare dividends or
to authorize the issuance of capital stock; excepting, however, such powers that
by law, the certificate of incorporation or these by-laws the board is
prohibited from so delegating. In the absence or disqualification of any member
of a committee and such member's alternate, if any, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Except as the board of directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the board or such rules, its business shall be conducted as nearly as may be in
the same manner as is provided
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by these by-laws for the conduct of business by the board of directors. Each
committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
4.7 Regular Meetings. Regular meetings of the board of directors may be
held without call or notice at such times and at such places, within or without
the State of Delaware, as the board of directors may from time to time
determine, provided that any director who was absent when such determination was
made shall be given notice of the determination. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as an annual meeting of the stockholders.
4.8 Special Meetings. Special meetings of the board of directors may be
held at such times and at such places, within or without the State of Delaware,
designated in a notice of the meeting, when called by the Chairman of the Board
or the Chief Executive Officer (or if there is no Chief Executive Officer, the
President) or by any director, reasonable notice thereof being given to each
director by the Secretary, the officer or any of the directors calling the
meeting.
4.9 Notice. It shall be reasonable and sufficient notice to a director:
(a) to send notice by mail at least forty-eight hours, or by telegram, telex,
facsimile or hand at least twenty-four hours, before the meeting, or directed to
the director at the director's usual or last known business or residence
address; or (b) to give notice to the director in person or by telephone at
least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by the director
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to the director. Neither notice of a meeting nor
a waiver of a notice need specify the purposes of the meeting.
4.10 Quorum. Except as may be otherwise provided by law, the
certificate of incorporation or these by-laws, at any meeting of the board of
directors a majority of the directors then in office shall constitute a quorum.
A quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. In the event one or more of the
directors shall be disqualified to vote at any meeting, then the required quorum
shall be reduced by one for each such director so disqualified, subject to the
preceding sentence. Any meeting may be adjourned from time to time by a majority
of the directors present at the meeting, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.
4.11 Action by Vote. Except as may be otherwise provided by law, the
certificate of incorporation or these by-laws, when a quorum is present at any
meeting the vote of a majority of the directors present shall be the act of the
board of directors.
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4.12 Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting if all the members of the board or such committee, as
the case may be, consent to the action in writing, and the written consent is
filed with the records of the meetings of the board or such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
4.13 Participation in Meetings by Conference Telephone. Members
of the board of directors or of any committee thereof may participate in a
meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.14 Compensation. The board of directors shall have the authority to
fix from time to time the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and the performance of their responsibilities as directors and may be paid a
fixed sum for attendance at each meeting of the board of directors and/or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation or its parent or subsidiary corporations in any other
capacity and receiving compensation therefor. The board of directors may also
allow compensation for members of special or standing committees for service on
such committees.
4.15 Removal or Resignation of Directors. Directors may be removed only
for cause by the affirmative vote of the holders of at least two-third of the
shares of capital stock of the Corporation issued, outstanding and entitled to
vote. Any director may resign at any time by delivering a resignation in writing
to the Chief Executive Officer (or if there is no Chief Executive Officer, the
President) or the Secretary or to a meeting of the board of directors. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time and without in either case the necessity of its being accepted,
unless the resignation shall so state. No director resigning and (except where a
right to receive compensation shall be expressly provided in a duly authorized
written agreement with the Corporation) no director removed shall have any right
to receive compensation as such director for any period following the director's
resignation or removal, or any right to damages on account of such removal,
whether the director's compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
SECTION 5. NOTICES
5.1 Form of Notice. Whenever, under the provisions of law, or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, such notice may be given by mail, addressed to
such director or stockholder, at the director's or stockholder's address as it
appears on the records of the Corporation, with postage thereon
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prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Unless written notice by mail is
required by law, written notice may also be given by telegram, cable, facsimile,
commercial delivery service, telex or similar means, addressed to such director
or stockholder at the address thereof as such address appears on the records of
the Corporation, in which case such notice shall be deemed to be given when
delivered into the control of the persons charged with effecting such
transmission, the transmission charge to be paid by the Corporation or the
person sending such notice and not by the addressee. Oral notice or other
in-hand delivery (in person or by telephone) shall be deemed given at the time
it is actually given.
5.2 Waiver of Notice. Whenever notice is required to be given under the
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the board of directors need be specified in any written waiver of
notice.
SECTION 6. OFFICERS AND AGENTS
6.1 Enumeration; Qualification. The officers of the Corporation shall
consist of a President, a Treasurer, a Secretary and such other officers, if
any, as the board of directors from time to time may in its discretion elect or
appoint, including a Chairman of the Board, a Chief Executive Officer, a Chief
Financial Officer, a General Counsel and one or more Vice Presidents, Assistant
Treasurers and Assistant Secretaries. Any officer may be, but none need be, a
director or stockholder. Any two or more offices may be held by the same person.
Any officer may be required by the board of directors to secure the faithful
performance of the officer's duties to the Corporation by giving bond in such
amount and with sureties or otherwise as the board of directors may determine.
6.2 Election. The board of directors shall choose a President, a
Secretary and a Treasurer at the first meeting of the board following each
annual meeting of stockholders. Other officers may be appointed by the board of
directors at such meeting, at any other meeting or by written consent. At any
time or from time to time, the directors may delegate to any officer their power
to elect or appoint any other officer or any agents.
6.3 Tenure. Except as otherwise provided by law, the certificate of
incorporation or these by-laws, each officer shall hold office until a successor
is elected and qualified, unless a shorter period shall have been specified in
the vote approving the officer's election or appointment, or until the officer
sooner dies, resigns or is removed. Each agent of the
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Corporation shall retain authority at the pleasure of the directors, or the
officer by whom the agent was appointed or by the officer who then holds agent
appointive power
6.4 Powers. Subject to law, the certificate of incorporation and these
by-laws, each officer shall have, in addition to the duties and powers herein
set forth, such duties and powers as
are commonly incident to the officer's office and such additional duties and
powers as the board of directors may from time to time designate.
6.5 President. If there is no Chief Executive Officer, the President of
the Corporation shall be the chief executive officer of the Corporation. The
President shall, when and in the absence of a Chairman of the Board, preside at
all meetings of the stockholders and at all meetings of the board of directors.
The President may sign all authorized contracts in the name of the Corporation,
shall have general charge and supervision of the business of the Corporation,
subject to the control of the board of directors and shall be the medium of
communication of the board of directors and any board committee of reports,
proposals and recommendations for their respective consideration or action. The
President may sign certificates representing capital stock of the Corporation as
provided in Subsection 7.1, and the President shall do and perform such other
duties as may be assigned from time to time by the board of directors. All
officers shall report to the President or according to the President's direction
in respect of any matters within the President's jurisdiction. The board of
directors may delegate from time to time certain or all of the aforesaid powers
and responsibilities to the Chief Executive Officer, if any.
6.6 Vice President. The Vice President, or if there shall be more than
one, the Vice Presidents in the order determined by the board of directors,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe. If a Vice President is designated as the chief operating officer of
the Corporation, then such Vice President shall be deemed to be the most senior
Vice President of the Corporation.
6.7 Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the stockholders and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or the Chief Executive Officer (or if there is no Chief Executive Officer, the
President), under whose supervision the Secretary shall be. The Secretary shall
keep in safe custody the seal of the Corporation and, when authorized by the
board of directors, affix the same to any instrument requiring it and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
(b) The Assistant Secretary, or if there be more than one, the
Assistant
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Secretaries in the order determined by the board of directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
6.8 Treasurer and Assistant Treasurers.
(a) If there is no Chief Financial Officer, the Treasurer
shall be the chief financial officer of the Corporation. The Treasurer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the board of directors. The Treasurer shall disburse funds of the Corporation
as may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer (or if there is
no Chief Executive Officer, the President) and the board of directors, at its
regular meetings, or when the board of directors so requires, an account of all
such officer's transactions as Treasurer and of the financial condition of the
Corporation. If required by the board of directors, the Treasurer shall give the
Corporation a bond (which shall be renewed as and when required) in such sum and
with such surety and sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of the Treasurer's office and for the
restoration of the Corporation, in case of the Treasurer's death, resignation or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation. The board of directors may delegate from time to
time certain or all of the aforesaid powers and responsibilities to the Chief
Financial Officer, if any.
(b) The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the board of directors,
shall in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
6.9 Resignation and Removal. Any officer may resign at any time by
delivering a resignation in writing to the Chief Executive Officer (or if there
is no Chief Executive Officer, the President), the Secretary or a meeting of the
board of directors. Such resignation shall be effective upon receipt unless
specified to be effective at some other time, and without in any case the
necessity of its being accepted unless the resignation shall so state. The board
of directors may, by a majority vote, at any time remove any officer either with
or without cause. The board of directors may at any time terminate or modify the
authority of any agent. No officer resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the Corporation) no officer removed shall have any right to any
compensation as such officer for any period following the officer's resignation
or removal, or any right to damages on account of such removal, whether the
officer's compensation be by the
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month or by the year or otherwise, unless in the case of a resignation, the
directors, or in the case of removal, the body acting on the removal, shall in
their or its discretion provide for compensation.
6.10 Vacancies. The board of directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of the President, the
Treasurer and the Secretary. Each such successor shall hold office for the
unexpired term of the predecessor and until a successor is elected and
qualified, or in each case until such officer sooner dies, resigns or is
removed.
SECTION 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the class
and series, if any, of the shares held by the stockholder, in such form as
shall, in conformity to law, the certificate of incorporation and the by-laws,
be prescribed from time to time by the board of directors. Such certificate
shall be signed by, or in the name of the Corporation by, (a) the Chief
Executive Officer, the President or a Vice President and (b) the Chief Financial
Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary. Any of the signatures on the certificate may be facsimiles. In case
an officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if the signatory were such
officer, transfer agent, or registrar at the time of its issue.
7.2 Stock Issuances. Unless otherwise voted by the stockholders and
subject to the provisions of the certificate of incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the Corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the board of directors in such manner, for such
consideration and on such terms as the board of directors may determine.
7.3 Stock Transfers. Subject to any restrictions with respect to the
transfer of shares of capital stock, shares of capital stock may be transferred
on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed, with necessary
transfer stamps affixed, and with such proof of the authenticity of signature as
the board of directors or the transfer agent of the Corporation may reasonably
require. Except as may be otherwise required by law, the certificate of
incorporation or these by-laws, the Corporation shall be entitled to treat the
record holder of capital stock as shown on its books as the owner of such
capital stock for all purposes, including the payment of dividends and the right
to receive notice and to vote or to give any consent with respect thereto and to
be held liable for such calls and assessments, if any, as may lawfully be made
thereon, regardless of any transfer, pledge or other disposition of such capital
stock until the shares have been properly transferred on the books of
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the Corporation. It shall be the duty of each stockholder to notify the
Corporation of the stockholder's post office address.
7.4 Lost, Stolen or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or such owner's legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
7.5 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed:
(a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
(b) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed; and
(c) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating to such purpose.
SECTION 8. GENERAL PROVISIONS
8.1 Fiscal Year. The fiscal year of the Corporation shall begin on the
first day of February in each calendar year and shall end on the last day of
January next following, unless otherwise determined by the board of directors.
14
<PAGE>
8.2 Seal. The board of directors may, by resolution, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
8.3 Dividends. Dividends upon the capital stock of the Corporation may
be declared by the board of directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, property or
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
8.4 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
8.5 Voting of Securities. Except as the directors may otherwise
designate, the Chief Executive Officer, the President, the Chief Financial
Officer, the Treasurer or the General Counsel may waive notice of, and act as,
or appoint any person or persons to act as, proxy or attorney-in-fact for the
Corporation (with or without power of substitution) at any meeting of
stockholders of any other corporation or organization of which the Corporation
holds securities.
8.6 Evidence of Authority. A certificate of the Secretary, an Assistant
Secretary or a temporary Secretary as to any action taken by the stockholders,
the board of directors or a committee thereof, or any officer or representative
of the Corporation shall be conclusive evidence of such action as to all persons
who rely on the certificate in good faith.
8.7 Interested Parties.
(a) No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or more
of the Corporation's directors or officers are directors or officers or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board of directors or committee thereof that authorizes the contract or
transaction, or solely because the vote of any such person is counted for such
purpose, if:
15
<PAGE>
(1) the material facts as to the relationship or
interest of the director or officer and the contract or transaction are
disclosed or known to the board of directors or the committee, and the board or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors do not constitute a quorum;
(2) the material facts as to the relationship or
interest of the director or officer and the contract or transaction are
disclosed or known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or
(3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee thereof that authorizes the contract or transaction.
8.8 Construction; Definitions. Unless the context requires otherwise,
the general provisions, rules of construction and definitions in the General
Corporation Law of Delaware shall govern the construction of these by-laws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular and the term "person"
includes both a corporation and a natural person. The term "including" as used
herein shall not be construed so as to exclude any other thing not referred to
or described..
8.9 Provisions Additional to Provisions of Law. All restrictions,
limitations, requirements and other provisions of these by-laws shall be
construed, insofar as possible, as supplemental and additional to all provisions
of law applicable to the subject matter thereof and shall be fully complied with
in addition to such provisions of law unless such compliance shall be illegal.
8.10 Provisions Contrary to Provisions of Law. Any section, subsection,
subdivision, sentence, clause or phrase of these by-laws that, upon being
construed in the manner provided in Section 8.9 of these by-laws, shall be
contrary to or inconsistent with any applicable provision of law, shall not
apply so long as said provision of law shall remain in effect. Any such result
shall not affect the validity or applicability of any other portion of these
by-laws, it being hereby declared that these by-laws would have been adopted
irrespective of the fact that any one or more sections, subsections,
subdivisions, sentences, clauses or phrases of these by-laws is or are illegal.
16
<PAGE>
SECTION 9. AMENDMENT OF BY-LAWS
9.1 By Board of Directors. These by-laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
9.2 By Stockholders. These by-laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of capital stock of the Corporation issued, outstanding
and entitled to vote at any regular or special meeting of stockholders, provided
notice of such alteration, amendment, repeal or adoption of new by-laws shall
have been stated in the notice of such regular or special meeting.
Notwithstanding the foregoing or any other provision of law, the certificate of
incorporation or these by-laws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least seventy-five percent of the shares of the capital stock of the Corporation
issued, outstanding and entitled to vote shall be required to amend or repeal,
or to adopt any provision inconsistent with, Subsections 3.5, 3.13, 3.14 and
3.16, Section 4 or Section 9 of these by-laws.
17
<PAGE>
================================================================================
NUMBER SHARES
- ---------------- ----------------
OUTLOOK SPORTS TECHNOLOGY, INC.
- ---------------- ----------------
COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP ______________
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
- --------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT
is the owner of
- --------------------------------------------------------------------------------
fully paid and non-assessable shares of Common Stock, $.01 par value, of
OUTLOOK SPORTS TECHNOLOGY, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued under
and subject to the laws of the State of Delaware and to the Certificate of
Incorporation and Bylaws of the Corporation, all as in effect from time to time.
This Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
Treasurer President
OUTLOOK SPORTS TECHNOLOGY, INC.
DELAWARE
[Corporate
Seal]
COUNTERSIGNED AND REGISTERED:
-------------------------------
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
================================================================================
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- Custodian
------------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
---------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _______________ hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
--------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do(es) hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________
--------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
--------------------------------------------------
Signature Guaranteed: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE l7Ad-15.
<PAGE>
NUMBER WARRANTS
- ------------ ------------
B OUTLOOK SPORTS TECHNOLOGY, INC
- ------------ ------------
CUSIP
OUTLOOK SPORTS TECHNOLOGY, INC
SEE REVERSE FOR
CERTAIN DEFINITIONS
- --------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT
is the owner of
- --------------------------------------------------------------------------------
or registered assigns (the "Registered Holder") is the owner of the number of
Common Stock Purchase warrants ("Warrants") specified above. Each warrant
initially entitles the Registered Holder to purchase subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$01 par value, of Outlook Sports Technology, Inc. a Delaware Corporation (the
"Company") at any time between _________ __, and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of_________ as Warrant Agent, or its successor (the
"Warrant Agent") accompanied by payment of an amount equal to _______ (the
"Purchase Price") in lawful money at the United States of America in cash or by
official bank or certified check made payable to the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated _________ __, by
and among the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. in
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________, or such earlier date as the Warrants shall be redeemed. If such date
shall in the State of New York be a holiday or a day on which the banks are
authorized to close, then the Expiration Date shall mean 5:00 P.M.(New York
time) the next following day which in the State of New York is not a holiday or
a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office at the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option at the Company, at a redemption
at a price of $0.125 per Warrant at any time after _________, provided the
market price (as defined in the Warrant Agreement) for the Common Stock
issuable upon exercise of such Warrant shall exceed _________. Notice of
redemption shall be given not later than the thirtieth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after
the date fixed for redemption, The Registered Holder shall have the rights
with respect to this Warrant except to receive the $0.125 per Warrant upon
surrender of this Certificate
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby ( not withstanding any
notations of ownership or writing hereon made by any one other than a duly
authorized officer of the Company or the Warrant Agent for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated
[SEAL]
- ------------------------ ---------------------------
Treasurer President
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_____________ Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
[please print or type name and address]
and be delivered to
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants to be registered in the name of, and delivered to, the Registered
Holder at the address stated below:
Dated:____________________________ X_______________________________________
________________________________________
________________________________________
Address
________________________________________
Taxpayer identification Number
________________________________________
Signature Guaranteed
________________________________________
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
[please print or type name and address]
_________ of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints __________________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:____________________________ X_______________________________________
Signature Guaranteed
________________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
<PAGE>
EXHIBIT 10.1
AGREEMENT
WHEREAS, William Barthold, Paul Berger and James Dodrill formed the
River Horse Partnership ("River Horse") to investigate the possibility of
establishing a licensing or distributorship arrangement with the Thacker Group
Limited ("Thacker") to market and sell Hippo golf equipment in the United States
(the "Opportunity"); and
WHEREAS, exploration of the possibility of establishing a licensing or
distributorship arrangement with Thacker revealed the impracticability and
inadvisability of pursuing such a venture with Thacker at that time; and
WHEREAS, subsequently, a majority interest in Thacker was sold to a
third party; and
WHEREAS, Messrs. Berger and Dodrill are presently investigating
potential business arrangements with the new management of Thacker; and
WHEREAS, Messrs, Barthold, Berger and Dodrill have prior to this time
not memorialized any agreement among themselves; and
WHEREAS, Messrs. Berger and Dodrill have incurred expenses in excess of
$70,000 and anticipate incurring significant additional expenses, and
WHEREAS, Mr. Barthold has presently incurred expenses of approximately
$2,500 (the "Expenses"), and
WHEREAS, Mr. Barthold has requested that a formal agreement be
established which will define the relationship between Mr. Barthold and Messrs.
Berger and Dodrill; and
WHEREAS, Mr. Barthold has requested that a formal agreement be
established which will define the relationship between Mr. Barthold and Messrs.
Berger and Dodrill; and
WHEREAS, Messrs. Barthod, Berger and Dodrill all acknowledge and agree
that time is of the essence in executing this document.
NOW, THEREFORE, the parties agree as follows:
1. WAIVER. This agreement serves to confirm that William Barthold, by
acceptance of this agreement, hereby waives any and all claims he may now or
hereafter have, (1) except as set forth below, towards equity ownership in
any entity or entities surviving or formed by any agreement between Thacker
and either River Horse or Messrs. Berger and Dodrill and (2) against River
Horse and/or Paul Berger and/or James Dodrill in any capacity. Messrs.
Dodrill and Berger hereby agree, in consideration for his execution of this
agreement, that Mr. Barthold shall not
1
<PAGE>
have any future financial obligation or liability arising from or in connection
with any business venture involving Mr. Barthold. Mr. Barthold acknowledges that
he no longer has the capacity to bind River Horse and/or Paul Berger and/or Jim
Dodrill in any capacity in any manner. The parties acknowledge that nothing in
this agreement shall be construed to prevent the other party from independently
pursuing business ventures with Thacker following execution of this agreement.
2. AGREEMENT. Messrs. Berger and Dodrill hereby sell, and Mr. Barthold
hereby purchases one percent (1%) of the interest in River Horse for an
amount equal to the Expenses. Messrs. Berger and Dodrill agree that payment
by Mr. Barthold of the Expenses will constitute payment in full of the
purchase price. Messrs. Berger and Dodrill hereby agree that should River
Horse enter into a business venture with Thacker and create a related U.S.
entity the business of which is the manufacture or sale of Hippo golf clubs
and equipment, Mr. Barthold will receive an offer of employment to begin on
September 1, 1996 in a non-executive position appropriate for him based on
his background and experience and at a salary level substantially similar to
salaries paid in the golf industry for similar positions. Such offer of
employment will be for a minimum term of three (3) years.
Mr. Barthold acknowledges that by accepting this agreement Messrs.
Berger and Dodrill retain all rights in or associated with River Horse including
its name and all copyrights, trademarks, trade names, trade dress, service marks
and goodwill now or hereafter associated with River Horse. As stated above,
however, nothing contained herein shall be construed to prevent Mr. Barthold
from independently pursuing business ventures with Thacker following execution
of this agreement.
3. CONFIDENTIALITY. Mr. Barthold agrees that for a period of one year
following the execution of this agreement he will not disclose the terms of
this agreement or any information which he obtained during or in connection
with his involvement with River Horse relating to the transactions
contemplated by River Horse or either or both of Messrs. Berger and Dodrill.
Mr. Barthold also agrees to promptly upon execution of this agreement return
to Messrs. Berger and Dodrill all documentation received, collected or
assembled by Mr. Barthold during or in connection with his involvement with
River Horse.
4. FURTHER ASSURANCES. The parties agree to execute any all documents
necessary to consummate the agreements made herein.
Mutually Accepted and Agreed to
on this 16th day of January, 1996.
/S/ William Barthold
- ----------------------------------
William Barthold
/S/ Paul Berger
- ----------------------------------
Paul Berger
2
<PAGE>
/S/ James Dodrill
- ----------------------------------
James Dodrill
3
<PAGE>
EXHIBIT 10.2
Dan Snider
Head Golf Professional
Chenal Country Club
Little Rock, Arkansas
January 16, 1998
Dear Dan:
Hippo, Inc. is pleased that you have agreed to become our first Advisory Staff
Member for a term of two years. As an Advisory Staff Member you have agreed to
accept responsibilities including, but not be limited to: playing Tegra golf
clubs and wearing Tegra apparel and headwear, carry our Tegra Retail Environment
and full line of merchandise within Chenal's pro shop, serve as an overall
ambassador for the Tegra brand and products including promoting the Tegra brand
and products to regional colleges, coaches and professional and amateur golfers,
develop club testing programs and administer tests at Chenal or otherwise as
needed by the company, suggest desirable accounts or other key influencers who
can further promote the brand and assist the company in placing product with
such accounts or influencers, assist the company as needed in marketing,
advertising or player representation needs, being available to answer questions
from potential investors in the company and being available for, as well as
seeking exposure for the Tegra brand and products in print ads, television
commercials or shows and general brand or product promotion.
We agree that our relationship will be one of employer-independent contractor,
and that you are not an employee of Hippo and are not entitled to the benefits
provided by Hippo to its employees, including, but not limited to, group
insurance and employee stock option plans. We recognize that you may during such
time as you work toward completing the tasks for Hippo work for othes during
those periods when you are not performing work for Hippo. However, you agree
that no such work will be for a manufacturer of golf clubs. We recognize that
you shall have sole control of the manner and means of performing your tasks for
Hippo, and shall complete it according to your own means and methods of work.
You shall direct the performance of all workers and subcontractors. Hippo may,
during the term of this agreement, engage other independent contractors to
perform the same work that you perform.
Your compensation will be comprised of the following: an annual cash
compensation of $5,000 and an additional compensation comprised of common stock
of Hippo, Inc. valued at $7,500. For 1998, the Company and you agree that the
stock portion of the compensation will be satisfied by 3,750 shares of common
stock which you will be granted upon execution of this letter agreement. For
1999, you will receive $3,750 worth of common stock, at fair market value on
each of January 1, 1999 and July 1, 1999. The cash component of your
compensation will for both years be paid in equal installments on April 1 and
October 1 of the respective year. You should be aware that the stock you receive
in 1998 will be subject to a one year holding period and will not be
1
<PAGE>
transferable during such time. Additionally, for the term of this agreement you
will receive a cash compensation of $2,500 for each "national exposure" of the
Tegra brand and product you achieve. National exposures are defined as exposure
through media such as Golf Digest, Golf Magazine or The Golf Channel. Please
indicate your acceptance of this offer by signing and dating the enclosed copy
of this letter and returning it to me. We look forward to your joining the Tegra
team.
Very truly yours,
Hippo, Inc.
BY: /S/ Jim Dodrill
----------------
Jim Dodrill
President
Accepted:
Date: 1-16-98
/S/ Dan Snider
- ---------------
Dan Snider
2
<PAGE>
EXHIBIT 10.3
BUSINESS NOTE AND SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Loan No. Call Collateral Officer
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$35,000.00 06-19-1997 Maturity 06000068293 A100 36 Account 0497 Initials
- ------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Leer's use only and do not limit the
applicabily of this document to any particular loan or item.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Borrower: Hippo, Inc. Lender: BARNETT BANK, N.A.
4400 N. Federal Highway, Suite 410 P.O. BOX 40329
Boca Raton, FL 33431 JACKSONVILLE, FL 32203-0329
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROMISE TO PAY. Hippo, Inc., jointly and severally if more than one
("Borrower"), promises to pay to BARNETT BANK, N.A. ("Lender"), or order, In
lawful money of the United States of America, on demand, the principal amount of
Thirty Five Thousand & .00/100 Dollars ($35,000.00) or so much as may be
outstanding, together with interest on the unpaid balance of principal advanced
from the date(s) of disbursement until paid in full as set forth herein. The
principal amount of this Agreement may be advanced, paid and readvanced in full
or part during the term of this Agreement provided no event of default or demand
for payment exists hereunder. The interest rate an this Agreement is subject to
change from time to time based on changes in an index which is the Barnett
Banks, Inc. prime rate (the "Index"). This is the rate Barnett Banks, Inc.
announces from time to time as its prime rate. The interest rate will be
adjusted to reflect a change in the Index on the same day as the Index changes.
The interest rate to be applied to the unpaid balance of this Agreement will be
at a per annum rate of 2.000 percentage points over the Index. Lender will tell
Borrower the current Index rate upon Borrower's request. NOTICE: Under no
circumstances will the effective rate of interest on this Agreement be more than
the maximum rate allowed by applicable law. Upon demand for payment of this
Agreement, the interest rate on this Agreement to be applied to the unpaid
balance of principal, unpaid accrued interest, costs and fees, to be applicable
until paid in full, will be the highest interest rate permitted by applicable
law.
PAYMENT. Borrower will pay this loan immediately upon Lender's demand. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning July 19, 1997, with all
subsequent interest payments to be due on the same day of each month after that.
Interest on this Agreement is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. This Agreement is due and payable
on demand and subject to being called at any time upon actual demand by Lender.
The inclusion of an interest payment schedule is merely to provide terms for
payment in the absence of actual demand and does not affect or impair Lender's
absolute right to demand payment of this Agreement at any time. Borrower agrees
that Lender may delay demand until, or make demand at anytime before, any
interest payment date. Borrower will pay Lender at Lender's address shown above
or at such other place as Lender may designate in writing. Payments shall be
allocated between principal, interest, costs, fees, if any, in the discretion of
Lender. Any payment to be debited from borrower's designated account will be
debited on the scheduled due date; however, if the scheduled due date is an a
weekend or holiday, the payment will be debited on the next non- weekend/holiday
day.
LOAN FEE. A nonrefundable, non-prorated loan fee of 1.000% of the original
principal amount may be charged at Lender's discretion each annual anniversary
from Date of Note and thereafter. The loan fee may be modified from time to time
by Lender without prior or concurrent notice to Borrower.
LATE CHARGE. If a payment is 10 days or more late, borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $25.00,
whichever is greater. If Lender demands payment of this loan, and Borrower does
not pay the loan within 10 days after Lender's demand, Borrower will also be
charged either 5.000% of the unpaid portion of the sum of the unpaid principal
plus accrued unpaid interest or $25.00, whichever is greater.
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GRANT OF SECURITY INTEREST. Borrower grants to Lender a security interest in the
Collateral to secure the Indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral, in addition to
all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Note and Security
Agreement, as this Business Note and Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Business Note and Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property
of Borrower, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All Inventory, chattel paper, accounts, equipment and general
intangibles
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising,
and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of and
substitution or any property described above.
(b) All products and produce of any of the property described in
this Collateral section.
(c) All accounts, contract rights, general intangibles,
instruments, rents, monies, payments, and all other rights,
arising out of a sale, lease, or other disposition of any
of the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic
media, together with all of Borrower's right, title, and
interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on
electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
hereby including all principal and interest, together with all other
indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents. In addition,
the word "Indebtedness" includes all other present or future obligations,
debts and liabilities, plus interest thereon, of Borrower to Lender.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender and
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each of Lender's affiliates and subsidiaries (whether checking, savings, or some
other account), including without limitation all accounts held jointly with
someone else and all accounts Borrower may open in the future, excluding however
all IRA, Keogh, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender and each of
Lender's affiliates and subsidiaries to the extent permitted by applicable law,
to charge or set off all sums owing on the Indebtedness against any and all such
accounts, and, at Lender's option, to administratively freeze all such accounts
to allow Lender to protect Lender's security interest and charge and set off
rights provided in this paragraph.
GARNISHMENT. Borrower consents to the issuance of a continuing writ of
garnishment or attachment against Borrower's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in part,
any money judgment entered in favor of Lender.
OBLIGATIONS OF BORROWER. Borrower warrants and covenants to Lender as follows:
Purpose. Borrower shall use the proceeds hereof solely for general
business purposes.
Organization; Authorization. Borrower is a corporation which is duly
organized, validly existing, and in good standing under the laws of the
state of Borrower's incorporation. Borrower has its chief executive office
at 4400 N. Federal Highway, Suite 410, Boca Raton, FL 33431. Borrower will
notify Lender of any change in the location of Borrower's chief executive
office. The execution of this Agreement by Borrower has been duly
authorized by all necessary action by Borrower and do not conflict with,
result in a violation of, or constitute a default under any provision of
its articles of incorporation or organization, or bylaws, or any agreement
or other instrument binding upon Borrower.
Perfection of Security Interest; Collateral Issues. Borrower agrees to
execute such financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's security interest in
the Collateral. Upon request of Lender, Borrower will deliver to Lender
any and all of the documents evidencing or constituting the Collateral,
and Borrower will note Lender's interest upon any and all chattel paper if
not delivered to Lender for possession by Lender. Except for inventory
sold or accounts collected in the ordinary course of its business, and
except as otherwise consented to by Lender in writing: (a)Borrower shall
keep the Collateral at Borrower's address shown above, or at such other
locations as are acceptable to Lender; (b) Borrower shall hold good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement; and (c) Borrower shall
defend Lender's rights in the Collateral against the claims and demands of
all other persons. Borrower shall maintain all tangible Collateral in good
condition and repair. Lender and its designated representatives and agents
shall have the right at all reasonable times to examine, inspect, and
audit the Collateral wherever located.
Financial Records; Information. Borrower shall (a) maintain its books and
records in accordance with accounting principles acceptable to Lender,
applied on a consistent basis, and permit Lender to examine and audit
Borrower's books and records at all reasonable times; and (b) furnish such
additional information and statements, lists of assets and liabilities,
agings of receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to Borrower's (and
any Guarantor's) financial condition and business operations as Lender may
request from time to time.
Compliance with Governmental Requirements. Borrower shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to its business and to
the ownership, production, disposition, or use of the Collateral,
including without limitation payment when due of all taxes, assessments
and liens upon the Collateral.
Maintenance of Casualty Insurance. Borrower shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis
reasonably acceptable to Lender and issued by a company or companies
reasonably acceptable to Lender. Borrower, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender. In connection with all policies
covering assets in which Lender holds or is offered a security interest,
Borrower will provide Lender with such loss payable or other endorsements
as Lender may require.
EXPENDITURES BY LENDER. If not paid when due, Lender may (but shall not be
obligated to) pay any (a) taxes, liens, security interests, encumbrances, and
other claims, at any time levied or placed on the Collateral and/or (b) costs
for insuring, maintaining and preserving the Collateral. All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate
charged hereunder from the date incurred or paid by Lender to the date of
repayment by Borrower. All such
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expenses shall become a part of the indebtedness and will be payable on demand.
This Agreement also will secure payment of these amounts. Such right shall be in
addition to all other rights and remedies to which Lender may be entitled upon
the occurrence of an Event of Default. BORROWER ACKNOWLEDGES THAT IF LENDER
PURCHASES ANY INSURANCE ON THE COLLATERAL, THE INSURANCE MAY PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, BORROWER'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the indebtedness.
Other Defaults. Failure of Borrower to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Borrower.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower is false or misleading in
any material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Default under any agreement with any
creditor, or commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other
method, by any creditor of Borrower or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness. This
includes a garnishment of any of Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or such Guarantor dies
or becomes incompetent.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Uniform Commercial Code. In addition and without limitation,
Lender may exercise any one or more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire indebtedness,
including any prepayment penalty which Borrower would be required to pay,
immediately due and payable, without notice, except that in the case of an
Event of Default of the type described in the "Insolvency" section above,
such acceleration shall be automatic.
Sell the Collateral. Lender shall have full power to sell, lease, transfer
or otherwise deal with the Collateral or proceeds thereof in its own name
or that of Borrower. lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender will give
Borrower reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The
requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral shall become a part
of the Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the rate hereon from date of expenditure until
repaid.
Default Rate. Lender may also, at its option, if permitted under
applicable law, do one or more of the following: (a)increase the interest
rate hereon by 5 percentage points, if and to the extent that the increase
does not cause the interest
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rate to exceed the maximum rate permitted by applicable law, and (b)add
any unpaid accrued interest to principal, and such sum will bear interest
therefrom until paid at the rate provided herein (including any increased
rate).
Other Rights and Remedies; Cumulative Nature. Lender shall have all the
rights and remedies of a secured creditor under the provisions of the
Uniform Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies it
may have available at law, in equity, or otherwise. All of Lender's rights
and remedies, whether evidenced by this Agreement or the Related Documents
or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall
not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower under
this Agreement, after Borrower's failure to perform, shall not affect
Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Florida. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the state and
federal courts in the State of Florida. This Agreement shall be governed
by and construed in accordance with the laws of the State of Florida.
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including reasonable attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Agreement. Lender may pay someone else to help enforce this
Agreement, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's reasonable attorneys'
fees and legal expenses whether or not there is a lawsuit, including
reasonable attorneys' fees and legal expenses for bankruptcy proceedings
(and including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also shall pay all court costs and such additional fees
as may be directed by the court.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Borrower, shall
constitute a waiver of any of Lender's rights or of any of Borrower's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
Documentary Stamp; Intangibles Taxes. Borrower agrees to indemnify and
hold Lender harmless against liability for the payment of documentary
stamp and intangibles taxes (including interest and penalties), if
applicable, which may be determined by the Florida Department of Revenue
to be payable with respect to this transaction.
JURISDICTION. In connection with any litigation regarding any matter
arising out of this document or any subsequent agreement between the
parties to this document, each submits to the exclusive jurisdiction of
the state and federal courts located in the State of Florida.
JURY WAIVER; DAMAGES. THE PARTIES TO THIS DOCUMENT ACKNOWLEDGE AND AGREE
THAT (I) ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY ANY PARTY OR ANY SUCCESSOR OR ASSIGN OF ANY SUCH
PARTY, ON OR WITH RESPECT TO THIS DOCUMENT OR ANY OTHER LOAN DOCUMENT OR
THE DEALINGS OF THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE
TRIED ONLY BY A COURT AND NOT BY A JURY AND EACH PARTY WAIVES THE RIGHT TO
TRIAL BY JURY; (II) EACH WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; AND (III) THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT
OF THIS DOCUMENT AND LENDER WOULD NOT EXTEND CREDIT IF THE WAIVERS SET
FORTH IN THIS SECTION WERE NOT A PART OF THIS DOCUMENT.
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BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. BORROWER WAIVES PRESENTMENT, DEMAND FOR PAYMENT,
PROTEST AND NOTICE OF DISHONOR. THIS AGREEMENT IS DATED JUNE 19, 1997.
BORROWER:
Hippo, Inc.
By: /s/ Paul Berger By: /s/ James G. Dodrill
----------------------------------- -----------------------------------
Paul Berger, CEO James G. Dodrill, President
GUARANTY OF INDEBTEDNESS
UNDER
BUSINESS NOTE AND SECURITY AGREEMENT
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EXHIBIT 10.4
REVOLVING ACCOUNTS RECEIVABLE FUNDING AGREEMENT
AGREEMENT between Hippo, Inc., a Delaware corporation having its principal place
of business at 4400 N. Federal Highway, Suite 410, Boca Raton, FL 33431,
hereinafter "Seller", and Gibraltar Financial Corporation, an Illinois
corporation, P.O. Box 66, Deerfield, IL, 60015, hereinafter "Purchaser". THE
PARTIES HEREBY AGREE AS FOLLOWS:
DEFINITIONS
As used in this Agreement:
The Maximum Advance Rate shall be seventy five percent (75%).
Indebtedness shall mean the amount owed by Seller to Purchaser from time to
time, i.e., all Cash Advances from Purchaser to Seller, less all collections
from the Purchased Accounts or from Seller applied to the Indebtedness.
The Maximum Indebtedness shall be one million dollars ($1,000,000.00).
Eligible Purchased Accounts shall mean Purchased Accounts less: a) Purchased
Accounts subject to repurchase pursuant to paragraph 7 hereunder; and b) the sum
of all Purchased Accounts belonging to a single Account Debtor [the party(ies)
obligated to pay the Account] if greater than ten (10%) of the then balance
owing by said Account Debtor remains unpaid after ninety (90)* days from the
date of Seller's original invoice evidencing same. * 120 days if the payment
terms of a Purchased Account is greater than net 60 days.
1. PURCHASE OF ACCOUNTS. From time to time, Seller may tender to Purchase some
or all of its Accounts which are defined as Seller's rights to payment for goods
sold or leased or services rendered. All of Seller's said Accounts, irrespective
of whether same are purchased by Purchaser are herein called "Account(s)".
Purchaser is not obligated to purchase any Account tendered and shall have the
right to purchase such Account(s) tendered as Purchaser, in its sole and
absolute discretion, shall determine. Purchaser will evidence its agreement to
purchase specific Account(s) tendered by issuance of its check or wire transfer
to Seller in the amount set forth in Paragraph 2 hereof. Said accounts are
hereinafter collectively called Purchase Account(s).
2. PAYMENT FOR ACCOUNTS. Purchaser shall, in its sole discretion from time to
time, make cash advances to Seller as the Purchase Price for the Purchased
Accounts ("Cash Advance"); provided, however; a) Seller is not then in default
to Purchase hereunder nor will Seller be in default to Purchaser immediately
after any Cash Advance; b) the ratio of the Indebtedness to Eligible Purchased
Accounts immediately after any Cash Advance is less than the Maximum Advance
Rate; and c) in no event and at no time shall the Indebtedness hereunder be in
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excess of the Maximum Indebtedness. Seller shall deliver the original invoices
(or, at Purchaser's option, copies of same) relating to Purchased Accounts to
Purchaser at such time, and such Purchased Accounts shall be deemed sold and
assigned to Purchaser at such time without any formal assignment being required.
Such Cash Advances made by Purchaser hereunder shall be deemed Indebtedness or
Seller to Purchaser hereunder. At Purchaser's election Indebtedness of Seller to
Purchase hereunder may be further evidenced by notes or other instruments
requested by, and in form satisfactory to Purchaser which Seller agrees to
execute. Any such notes shall be for the amount of the Maximum Indebtedness
above shown or such lesser amount as may exist from time to time hereunder.
3. CHARGES. In consideration of the purchase of said Purchased Accounts, Seller
agrees to pay charges ("Charges") to Purchaser with respect to each Purchased
Account of an amount equal to the sum of: (a) one and one half* (1.5*%) percent
of the face amount thereof due at time of Purchase which shall be deducted from
any Cash Advance; plus (b) interest on the Indebtedness outstanding from time to
time at the rate of twenty four percent (24%) per annum calculated on a 360 day
year and payable monthly. All Charges, unless otherwise provided for herein,
shall be payable monthly and Seller hereby authorized Purchaser to add each
month's Charges as appropriate to Seller's Indebtedness hereunder as of the last
day of the month the Charges were incurred. The calculation by Purchaser of all
Charges and of the Indebtedness for a particular month shall be deemed accepted
by Seller unless contested in writing to Purchaser within thirty (30) days
following the end of such month. *Two (2) percent if the payment terms of a
Purchased Account is greater than net 60 days.
4. COLLECTIONS. All collections from Accounts will be applied to Seller's
Indebtedness hereunder and will be considered collected 5 business days after
receipt assuming same is in fact collected. Seller shall direct all Accounts
Debtors to send all payments for all Accounts directly to Purchaser.
5. POWER OF ATTORNEY. At any time after purchase of a Purchased Account, or if
Seller shall be in default hereunder, Purchaser shall have the right to notify
Account Debtors of Purchaser's rights with respect to the Accounts and to notify
Account Debtors to make payment of the Accounts directly to Purchaser. Purchaser
shall also have the right in its name to compromise or extend the time for
payment of any Account for such amounts, and upon such terms as Purchaser may
determine; to demand, collect, receive and sue for any and all amounts due or to
become due on the Accounts; and to take control of cash and other proceeds of
any Accounts. Seller hereby constitutes Purchaser's President, or any other
person designated by Purchaser, as Seller's attorney-in-fact with full authority
to act for Seller; to endorse Seller's name upon notes, acceptances, checks,
drafts, money orders or other evidences of payment or collateral that may come
into Purchaser's possession; to sign Seller's name on any invoice, freight bill,
bill of lading, storage or warehouse receipt, or other instrument or document in
respect to any Account, to sign Seller's name on UCC financing statements and on
notices to Account Debtors; to send notices and verifications of Accounts to and
collect Accounts from Account Debtors; and to open Seller's mail and take
payments for Accounts. Seller shall in all other ways do all acts and things
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necessary or appropriate to protect, preserve and realize upon the Accounts for
the benefit of Purchaser and to carry out this Agreement and shall not
interfere, directly or indirectly, with any of the rights given Purchaser in
this paragraph. Seller hereby ratified and approves all acts of such attorney or
designee, and such attorney shall not be liable for any acts of omission or
commission, nor for any error of judgment or mistake of fact or law. The powers
granted in this paragraph are coupled with an interest, and are irrevocable
while any Purchased Accounts are unpaid or sums are otherwise owned by Seller to
Purchaser and until this agreement is terminated.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. To induce Purchaser to
purchase Accounts from Seller, with full knowledge that the truth and accuracy
of the following are being relied upon by the Purchaser in the purchase of and
payment for the Purchased Accounts, Seller represents, warrants and covenants to
Purchaser and agrees that: (a) Seller is the sole and absolute owner of each
account and has full legal right to make said sale, assignment and transfer
thereof hereunder; (b) The correct amount owed on each Account is as set forth
on the document tendering such Account to Purchaser and such amount is not in
dispute; (c) The payment of each Account is not contingent upon the fulfillment
of any obligation or condition, past or future, and any and all obligations
required of the Seller with regard to such Account have been fulfilled by
Seller; (d) Each Account is based on an actual sale and delivery of goods and/or
services actually rendered for which an invoice has been tendered to the Account
Debtor, is presently due and owing to Seller, is not past due or in default, has
not been previously sold, assigned, transferred or pledged, and is free of any
encumbrance or lien; (e) There are no defenses, offsets, or counterclaims with
respect to any of the Accounts and no agreement has been made under which the
Account Debtor may claim any deduction or discount, except as otherwise stated
in any of the invoices submitted to Purchaser in connection with the tender of
such Account for purchase; (f) Upon purchase, Seller will convey to Purchaser
good and marketable title to each Purchased Account free and clear of all liens
and encumbrances which shall thereafter be the sole and exclusive property of
the Purchaser; (g) Each Account Debtor is not insolvent as that term is defined
in the United States Bankruptcy Code; (h) The Seller's place of business and the
place where the records concerning all Accounts herein referred to are kept is
the one set forth at the beginning of this Agreement, Seller will promptly
advise Purchaser in writing if such place of business or record keeping is
changed or a new place of business or record keeping is added; (i) All Accounts,
now existing or hereafter arising, shall comply with each and every one of the
representations, warranties, covenants and agreements referred to in this
Paragraph and as otherwise supplemented pursuant to this Agreement; (j) All
sales and other taxes imposed with respect to the Accounts have been remitted by
Seller to the propr taxing authority; (k) All invoices with respect to Purchased
Accounts shall state that the Account is payable to Purchaser at Purchaser's
address; (l) no Account is evidenced by a note or other instrument; (m) Seller
will not, during the terms of this Agreement, sell, transfer, pledge, grant a
security interest in or hypothecate any of its Accounts to any party other than
Purchaser. Seller hereby agrees to indemnify and hold harmless Purchaser from
and against any and all losses, claims, demands, liabilities, suits, actions,
causes of action, administrative proceedings or costs (including attorneys' fees
and costs and expenses of defense) arising out of (1) any breach or violation of
any representation, guarantee or warranty set forth in this Agreement, (2) any
rejection of goods or
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services or alleged claims, defenses or offsets of every kind and nature by any
Account Debtor, or (3) any other breach or violation of this Agreement by
Seller. Each Account shall be the property of the Purchaser and shall be
collected by Purchaser, but if for any reason it should be paid to Seller,
Seller shall promptly notify Purchaser of such payment, shall hold any checks,
drafts, or monies so received in trust for the benefit of Purchaser, and shall
promptly endorse, transfer and deliver the same to the Purchaser, however,
failure to deliver said payment to Purchaser within five business days of
receipt shall result in an additional charge to be paid by Seller to Purchaser
of ten percent of said payment.
7. ASSUMPTION OF RISK. Seller hereby assumes full risk of non-payment, and
hereby unconditionally guarantees the full and prompt payment of the full face
amount of all Purchased Accounts. If any Purchased Account shall remain unpaid
after ninety (90)* days from the date of Seller's original invoice evidencing
same, or if Purchaser shall otherwise deem itself insecure for any reason
whatsoever, or if any Account Debtor shall become bankrupt, insolvent or the
subject or a reorganization, or makes an assignment for the benefit of
creditors, then or any time thereafter, Purchaser, upon notice to Seller, may,
at Purchaser's election a) require Seller to repurchase within five (5) days
thereafter such Purchased Account(s) in which event Seller shall pay to
Purchaser an amount equal to the uncollected balance of such Purchased Account
plus Purchaser's costs relating to the collection of such Purchased Account plus
all other Charges and amounts owed to Purchaser hereunder with respect thereto
or b) deduct such Purchased Account from Eligible Purchased Accounts. Seller's
obligations hereunder shall not be affected by Purchaser's actions or inaction
with respect to such Accounts. *120 days if the payment terms of a Purchased
Account is greater than 60 days.
8. SECURITY INTEREST. As security for the performance of all Seller's
obligations hereunder, including, but not limited to the payment of all amounts
owing Purchaser, and to secure the repayment by Seller to Purchaser of any
amounts which Purchaser, at its option, may hereafter loan to Seller independent
of this agreement, Seller hereby grants to Purchaser a first priority security
interest in all of Seller's presently owned or hereafter acquired assets
including, without limitation, all Accounts, accounts receivable, contract
rights, investment property, chattel paper, general intangibles, instruments,
inventory, equipment, furniture, fixtures, all books, records (computerized or
manual), computer disks and software in connection with all the foregoing, and
all proceeds and products of the foregoing including but not limited to
insurance proceeds, lock box proceeds and deposit accounts. The security
interest specifically includes, without limitation, Seller's rights to any
returned personal property from Account Debtors and also shall include all right
of repleven, reclamation, and stoppage in transit. In the event of any default
by Seller under this Agreement and/or pursuant to any loan which Purchaser may
make to Seller, Purchaser shall have all rights with respect to the aforesaid
collateral of a secured party under the Uniform Commercial Code of the state in
which Seller is located. Seller agrees that it will execute and deliver to
Purchaser such documents, including financing statements, all in form
satisfactory to
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Purchaser, as Purchaser shall, from time to time desire to perfect the security
interest granted to it hereunder. In addition, at Purchaser's request Seller
agrees to enter into and execute, a lock box agreement with a bank designated by
Purchaser in form satisfactory to Purchaser to be applicable to the full term of
this Agreement and thereafter so long as any amounts are, or may be, owed to
Purchaser hereunder.
9. DEFAULT AND REMEDIES. The occurrence of any one or more of the following
events shall constitute a default ("Default") of this Agreement by Seller: (i)
the failure of Seller to repurchase any Purchased Account when required pursuant
to Paragraph 7 hereof; (ii) the failure of Seller to perform any other covenant
or agreement contained herein; (iii) if any warranty or representation of seller
made herein shall be untrue; (iv) the dissolution or termination of existence of
Seller or any of Seller's guarantors hereof (Guarantor); (v) the death of any
Seller or Guarantor if Seller or Guarantor shall be an individual; (vi) if
Seller or Guarantor shall file or have filed against it a petition in bankruptcy
or for reorganization or adjustment of its debts or if Seller or Guarantor shall
make an assignment for the benefit of creditors; (vii) if a tax lien shall be
filed against Seller; (viii) if a judgment shall be entered against Seller which
is not promptly satisfied or if a levy or attachment shall be filed against
Seller or its property; (ix) if the ratio of Indebtedness divided by Eligible
Purchased Accounts is, at any time, in excess of the Maximum Advance Rate; (x)
if the Indebtedness exceeds the Maximum Indebtedness; and/or (xi) if Purchaser
shall deem itself insecure for any reason whatsoever. In the event a Default
shall occur: i) Purchaser shall have the right to require Seller to immediately
repurchase all of the Purchased Accounts for an amount equal to the Indebtedness
then owed by Seller to Purchaser plus all Charges and other amounts due
Purchaser; ii) Seller shall pay to Purchaser all other damages, costs and losses
caused to it by reason of such Default, including, but not limited to reasonable
attorneys' fees, court costs, other collection expenses and all other expenses
and costs incurred or paid by Purchaser to obtain performance or to enforce any
covenant or agreement of Seller hereunder; and iii) Purchaser shall have the
right to enforce all rights which it may have with respect to the security
interest granted to it pursuant to this agreement and specifically, but not by
way of limitation, to notify all Account Debtors of Seller's Accounts to make
all payments directly to Purchaser, to notify and require the U.S. Post Office
to deliver Seller's mail to Purchaser, and to open Seller's mail and take and
endorse for deposit in the name of Seller all payments received upon any of
Seller's Accounts and to deposit same for benefit of Purchaser. In addition to
the Charges in Paragraph 3 above, Seller shall pay Purchaser a late payment
charge equal to eighteen per cent (18%) per annum of any amounts not paid when
due to the date of payment thereof. To the extent permitted by law, Seller
hereby irrevocably authorizes any attorney of any court of record to appear for
Seller in such court, in term time or vacation, at any time after a default
hereunder and confess judgment against Seller, without process in favor of
Purchaser, its successors or assigns, for such amount as may appear due, owing
and unpaid hereunder, together with costs of collection including reasonable
attorney's fees, and to waive and release all errors which may intervene in any
such proceedings, and consent to immediate execution upon such judgment, hereby
ratifying and confirming all that said attorney may do by virtue hereof.
10. TERM AND TERMINATION. This Agreement shall commence as of the date hereof
and shall continue in force and effect beginning from the date that the first
Purchased Account is purchased and continuing for a period of six (6) months
(Initial Term) and shall be automatically
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renewed for successive periods of six (6) months (Renewal Term) unless
terminated as follows: seller may terminate this agreement by so notifying
Purchaser in writing 30 days before the end of any Initial or Renewal term
hereof, provided, however, that all of Purchaser's security interests in assets
of Seller as provided for in paragraph 8 hereof and otherwise and all other
rights pursuant to Paragraphs 5 and 8 hereof shall survive such termination
until all of Seller's obligations to Purchaser have been paid in full and
discharged. Any and all of Seller's representations, agreements, covenants,
obligations, liabilities and undertakings under this Agreement or any collateral
agreements existing prior to any termination hereof shall not be affected by a
termination of this Agreement and shall survive such termination. Seller agrees
that if Purchaser has not purchased accounts during any Initial or Renewal Term
hereof which, in the aggregate, exceed $n/a/ (Minimum Amount), Seller agrees to
pay to Purchaser, on demand, an additional amount equal to what the Charges
pursuant to paragraph 3 a) hereof would have been on said Minimum Amount, less
the actual Charges pursuant to paragraph 3 a) hereof paid by Seller to Purchaser
during said Initial or Renewal Term.
11. NOTICES. Notices required or permitted hereunder shall be in writing and
shall be given by personal delivery or certified or registered mail, postage
prepaid, to the parties at their addresses hereinabove set forth. Such notice
shall be deemed given when delivered or mailed as aforesaid. Either party shall
have the right to change its address by notice as herein provided.
12. CONSTRUCTION. The laws of Illinois shall govern the construction of this
Agreement and the rights, remedies, duties and obligations of the parties hereto
with respect to all transactions hereunder. Any matter or controversy between
Seller and Purchaser shall only be litigated in the state or federal courts
located at Chicago, Illinois, and Seller hereby expressly consents to such
jurisdiction and venue, except that Purchaser shall also have the right to
initiate legal proceedings in any other jurisdiction wherein Purchaser's
collateral may be located and each party hereby submits to the jurisdiction of
such courts. TO THE EXTENT PERMITTED BY LAW, SELLER AND PURCHASER WAIVE THEIR
RIGHT TO TRIAL BY JURY.
13. ASSIGNMENT BY PURCHASER. Purchaser, without notice to Seller, may assign
and/or pledge all of Purchaser's rights hereunder to Purchaser's lender
(Assignee). Seller hereby consents to any such Assignment and agrees that in
such event, upon request of Assignee, it will render all acts, performance and
payment directly to Assignee, said Assignee having all of Purchaser's rights
hereunder but none of Purchaser's obligations.
14. GENERAL. Waiver by Purchaser of any breach or default of this Agreement or
of any warranty, representation, covenant, obligation or guaranty herein shall
not be construed as waiver of any subsequent breach or default. Failure by
Purchaser to exercise any right or remedy hereunder shall not operate as a
waiver of any subsequent breach or default. All rights and remedies are
cumulative and not alternative. This Agreement contains the entire agreement of
the parties and may not be modified except by a written agreement executed by
Seller and Purchaser.
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15. SEVERABILITY. If any provision of this Agreement is held or found to be
illegal, invalid or unenforceable, all other provisions shall nevertheless
continue to be binding on the parties hereto and shall be of full force and
effect.
SELLER: HIPPO, INC.
BY: /S/ Jim Dodrill President DATE: November 25, 1997
--------------------------------
Jim Dodrill (Title)
Accepted at Northbrook, IL this ______________ day of ____________________, 19__
PURCHASER: Gibraltar Financial Corporation
BY:
---------------------------
Ron Winicour, President
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EXHIBIT 10.5
AMENDMENT TO REVOLVING ACCOUNTS RECEIVABLE FUNDING AGREEMENT
DATED: November 25, 1997 (The Agreement) BETWEEN
HIPPO, INC. AS SELLER AND
GIBRALTAR FINANCIAL CORPORATION AS PURCHASER
Notwithstanding anything to the contrary contained in the Agreement, Seller and
Purchaser agree as follows:
Delete Paragraph 8, SECURITY INTEREST, in its entirety, and substitute therefore
the following:
8. SECURITY INTEREST. As security for the performance of all Seller's
obligations hereunder, including, but not limited to the payment of all amounts
owing Purchaser, and to secure the repayment by Seller to Purchaser of any
amounts which Purchaser, at its option, may hereafter loan to Seller independent
of this agreement, Seller hereby grants to Purchaser a first priority security
interest in all of Seller's presently owned or hereafter acquired a) Accounts,
b) accounts receivable, c) inventory, d) insofar as they pertain to the sale of
goods or services in the ordinary course of business, chattel paper and contract
rights, e) all books, records (computerized or manual), computer disks and
software in connection with all the foregoing, and f) all proceeds and products
of the foregoing including but not limited to insurance proceeds, lock box
proceeds. The security interest specifically includes, without limitation,
Seller's rights to any returned personal property from Account Debtors and also
shall include all rights of repleven, reclamation, and stoppage in transit. In
the event of any default by Seller under this Agreement and/or pursuant to any
loan which Purchaser may make to Seller, Purchaser shall have all rights with
respect to the aforesaid collateral of a secured party under the Uniform
Commercial Code of the state in which Seller is located. Seller agrees that it
will execute and deliver to Purchaser such documents, including financing
statements, all in form satisfactory to Purchaser, as Purchaser shall, from time
to time desire to perfect the security interest granted to it hereunder. In
addition, at Purchaser's request Seller agrees to enter into and execute, a lock
box agreement with a bank designated by Purchaser in form satisfactory to
Purchaser to be applicable to the full term of this Agreement and thereafter so
long as any amounts are, or may be, owed to Purchaser hereunder.
Notwithstanding anything to the contrary herein contained, provided Seller is
not in default hereunder, Purchaser shall subordinate its security interest in
the inventory for the purpose of Seller obtaining a loan secured by Seller's
inventory.
All other terms and conditions of the Agreement remain the same.
Dated: November 25, 1997
Seller: Hippo, Inc. /S/ Jim Dodrill
---------------------------
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EXHIBIT 10.6
DEMAND NOTE (SECURED)
FOR VALUE RECEIVED, the undersigned ("Obligor") promises to pay to the
order of Gibraltar Financial Corporation ("Payee") at its principal place of
business in Northbrook, Illinois, or such other place as Payee may designate
from time to time hereafter, the principal sum of $1,000,000.00 or such lesser
or greater principal sum as may then be owed by Obligor to Payee pursuant to
that certain Revolving Accounts Receivable Funding Agreement dated November 25,
1997 and as same may be amended hereafter from time to time (the "Funding
Agreement"). In Addition, Obligor agrees to additionally pay those charges as
provided pursuant to Paragraph 3 of the Funding Agreement and all other amounts
due and owing pursuant to the Funding Agreement. Obligor's obligations and
liabilities to the Payee under this Note and all other obligations and
liabilities of the Obligor to the Payee under the Funding Agreement, whether
primary, secondary, direct, contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable to the Payee by the
Obligor ("Obligor's Liabilities") shall be payable on demand.
To secure the prompt payment of Obligor's Liabilities and the prompt,
full and faithful performance by Obligor of all the provisions to be kept,
observed or performed by the Obligor under this Note and/or pursuant to the
Funding Agreement, Obligor has granted to Payee a security interest in
Obligor's property as more fully set forth and described in the Funding
Agreement. All of said described property is referred to herein individually
and collectively as Collateral.
Regardless of the adequacy of the Collateral, any deposits or other sums
at any time credited by or payable or due from Payee to Obligor, or any monies,
cash, cash equivalents, securities instruments, documents or other assets of
Obligor in the possession or control of Payee or its bailee for any purpose, may
be reduced to cash and applied by Payee to or setoff by Payee against Obligor's
Liabilities.
Payee may take, and Obligor hereby waives notice of, any action from time
to time that payee may deem necessary or appropriate to maintain or protect the
Collateral and Payee's security interest therein, and in particular Payee may at
any time (i) transfer the whole or any part of the collateral into the name of
the Payee or its nominee, (ii) collect any amounts due on Collateral directly
from persons obligated thereon, (iii) take control or any proceeds and products
of Collateral, and/or (iv) sue or make any compromise or settlement with respect
to any Collateral. Obligor hereby releases Payee from any and all causes of
action or claims which Obligor may now or hereafter have for any asserted loss
or damage to Obligor claimed to be caused by or arising from: (a) Payee's taking
any action permitted by this paragraph; (b) any failure of Payee to protect,
enforce or collect in whole or in part any of the Collateral; and/or (c) any
other act or omissions to act on the part of Payee, its officers, agents or
employees, except for willful misconduct.
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Upon demand, (i) all of Obligor's Liabilities shall be immediately due and
payable; (ii) Payee may exercise any one or more of the rights and remedies
accruing to a secured party under the Uniform Commercial Code of the relevant
jurisdiction and any other applicable law upon default by a debtor; (iii) Payee
may enter, with or without process of law and without breach of the peace, any
premises where the Collateral is or may be located, and may seize or remove the
Collateral from said premises and/or remain upon said premises and use the same
for the purpose of collecting, preparing and disposing of the Collateral; and/or
(iv) Payee may sell or otherwise dispose of the Collateral at public or private
sale for cash or credit; provided, however, that Obligor shall be credited with
the net proceeds of any such sale only when the same are actually received by
Payee.
Immediately upon demand by Payee, Obligor shall assemble the Collateral
and make it available to Payee at a place or places to be designated by Payee
which is reasonably convenient to Payee and Obligor.
All of Payee's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Payee of any partial payment made hereunder
after the time when any of Obligor's Liabilities become due and payable will not
establish a custom or waive any rights of Payee to enforce prompt payment
hereof. Payee's failure to require strict performance by Obligor of any
provision of this Note shall not waive, affect or diminish any right of Payee
thereafter to demand strict compliance and performance therewith. Obligor and
every endorser waive presentment, demand and protest and notice of presentment,
protest, default, non-payment, maturity, release, compromise, settlement
extension or renewal of this Note, and hereby ratify and confirm whatever Payee
may do in this regard. Obligor further waives any and all notice or demand to
which Obligor might be entitled with respect to this Note by virtue of any
applicable statue of law (to the extent permitted by law).
Obligor agrees to pay, immediately upon demand by Payee, any and all
costs, fees and expenses (including reasonable attorney's fees, costs and
expenses) incurred by Payee (i) in enforcing any of Payee's rights hereunder,
and (ii) in representing Payee in any litigation, contest, suit or dispute, or
to commence, defend or intervene or to take any action with respect to any
litigation, contest, suit or dispute (whether instituted by Payee, Obligor or
any other person) in any way relating to this Note, Obligor's Liabilities or the
Collateral, and to the extent not paid, the same shall become part of Obligor's
Liabilities.
This Note shall be deemed to have been submitted by Obligor to Payee and
to have been made at Payee's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
Cash Advances under this Note may be made by Payee upon oral or written
request of any person authorized to make such requests on behalf of Obligor
("Authorized Person"). Obligor agrees that Payee may act on requests which Payee
in good faith believes to be made by an Authorized Person, regardless of whether
such requests are in fact made by an Authorized Person.
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Any such advance shall be conclusively presumed to have been made by Payee to or
for the benefit of Obligor. Obligor does hereby irrevocably confirm, ratify and
approve all such Cash Advances by Payee and agrees to indemnify Payee against
any and all loses and expenses (including reasonable attorneys' fees) and shall
hold Payee harmless with respect thereto.
TO INDUCE PAYEE TO ACCEPT THIS NOTE, OBLIGOR IRREVOCABLY AGREES THAT,
SUBJECT TO PAYEE'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
OBLIGOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. OBLIGOR HEREBY WAIVES AND
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST OBLIGOR BY PAYEE IN ACCORDANCE WITH THIS PARAGRAPH.
OBLIGOR IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY AMENDMENT, OR THE FUNDING AGREEMENT, OR (II)
ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS
NOTE OR ANY SUCH AMENDMENT, OR THE FUNDING AGREEMENT, AND AGREES THAT ANY SUCH
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
DATE: November 25, 1997
OBLIGOR:
HIPPO, INC.
BY: /S/ Jim Dodrill
--------------------------
Jim Dodrill, President
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EXHIBIT 10.7
Form of Promissory Note signed by the Company in favor of Paul
Berger, Jim Dodrill and Stanley Berger for all advances made by
them to the Company: This form of note was signed by the
Company in favor of the three individuals for all advances made by
them to the Company, except for the advances made by Stanley
Berger in the three private placement financings.
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__% UNSECURED NON-NEGOTIABLE PROMISSORY NOTE
$____________ New York, New York
____________, 199_
On the earlier of September 30, 1998 or within five business days
following the closing of an offering of securities of the undersigned Outlook
Sports Technology, Inc., a Delaware corporation (the "Maker") resulting in gross
proceeds to the Maker of at least $7,500,000 (the "Maturity Date"), for value
received, the Maker, promises to pay to ___________________ (the "Payee"), the
principal sum of ____________________ United States Dollars ($____________) or
the then outstanding principal amount hereof, together with interest on any and
all principal amounts remaining unpaid hereunder from time to time outstanding
from the date hereof until payment in full, such interest to be payable at such
rates and such times as are hereinafter specified.
1. Interest and Principal
1.01 Interest. The Maker shall pay interest on the outstanding principal
amount of this Note from the date hereof until such principal amount is paid in
full at the rate of ________ percent (__%) per annum.
1.02 Principal. The entire outstanding principal together with interest
accrued thereon on amount of this Note shall be paid on the earlier of September
30, 1998 or within five business days following the closing of an offering of
securities of the Maker resulting in gross proceeds to the Maker of at least
$7,500,000.
1.03 Prepayment. This Note may be prepaid, without premium or penalty, in
whole or in part, at any time or from time to time after __________________,
199_, at the option of the Maker, by paying to the Payee an amount equal to the
amount to be prepaid together with interest accrued thereon through the date of
prepayment.
1.04 Delivery of Payment. All payments made hereunder shall be made by
check mailed first class, postage paid to the Payee at the address set forth
above or to such other address as the Payee may from time to time designate in
writing to the Maker. Such payments shall be accompanied by a notice setting
forth in reasonable detail (a) the amount of interest and principal being paid
and (b) the remaining principal amount. If any payments are required to be made
on a day which is not a Business Day (as hereinafter defined) the date on which
such payment is required to be made shall be extended to, and such payment shall
be required to be made on, the next Business Day. "Business Day" shall mean a
day other than Saturday, Sunday and any day which shall be in the City of New
York, New York, a legal holiday or a day on which banking institutions are
authorized by law to close.
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2. Defaults and Remedies.
2.01 Events of Default. An "Event of Default" shall occur if:
(a) the Maker defaults in the payment of interest on this
Note when the same becomes due and payable and such Default continues
for a period of 30 days;
(b) the Maker defaults in the payment of principal on this
Note when the same becomes due and payable, at maturity or otherwise;
(c) the Maker fails to comply with any of the other
agreements contained in this Note, and the Default continues for the
period and after the notice specified below; and
(d) the Maker pursuant to or within the meaning of any
Bankruptcy Law (as defined below):
(i) commences a voluntary case;
(ii) consents to the entry of an order against it for
relief in an involuntary case; or
(iii) makes a general assignment for the benefit of its
creditors; or
(e) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Maker in an involuntary
case;
(ii) appoints a Custodian (as hereinafter defined) for
all or substantially all of the assets of the
Company; or
(iii) orders a liquidation of the Company.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law. The term "Custodian" means any receiver, trustee,
assignee, liquidator, or similar official under any Bankruptcy Law.
A default under clause (c) above shall not constitute an Event of
Default until Payee notifies the Maker of the Default and the Maker does not
cure the Default within 60 days of such notice. The notice must specify the
Event of Default, demand that it be remedied, and state that it is a notice of
Event of Default.
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<PAGE>
2.02 Acceleration. If an Event of Default occurs and is continuing, the
holder of this Note may, by notice to the Maker, declare the principal of and
accrued interest on this Note to be immediately due and payable.
2.03 Other Remedies. If an Event of Default occurs and is continuing,
the holder of this Note may pursue any available remedy to collect the payment
of interest, principal or premium, if any, on this Note or to enforce any
provision of this Note. A delay or omission by the holder of this Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver or acquiesce in the Event of
Default.
All remedies are cumulative to the extent permitted by law.
3. Usury.
It is the intention of the parties hereto to conform strictly to
applicable usury laws now or hereafter in effect. In the event that any of the
terms or provisions of this Note are in conflict with applicable usury law this
Section 3 shall govern as to such terms or provisions, and this Note shall in
all other respects remain in full force and effect. If any transaction
contemplated hereby would be usurious, it is agreed that the aggregate of all
consideration which constitutes interest under applicable law that is contracted
for, charged or received under this Note shall under no circumstances exceed the
maximum interest allowed by applicable law. Accordingly, if interest in excess
of the legal maximum is contracted for, charged or received: (i) this Note shall
be automatically reformed so that the effective rate of interest shall be
reduced to the maximum rate of interest permitted by applicable law, for the
purpose of determining said rate and to the extent permitted by applicable law,
all interest contracted for, charged or received shall be amortized, prorated
and spread throughout the full term of this Note so that the effective rate of
interest is uniform throughout the life of this Note, and (ii) any excess of
interest over the maximum amount allowed under applicable law shall be applied
as a credit against the then unpaid principal amount hereof.
4. Miscellaneous
The undersigned hereby waives presentment, demand for payment, notice
of dishonor, and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
hereby consents to any extensions of time, renewals, releases of any party to
this Note, waivers or modifications that may be granted or consented to by the
Payee in respect to the time of payment or any other provision of this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
(EXCLUSIVE OF THE LAWS GOVERNING CONFLICTS OF LAWS) OF THE STATE OF NEW YORK.
By:___________________________________
Name:
Title:
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EXHIBIT 10.8
SECURITY AGREEMENT
Hippo, Inc. (the "Debtor") hereby grants to Stanley Berger (the
"Secured Party") a security interest in all of its accounts receivable, whether
now existing or hereafter arising, and all proceeds of such receivables to
secure the full payment by the Debtor of the loan of $25,000 made to the Debtor
by the Secured Party on or about October 1, 1997.
Executed as an agreement under seal of the parties as of this 1st day
of October, 1997.
HIPPO, INC.
By:/s/ Jim Dodrill
-------------------------
Title: President
/s/ Stanley Berger
-------------------------
Stanley Berger
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EXHIBIT 10.9
December 3, 1997
Gibraltar Financial Corporation
60 Revere Drive
Suite 840
Northbrook, IL 60062
Gentlemen:
In consideration of Gibraltar Financial Corporation (Gibraltar) entering into a
Revolving Accounts Receivable Funding Agreement with Hippo, Inc. (Debtor), and
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned hereby subordinates to Gibraltar any and all
right, title and interest the undersigned may have in the following assets of
Debtor (the Collateral):
All Debtor's existing or hereafter arising a) Accounts, b) accounts receivable,
c) inventory, d) insofar as they pertain to the sale of goods or services in the
ordinary course of business, chattel paper and contract rights, e) and all
books, records, (computerized or manual), computer disks and software in
connection with all the foregoing, and f) all proceeds and products of the
foregoing including but not limited to insurance proceeds, and lock box
proceeds. The subordination specifically includes, without limitation, Seller's
rights to any returned personal property from Account Debtors and also shall
include all rights of replevin, reclamation, and stoppage in transit.
The subordination and priorities established by this Agreement shall prevail
irrespective of the time, order, manner or method of creation, attachment or
perfection of the respective security interests and/or liens held by Gibraltar
and the undersigned.
The undersigned agrees to execute, upon request, the appropriate UCC forms to
effect the foregoing.
Sincerely,
X /s/ Stanley Berger
--------------------------
Stanley Berger
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Exhibit 10.10
Date: January 24, 1997
NON-QUALIFIED STOCK OPTION GRANTED
by
HIPPO, INC.
(hereinafter called the "Company")
to
Paul Berger
(hereinafter called the "Holder")
WITNESSETH:
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company at the
option price of $.16 per share an aggregate of 88,100 shares of Common Stock of
the Company, $.01 par value, at the time and in the manner hereinafter stated.
The Holder shall have the right and option to purchase hereunder any or
all of such shares as follows:
(a) 25 % of the shares on the first day of the first calendar quarter
of 1997; and
(b) an additional 25 % of the shares on the first day of each remaining
calendar quarter of 1997.
Except as otherwise provided herein, such right and option to purchase shares
shall terminate seven years from the date hereof.
This option shall be exercised by the delivery of written notice to the
Company setting forth the number of shares with respect to which the option is
to be exercised, together with (a) cash, certified check, bank draft or postal
or express money order payable to the order of the Company for an amount equal
to the option price of such shares, or (b) with the consent the Board of
Directors of the Company (the "Board"), shares of Common Stock of the Company
having a fair market value equal to the option price of such shares, or (c) with
the consent of the
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Board, a combination of (a) and (b), and specifying the address to which the
certificates for such shares are to be mailed. For the purpose of the preceding
sentence, the fair market value of the shares of Common Stock so delivered to
the Company shall be the fair market value thereof as determined in good faith
by the Board.
SECOND: As a condition precedent to any exercise of this option, the
Holder (or if any other individual or individuals are exercising this option,
such individual or individuals) shall deliver to the Company an investment
letter in form and substance satisfactory to the Company's counsel which shall
contain, among other matters, a statement in writing that the option is then
being exercised only with a view to investment in, and not with a view to the
disposition of, the shares with respect to which the option is then being
exercised; that the Holder and/or his attorneys, accountants, and/or advisors
have fully investigated the Company and the business and financial conditions
concerning it and have knowledge of the Company's then current corporate
activities and financial condition; and that the Holder believes that the nature
and amount of the shares being purchased by him are consistent with his
investment objectives, abilities and resources. The condition and restriction
imposed by this paragraph and any investment representation made pursuant to
this paragraph shall be inoperative at any time when there shall be an effective
registration statement under the Securities Act of 1933 covering the stock
subject to this option or acquired through the exercise of this option.
THIRD: As promptly as practicable after receipt of the written notice
and payment described in paragraph FIRST and, if required as a condition to
exercise, the investment letter described in paragraph SECOND, the Company shall
deliver or cause to be delivered to the Holder (or if any other individual or
individuals are exercising this option, to such individual or individuals) at
the address specified pursuant to paragraph FIRST hereof a certificate or
certificates for the number of shares with respect to which the option is then
being exercised, registered in the name or names of the individual or
individuals exercising the option, either alone or jointly with another person
or persons with rights of survivorship, as the individual or individuals
exercising the option shall prescribe in writing to the Company at or prior to
such purchase; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent shall have deposited
such certificate or certificate in the United States mail, addressed to the
Holder (or such individual or individuals) at the address so specified; and
provided further that if any law or regulation or order of the Securities and
Exchange Commission or other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificates for such shares shall
be extended until such action shall be taken and completed, it being understood
that the Company shall have no obligation to take and complete any such action.
The Holder acknowledges that he has been advised to consult his tax
adviser with respect to the tax consequences of the grant and exercise of this
option. If federal, state or local law shall require that the Company withhold
or pay in connection with exercise of this option any taxes or other charges,
then the Company shall be entitled either (a) as an additional condition
precedent
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to any exercise of this option, to require that the Holder pay to the Company in
cash at the time of exercise an amount equal to the amount of any such taxes or
charges or (b) to deduct such amount from payments of any kind otherwise due to
the Holder.
FOURTH: The existence of this option shall not affect in any way the
right or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any issue of
bonds, debentures, preferred or prior preference stock or other capital stock
ahead of or affecting the Common Stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number o shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then the number,
class, and price per share of stock subject to this option shall be
appropriately adjusted in such a manner as to entitle the Holder to receive upon
exercise of this option, for the same aggregate consideration, the same total
number and class of shares as the Holder would have received as a result of the
event requiring the adjustment had the Holder exercised this option in full
immediately prior to such event.
After a merger of one or more corporations with or into the Company, or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, the Holder shall, at no additional cost, be
entitled upon exercise of this option to receive in lieu of the shares of Common
Stock as to which this option was exercisable immediately prior to such event,
the number and class of shares of stock or other securities, cash or property
(including, without limitation, shares of stock or other securities of another
corporation or Common Stock) to which the Holder would have been entitled
pursuant to the terms of the merger or consolidation if, immediately prior to
such merger or consolidation, the Holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as to which this
option shall be so exercised.
If the Company is merged with or into or consolidated with another
corporation under circumstances where stockholders of the Company immediately
prior to such merger or consolidation do not own after such merger or
consolidation shares representing at least fifty percent (50%) of the voting
power of the Company or the surviving or resulting corporation, as the case may
be, or if shares representing fifty percent (50%) or more of the voting power of
the Company are transferred to an Unrelated Third Party, as hereinafter defined,
or if the Company is liquidated, or sells or otherwise disposes of substantially
all its assets while this option remains
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outstanding, after the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be (the "Transaction"), the
Holder of this option shall at n extra cost be entitled, upon exercise of this
option, to receive, in lieu of the shares of Common Stock as to which this
option was exercisable immediately prior to the Transaction, the number and
class of shares of stock or other securities, cash or property (including,
without limitation shares of stock or other securities of another corporation or
Common Stock) to which the Holder would have been entitled pursuant to the terms
of the Transaction if, immediately prior to such event, the Holder had been the
holder of record of a number of shares of Common Stock equal to the number of
such shares as to which this option shall be so exercised.
"Unrelated Third Party" shall mean any person who is not, as
of the date of grant of this option, a holder of stock of any class or
preference or any stock option of the Company.
Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this option.
Notwithstanding the foregoing provisions of this paragraph FOURTH, in
no event shall the exercise price of this option be less than the par value per
share of the Common Stock or other stock for which this option is exercisable.
If any adjustment or right specified in this paragraph by its terms would permit
the Holder on exercise of this option to purchase any share of Common Stock or
any other stock for less than the par value thereof, the Holder shall
nevertheless be required to pay such par value as the exercise price under this
option.
FIFTH: No person shall, by virtue of the granting of this option to the
Holder, be deemed to be a holder of any shares purchasable under this option or
to be entitled to the right or privileges of a holder of such shares unless and
until this option has been exercised with respect to such shares and they have
been issued pursuant to that exercise of this option.
The granting or exercise of this option shall not impose upon the
Company any obligation to employ or to continue to employ the Holder or to have
or continue the Holder in any other position at the Company, and the right of
the Company to terminate the employment of the Holder or to remove the Holder
from any other position at the Company shall not be diminished or affected by
reason of the fact that this option has been granted to, or exercised by, the
Holder.
The Company shall, at all times while any portion of this option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued stock or reacquired shares, a sufficient number of shares of its Common
Stock to satisfy the requirements of this option; shall comply with the terms of
this option promptly upon exercise of the option rights; and shall pay
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<PAGE>
all fees or expenses necessarily incurred by the Company in connection with the
issuance and delivery of shares pursuant to the exercise of this option.
SIXTH: This option is not transferable by the Holder otherwise than by
will or the laws of descent and distribution, and is exercisable, during the
Holder's lifetime, only by the Holder.
In the event of the death of the Holder and before the
expiration date of this option, this option shall terminate on the earlier of
its expiration date and a date one hundred eighty (180) days after the Holder's
death. After the death of the Holder, the Holder's executors, administrators or
any person or persons to whom this option may be transferred by will or by the
laws of descent and distribution shall have the right, at any time prior to such
termination, to exercise such option to the extent the Holder was entitled to
exercise such option immediately prior to the Holder's death.
SEVENTH: Any notice to be given to the Company hereunder shall be
deemed sufficient if addressed to the Company and delivered by hand or by mail
to the President of the Company, 4400 North Federal Highway, Suite 210, Boca
Raton, Florida 33431 or such other address as the Company may hereafter
designate.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at the Holder's
address furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
EIGHTH: This option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that the Holder will not
exercise the option granted hereby nor will the Company be obligated to issue or
sell any shares of stock hereunder if the exercise thereof or the issuance or
sale of such shares, as the case may be, would constitute a violation by the
Holder or the Company of any such law, regulation or order or any provision
thereof. The Company shall not be obligated to take any action in order to cause
the exercise of this option or the issuance of shares pursuant hereto to comply
with any such law, regulation, order or provision.
NINTH: By exercising this option, the Holder shall be deemed to agree
to the following procedure with respect to the Company's shares obtained through
such exercise: Upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, the Holder shall agree in
writing that for a period of time (not to exceed 180 days) from the effective
date of any registration of securities of the Company the Holder will not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares issued pursuant to the exercise of this option, without
the prior written consent of the Company or such underwriters, as the case may
be.
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TENTH: This option shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the date first above written.
HIPPO, INC.
By: /s/ Paul Berger
-------------------------
Chairman of the Board
ATTEST:
/s/ Jim Dodrill
- -------------------------
Secretary
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Exhibit 10.11
Date: September 5, 1996
NON-QUALIFIED STOCK OPTION GRANTED
by
HIPPO, INC.
(hereinafter called the "Company")
to
James G. Dodrill, II
(hereinafter called the "Holder")
WITNESSETH:
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company at the
option price of $.05 per share an aggregate of 264,300 shares of Common Stock of
the Company, $.01 par value, at the time and in the manner hereinafter stated.
The Holder shall have the right and option to purchase hereunder any or all of
such shares beginning on the date hereof. Except as otherwise provided herein,
such right and option to purchase shares shall terminate seven years from the
date hereof.
This option shall be exercised by the delivery of written notice to the
Company setting forth the number of shares with respect to which the option is
to be exercised, together with (a) cash, certified check, bank draft or postal
or express money order payable to the order of the Company for an amount equal
to the option price of such shares, or (b) with the consent of the Board of
Directors of the Company (the "Board"), shares of Common Stock of the Company
having a fair market value equal to the option price of such shares, or (c) with
the consent of the Board, a combination of (a) and (b), and specifying the
address to which the certificates for such shares are to be mailed. For the
purpose of the preceding sentence, the fair market value of the shares of Common
Stock so delivered to the Company shall be the fair market value thereof as
determined in good faith by the Board.
SECOND: As a condition precedent to any exercise of this option, the
Holder (or if any other individual or individuals are exercising this option,
such individual or individuals) shall deliver to the Company an investment
letter in form and substance satisfactory to the Company's
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<PAGE>
counsel which shall contain, among other matters, a statement in writing that
the option is then being exercised only with a view to investment in, and not
with a view to the disposition of, the shares with respect to which the option
is then being exercised; that the Holder and/or his attorneys, accountants,
and/or advisors have fully investigated the Company and the business and
financial conditions concerning it and have knowledge of the Company's then
current corporate activities and financial condition; and that the Holder
believes that the nature and amount of the shares being purchased by him are
consistent with his investment objectives, abilities and resources. The
condition and restriction imposed by this paragraph and any investment
representation made pursuant to this paragraph shall be inoperative at any time
when there shall be an effective registration statement under the Securities Act
of 1933 covering the stock subject to this option or acquired through the
exercise of this option.
THIRD: As promptly as practicable after receipt of the written notice
and payment described in paragraph FIRST and, if required as a condition to
exercise, the investment letter described in paragraph SECOND, the Company shall
deliver or cause to be delivered to the Holder (or if any other individual or
individuals are exercising this option, to such individual or individuals) at
the address specified pursuant to paragraph FIRST hereof a certificate or
certificates for the number of shares with respect to which the option is then
being exercised, registered in the name or names of the individual or
individuals exercising the option, either alone or jointly with another person
or persons with rights of survivorship, as the individual or individuals
exercising the option shall prescribe in writing to the Company at or prior to
such purchase; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent shall have deposited
such certificate or certificates in the United States mail, addressed to the
Holder (or such individual or individuals) at the address so specified; and
provided further that if any law or regulation or order of the Securities and
Exchange Commission or other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificates for such shares shall
be extended until such action shall be taken and completed, it being understood
that the Company shall have no obligation to take and complete any such action.
The Holder acknowledges that he has been advised to consult his tax
adviser with respect to the tax consequences of the grant and exercise of this
option. If federal, state or local law shall require that the Company withhold
or pay in connection with exercise of this option any taxes or other charges,
then the Company shall be entitled either (a) as an additional condition
precedent to any exercise of this option, to require that the Holder pay to the
Company in cash at the time of exercise an amount equal to the amount of any
such taxes or charges or (b) to deduct such amount from payments of any kind
otherwise due to the Holder.
FOURTH: The existence of this option shall not affect in any way the
right or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any
2
<PAGE>
issue of bonds, debentures, preferred or prior preference stock or other capital
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then the number,
class, and price per share of stock subject to this option shall be
appropriately adjusted in such a manner as to entitle the Holder to receive upon
exercise of this option, for the same aggregate consideration, the same total
number and class of shares as the Holder would have received as a result of the
event requiring the adjustment had the Holder exercised this option in full
immediately prior to such event.
After a merger of one or more corporations with or into the Company, or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, the Holder shall, at no additional cost, be
entitled upon exercise of this option to receive in lieu of the shares of Common
Stock as to which this option was exercisable immediately prior to such event,
the number and class of shares of stock or other securities, cash or property
(including, without limitation, shares of stock or other securities of another
corporation or Common Stock) to which the Holder would have been entitled
pursuant to the terms of the merger or consolidation if, immediately prior to
such merger or consolidation, the Holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as to which this
option shall be so exercised.
If the Company is merged with or into or consolidated with another
corporation under circumstances where stockholders of the Company immediately
prior to such merger or consolidation do not own after such merger or
consolidation shares representing at least fifty percent (50%) of the voting
power of the Company or the surviving or resulting corporation, as the case may
be, or if shares representing fifty percent (50%) or more of the voting power of
the Company are transferred to an Unrelated Third Party, as hereinafter defined,
or if the Company is liquidated, or sells or otherwise disposes of substantially
all its assets while this option remains outstanding, after the effective date
of such merger, consolidation, liquidation, sale or disposition, as the case may
be (the "Transaction"), the Holder of this option shall at no extra cost be
entitled, upon exercise of this option, to receive, in lieu of the shares of
Common Stock as to which this option was exercisable immediately prior to the
Transaction, the number and class of shares of stock or other securities, cash
or property (including, without limitation, shares of stock or other securities
of another corporation or Common Stock) to which the Holder would have been
entitled pursuant to the terms of the transaction if, immediately prior to such
event, the
3
<PAGE>
Holder had been the holder of record of a number of shares of Common Stock equal
to the number of such shares as to which this option shall be so exercised.
"Unrelated Third Party" shall mean any person who is not, as of the
date of grant of this option, a holder of stock of any class or preference or
any stock option of the Company.
Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this option.
Notwithstanding the foregoing provisions of this paragraph FOURTH, in
no event shall the exercise price of this option be less than the par value per
share of the Common Stock or other stock for which this option is exercisable.
If any adjustment or right specified in this paragraph by its terms would permit
the Holder on exercise of this option to purchase any share of Common Stock or
any other stock for less than the par value thereof, the Holder shall
nevertheless be required to pay such par value as the exercise price under this
option.
FIFTH: No person shall, by virtue of the granting of this option to the
Holder, be deemed to be a holder of any shares purchasable under this option or
to be entitled to the rights or privileges of a holder of such shares unless and
until this option has been exercised with respect to such shares and they have
been issued pursuant to that exercise of this option.
The granting or exercise of this option shall not impose upon the
Company any obligation to employ or to continue to employ the Holder or to have
or continue the Holder in any other position at the Company, and the right of
the Company to terminate the employment of the Holder or to remove the Holder
from any other position at the Company shall not be diminished or affected by
reason of the fact that this option has been granted to, or exercised by, the
Holder.
The Company shall, at all times while any portion of this option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued stock or reacquired shares, a sufficient number of shares of its Common
Stock to satisfy the requirements of this option; shall comply with the terms of
this option promptly upon exercise of the option rights; and shall pay all fees
or expenses necessarily incurred by the Company in connection with the issuance
and delivery of shares pursuant to the exercise of this option.
SIXTH: This option is not transferable by the Holder otherwise than by
will or the laws of descent and distribution, and is exercisable, during the
Holder's lifetime, only by the Holder.
In the event of the death of the Holder and before the expiration date
of this option, this option shall terminate on the earlier of its expiration
date and a date one hundred eighty (180)
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<PAGE>
days after the Holder's death. After the death of the Holder, the Holder's
executors, administrators or any person or persons to whom this option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior termination, to exercise such option to the extent the
Holder was entitled to exercise such option immediately prior to the Holder's
death.
SEVENTH: Any notice to be given to the Company hereunder shall be
deemed sufficient if addressed to the Company and delivered by hand or by mail
to the President of the Company, 4400 North Federal Highway, Suite 210, Boca
Raton, Florida 33431 or such other address as the Company may hereafter
designate.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at the Holder's
address furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
EIGHTH: This option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that the Holder will not
exercise the option granted hereby nor will the Company be obligated to issue or
sell any shares of stock hereunder if the exercise thereof or the issuance or
sale of such shares, as the case may be, would constitute a violation by the
Holder or the Company of any such law, regulation or order or any provision
thereof. The Company shall not be obligated to take any action in order to cause
the exercise of this option or the issuance of shares pursuant hereto to comply
with any such law, regulation, order or provision.
NINTH: By exercising this option, the Holder shall be deemed to agree
to the following procedure with respect to the Company's shares obtained through
such exercise: Upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, the Holder shall agree in
writing that for a period of time (not to exceed 180 days) from the effective
date of any registration of securities of the Company the Holder will not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares issued pursuant to the exercise of this option, without
the prior written consent of the Company or such underwriters, as the case may
be.
TENTH: This option shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the date first above written.
HIPPO, INC.
By: /s/ Paul Berger
-------------------------
Chairman of the Board
ATTEST
/s/ Jim Dodrill
- -------------------
Secretary
6
<PAGE>
EXHBIT 10.12
Form of Warrant for the purchase of the Common Stock of the Company
received by Stanley Berger as consideration for advances made by him to
the Company: This form of warrant was signed by the Company as
consideration to Stanley Berger for all advances made by him to the
Company, except for (i) the advance made by him on October 1, 1997 for
which he received a security interest in all of the Company's accounts
receivable, and (ii) all of the advances made by him as a participant
in the Company's three private placement financings.
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<PAGE>
THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
Non-Transferable
Common Stock Purchase Warrant
HIPPO, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received, Stanley Berger ("Holder") is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time on or after the date hereof and prior to 5:00 P.M., New York City time, on
the Expiration Date, ___________ (subject to adjustment hereafter as provided in
Section 2, the "Warrant Number") fully paid and non-assessable shares of Common
Stock at a price per share of $____ as of the date hereof, subject to adjustment
hereafter as provided in Section 2 (the "Purchase Price").
Certain capitalized terms used herein shall have the meanings set forth
in Section 6.
Section 1. EXERCISE OF WARRANT.
1.1. Exercise. This Warrant may be exercised by Holder, in whole or in
part, at any time and from time to time by surrender of this Warrant, together
with (i) the form of subscription at the end hereof duly executed by Holder, to
the Company at its principal office, and (ii) payment, by certified or official
bank check payable to the order of the Company or by wire transfer to its
account, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then being exercised by the Purchase Price then
in effect. In the event the Warrant is not exercised in full, the Company, at
its expense, shall forthwith issue and deliver to or upon the order of Holder a
new Warrant of like tenor in the name of Holder or as Holder (upon payment by
Holder of any applicable transfer taxes) may request, calling in the aggregate
on the face thereof for the number of shares of Common Stock equal (without
giving effect to any adjustment therein) to (i) the number of such shares called
for on the face of this Warrant minus (ii) the number of such shares for which
this Warrant shall have been exercised (without giving effect to any adjustment
in number as a result of changes in the Purchase Price called for above).
1.2 Delivery of Stock Certificates. Subject to the terms and conditions
of this Agreement, as soon as practicable after the exercise of this Warrant in
full or in part, the Company at its
2
<PAGE>
expense (including, without limitation, the payment by it of any applicable
issue taxes) will cause to be issued in the name of and delivered to Holder, or
as Holder (upon payment by Holder of any applicable transfer taxes) may direct,
a certificate or certificates for the number of fully paid and non-assessable
shares of Common Stock to which Holder shall be entitled on such exercise,
together with any other stock or other securities and property (including cash,
where applicable) to which Holder is entitled upon such exercise.
1.3. Fractional Shares. This Warrant may not be exercised as to
fractional shares of Common Stock. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event Holder shall be entitled to cash equal
to the value of such fractional share on the basis of the mean between the low
bid and high asked prices of the Common Stock on the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotations
System or the closing market price of the Common Stock on a national securities
exchange on the trading day immediately prior to the date of exercise, whichever
is applicable, or if neither is applicable, then on the basis of the then market
value of the Common Stock as it shall be reasonably determined by the Board of
Directors of the Company.
1.4. Compliance with Law. This Warrant is subject to all laws,
regulations and orders of any governmental authority that may be applicable
hereto and, notwithstanding any of the provisions hereof, the Holder agrees that
the Holder will not exercise the Warrant nor will the Company be obligated to
issue any shares of stock hereunder if exercise thereof or the issuance of such
shares, as the case may be, would constitute a violation by the Holder or the
Company of any such law, regulation or order or any provision thereof. As a
consequence, the Holder may not be able to exercise this Warrant if it is not an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act as of the time of exercise. The Company shall not be obligated to
take any affirmative action in order to cause the exercise of this Warrant or
the issuance of shares pursuant hereto to comply with any such law, regulation,
order or provision.
Section 2. ADJUSTMENTS.
2.1. Adjustment for Stock Dividends. In case the Company shall pay a
dividend or make any other distribution on any class of capital stock of the
Company in shares of Common Stock, the Purchase Price in effect at the close of
business on the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Purchase Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares of Common Stock constituting such dividend
or other distribution, such reduction to become effective immediately prior to
the opening of business on the day following the date fixed for such
determination. For the purposes of this Section 2.1, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company.
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2.2. Adjustment for Stock Subdivisions and Combinations. In case
outstanding shares of Common Stock shall be subdivided into a greater number of
shares of Common Stock, the Purchase Price in effect at the close of business on
the day upon which such subdivision becomes effective shall be proportionately
reduced and, conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Purchase Price in
effect at the opening of business on the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately prior to the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
2.3. Computation of Adjusted Purchase Price. Whenever the Purchase
Price is adjusted as provided in this Section 2:
(a) The Company shall compute the adjusted Purchase Price to
the nearest one-hundredth of a cent in accordance with this Section 2 and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Purchase Price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be filed at the office maintained pursuant to Section 3.3;
(b) A notice stating that the Purchase Price has been adjusted
and setting forth the adjusted Purchase Price shall, as soon as practicable
after it is required, be mailed to Holder; and
(c) At its option, Holder may confirm the adjustment noted on
the certificate by causing such adjustment to be computed by an independent
certified public accountant at the expense of the Company.
2.4. Minimum Adjustment. No adjustment in the Purchase Price shall be
required under this Section 2 unless such adjustment would require an increase
or decrease of at least one percent in such price; provided, however, that any
adjustments that by reason of this Section 2.4 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 2 shall be made to the nearest one-hundredth of
a cent or to the nearest one-hundredth of a share as the case may be.
2.5. Adjustment of Warrant Number. When any adjustment is required to
be made in the Exercise Price, the Warrant Number shall be changed to the number
determined by dividing (i) an amount equal to the Warrant Number immediately
prior to such adjustment, multiplied by the Exercise Price in effect immediately
prior to such adjustment, by (ii) the Exercise Price in effect immediately after
such adjustment.
Section 3. CERTAIN OBLIGATIONS OF THE COMPANY.
3.1. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available out of its authorized and unissued Common Stock
or out of shares of its treasury
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stock, solely for the purpose of issue upon exercise of the purchase rights
evidenced by this Warrant, a number of shares of Common Stock equal to the
number of shares of Common Stock issuable hereunder. The Company will from time
to time, in accordance with the laws of the State of Delaware, take action to
increase the authorized amount of its Common Stock if at any time the number of
shares of Common Stock authorized but remaining unissued and unreserved for
other purposes shall be insufficient to permit the exercise of this Warrant.
3.2. No Valuation or Impairment. The Company will not, by amendment of
its Certificate of Incorporation, including, without limitation, amendment of
the par value of its Common Stock, or through reorganization, consolidation,
merger, dissolution, issuance of capital stock or sale of treasury stock
(otherwise than upon exercise of this Warrant) or sale of assets, or by any
other voluntary act or deed, avoid or seek to avoid the material performance or
observance of any of the covenants, stipulations or conditions in this Warrant
to be observed or performed by the Company. The Company will at all times in
good faith assist, insofar as it is able, in the carrying out of all of the
provisions of this Warrant in a reasonable manner and in the taking of all other
action that may be necessary in order to protect the rights of the holder of
this Warrant against dilution in the manner required by the provisions of this
Warrant.
3.3. Maintenance of Office. The Company will maintain an office where
presentations and demands to or upon the Company in respect of this Warrant may
be made. The Company will give notice in writing to Holder, at the address of
Holder appearing on the books of the Company, of each change in the location of
such office.
Section 4. REORGANIZATION, ETC.
If any reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another corporation, or
sale of all or substantially all of its assets to another corporation or other
Person shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby Holder shall thereafter have the right to purchase and
receive upon the terms and conditions herein specified and in lieu of the shares
of Common Stock of the Company immediately theretofore purchasable and
receivable upon exercise of this Warrant such securities or property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this Warrant had
such reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Purchase Price
and of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any securities or
property thereafter deliverable upon the exercise hereof. The Company shall not
effect any such reorganization, consolidation, merger or sale unless, prior to
or contemporaneously with the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or merger or the
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corporation or other Person purchasing such assets shall assume by written
instrument executed and delivered to Holder, the obligation to deliver to Holder
such securities or property as, in accordance with the foregoing provisions,
Holder may be entitled to purchase or receive.
Section 5. NOTICES OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger of
the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such event, the Company will give to Holder a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock for securities or other
property deliverable on such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date specified in such
notice on which any such action is to be taken.
Section 6. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
6.1. The term Common Stock means the Company's Common Stock, par value
$.01 per share, and any other securities into which or for which the Common
Stock is converted or exchanged pursuant to a plan of reclassification,
reorganization, consolidation, merger, sale of assets, dissolution, liquidation,
or otherwise.
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6.2. The term Expiration Date shall mean the fifth anniversary of the
date of this Warrant.
6.3. The term Person shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization or
any government, governmental department or agency or political subdivision
thereof.
6.4. The term Warrant Stock shall mean any equity security issued upon
exercise of this Warrant.
Section 7. REPLACEMENT OF WARRANTS.
Upon (a) surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant and (b) in the case of any loss, theft or destruction of any Warrant,
receipt of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company, then, in the absence of actual notice to the Company
that this Warrant has been acquired by a bona fide purchaser, the Company, at
its expense, shall execute and deliver, in lieu of this Warrant, a new Warrant
identical in form to this Warrant.
Section 8. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms hereof
or otherwise.
Section 9. TRANSFER.
(i) This Warrant and the shares of Common Stock issuable hereunder
shall not be sold, transferred, pledged or hypothecated unless the proposed
disposition is the subject of a Federal currently effective registration
statement under the Securities Act or unless the Company has received an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition. Subject to the first sentence of this Section, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the registered holder thereof in person or by a duly
authorized attorney, upon surrender of this Warrant together with an assignment
hereof properly endorsed. Until transfer hereof on the registration books of the
Company, the Company may treat the existing registered holder hereof as the
owner hereof for all purposes. Any transferee of this Warrant and any rights
hereunder, by acceptance thereof, agrees to assume all of the obligations of
Holder and to be bound by all of the terms and provisions of this Warrant.
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(ii) This Warrant is not transferable in any case except with the prior
written consent of the Company, which consent may be withheld in its sole
discretion.
Section 10. NOTICES.
Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail,
postage prepaid, (iii) telegraphed or (iv) telexed or sent by facsimile
transmission, and shall be deemed given when so delivered personally,
telegraphed, telexed, sent by facsimile transmission (confirmed in writing) or
mailed. Notices shall be addressed, if to Holder, to the address of Holder
appearing in the Company's records or, if to the Company, to its office
maintained pursuant to Section 3.3.
Section 11. MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if any,
that it may legally be enforced and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware without regard to its principles of conflicts of
laws. The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof. This Warrant shall take
effect as an instrument under seal.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
Dated as of HIPPO, INC.
----------------------
(Corporate Seal) By:
Chairman of the Board
Attest:
- ----------------------------------
Secretary
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FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: HIPPO, INC.
The undersigned, the holder of the within Common Stock Purchase
Warrant, hereby irrevocably elects to exercise this Common Stock Purchase
Warrant for, and to purchase thereunder * shares of Common Stock of HIPPO, INC.
(the "Company") and herewith makes payment of $ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to , whose
address is
.
Dated:
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
(Address)
*Insert here the number of shares (all or part of the number of shares
called for in the Common Stock Purchase Warrant) as to which the Common Stock
Purchase Warrant is being exercised without making any adjustment for any other
stock or other securities or property or cash that, pursuant to the adjustment
provisions of the Common Stock Purchase Warrant, may be deliverable on exercise.
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FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto of
the right represented by the within Common Stock Purchase Warrant to purchase
shares of Common Stock of HIPPO, INC. to which the within
Common Stock Purchase Warrant relates, and appoints , Attorney to transfer such
right on the books of HIPPO, INC. with full power of substitution in the
premises.
Dated:
(Signature must conform in all respects to
name of Holder as specified on the face of the
Warrant)
(Address)
Signed in the presence of:
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EXHIBIT 10.13
Form of Promissory Note signed by the Company in favor of all participants in a
private financing between February 4, 1997 and April 30, 1997: This form of note
was signed by the Company in favor of all participants in a private financing
between February 4, 1997 and April 30, 1997, including one note in favor of
Stanley Berger, an affiliate of the Company, who invested in the amount of
$25,000.
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
NON-TRANSFERABLE 12.5% NOTE
$100,000 ___________, 1997
Boca Raton, Florida
For value received, Hippo, Inc., a Delaware corporation (the
"Company"), with its principal office at 4400 North Federal Highway, Suite 410,
Boca Raton, Florida 33431, promises to pay to the order of _______________ at
____________________________________________________ (the "Payee"), on the
earlier of (i) September 30, 1997 or (ii) five business days following the date
on which the Company completes an offering of its securities resulting in gross
proceeds to the Company of at least $7,500,000 (the "Maturity Date"), the
principal amount of One Hundred Thousand Dollars ($100,000) together with
interest from the date hereof on the unpaid balance from time to time
outstanding at the rate of 12.5 percent per annum.
This Note is issued pursuant to a Subscription Agreement between the
Company and the Payee (the "Subscription Agreement"), a copy of which
Subscription Agreement is available for inspection at the Company's principal
office. This Note is one of several 12.5% Notes issued by the Company in
connection with a private placement financing described in the Subscription
Agreement, which 12.5% Notes are hereinafter referred to as the "Notes".
This Note may be prepaid in whole or in part at any time prior to the
Maturity Date at the option of the Company without premium, penalty or other
fees.
If any of the following events of default (collectively, "Events of
Default") shall occur:
(a) Payment of any principal or interest due under the Note shall not
be made on or before the Maturity Date;
(b) The Company shall (1) voluntarily terminate operations or apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of the Company or of all or a substantial part
of the assets of the Company, (2) admit in writing its inability,
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or be generally unable, to pay its debts as the debts become due, (3) make a
general assignment for the benefit of its creditors, (4) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), (5) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
(6) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Federal Bankruptcy Code or applicable state bankruptcy laws or (7) take any
corporate action for the purpose of effecting any of the foregoing;
(c) Without its application, approval or consent, a proceeding shall be
commenced, in any court of competent jurisdiction, seeking in respect of the
Company: the liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, the appointment of a trustee, receiver,
liquidator or the like of the Company or of all or any substantial part of the
assets of the Company, or other like relief in respect of the Company under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts; and, if the proceeding is being contested in
good faith by the Company, the same shall continue undismissed, or unstayed and
in effect for any period of 90 consecutive days, or an order for relief against
the Company shall be entered in any case under the Federal Bankruptcy Code or
applicable state bankruptcy laws;
then, and in any such event and at any time thereafter while such Event of
Default is continuing, the Payee by written notice to the Company and all other
holders of Notes (the "Default Notice") may declare the entire unpaid principal
amount of this Note, together with accrued and unpaid interest thereon, to be
due and payable no later than ten days after receipt of such Default Notice by
the Company; provided, however, that notwithstanding the above, if there shall
occur an Event of Default under clause (b) or (c) above, then this Note shall
become immediately due and payable without the necessity of any action by the
Payee or notice to the Company. The foregoing notwithstanding, the holders of
Notes having an aggregate principal amount greater than 50 percent of the
aggregate principal amount of all Notes may waive any Event of Default no later
than ten days after any Default Notice, if any, has been received by the Company
with respect thereto or extend the Maturity Date.
No delay or omission by the Payee in exercising or enforcing any of the
Payee's powers, rights, privileges, remedies or discretions hereunder shall
operate as a waiver thereof on that occasion nor on any other occasion.
Except as specifically provided above, the Company hereby waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
hereof and also waives any delay on the part of the Payee.
This Note shall be binding upon the Company and upon its legal
representatives, successors and representatives, and shall inure to the benefit
of the Payee and its legal representatives, heirs, successors, endorsees and
assigns.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
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TO ITS PRINCIPLES OF CONFLICTS OF LAWS AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT.
IN WITNESS WHEREOF, the Company has executed this Note as of the date
first above written.
WITNESS: HIPPO, INC.
Signed in my Presence:
__________________________________ By:_______________________________
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EXHIBIT 10.14
Form of Warrant for the purchase of the Common Stock of the Company
received by all participants in a private financing between February 4,
1997 and April 30, 1997: This form of Warrant was signed by the Company
as consideration to all participants in a private financing between
February 4, 1997 and April 30, 1997, including a Warrant as
consideration to Stanley Berger, an affiliate of the Company, who
received a Warrant to purchase 8,250 shares.
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THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
Non-Transferable
Common Stock Purchase Warrant
HIPPO, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received, ______________________ ("Holder") is entitled, subject
to the terms set forth below, to purchase from the Company at any time or from
time to time on or after the date hereof and prior to 5:00 P.M., New York City
time, on the Expiration Date, 33,000 (subject to adjustment hereafter as
provided below and in Section 2, the "Warrant Number") fully paid and
non-assessable shares of Common Stock at a price per share of $.25 as of the
date hereof, subject to adjustment hereafter as provided in Section 2 (the
"Purchase Price").
This Warrant is being issued in connection with the sale of the
Company's Promissory Notes dated as of the date hereof (the "Notes"). If the
Notes are repaid by the Company within 45 days after the date hereof, the
Warrant Number shall automatically be reduced to 25,000 without further action
by the Company, such reduction to become effective immediately upon the
Company's making of such repayment to the holders of the Notes.
Certain capitalized terms used herein shall have the meanings set forth
in Section 6.
Section 1. EXERCISE OF WARRANT.
1.1. Exercise. This Warrant may be exercised by Holder, in whole or in
part, at any time and from time to time by surrender of this Warrant, together
with (i) the form of subscription at the end hereof duly executed by Holder, to
the Company at its principal office, and (ii) payment, by certified or official
bank check payable to the order of the Company or by wire transfer to its
account, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then being exercised by the Purchase Price then
in effect. In the event the Warrant is not exercised in full, the Company, at
its expense, shall forthwith issue and deliver to or upon the order of Holder a
new Warrant of like tenor in the name of Holder or as Holder (upon payment by
Holder of any applicable transfer taxes) may request, calling in the aggregate
on the face thereof for the number of shares of Common Stock equal (without
giving effect to any adjustment therein) to (i) the number of such shares
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called for on the face of this Warrant minus (ii) the number of such shares for
which this Warrant shall have been exercised (without giving effect to any
adjustment in number as a result of changes in the Purchase Price called for
above).
1.2 Delivery of Stock Certificates. Subject to the terms and conditions
of this Agreement, as soon as practicable after the exercise of this Warrant in
full or in part, the Company at its expense (including, without limitation, the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to Holder, or as Holder (upon payment by Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which Holder
shall be entitled on such exercise, together with any other stock or other
securities and property (including cash, where applicable) to which Holder is
entitled upon such exercise.
1.3. Fractional Shares. This Warrant may not be exercised as to
fractional shares of Common Stock. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event Holder shall be entitled to cash equal
to the value of such fractional share on the basis of the mean between the low
bid and high asked prices of the Common Stock on the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotations
System or the closing market price of the Common Stock on a national securities
exchange on the trading day immediately prior to the date of exercise, whichever
is applicable, or if neither is applicable, then on the basis of the then market
value of the Common Stock as it shall be reasonably determined by the Board of
Directors of the Company.
1.4. Compliance with Law. This Warrant is subject to all laws,
regulations and orders of any governmental authority that may be applicable
hereto and, notwithstanding any of the provisions hereof, the Holder agrees that
the Holder will not exercise the Warrant nor will the Company be obligated to
issue any shares of stock hereunder if exercise thereof or the issuance of such
shares, as the case may be, would constitute a violation by the Holder or the
Company of any such law, regulation or order or any provision thereof. As a
consequence, the Holder may not be able to exercise this Warrant if it is not an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act as of the time of exercise. The Company shall not be obligated to
take any affirmative action in order to cause the exercise of this Warrant or
the issuance of shares pursuant hereto to comply with any such law, regulation,
order or provision.
Section 2. ADJUSTMENTS.
2.1. Adjustment for Stock Dividends. In case the Company shall pay a
dividend or make any other distribution on any class of capital stock of the
Company in shares of Common Stock, the Purchase Price in effect at the close of
business on the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Purchase Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares of Common Stock constituting
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such dividend or other distribution, such reduction to become effective
immediately prior to the opening of business on the day following the date fixed
for such determination. For the purposes of this Section 2.1, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company.
2.2. Adjustment for Stock Subdivisions and Combinations. In case
outstanding shares of Common Stock shall be subdivided into a greater number of
shares of Common Stock, the Purchase Price in effect at the close of business on
the day upon which such subdivision becomes effective shall be proportionately
reduced and, conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Purchase Price in
effect at the opening of business on the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately prior to the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
2.3. Computation of Adjusted Purchase Price. Whenever the Purchase
Price is adjusted as provided in this Section 2:
(a) The Company shall compute the adjusted Purchase Price to
the nearest one-hundredth of a cent in accordance with this Section 2 and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Purchase Price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be filed at the office maintained pursuant to Section 3.3;
(b) A notice stating that the Purchase Price has been adjusted
and setting forth the adjusted Purchase Price shall, as soon as practicable
after it is required, be mailed to Holder; and
(c) At its option, Holder may confirm the adjustment noted on
the certificate by causing such adjustment to be computed by an independent
certified public accountant at the expense of the Company.
2.4. Minimum Adjustment. No adjustment in the Purchase Price shall be
required under this Section 2 unless such adjustment would require an increase
or decrease of at least one percent in such price; provided, however, that any
adjustments that by reason of this Section 2.4 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 2 shall be made to the nearest one-hundredth of
a cent or to the nearest one-hundredth of a share as the case may be.
2.5 Adjustment of Warrant Number. When any adjustment is required to be
made in the Exercise Price, the Warrant Number shall be changed to the number
determined by dividing (i) an amount equal to the Warrant Number immediately
prior to such adjustment multiplied by the Exercise Price in effect immediately
prior to such adjustment, by (ii) the Exercise Price in effect immediately after
such adjustment.
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Section 3. CERTAIN OBLIGATIONS OF THE COMPANY.
3.1. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available out of its authorized and unissued Common Stock
or out of shares of its treasury stock, solely for the purpose of issue upon
exercise of the purchase rights evidenced by this Warrant, a number of shares of
Common Stock equal to the number of shares of Common Stock issuable hereunder.
The Company will from time to time, in accordance with the laws of the State of
Delaware, take action to increase the authorized amount of its Common Stock if
at any time the number of shares of Common Stock authorized but remaining
unissued and unreserved for other purposes shall be insufficient to permit the
exercise of this Warrant.
3.2. No Valuation or Impairment. The Company will not, by amendment of
its Certificate of Incorporation, including, without limitation, amendment of
the par value of its Common Stock, or through reorganization, consolidation,
merger, dissolution, issuance of capital stock or sale of treasury stock
(otherwise than upon exercise of this Warrant) or sale of assets, or by any
other voluntary act or deed, avoid or seek to avoid the material performance or
observance of any of the covenants, stipulations or conditions in this Warrant
to be observed or performed by the Company. The Company will at all times in
good faith assist, insofar as it is able, in the carrying out of all of the
provisions of this Warrant in a reasonable manner and in the taking of all other
action that may be necessary in order to protect the rights of the holder of
this Warrant against dilution in the manner required by the provisions of this
Warrant.
3.3. Maintenance of Office. The Company will maintain an office where
presentations and demands to or upon the Company in respect of this Warrant may
be made. The Company will give notice in writing to Holder, at the address of
Holder appearing on the books of the Company, of each change in the location of
such office.
Section 4. REORGANIZATION, ETC.
If any reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another corporation, or
sale of all or substantially all of its assets to another corporation or other
Person shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby Holder shall thereafter have the right to purchase and
receive upon the terms and conditions herein specified and in lieu of the shares
of Common Stock of the Company immediately theretofore purchasable and
receivable upon exercise of this Warrant such securities or property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this Warrant had
such reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Purchase Price
and of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any securities or
property
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thereafter deliverable upon the exercise hereof. The Company shall not effect
any such reorganization, consolidation, merger or sale unless, prior to or
contemporaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation or other Person purchasing such assets shall assume by written
instrument executed and delivered to Holder, the obligation to deliver to Holder
such securities or property as, in accordance with the foregoing provisions,
Holder may be entitled to purchase or receive.
Section 5. NOTICES OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger of
the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such event, the Company will give to Holder a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock for securities or other
property deliverable on such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date specified in such
notice on which any such action is to be taken.
Section 6. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
6.1. The term Common Stock means the Company's Common Stock, par value
$.01 per share, and any other securities into which or for which the Common
Stock is converted or exchanged
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pursuant to a plan of reclassification, reorganization, consolidation, merger,
sale of assets, dissolution, liquidation, or otherwise.
6.2. The term Expiration Date shall mean the fifth anniversary of the
date of this Warrant.
6.3. The term Person shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization or
any government, governmental department or agency or political subdivision
thereof.
6.4. The term Warrant Stock shall mean any equity security issued upon
exercise of this Warrant.
Section 7. REPLACEMENT OF WARRANTS.
Upon (a) surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant and (b) in the case of any loss, theft or destruction of any Warrant,
receipt of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company, then, in the absence of actual notice to the Company
that this Warrant has been acquired by a bona fide purchaser, the Company, at
its expense, shall execute and deliver, in lieu of this Warrant, a new Warrant
identical in form to this Warrant.
Section 8. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms hereof
or otherwise.
Section 9. TRANSFER.
This Warrant and the shares of Common Stock issuable hereunder shall
not be sold, transferred, pledged or hypothecated unless the proposed
disposition is the subject of a Federal currently effective registration
statement under the Securities Act or unless the Company has received an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition. Subject to the first sentence of this Section, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the registered holder thereof in person or by a duly
authorized attorney, upon surrender of this Warrant together with an assignment
hereof properly endorsed. Until transfer hereof on the registration books of the
Company, the Company may treat the existing registered holder hereof as the
owner hereof for all purposes. Any transferee of this Warrant and any rights
hereunder, by acceptance thereof, agrees to assume all of the obligations of
Holder and to be bound by all of the terms and provisions of this Warrant.
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This Warrant is not transferable in any case except with the prior
written consent of the Company, which consent may be withheld in its sole
discretion.
Section 10. NOTICES.
Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail,
postage prepaid, (iii) telegraphed or (iv) telexed or sent by facsimile
transmission, and shall be deemed given when so delivered personally,
telegraphed, telexed, sent by facsimile transmission (confirmed in writing) or
mailed. Notices shall be addressed, if to Holder, to the address of Holder
appearing in the Company's records or, if to the Company, to its office
maintained pursuant to Section 3.3.
Section 11. MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if any,
that it may legally be enforced and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware without regard to its principles of conflicts of
laws. The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof. This Warrant shall take
effect as an instrument under seal.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
Dated as of ________________ HIPPO, INC.
(Corporate Seal) By:
--------------------------------
Chief Executive Officer
Attest:
- --------------------------------
Secretary
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FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: HIPPO, INC.
The undersigned, the holder of the within Common Stock Purchase
Warrant, hereby irrevocably elects to exercise this Common Stock Purchase
Warrant for, and to purchase thereunder *__________ shares of Common Stock of
HIPPO, INC. (the "Company") and herewith makes payment of $________ therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to _____________________________________, whose address is
_____________________________________________________________________________.
Dated: ----------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
----------------------------------------
(Address)
----------------------------------------
Signed in the presence of:
- -----------------------------------
*Insert here the number of shares (all or part of the number of shares
called for in the Common Stock Purchase Warrant) as to which the Common Stock
Purchase Warrant is being exercised without making any adjustment for any other
stock or other securities or property or cash that, pursuant to the adjustment
provisions of the Common Stock Purchase Warrant, may be deliverable on exercise.
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FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________________ of
_______________________________________________ the right represented by the
within Common Stock Purchase Warrant to purchase ________shares of Common Stock
of Hippo, Inc. to which the within Common Stock Purchase Warrant relates, and
appoints ___________________________ Attorney to transfer such right on the
books of HIPPO, INC. with full power of substitution in the premises.
Dated: ----------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
----------------------------------------
(Address)
----------------------------------------
Signed in the presence of:
- -----------------------------------
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EXHIBIT 10.15
Form of Promissory Note signed by the Company in favor of all participants in a
private financing between May 12, 1997 and June 30, 1997: This form of note was
signed by the Company in favor of all participants in a private financing
between May 12, 1997 and June 30, 1997, including one note in favor of Stanley
Berger, an affiliate of the Company, who invested in the amount of $100,000.
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
NON-TRANSFERABLE 15% NOTE
$50,000 ___________, 1997
Boca Raton, Florida
For value received, Hippo, Inc., a Delaware corporation (the
"Company"), with its principal office at 4400 North Federal Highway, Suite 410,
Boca Raton, Florida 33431, promises to pay to the order of _____________ at
________________________________________________________ (the "Payee"), on the
earlier of (i) September 30, 1997 or (ii) five business days following the date
on which the Company completes an offering of its securities resulting in gross
proceeds to the Company of at least $7,500,000 (the "Maturity Date"), the
principal amount of Fifty Thousand Dollars ($50,000) together with interest from
the date hereof on the unpaid balance from time to time outstanding at the rate
of 15 percent per annum.
This Note is issued pursuant to a Subscription Agreement between the
Company and the Payee (the "Subscription Agreement"), a copy of which
Subscription Agreement is available for inspection at the Company's principal
office. This Note is one of several 15% Notes issued by the Company in
connection with a private placement financing described in the Subscription
Agreement, which 15% Notes are hereinafter referred to as the "Notes".
This Note may be prepaid in whole or in part at any time prior to the
Maturity Date at the option of the Company without premium, penalty or other
fees.
If any of the following events of default (collectively, "Events of
Default") shall occur:
(a) Payment of any principal or interest due under the Note shall not
be made on or before the Maturity Date;
(b) The Company shall (1) voluntarily terminate operations or apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of the Company or of all or a substantial part
of the assets of the Company, (2) admit in writing its inability,
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or be generally unable, to pay its debts as the debts become due, (3) make a
general assignment for the benefit of its creditors, (4) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), (5)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, (6) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code or applicable state
bankruptcy laws or (7) take any corporate action for the purpose of effecting
any of the foregoing;
(c) Without its application, approval or consent, a proceeding shall
be commenced, in any court of competent jurisdiction, seeking in respect of
the Company: the liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, the appointment of a trustee, receiver,
liquidator or the like of the Company or of all or any substantial part of
the assets of the Company, or other like relief in respect of the Company
under any law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or adjustment of debts; and, if the proceeding is being
contested in good faith by the Company, the same shall continue undismissed,
or unstayed and in effect for any period of 90 consecutive days, or an order
for relief against the Company shall be entered in any case under the Federal
Bankruptcy Code or applicable state bankruptcy laws;
then, and in any such event and at any time thereafter while such Event of
Default is continuing, the Payee by written notice to the Company and all
other holders of Notes (the "Default Notice") may declare the entire unpaid
principal amount of this Note, together with accrued and unpaid interest
thereon, to be due and payable no later than ten days after receipt of such
Default Notice by the Company; provided, however, that notwithstanding the
above, if there shall occur an Event of Default under clause (b) or (c)
above, then this Note shall become immediately due and payable without the
necessity of any action by the Payee or notice to the Company. The foregoing
notwithstanding, the holders of Notes having an aggregate principal amount
greater than 50 percent of the aggregate principal amount of all Notes may
waive any Event of Default no later than ten days after any Default Notice,
if any, has been received by the Company with respect thereto or extend the
Maturity Date.
No delay or omission by the Payee in exercising or enforcing any of
the Payee's powers, rights, privileges, remedies or discretions hereunder
shall operate as a waiver thereof on that occasion nor on any other occasion.
Except as specifically provided above, the Company hereby waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
hereof and also waives any delay on the part of the Payee.
This Note shall be binding upon the Company and upon its legal
representatives, successors and representatives, and shall inure to the
benefit of the Payee and its legal representatives, heirs, successors,
endorsees and assigns.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO
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ITS PRINCIPLES OF CONFLICTS OF LAWS AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT.
IN WITNESS WHEREOF, the Company has executed this Note as of the date
first above written.
WITNESS: HIPPO, INC.
Signed in my Presence:
By:
- ------------------------- -----------------------------
President
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EXHIBIT 10.16
Form of Warrant for the purchase of the Common Stock of the Company received by
all participants in a private financing between May 12, 1997 and June 30, 1997:
This form of Warrant was signed by the Company as consideration to all
participants in a private financing between May 12, 1997 and June 30, 1997,
including a Warrant as consideration to Stanley Berger, an affiliate of the
Company, who received a Warrant to purchase 133,000 shares.
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THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
Non-Transferable
Common Stock Purchase Warrant
HIPPO, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received, ___________________, ("Holder") is entitled, subject
to the terms set forth below, to purchase from the Company at any time or from
time to time on or after the date hereof and prior to 5:00 P.M., New York City
time, on the Expiration Date, 66,500 (subject to adjustment hereafter as
provided below and in Section 2, the "Warrant Number") fully paid and
non-assessable shares of Common Stock at a price per share of $.25 as of the
date hereof, subject to adjustment hereafter as provided in Section 2 (the
"Purchase Price").
This Warrant is being issued in connection with the sale of the
Company's Promissory Notes dated as of the date hereof (the "Notes").
Certain capitalized terms used herein shall have the meanings set forth
in Section 6.
Section 1. EXERCISE OF WARRANT.
1.1. Exercise. This Warrant may be exercised by Holder, in whole or in
part, at any time and from time to time by surrender of this Warrant, together
with (i) the form of subscription at the end hereof duly executed by Holder, to
the Company at its principal office, and (ii) payment, by certified or official
bank check payable to the order of the Company or by wire transfer to its
account, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then being exercised by the Purchase Price then
in effect. In the event the Warrant is not exercised in full, the Company, at
its expense, shall forthwith issue and deliver to or upon the order of Holder a
new Warrant of like tenor in the name of Holder or as Holder (upon payment by
Holder of any applicable transfer taxes) may request, calling in the aggregate
on the face thereof for the number of shares of Common Stock equal (without
giving effect to any adjustment therein) to (i) the number of such shares called
for on the face of this Warrant minus (ii) the number of such shares for which
this Warrant shall have been exercised (without giving effect to any adjustment
in number as a result of changes in the Purchase Price called for above).
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<PAGE>
1.2 Delivery of Stock Certificates. Subject to the terms and conditions
of this Agreement, as soon as practicable after the exercise of this Warrant in
full or in part, the Company at its expense (including, without limitation, the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to Holder, or as Holder (upon payment by Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which Holder
shall be entitled on such exercise, together with any other stock or other
securities and property (including cash, where applicable) to which Holder is
entitled upon such exercise.
1.3. Fractional Shares. This Warrant may not be exercised as to
fractional shares of Common Stock. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event Holder shall be entitled to cash equal
to the value of such fractional share on the basis of the mean between the low
bid and high asked prices of the Common Stock on the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotations
System or the closing market price of the Common Stock on a national securities
exchange on the trading day immediately prior to the date of exercise, whichever
is applicable, or if neither is applicable, then on the basis of the then market
value of the Common Stock as it shall be reasonably determined by the Board of
Directors of the Company.
1.4. Compliance with Law. This Warrant is subject to all laws,
regulations and orders of any governmental authority that may be applicable
hereto and, notwithstanding any of the provisions hereof, the Holder agrees that
the Holder will not exercise the Warrant nor will the Company be obligated to
issue any shares of stock hereunder if exercise thereof or the issuance of such
shares, as the case may be, would constitute a violation by the Holder or the
Company of any such law, regulation or order or any provision thereof. As a
consequence, the Holder may not be able to exercise this Warrant if it is not an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act as of the time of exercise. The Company shall not be obligated to
take any affirmative action in order to cause the exercise of this Warrant or
the issuance of shares pursuant hereto to comply with any such law, regulation,
order or provision.
Section 2. ADJUSTMENTS.
2.1. Adjustment for Stock Dividends. In case the Company shall pay a
dividend or make any other distribution on any class of capital stock of the
Company in shares of Common Stock, the Purchase Price in effect at the close of
business on the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Purchase Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares of Common Stock constituting such dividend
or other distribution, such reduction to become effective immediately prior to
the opening of business on the day following the date fixed for such
determination. For the purposes of this Section 2.1, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company.
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2.2. Adjustment for Stock Subdivisions and Combinations. In case
outstanding shares of Common Stock shall be subdivided into a greater number of
shares of Common Stock, the Purchase Price in effect at the close of business on
the day upon which such subdivision becomes effective shall be proportionately
reduced and, conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Purchase Price in
effect at the opening of business on the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately prior to the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
2.3. Computation of Adjusted Purchase Price. Whenever the Purchase
Price is adjusted as provided in this Section 2:
(a) The Company shall compute the adjusted Purchase Price to
the nearest one-hundredth of a cent in accordance with this Section 2 and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Purchase Price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be filed at the office maintained pursuant to Section 3.3;
(b) A notice stating that the Purchase Price has been adjusted
and setting forth the adjusted Purchase Price shall, as soon as practicable
after it is required, be mailed to Holder; and
(c) At its option, Holder may confirm the adjustment noted on
the certificate by causing such adjustment to be computed by an independent
certified public accountant at the expense of the Company.
2.4. Minimum Adjustment. No adjustment in the Purchase Price shall be
required under this Section 2 unless such adjustment would require an increase
or decrease of at least one percent in such price; provided, however, that any
adjustments that by reason of this Section 2.4 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 2 shall be made to the nearest one-hundredth of
a cent or to the nearest one-hundredth of a share as the case may be.
2.5 Adjustment of Warrant Number. When any adjustment is required to be
made in the Exercise Price, the Warrant Number shall be changed to the number
determined by dividing (i) an amount equal to the Warrant Number immediately
prior to such adjustment multiplied by the Exercise Price in effect immediately
prior to such adjustment, by (ii) the Exercise Price in effect immediately after
such adjustment.
Section 3. CERTAIN OBLIGATIONS OF THE COMPANY.
3.1. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available out of its authorized and unissued Common Stock
or out of shares of its treasury stock, solely
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for the purpose of issue upon exercise of the purchase rights evidenced by this
Warrant, a number of shares of Common Stock equal to the number of shares of
Common Stock issuable hereunder. The Company will from time to time, in
accordance with the laws of the State of Delaware, take action to increase the
authorized amount of its Common Stock if at any time the number of shares of
Common Stock authorized but remaining unissued and unreserved for other purposes
shall be insufficient to permit the exercise of this Warrant.
3.2. No Valuation or Impairment. The Company will not, by amendment of
its Certificate of Incorporation, including, without limitation, amendment of
the par value of its Common Stock, or through reorganization, consolidation,
merger, dissolution, issuance of capital stock or sale of treasury stock
(otherwise than upon exercise of this Warrant) or sale of assets, or by any
other voluntary act or deed, avoid or seek to avoid the material performance or
observance of any of the covenants, stipulations or conditions in this Warrant
to be observed or performed by the Company. The Company will at all times in
good faith assist, insofar as it is able, in the carrying out of all of the
provisions of this Warrant in a reasonable manner and in the taking of all other
action that may be necessary in order to protect the rights of the holder of
this Warrant against dilution in the manner required by the provisions of this
Warrant.
3.3. Maintenance of Office. The Company will maintain an office where
presentations and demands to or upon the Company in respect of this Warrant may
be made. The Company will give notice in writing to Holder, at the address of
Holder appearing on the books of the Company, of each change in the location of
such office.
Section 4. REORGANIZATION, ETC.
If any reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another corporation, or
sale of all or substantially all of its assets to another corporation or other
Person shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby Holder shall thereafter have the right to purchase and
receive upon the terms and conditions herein specified and in lieu of the shares
of Common Stock of the Company immediately theretofore purchasable and
receivable upon exercise of this Warrant such securities or property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this Warrant had
such reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Purchase Price
and of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any securities or
property thereafter deliverable upon the exercise hereof. The Company shall not
effect any such reorganization, consolidation, merger or sale unless, prior to
or contemporaneously with the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or merger or the
corporation or other Person purchasing such assets shall assume by written
instrument executed
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and delivered to Holder, the obligation to deliver to Holder such securities or
property as, in accordance with the foregoing provisions, Holder may be entitled
to purchase or receive.
Section 5. NOTICES OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger of
the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such event, the Company will give to Holder a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock for securities or other
property deliverable on such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date specified in such
notice on which any such action is to be taken.
Section 6. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
6.1. The term Common Stock means the Company's Common Stock, par value
$.01 per share, and any other securities into which or for which the Common
Stock is converted or exchanged pursuant to a plan of reclassification,
reorganization, consolidation, merger, sale of assets, dissolution, liquidation,
or otherwise.
6.2. The term Expiration Date shall mean the fifth anniversary of the
date of this Warrant.
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6.3. The term Person shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization or
any government, governmental department or agency or political subdivision
thereof.
6.4. The term Warrant Stock shall mean any equity security issued upon
exercise of this Warrant.
Section 7. REPLACEMENT OF WARRANTS.
Upon (a) surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant and (b) in the case of any loss, theft or destruction of any Warrant,
receipt of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company, then, in the absence of actual notice to the Company
that this Warrant has been acquired by a bona fide purchaser, the Company, at
its expense, shall execute and deliver, in lieu of this Warrant, a new Warrant
identical in form to this Warrant.
Section 8. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms hereof
or otherwise.
Section 9. TRANSFER.
This Warrant and the shares of Common Stock issuable hereunder shall
not be sold, transferred, pledged or hypothecated unless the proposed
disposition is the subject of a Federal currently effective registration
statement under the Securities Act or unless the Company has received an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition. Subject to the first sentence of this Section, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the registered holder thereof in person or by a duly
authorized attorney, upon surrender of this Warrant together with an assignment
hereof properly endorsed. Until transfer hereof on the registration books of the
Company, the Company may treat the existing registered holder hereof as the
owner hereof for all purposes. Any transferee of this Warrant and any rights
hereunder, by acceptance thereof, agrees to assume all of the obligations of
Holder and to be bound by all of the terms and provisions of this Warrant.
This Warrant is not transferable in any case except with the prior
written consent of the Company, which consent may be withheld in its sole
discretion.
Section 10. NOTICES.
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Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail,
postage prepaid, (iii) telegraphed or (iv) telexed or sent by facsimile
transmission, and shall be deemed given when so delivered personally,
telegraphed, telexed, sent by facsimile transmission (confirmed in writing) or
mailed. Notices shall be addressed, if to Holder, to the address of Holder
appearing in the Company's records or, if to the Company, to its office
maintained pursuant to Section 3.3.
Section 11. MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if any,
that it may legally be enforced and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware without regard to its principles of conflicts of
laws. The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof. This Warrant shall take
effect as an instrument under seal.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
Dated as of __________ HIPPO, INC.
(Corporate Seal) By:____________________________________
Chief Executive Officer
Attest:
- --------------------------------
Secretary
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FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: HIPPO, INC.
The undersigned, the holder of the within Common Stock Purchase
Warrant, hereby irrevocably elects to exercise this Common Stock Purchase
Warrant for, and to purchase thereunder *__________ shares of Common Stock of
HIPPO, INC. (the "Company") and herewith makes payment of $________ therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to _____________________________________, whose address is
______________________________________________________________________________.
Dated: ----------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
----------------------------------------
(Address)
----------------------------------------
Signed in the presence of:
- -----------------------------------
_______________________________
*Insert here the number of shares (all or part of the number of shares
called for in the Common Stock Purchase Warrant) as to which the Common Stock
Purchase Warrant is being exercised without making any adjustment for any other
stock or other securities or property or cash that, pursuant to the adjustment
provisions of the Common Stock Purchase Warrant, may be deliverable on exercise.
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FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________________ of
_______________________________________________ the right represented by the
within Common Stock Purchase Warrant to purchase ________shares of Common Stock
of Hippo, Inc. to which the within Common Stock Purchase Warrant relates, and
appoints ___________________________ Attorney to transfer such right on the
books of HIPPO, INC. with full power of substitution in the premises.
Dated: ----------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
----------------------------------------
(Address)
----------------------------------------
Signed in the presence of:
- -----------------------------------
President
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EXHIBIT 10.17
Form of Promissory Note signed by the Company in favor of all participants in a
private financing in July, 1997: This form of Note was signed by the Company in
favor of all participants in a private financing in July, 1997, including one
note in favor of Stanley Berger, an affiliate of the Company, who invested in
the amount of $45,000.
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
NON-TRANSFERABLE 12.5% NOTE
$75,000 _____________, 1997
New York, New York
For value received, Hippo, Inc., a Delaware corporation (the
"Company"), with its principal office at 4400 North Federal Highway, Suite 410,
Boca Raton, Florida 33431, promises to pay to the order of _______________ at
_____________________________________________________ (the "Payee"), on the
earlier of (i) September 30, 1997 or (ii) five business days following the date
on which the Company completes an offering of its securities resulting in gross
proceeds to the Company of at least $3,000,000 (the "Maturity Date"), the
principal amount of Seventy-five Thousand Dollars ($75,000) together with
interest from the date hereof on the unpaid balance from time to time
outstanding at the rate of 12.5 percent per annum.
This Note may be prepaid in whole or in part at any time prior to the
Maturity Date at the option of the Company without premium, penalty or other
fees.
If any of the following events of default (collectively, "Events of
Default") shall occur:
(a) Payment of any principal or interest due under the Note shall not
be made on or before the Maturity Date;
(b) The Company shall (1) voluntarily terminate operations or apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of the Company or of all or a substantial part
of the assets of the Company, (2) admit in writing its inability, or be
generally unable, to pay its debts as the debts become due, (3) make a general
assignment for the benefit of its creditors, (4) commence a voluntary case under
the Federal Bankruptcy Code (as now or hereafter in effect), (5) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, (6) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it
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in an involuntary case under the Federal Bankruptcy Code or applicable state
bankruptcy laws or (7) take any corporate action for the purpose of effecting
any of the foregoing;
(c) Without its application, approval or consent, a proceeding shall be
commenced, in any court of competent jurisdiction, seeking in respect of the
Company: the liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, the appointment of a trustee, receiver,
liquidator or the like of the Company or of all or any substantial part of the
assets of the Company, or other like relief in respect of the Company under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts; and, if the proceeding is being contested in
good faith by the Company, the same shall continue undismissed, or unstayed and
in effect for any period of 90 consecutive days, or an order for relief against
the Company shall be entered in any case under the Federal Bankruptcy Code or
applicable state bankruptcy laws;
then, and in any such event and at any time thereafter while such Event of
Default is continuing, the Payee by written notice to the Company (the "Default
Notice") may declare the entire unpaid principal amount of this Note, together
with accrued and unpaid interest thereon, to be due and payable no later than
ten days after receipt of such Default Notice by the Company; provided, however,
that notwithstanding the above, if there shall occur an Event of Default under
clause (b) or (c) above, then this Note shall become immediately due and payable
without the necessity of any action by the Payee or notice to the Company.
No delay or omission by the Payee in exercising or enforcing any of the
Payee's powers, rights, privileges, remedies or discretions hereunder shall
operate as a waiver thereof on that occasion nor on any other occasion.
Except as specifically provided above, the Company hereby waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
hereof and also waives any delay on the part of the Payee.
This Note shall be binding upon the Company and upon its legal
representatives, successors and representatives, and shall inure to the benefit
of the Payee and its legal representatives, heirs, successors, endorsees and
assigns.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT.
IN WITNESS WHEREOF, the Company has executed this Note as of the
date first above written.
WITNESS: HIPPO, INC.
signed in my Presence:
________________________________ By:_________________________________
President
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EXHIBIT 10.18
Form of Warrant for the purchase of the Common Stock of the Company received by
all participants in a private financing in July, 1997: This form of Warrant was
signed by the Company as consideration to all participants in a private
financing July, 1997, including a Warrant as consideration to Stanley Berger, an
affiliate of the Company, who received a Warrant to purchase 22,500 shares.
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THIS WARRANT AND THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
HIPPO, INC.
Non-Transferable
Common Stock Purchase Warrant
HIPPO, INC., a Delaware corporation (the "Company"), hereby certifies
that, for value received, _________________ ("Holder") is entitled, subject to
the terms set forth below, to purchase from the Company at any time or from time
to time on or after the date hereof and prior to 5:00 P.M., New York City time,
on the Expiration Date, 37,500 (subject to adjustment hereafter as provided in
Section 2, the "Warrant Number") fully paid and non-assessable shares of Common
Stock at a price per share of $.70 as of the date hereof, subject to adjustment
hereafter as provided in Section 2 (the "Purchase Price").
Certain capitalized terms used herein shall have the meanings set forth
in Section 6.
Section 1. EXERCISE OF WARRANT.
1.1. Exercise. This Warrant may be exercised by Holder, in whole or in
part, at any time and from time to time by surrender of this Warrant, together
with (i) the form of subscription at the end hereof duly executed by Holder, to
the Company at its principal office, and (ii) payment, by certified or official
bank check payable to the order of the Company or by wire transfer to its
account, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then being exercised by the Purchase Price then
in effect. In the event the Warrant is not exercised in full, the Company, at
its expense, shall forthwith issue and deliver to or upon the order of Holder a
new Warrant of like tenor in the name of Holder or as Holder (upon payment by
Holder of any applicable transfer taxes) may request, calling in the aggregate
on the face thereof for the number of shares of Common Stock equal (without
giving effect to any adjustment therein) to (i) the number of such shares called
for on the face of this Warrant minus (ii) the number of such shares for which
this Warrant shall have been exercised (without giving effect to any adjustment
in number as a result of changes in the Purchase Price called for above).
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<PAGE>
1.2 Delivery of Stock Certificates. Subject to the terms and conditions
of this Agreement, as soon as practicable after the exercise of this Warrant in
full or in part, the Company at its expense (including, without limitation, the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to Holder, or as Holder (upon payment by Holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to which Holder
shall be entitled on such exercise, together with any other stock or other
securities and property (including cash, where applicable) to which Holder is
entitled upon such exercise.
1.3. Fractional Shares. This Warrant may not be exercised as to
fractional shares of Common Stock. In the event that the exercise of this
Warrant, in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event Holder shall be entitled to cash equal
to the value of such fractional share on the basis of the mean between the low
bid and high asked prices of the Common Stock on the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotations
System or the closing market price of the Common Stock on a national securities
exchange on the trading day immediately prior to the date of exercise, whichever
is applicable, or if neither is applicable, then on the basis of the then market
value of the Common Stock as it shall be reasonably determined by the Board of
Directors of the Company.
1.4. Compliance with Law. This Warrant is subject to all laws,
regulations and orders of any governmental authority that may be applicable
hereto and, notwithstanding any of the provisions hereof, the Holder agrees that
the Holder will not exercise the Warrant nor will the Company be obligated to
issue any shares of stock hereunder if exercise thereof or the issuance of such
shares, as the case may be, would constitute a violation by the Holder or the
Company of any such law, regulation or order or any provision thereof. As a
consequence, the Holder may not be able to exercise this Warrant if it is not an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act as of the time of exercise. The Company shall not be obligated to
take any affirmative action in order to cause the exercise of this Warrant or
the issuance of shares pursuant hereto to comply with any such law, regulation,
order or provision.
Section 2. ADJUSTMENTS.
2.1. Adjustment for Stock Dividends. In case the Company shall pay a
dividend or make any other distribution on any class of capital stock of the
Company in shares of Common Stock, the Purchase Price in effect at the close of
business on the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Purchase Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares of Common Stock constituting such dividend
or other distribution, such reduction to become effective immediately prior to
the opening of business on the day following the date fixed for such
determination. For the purposes of
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this Section 2.1, the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company.
2.2. Adjustment for Stock Subdivisions and Combinations. In case
outstanding shares of Common Stock shall be subdivided into a greater number of
shares of Common Stock, the Purchase Price in effect at the close of business on
the day upon which such subdivision becomes effective shall be proportionately
reduced and, conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Purchase Price in
effect at the opening of business on the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately prior to the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
2.3. Computation of Adjusted Purchase Price. Whenever the Purchase
Price is adjusted as provided in this Section 2:
(a) The Company shall compute the adjusted Purchase Price to
the nearest one-hundredth of a cent in accordance with this Section 2 and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Purchase Price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be filed at the office maintained pursuant to Section 3.3;
(b) A notice stating that the Purchase Price has been adjusted
and setting forth the adjusted Purchase Price shall, as soon as practicable
after it is required, be mailed to Holder; and
(c) At its option, Holder may confirm the adjustment noted on
the certificate by causing such adjustment to be computed by an independent
certified public accountant at the expense of the Company.
2.4. Minimum Adjustment. No adjustment in the Purchase Price shall be
required under this Section 2 unless such adjustment would require an increase
or decrease of at least one percent in such price; provided, however, that any
adjustments that by reason of this Section 2.4 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 2 shall be made to the nearest one-hundredth of
a cent or to the nearest one-hundredth of a share as the case may be.
2.5 Adjustment of Warrant Number. When any adjustment is required to be
made in the Exercise Price, the Warrant Number shall be changed to the number
determined by dividing (i) an amount equal to the Warrant Number immediately
prior to such adjustment multiplied by the Exercise Price in effect immediately
prior to such adjustment, by (ii) the Exercise Price in effect immediately after
such adjustment.
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Section 3. CERTAIN OBLIGATIONS OF THE COMPANY.
3.1. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available out of its authorized and unissued Common Stock
or out of shares of its treasury stock, solely for the purpose of issue upon
exercise of the purchase rights evidenced by this Warrant, a number of shares of
Common Stock equal to the number of shares of Common Stock issuable hereunder.
The Company will from time to time, in accordance with the laws of the State of
Delaware, take action to increase the authorized amount of its Common Stock if
at any time the number of shares of Common Stock authorized but remaining
unissued and unreserved for other purposes shall be insufficient to permit the
exercise of this Warrant.
3.2. No Valuation or Impairment. The Company will not, by amendment of
its Certificate of Incorporation, including, without limitation, amendment of
the par value of its Common Stock, or through reorganization, consolidation,
merger, dissolution, issuance of capital stock or sale of treasury stock
(otherwise than upon exercise of this Warrant) or sale of assets, or by any
other voluntary act or deed, avoid or seek to avoid the material performance or
observance of any of the covenants, stipulations or conditions in this Warrant
to be observed or performed by the Company. The Company will at all times in
good faith assist, insofar as it is able, in the carrying out of all of the
provisions of this Warrant in a reasonable manner and in the taking of all other
action that may be necessary in order to protect the rights of the holder of
this Warrant against dilution in the manner required by the provisions of this
Warrant.
3.3. Maintenance of Office. The Company will maintain an office where
presentations and demands to or upon the Company in respect of this Warrant may
be made. The Company will give notice in writing to Holder, at the address of
Holder appearing on the books of the Company, of each change in the location of
such office.
Section 4. REORGANIZATION, ETC.
If any reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another corporation, or
sale of all or substantially all of its assets to another corporation or other
Person shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby Holder shall thereafter have the right to purchase and
receive upon the terms and conditions herein specified and in lieu of the shares
of Common Stock of the Company immediately theretofore purchasable and
receivable upon exercise of this Warrant such securities or property as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this Warrant had
such reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of Holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Purchase Price
and of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any securities or
property thereafter deliverable upon the exercise hereof. The Company shall not
effect any such reorganization, consolidation, merger or sale unless, prior to
or contemporaneously with the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or merger or the
corporation or other Person purchasing such assets shall assume by written
instrument executed
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and delivered to Holder, the obligation to deliver to Holder such securities or
property as, in accordance with the foregoing provisions, Holder may be entitled
to purchase or receive.
Section 5. NOTICES OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger of
the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such event, the Company will give to Holder a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock for securities or other
property deliverable on such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable on such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date specified in such
notice on which any such action is to be taken.
Section 6. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
6.1. The term Common Stock means the Company's Common Stock, par value
$.01 per share, and any other securities into which or for which the Common
Stock is converted or exchanged
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pursuant to a plan of reclassification, reorganization, consolidation, merger,
sale of assets, dissolution, liquidation, or otherwise.
6.2. The term Expiration Date shall mean the fifth anniversary of the
date of this Warrant.
6.3. The term Person shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization or
any government, governmental department or agency or political subdivision
thereof.
6.4. The term Warrant Stock shall mean any equity security issued upon
exercise of this Warrant.
Section 7. REPLACEMENT OF WARRANTS.
Upon (a) surrender of this Warrant in mutilated form or receipt of
evidence satisfactory to the Company of the loss, theft or destruction of this
Warrant and (b) in the case of any loss, theft or destruction of any Warrant,
receipt of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company, then, in the absence of actual notice to the Company
that this Warrant has been acquired by a bona fide purchaser, the Company, at
its expense, shall execute and deliver, in lieu of this Warrant, a new Warrant
identical in form to this Warrant.
Section 8. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any breach or threatened breach by the Company of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a breach of any of the terms hereof
or otherwise.
Section 9. TRANSFER.
This Warrant and the shares of Common Stock issuable hereunder shall
not be sold, transferred, pledged or hypothecated unless the proposed
disposition is the subject of a Federal currently effective registration
statement under the Securities Act or unless the Company has received an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition. Subject to the first sentence of this Section, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the registered holder thereof in person or by a duly
authorized attorney, upon surrender of this Warrant together with an assignment
hereof properly endorsed. Until transfer hereof on the registration books of the
Company, the Company may treat the existing registered holder hereof as the
owner hereof for all purposes. Any transferee of this Warrant and any rights
hereunder, by acceptance thereof, agrees to assume all of the obligations of
Holder and to be bound by all of the terms and provisions of this Warrant.
This Warrant is not transferable in any case except with the prior
written consent of the Company, which consent may be withheld in its sole
discretion.
Section 10. NOTICES.
Where this Warrant provides for notice of any event, such notice shall
be given (unless otherwise herein expressly provided) in writing and either (i)
delivered personally, (ii) sent by certified, registered or express mail,
postage prepaid, (iii) telegraphed or (iv) telexed or sent by facsimile
transmission, and shall be deemed given when so delivered personally,
telegraphed, telexed, sent by facsimile transmission (confirmed in writing) or
mailed. Notices shall be addressed, if to Holder, to the address of Holder
appearing in the Company's records or, if to the Company, to its office
maintained pursuant to Section 3.3.
Section 11. MISCELLANEOUS.
This Warrant shall be binding upon the Company and Holder and their
legal representatives, successors and assigns. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if any,
that it may legally be enforced and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware without regard to its principles of conflicts of
laws. The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof. This Warrant shall take
effect as an instrument under seal.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
Dated as of __________ HIPPO, INC.
(Corporate Seal) By:_____________________________________
Chief Executive Officer
Attest:
- --------------------------------
Secretary
7
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of
Common Stock Purchase Warrant)
TO: HIPPO, INC.
The undersigned, the holder of the within Common Stock Purchase
Warrant, hereby irrevocably elects to exercise this Common Stock Purchase
Warrant for, and to purchase thereunder *__________ shares of Common Stock of
HIPPO, INC. (the "Company") and herewith makes payment of $________ therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to _____________________________________, whose address is
- -----------------------------------------------------------------------------.
Dated: ----------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
----------------------------------------
(Address)
----------------------------------------
Signed in the presence of:
- -----------------------------------
*Insert here the number of shares (all or part of the number of shares
called for in the Common Stock Purchase Warrant) as to which the Common Stock
Purchase Warrant is being exercised without making any adjustment for any other
stock or other securities or property or cash that, pursuant to the adjustment
provisions of the Common Stock Purchase Warrant, may be deliverable on exercise.
8
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of
Common Stock Purchase Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________________ of
_______________________________________________ the right represented by the
within Common Stock Purchase Warrant to purchase ________shares of Common Stock
of Hippo, Inc. to which the within Common Stock Purchase Warrant relates, and
appoints ___________________________ Attorney to transfer such right on the
books of HIPPO, INC. with full power of substitution in the premises.
Dated: ----------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
----------------------------------------
(Address)
----------------------------------------
Signed in the presence of:
- -----------------------------------
9
<PAGE>
EXHIBIT 10.19
Form of Consent to extension of payment date for all Notes executed by the
Company in all private financings, which Consents were signed by more than 50%
of all participants in private financings between March and June, 1997.
1
<PAGE>
January 26, 1998
Dear Investor:
As you know, Hippo, Inc. (the "Company") was not able to conclude its proposed
equity offering by September 30. We are continuing our efforts to raise
substantial capital and have signed a letter of intent with Argent Securities,
Inc. to consummate an initial public offering of the Company's common stock with
a goal of having the offering effective by May 15, 1998.
The Company would like to extend the Maturity Date under the Non-Transferable
Note or Notes issued to you earlier this year to the earlier of (i) September
30, 1998 or (ii) five days after the date on which the Company completes the
Offering (the "Extended Payment Date"). Such extension will be effective with
respect to Notes issued in March/April upon the consent of holders of Notes
having an aggregate principal of more than 50% of the total of such Notes, and
with respect to the Notes issued in June, upon consent of holders of such Notes
having an aggregate principal of more than 50% of the total of the Notes issued
in June.
As consideration for your agreement to the extension, you will receive an
additional warrant to purchase an amount of common stock of the Company equal to
25% of the amount of your existing warrant under the March/April and June Notes
and at an exercise price equivalent to the exercise price of the March/April and
June Notes. Should you have any questions, please feel free to call me at (561)
750-7528. If not, we would appreciate it if you would indicate your agreement to
the extension of the Maturity Date of your Non-Transferable Note or Notes to the
Extended Payment Date by signing a copy of this letter in the space indicated
below and faxing it back to us at (561) 750-7529. Please also mail such signed
copy to us in the enclosed federal express envelope.
Thank you again for your cooperation in this matter.
Very truly yours,
Hippo, Inc.
/s/ Paul Berger
Paul H. Berger
CEO
Acknowledged And Agreed
- -------------------------
Signature
2
<PAGE>
Exhibit 10.20
SUBSCRIPTION AGREEMENT
Hippo, Inc.
4400 N. Federal Highway
Suite 210
Boca Raton, Florida 33431
Attn: Mr. Paul Berger
Re: Purchase of Notes and Warrants
------------------------------
Gentlemen:
1. (a) The undersigned hereby subscribes for ___ units (the "Units"),
each Unit consisting of a non-transferable $______ principal amount promissory
note (each, a "Note") of Hippo, Inc., a Delaware corporation (the "Company") and
_______________________________________________________________________ warrants
(each, a "Warrant") to purchase one share of common stock [per warrant at the
Initial Public Offering ("IPO") of the Company.] The Note and any interest shall
be repaid within five business days following the close of the IPO, or in the
event the IPO does not occur, no later than September 30, 1998. [The Warrants
shall be offered on the identical terms of those being offered to the public at
the IPO and shall be locked up for a period of one (1) year after the IPO. All
investors with a minimum $50,000 investment will receive a complimentary set of
Tegra brand golf clubs.] The undersigned hereby agrees to pay the Company the
amount of $______ for each Unit subscribed for at the closing of the purchase of
the Units (the "Closing"), which will occur if and when the Company accepts this
Subscription Agreement. The undersigned understands that a minimum investment of
the Units, or $______, is required although the Company may accept less than the
minimum at its discretion. The Notes and the Warrants shall hereinafter be
referred to collectively as the "Securities".
(b) Either (i) a check in the amount of the undersigned's
entire purchase price for the Units is enclosed herewith, or (ii) the
undersigned has effectuated a wire transfer concurrently herewith to the
non-interest bearing Hippo Account at the following bank address:
Barnett Bank of Palm Beach County
1000 North Federal Highway
Boca Raton, FL 33431
ABA# 063000047
Account: Hippo, Inc.
1611993474
<PAGE>
Such payment will be returned, without deduction and without
interest, in the event that this subscription is not accepted by the Company or
the private placement of the Securities (the "Private Placement") is withdrawn
or otherwise does not close.
2. To induce the Company to accept this subscription, the undersigned
hereby agrees that within five (5) days after receipt of written request from
the Company, the undersigned will provide such information and execute and
deliver such documents as the Company may reasonably request to comply with any
and all laws and ordinances to which the Company may be subject, including
without limitation, the securities laws of the United States of America or any
other jurisdiction.
3. To induce the Company to accept this subscription, the undersigned
hereby represents, warrants and agrees that:
(a) The information provided by the undersigned in the
Confidential Purchaser Questionnaire enclosed herewith, and any other
information provided to the Company by the undersigned, is true and correct in
all respects as of the date hereof and will be true and correct in all respects
an of the Closing (or, if there have been any changes in such information since
the date the Confidential Purchaser Questionnaire or such other information was
furnished to the Company, the undersigned has advised the Company in writing of
such changes).
(b) The undersigned, if an individual, is over 21 years of
age, and the address set forth below is the true residence and domicile of the
undersigned, and the undersigned has no present intention of becoming a resident
or domiciliary of any other state or jurisdiction. If a corporation, trust,
partnership or other entity, the undersigned has its principal place of business
at the address set forth below.
(c) The undersigned has received and reviewed carefully the
Company's Private Placement Memorandum dated ____________________________, (the
"Memorandum").
(d) The undersigned has had an opportunity to ask questions of
and receive answers from the Company concerning the Company and all other
matters pertinent to an investment in the Securities, and all such questions
have been answered to the full satisfaction of the undersigned. The undersigned
has been given access to the Company's books and records and all other documents
and information that the undersigned has requested related to an investment in
the Securities.
(e) Except as set forth in the Memorandum, no representation
or warranties have been made to the undersigned by the Company or any agent,
employee or affiliate thereof, and no oral or written information furnished to
the undersigned or his advisors, if any, was in any way inconsistent with the
Memorandum. In entering into this transaction, the undersigned is not relying
upon any information other than that contained in the Memorandum and the results
of the undersigned's own investigation.
-2-
<PAGE>
(f) The undersigned understands that the Securities have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state blue sky or securities law, in reliance on exemptions
thereunder, that they have not been approved or disapproved by the Securities
and Exchange Commission or by any other federal or state authority or agency,
and that no such authority or agency has passed on the accuracy or adequacy of
the Memorandum.
(g) The undersigned is acquiring the Securities for the
undersigned's own account, for investment purposes only, and not for, with a
view to or in connection with any resale or other distribution thereof, in whole
or in part.
(h) [Other than Argent Securities, Inc.,] the undersigned has
not employed or dealt with a broker or finder, or any other similar person or
entity who may be entitled to compensation, in connection with this proposed
purchase of the Securities.
(i) The undersigned has carefully considered and has, to the
extent he believes appropriate, discussed with his professional legal, tax and
financial advisors the suitability of an investment in the Company for his
particular tax and financial situation and has determined that the Securities
are a suitable investment for him.
(j) The undersigned (either alone, or, if the undersigned in
the undersigned's Confidential Purchaser Questionnaire designated one or more
Investor Representatives, together with such Investor Representative(s)) has
such knowledge and experience in financial and business matters that the
undersigned is capable of evaluating the merits and risks of an investment in
the Company.
(k) The undersigned is an "accredited investor," as such term
is defined in Rule 501 promulgated by the Securities and Exchange Commission
under the Securities Act.
(l) The undersigned acknowledges and understands that:
(i) The Securities are a speculative investment and
involve substantial risks.
(ii) The Company has limited financial resources and
operating history.
(iii) The Securities will constitute "restricted
securities" within the meaning of Rule 144 promulgated under
the Securities Act; there are substantial restrictions on the
transferability of the Securities; there will be no public
market for the Securities; the Securities cannot be resold
unless they are registered under the Securities Act or unless
an exemption from registration is available; Rule 144
-3-
<PAGE>
is not now available to provide an exemption for resale of the
Securities because the Company is not required to file, and
does not file, current reports under the Securities Exchange
Act of 1934, as amended, and because information concerning
the Company substantially equivalent to that which would be
available if the Company were required to file such reports
is not now publicly available; the Company may become a
reporting entity at some future date, but no assurance can be
given that it will do so; and accordingly, it may not be
possible for the undersigned to liquidate the undersigned's
investment in the Securities when the undersigned wants to
do so.
(iv) The Notes and the warrants are not transferable
except with the Company's prior written consent, which may be
withheld in the Company's sole discretion.
(m) The undersigned is able:
(i) to bear the full economic risk of an investment
in the Securities;
(ii) to hold the Securities indefinitely; and
(iii) to afford a complete loss of the undersigned's
investment in the Securities.
(n) If this Subscription Agreement is executed and delivered
on behalf of a partnership, corporation, trust or other entity,
(i) the execution and delivery of this Subscription
Agreement, the Confidential Purchaser Questionnaire and any
other instruments executed and delivered on behalf of such
partnership, corporation, trust or other entity, and the
purchase of the Securities by such entity, have been duly
authorized;
(ii) this Subscription Agreement is binding upon such
partnership, corporation, trust or other entity; and
(iii) such partnership, corporation, trust or other
entity was not formed for the specific purpose of investing in
the Company.
4. The undersigned acknowledges that the undersigned understands the
meaning and legal consequences of the representations and warranties contained
in paragraph 3 hereof, and that the Company intends to rely upon them. The
undersigned hereby agrees to indemnify and hold harmless the Company and each
director, officer or agent thereof from and against any and all losses, damages,
liabilities and expenses arising out of or in connection with any breach of, or
inaccuracy in, any representation or warranty of the undersigned, whether
contained in this Subscription Agreement or otherwise.
-4-
<PAGE>
5. The undersigned hereby agrees that the Company or its transfer
agent(s) may maintain "stop transfer"orders with respect to the Securities and
that in addition to any other legends which counsel for the Company shall deem
necessary or desirable to cause the sale of the Securities to the undersigned to
be exempt under the blue sky or securities laws of any state, each of the
Securities will bear a conspicuous legend in substantially the following form:
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under the
provisions of any applicable state securities laws, and may not be
sold, pledged, hypothecated or otherwise transferred unless (i) a
registration statement with respect thereto is effective under the
Securities Act or (ii) the Company has received an opinion of counsel
reasonably satisfactory to the Company that such registration is not
required.
[6. No reliance upon placement agent. This investment is made without
any reliance from information, either verbal or written, provided by Argent
Securities, Inc. Accordingly, the undersigned agrees to hold harmless Argent
Securities, Inc. for any and all losses, damages, liabilities, expenses
(including attorney fees) of any kind that may occur as a result from making
this investment.]
7. (a) It is understood that this Subscription Agreement is not binding
on the Company until the Company accepts it, which acceptance is at the sole
discretion of the Company, by executing this Subscription Agreement where
indicated. The Company will have the right to reject this Subscription
Agreement, in whole or in part, and will not be obligated to allocate the
Securities among subscribers pro rata in the event of an over-subscription. This
Subscription Agreement will be null and void if the Company does not accept it.
If the Company does not accept this Subscription, any payment tendered by the
undersigned herewith will be returned to the undersigned without interest, and
the Company and the undersigned will have no further obligation to each other
hereunder.
(b) It is understood that the Company will have the right to
terminate or withdraw the Private Placement at any time. The undersigned also
understands that there is no aggregate minimum dollar level of accepted
subscriptions required as a condition to the Closing. In the event that the
Private Placement is withdrawn or otherwise does not close as to the
undersigned's subscription, any payment rendered by the undersigned herewith
will be returned to the undersigned without interest.
8. (a) This Subscription Agreement is not transferable or assignable by
the undersigned. Except as otherwise provided by applicable law, this
Subscription Agreement may
-5-
<PAGE>
not be revoked or canceled by the undersigned, unless the Company in its sole
discretion consents to revocation, rejects the subscription or withdraws the
Private Placement.
(b) The representations, warranties, understandings and
acknowledgments in this Agreement are true and accurate as of the date hereof,
shall be true and accurate on the date of the acceptance hereof by the Company
and shall survive thereafter.
(c) All notices or other communications to be given or made
hereunder shall be in writing and shall be delivered personally or mailed, by
registered or certified mail, return receipt requested, postage prepaid, to the
undersigned or to the Company as the case may be, at their respective addresses
set forth herein.
(d) This Subscription Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State of
Delaware without regard to its principles of conflicts of laws.
This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements, representations, warranties and
understandings in connection herewith. This Agreement may be amended only by a
writing executed by all parties hereto.
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement as an instrument under seal on the date set forth below.
Name of Subscriber
Date Signature
Title (if the subscriber is not a natural person)
Amount of Investment $__________
-6-
<PAGE>
Please print information
below exactly as you wish
it to appear in the records
of the Company.
Name and capacity in which
subscription is made see
next page for particular
requirements.
ADDRESS:
Number and Street
City State Zip Code
Social Security Number or other Taxpayer
Identification Number
Address for notices if different from above
-7-
<PAGE>
Additional Execution Page -- to be completed
in all cases except where subscriber is
an individual acting as such solely
for his or her own account.
Please check to indicate form of ownership of, or organization of entity
acquiring, Units.
<TABLE>
<CAPTION>
<S> <C>
_____ TENANTS-IN-COMMON _____ CORPORATION
(Both parties must sign on preceding (A certificate of corporate resolution
page.) authorizing attached or sent under separate
_____ JOINT TENANTS WITH RIGHT cover.)
OF SURVIVORSHIP
(Both parties must sign.)
_____ COMMUNITY PROPERTY _____ PARTNERSHIP
(One signature required if interest held in (A copy of Certificate of Limited
one name, i.e., managing spouse; two Partnership or Partnership Agreement or
signatures execute this Subscription other evidence of authority must be
Agreement required if interest held in attached or sent under separate cover.)
both names.)
_____ TRUST
The name of the trust, name of trustee,
and date trust was formed:
</TABLE>
(A copy of the Trust-Agreement or other
authorization must be attached or
forwarded under separate cover.)
-8-
<PAGE>
Exhibit 10.21
SANCTUARY SHORT TERM LEASE AGREEMENT
------------------------------------
THIS AGREEMENT OF LEASE ENTERED INTO THIS 13th day of March, 1997
between SANCTUARY OF BOCA, INC., a Florida Corporation (hereinafter referred to
as "Landlord"), with its principal place of business at 4400 North Federal
Highway, Suite 210, Boca Raton, FL 33431 and HIPPO, INC. (hereinafter referred
to as "Tenant') whose mailing address is 4400 N. FEDERAL HIGHWAY, SUITE 210-05,
BOCA RATON, FL 33431.
1. Demised Premises: Landlord leases to Tenant and Tenant rents from
Landlord those certain premises described as Suite 410 consisting of
approximately 1523 square feet in the office building having a gross leasable
area of approximately 17,921 square feet (hereinafter referred to as Office
Building located at 4400 N. Federal Highway, Boca Raton, FL 33431, State of
Florida, said measurements being from center of partition to center of
partition, except that in the event Demised Premises is an end suite,
measurements shall include full width of end wall (hereinafter called the
"Demised Premises"). The boundaries and location of the Demised Promises are
outlined in a diagram of the Office Building, which is attached hereto and made
a part hereof and marked "Exhibit A". Said Exhibit sets forth the general layout
of the Office Building and shall not be deemed to be a warranty, representation
or agreement on the part of Landlord that said Office Building will be exactly
as indicated on said diagram. Landlord may increase, reduce or change the
number, dimensions or locations of the walks, buildings and parking areas as
Landlord shall deem proper, and reserves the right to make alterations or
additions to, and to build additional suites on, the building in which the
Demised Promises are contained and to add buildings adjoining same or elsewhere
in the Office Building.
The use and occupation by Tenant of the Demised Promises shall include
the right to the non-exclusive use, in common with others, of all such
automobile parking areas, driveways, truck and service courts, walks and other
facilities designated for common use, as have been installed by Landlord, and of
such other and further facilities as may be provided or designated from time to
time by Landlord for common use, subject, however, to the terms and conditions
of this Lease and to reasonable rules and regulations for the use thereof, as
prescribed from time to time by Landlord.
1.01 ACCEPTANCE OF PREMISES. The Premises are hereby leased to Tenant
subject to: (i) any and all laws, as applicable, now in force hereafter enacted;
and (ii) any title matters of record or otherwise disclosed to Tenant. If
construction of the Premises is completed as of the date this Lease is signed by
the parties, Tenant certifies that it has inspected the Premises and, in
reliance on such inspection, acknowledges and accepts the Premises and the
Office Building, all of which Tenant confirms as being satisfactory. Tenant
further acknowledges that the Premises, including all fixtures, equipment and
furnishings contained therein, are in satisfactory or excellent condition and
accepts the Promises in its "AS IS" condition, without requiring Landlord to
make any repairs or replacements
1
<PAGE>
thereof. Tenant hereby waives any objection to and releases Landlord from any
liability arising from the condition of the Premises from and after the date of
Lease execution.
1.02. Landlord will, at its sole expense, perform all work specified to
be performed by Landlord more specifically set forth in Exhibit "B" attached
hereto and entitled "Landlord's Improvements". Tenant will, at its sole expense,
perform all other work necessary to complete the premises for its business
purposes including, without limitation, the work specified to be performed by
Tenant more particularly described in Exhibit "C" attached hereto as "Tenant's
Improvements"; provided however, all of Tenant's work shall be performed by
licensed contractors acceptable to Landlord, in accordance with its final plans,
specifications and drawings furnished to Landlord, which shall be in compliance
with all laws, including applicable building and zoning codes.
2. Term: The term of this Lease shall be twelve (12) months and fifteen
(15) days commencing on March 17, 1997 ("Commencement Date") and ending March
31, 1998 ("Expiration Date"). At the expiration of the term of the Lease, Tenant
will vacate and surrender the Premises to Landlord in accordance with the terms
hereof and said Premises shall be in broomclean condition.
3. Tenant covenants to pay to Landlord, in equal monthly installments
the rent plus applicable sales and use tax in advance of the first day of each
calendar month of each year of the term. The schedule for the rent per month is
as follows:
March 17, 1997 through March 31, 1997 $1,158.15 plus FL State Sales Tax
April 1, 1997 through March 31, 1998 $2,316.23 plus FL State Sales Tax
4. Landlord acknowledges receipt of the first months rent in the amount
of $0.
5. Covenant to pay. Tenant shall pay Rent to Landlord from the
Commencement Date without prior demand, together with all applicable Florida
sales tax thereon as provided by law from time to time; for any Lease Year
greater or less than twelve (12) months shall be prorated on the per diem basis,
based upon the number of days elapsed over 365-day year. Tenant agrees that its
covenant to pay Rent to Landlord is an independent covenant and that all such
amounts are payable without counterclaim set-off, deductions, abate or reduction
whatsoever, except as expressly provided for in this Lease.
6. Rent Past Due: Tenant agrees that if the rent has not been paid by
the 5th of the month, there will be a $50.00 late charge. If rent has not been
paid by the 10th of the month, there will be a late charge of $75.00 and if rent
has not been paid by the end of the month the late charge shall be $175.00.
Tenant agrees to pay the cost of collection and reasonable attorneys fees on any
part of rental that is past due, plus interest not to exceed 8% per annum or the
maximum legal interest rate, whichever sum is less.
2
<PAGE>
7. No Abatement of Rent. Except as specifically provided to the
contrary in this Lease, there shall be no abatement from or reduction of the
Rent due, nor shall Tenant be entitled to damages, losses, costs or
disbursements from Landlord during the Term caused by or on account of the fire,
water or sprinkler systems or the partial or temporary failure or stoppage of
any heating, cooling, lighting, plumbing or other services in or to the Premises
or the Office Building, whether due to Force Majeure or the making of
alterations, repairs, renewals, improvements or structural changes to the
Premises, the Office Building, the equipment or systems supplying the services,
or from any cause whatsoever, provided that the said failure or stoppage is
remedied within a reasonable time.
8. Security Deposit. Landlord acknowledges receipt of a Security
Deposit in the amount of $4,962.42, to be held by Landlord, without any
liability for interest thereon, as security for the performance by Tenant of all
its obligations under this Lease. In the event of default by Tenant of any of
its obligations under this Lease, Landlord may at its option, but without
prejudice to any other rights which Landlord may have, apply all or part of the
Security Deposit to compensate Landlord for any loss, damage or expense
sustained by Landlord as a result of such default. If all or any part of the
Security Deposit is so applied, Tenant shall restore the Security Deposit to its
original amount on demand of Landlord. Within thirty (30) days following
termination of this Lease, if Tenant is not then in default, the Security
Deposit will be returned by Landlord to Tenant. If Landlord sells its interest
in the Premises, it may deliver the Security Deposit to the Purchaser and
Landlord will thereupon be released from any further liability with respect to
the Security Deposit or its return to Tenant and the purchaser shall become
directly responsible to Tenant. Landlord shall not be required to pay Tenant any
interest on said security deposit. A total of Five Garage door openers have been
given to Tenant for the use of parking 5 cars in the North Garage. Tenant
acknowledges that the security deposit for the five (5) garage openers will be
returned only upon receipt of each garage door opener device.
9. Payment of Operating Costs. In addition to payments of Rent, Tenant
shall pay to Landlord Tenant's Proportionate Share of "Operating Costs" (defined
in Section 11 hereof). Tenant's Proportionate Share of the Operating Costs shall
be 8.5%. The amount of the Operating Costs payable to Landlord may be estimated
by Landlord for such period as Landlord determines from time to time, and Tenant
agrees to pay Landlord the amounts so estimated in equal installments, in
advance, on the first day of each month during such period. Notwithstanding the
foregoing when bills for all or any portion of Operating Costs so estimated are
actually received by Landlord, Landlord may bill Tenant for Tenant's
Proportionate Share thereof, less any amount previously paid by Tenant to
Landlord on account of such item(s) by way of estimated Operating Costs
payments. Within a reasonable period of time after the end of the period for
which estimated payments have been made, Landlord shall submit to Tenant a
statement setting forth the actual amounts payable by Tenant based on actual
costs. If the amount Tenant has paid based on estimates is less than the amount
due based on actual costs, Tenant shall pay Landlord such deficiency within (5)
days after submission of such statement to Tenant. If the amount paid by Tenant
is greater than the amount actually due, the excess may be retained by Landlord
to be credited and applied by Landlord to the next due installment(s) of
Tenant's Proportionate Share of Operating Costs, or as to the final lease year,
provided Tenant is not in default,
3
<PAGE>
Landlord will refund such excess to Tenant or credit such amount to Tenant's
next rent payment coming due at Landlord's option. Tenant's Proportionate Share
of actual Operating Costs for the final estimate period of the Term of this
Lease shall be due and payable even though it may not be finally calculated
until after the expiration of the Term. Accordingly, Landlord shall have the
right to continue to hold Tenant's Security Deposit following expiration of the
Term until Tenant's share of actual Operating Costs has been paid, unless an
alternative security (letter of credit or otherwise) is furnished to the
satisfaction of the Landlord.
10. Net Lease. Except as provided herein, this Lease is a completely
net lease to Landlord, except as otherwise expressly herein stated. Landlord is
not responsible for any expenses or outlays of any nature arising from or
relating to the Premises, the use or occupancy thereof, the contents thereof or
the business carried on therein. Tenant shall pay all costs, expenses, charges,
assessments, impositions and outlays of every nature and kind relating to the
Premises except as expressly herein stated.
11. Operating Costs Defined. Operating Costs shall mean any amounts
paid or payable, whether by Landlord or by others on behalf of Landlord, arising
out of Landlord's ownership, maintenance, operation, repair, replacement and
administration of the Office Building, including, without limitation: (a) the
cost of taxes including all costs associated with the appeal of any assessment
on taxes; (b) the cost of insurance which Landlord is obligated or permitted to
obtain under this Lease, including, but not limited to, rent interruption
insurance, and any deductible amount applicable to any claim made by Landlord
under such insurance; (c) the cost of security, janitorial, landscaping, window
cleaning, garbage removal and trash removal services; (d) the cost of heating,
ventilating and air conditioning to the extent incurred with respect to Common
Areas or with respect to any shared systems; (e) the cost of all gas, water,
sewer, electricity, telephone and any other utilities used in the maintenance,
operation or administration of the Office Building; (f) salaries, wages and
other amounts paid or payable for all personnel involved in the repair,
maintenance, operation, leasing, security, supervision or cleaning of the Office
Building, including fringe benefits, unemployment and workmen's compensation
insurance premiums, pension plan contributions and other employment costs, as
well as the cost of engaging independent contractors to perform any of the
foregoing services; (g) auditing, accounting and legal fees and costs; (h) the
cost of repairing, replacing, operating and maintaining the Office Building, and
the equipment serving the Office Building; (i) the cost of the rental of any
equipment and signs (not including Tenant's signage); (j) amortization of the
costs referred to in subsection (h) immediately above to the extent not charged
fully in the year in which they are incurred, all as determined by Landlord in
accordance with sound accounting principles, together with interest on any
unamortized balance of such costs calculated at three percent (3%) per annum
above the "Prime Rate" during the period of calculation, as stated in the Wall
Street Journal, or similar publication in the event the Wall Street Journal
ceases publication; (k) all management fees; (l) administration costs and fees;
(m) capital expenditures which are required by law and/or which result in a
substantial labor or cost saving device or operation, in which case the capital
expenditures
4
<PAGE>
shall be amortized over (10) years and included by Landlord to conduct any
environmental tests required by State or Federal Law, including administrative
agencies, or by Landlord.
12. Acceptance of Premises. The Premises are hereby leased to Tenant
subject to: (i)any and all laws, as applicable, now in force hereafter enacted;
and (ii) any title matters of record or otherwise disclosed to Tenant. If
construction of the Premises is completed as of the date this Lease is signed by
the parties, Tenant certifies that it has inspected the Premises and, in
reliance on such inspection, acknowledges and accepts the Premises and the
Office Building, all of which Tenant confirms as being satisfactory. Tenant
further acknowledges that the Premises, including all fixtures, equipment and
furnishings contained therein, are in satisfactory or excellent condition and
accepts the Premises in its "AS IS" condition, without requiring Landlord to
make any repairs or replacements thereof. Tenant hereby waives any objection to
and releases Landlord from any liability arising from the condition of the
Premises from and after the date of Lease execution.
13. Use. Tenant shall use the Premises exclusively as a general office,
and for no other use or purpose whatsoever. Tenant shall comply with all laws,
ordinances, rules and regulations of applicable governmental authorities
respecting the use, operation and activities of the Premises (including
sidewalks, streets, approaches, drives, entrances and Common Areas which serve
the Premises), and Tenant shall not make, suffer or permit any unlawful,
improper or offensive use of the Premises or such other areas, or any part
thereof, or permit any nuisance thereon. Tenant shall not make any use of the
Premises which would make void or voidable any policy of fire or extended
coverage insurance covering the Premises. Tenant shall use the Premises only for
the purposes stated in this Lease and shall not leave said Premises vacant or
suffer or permit any waste or mistreatment thereof.
14. Tenant's Covenants To Use and Occupancy.
A) Tenant shall not store or bring on the Premises any
articles of any combustible, toxic or dangerous nature and shall at all times
keep the Premises in such condition as to comply with all laws. Tenant shall
keep and maintain on the Premises all safety apparatus or appliances required by
law. Tenant shall not cause, permit or suffer any act, occurrence, or series of
acts or occurrences upon the Premises which shall cause the rate of insurance on
the Premises and/or Office Building, or any part thereof, to be cancelled,
result in an increase in the Premises for coverage of same or preclude the
obtaining of such insurance.
B) Tenant shall not keep or display any merchandise which in
any manner shall obstruct the Common Areas, and shall not sell, advertise,
conduct or solicit business within the Office Building other than in the
Premises. Tenant shall not cause, permit or suffer any machine selling
merchandise, services or entertainment, including vending machines or other
machines operated by coins to be present on the Premises without prior written
consent of Landlord.
5
<PAGE>
15. Defaults. A default by Tenant shall be deemed to have occurred
hereunder, if and whenever: (a) any Minimum Rent is in arrears by the fifth of
the month, whether or not any notice or demand for payment has been made by
Landlord; (b) any Additional Rent is in arrears and is not paid within five (5)
days after written demand by Landlord; (c) Tenant has breached any of its
obligations in this Lease (other than the payment of Rent) and Tenant fails to
remedy such breach within fifteen (15) days (or such shorter period as may
provided in this Lease), (d) Tenant makes a sale in bulk of all or a substantial
portion of its assets other than in conjunction with a transfer approved by
Landlord; (e) this Lease or any of Tenant's assets are taken under a writ of
execution; (f) Tenant proposes to make a transfer other than in compliance with
the provisions of this Lease; (g) Tenant abandons or attempts to abandon the
Premises or the Promises become vacant, unoccupied or not open for business
during the required hours, for a period of five (5) consecutive days or more
without the consent of Landlord; (h) any of Landlord's policies of insurance
with respect to the Office Building are actually or threatened to be cancelled
or adversely changed as a result of any use or occupancy of the Premises or (i)
any obligations of Tenant or any Guarantor owing to Landlord, whether or not
related to this Lease and however arising (whether by operation of law,
contract, acquired or otherwise) shall be in default. (j) Right of Redemption.
No right of redemption shall be exercised under any present or future law, in
case the Tenant shall be dispossessed for any cause, or if the Landlord shall,
in any other manner, obtain possession of the demised premises in consequence of
the violation of the covenants and agreements of tenant.
16. Default Remedies. In the event of any default hereunder by Tenant,
then without prejudice to any other rights which it has pursuant to this Lease
or at law or in equity, Landlord shall have the following rights and remedies,
some or all of which may be exercised by Landlord: (A) Landlord may terminate
this Lease by notice to Tenant and retake possession of the Premises for
Landlord's account, (B) Landlord may enter the Premises as agent of Tenant to
take possession of any property of Tenant on the Premises, to store such
property at the expense and risk of Tenant or sell or otherwise dispose of such
property in such manner as Landlord may see fit without notice to Tenant, which
shall be credited towards any Rent owed Landlord pursuant hereunder. (C)
Landlord may accelerate all Rent for the entire term.
17. Maintenance and Repairs by Landlord. Landlord covenants to keep the
following in good order, repair and condition: (i) the structure of the Office
Building, including all of the exterior walls, structural columns, beams,
joists, footings and stem walls and roots; (ii) the mechanical, electrical, and
other bases building systems (except such as may be installed by or be the
property of Tenant), and (iii) the entrances, sidewalks, corridors, parking
areas and other facilities from time to time comprising the Common Areas. So
long as Landlord is acting in good faith, Landlord shall not be responsible for
any damages caused to Tenant by reason of failure of equipment or facilities
serving the Office Building or delays in the performance of any work for which
Landlord is responsible pursuant to this Lease.
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<PAGE>
18. Maintenance and Repairs by Tenant. Tenant shall, at its sole cost,
maintain the Premises, in good order, condition and repair, exclusive of base
building mechanical, plumbing and electrical systems, all to a standard
consistent with a first class Office Building, with the exception only as those
which are the obligation of Landlord set forth in Section 17 above. All repairs
and maintenance performed by Tenant in the Premises shall be performed by
contractors or workmen designated or approved by Landlord. At the expiration or
earlier termination of the Term, Tenant shall surrender the Premises to Landlord
in as good condition and repair as Tenant is required to maintain the Premises
throughout the Term.
19. Tenant's Alterations. Tenant shall not have the right to make
non-structural interior alterations to the Premises without Landlord's written
permission.
20. Repair Where Tenant at Fault. Notwithstanding any other provisions
of this lease, if any part of the Office Building is damaged or destroyed or
requires repair, replacement or alteration as a result of the act or omission of
Tenant or Tenant's Agent, Landlord shall have the right to perform same and the
cost of such repairs, replacement or alterations, plus an administration fee
equal to fifteen percent (15%) of such costs, shall be paid by Tenant upon
demand by Landlord, as Additional Rent.
21. Removal of Improvements and Fixtures. All Leasehold improvements,
other than immediately upon their placement in the Premises become Landlord's
property without compensation to Tenant. Except as otherwise agreed by Landlord
in writing, no Leasehold Improvements shall be removed from the Premises by
Tenant either during or at the expiration or sooner termination of the Term
except that: (a) Tenant may during the Term, in the usual course of its
business, remove its trade fixtures, provided that Tenant is not in default
under this Lease; and (b) Tenant shall, at the expiration or earlier termination
of the Term, at its sole cost, remove such of Leasehold Improvements and trade
fixtures in the Premises as Landlord shall require be removed and restore the
Premises to Landlord's then current Office Building standard to the extent
required by Landlord. Tenant shall at its own expense repair any damage caused
to the Office Building by such removal. If Tenant does not remove its trade
fixtures at the expiration or earlier termination of the Term, the trade
fixtures shall, at the option of Landlord, become the property of Landlord and
may be removed from the premises and sold or disposed of by landlord in such
manner as it deems advisable without any accounting to Tenant.
22. Casualty. In the event any improvements on the Office Building site
are rendered untenantable by fire or other casualty, Landlord shall have the
option of terminating this Lease or rebuilding, and in such event written notice
of the election by Landlord shall be given to Tenant within thirty (30) days
after the occurrence of such casualty. In the event Landlord elects to rebuild,
(1) Landlord shall not be obligated to rebuild the Tenant's or any other Tenant
Improvements; and (2) the affected portions of the Office Building shall be
restored, as nearly as practicable in Landlord's reasonable judgment, to their
former condition, exclusive of Tenant Improvements, within a reasonable time,
during which time no payment of rent or other sum due hereunder from Tenant to
Landlord shall abate unless and until Tenant's space shall have continued
untenantable for at least thirty (30) days
7
<PAGE>
after (and as a result of) such casualty. In the event (i) Landlord fails to
give timely notice of its election to rebuild, or (ii) Landlord fails to rebuild
so that Tenant's Improvements can be replaced within six (6) months of such
casualty, the term of this Lease shall then expire and this Lease and all
options and rights under it shall be of no further force or effect and Landlord
shall be entitled to sole possession of the Premises, and Landlord shall not be
obligated to reimburse the Tenant for the value or cost of its improvements, or
for any expense or damage incident to such casualty or such election.
23. Damage. Landlord shall not be liable for any damage to any property
or person at any time in the leased premises or building from air-conditioners,
electricity, water, rain, wind, whether they may leak into, issue or flow from
any part of said building or from any other place or quarter. Tenant shall give
to Landlord or its agent, prompt written notice of any accident.
24. Liability of Landlord. Tenant shall look solely to Landlord's
estate and interest in the Office Building and the rentals therefrom for the
satisfaction of any right of Tenant for the collection of a judgement or other
judicial process or arbitration award requiring the payment of money by
Landlord, subject, however, to any prior rights of any Mortgagee, and no other
property or assets of Landlord, Landlord's Agents, including all of Landlord's
general partners, incorporators, shareholders, officers, directors, or other
principals, disclosed or otherwise, or affiliates, shall be subject to levy,
lien, execution, attachment or other enforcement procedure for the satisfaction
of Tenant's rights and remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder, or under Law, including Tenant's
use and occupancy of the Premises, or any liability of Landlord to Tenant. The
limitation of Landlord's liability under this Section 24 shall be absolute and
without exception, and shall survive the expiration or earlier termination of
this Lease.
25. Liens. Tenant shall promptly pay for all materials supplied and
work done in respect of the Premises so as to ensure that no lien is recorded
against any portion of the real property upon which the Office Building is
erected or against Landlord's or Tenant's interest therein. If a lien is so
recorded, Tenant shall discharge it promptly by payment or bonding. If any such
lien against the Office Building or Landlord's interest therein is recorded and
not discharged to Tenant as above required within fifteen (15) days following
recording, Landlord shall have the right to remove such lien by bonding or
payment and the cost thereof shall be paid immediately from Tenant to Landlord.
Tenant has no right or authority to create any mechanics' or materialmen's lien
on the Office Building or Landlord's interest therein and Tenant in compliance
with Section 713.10, Florida Statutes, shall provide written notice (and provide
written acknowledgment thereof to Landlord) to all suppliers of labor or
materials, as well as all contractors and subcontractors, as applicable, prior
to ordering such labor or materials or executing any agreement for construction
of Leasehold Improvements.
26. Assignments, Subleases and Transfers. Tenant shall not enter into,
consent to or permit any transfer of this Lease without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld, but shall be subject to Landlord's rights under the following Sections
27 and 28.
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<PAGE>
27. Landlord's Right to Consent. If Tenant intends to effect a
transfer, tenant shall give prior notice to Landlord of such intent specifying
the identity of the Transferee and providing such financial, business or other
information relating to the transfer, the proposed Transferee and its principals
as Landlord or any mortgagee requires, together with copies of sufficient
documents to evidence the particulars of the proposed transfer, including the
total consideration to be paid by the Transferee. Landlord shall, within thirty
(30) days after having received such notice and all requested information,
notify Tenant either that it consents or does not consent to the transfer in
accordance with the provisions and qualifications of this Article 27. If
Landlord fails to timely give any notice, Landlord shall be deemed to have
refused consent to the transfer.
28. Conditions of Transfer.
A) If there is a permitted transfer, Landlord may collect Rent
from the Transferee and apply the net amount collected to the Rent required to
be paid pursuant to this Lease, but no acceptance by Landlord of any payments by
a Transferee shall be deemed a waiver of any provisions hereof regarding Tenant.
Any consent by Landlord shall be subject to Tenant and Transferee executing an
agreement with Landlord agreeing: (i) that the Transferee will be bound by all
of the terms of this Lease as if such Transferee had originally executed this
Lease as tenant, and (ii) to amend this Lease to incorporate such terms,
covenants, and conditions as are necessary so that this Lease will be in
accordance with Landlord's standard form of Lease in use for the Office Building
at the time of the transfer, and so as to incorporate therein any conditions
imposed by Landlord in its consent to such transfer and such further conditions
as may be required by the provisions of this Section 28.
B) Notwithstanding any transfer permitted or consented to by
Landlord, or acceptance of Rent from the Transferee, Tenant (and Guarantor if
applicable) shall be jointly and severally liable with the Transferee under this
Lease and shall not be released from performing any of the terms of this Lease.
29. Indemnification. Each party agrees to indemnify and hold the other
harmless from and against any and all loss, damage, claim, demand, liability or
expense by reason of any damage or injury to persons (including loss of life) or
property which may arise or become claimed to have arisen as a result of or in
connection with the indemnifying party's (i) improvement, occupancy or use of
the Premises or Office Building or its site, or (ii) failure to conscientiously
and promptly perform any of its obligations under this Lease.
30. Insurance.
A) Tenant shall, at its sole expense, provide and maintain in
force during the entire term of this Lease, and any extension or renewal hereof,
public liability insurance with limits of coverage not less than One Million
Dollars ($1,000,000.00) (for death or bodily injury for any one occurrence) and
One Million Dollars ($ 1,000,000.00) for any property damage or loss from any
one
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<PAGE>
accident. Each such policy of insurance shall name as the insured thereunder
both the Landlord and Tenant. Each such liability insurance policy shall be of
the type commonly known as Owner's, Landlord's and Tenant's insurance and shall
be obtained from a company reasonably satisfactory to both parties.
B) Builder's Risk Insurance. At the times during which
construction is being performed within or upon the Premises by Tenant, whether
during initial construction or thereafter at any time, Tenant shall provide
builder's risk insurance with such reasonable limits as Landlord shall from time
to time require, and any such policy or insurance shall have as named insured
thereunder both Landlord and Tenant. Further, Tenant shall maintain at all times
during the term of the Lease, Workmen's Compensation and Employer's Liability
insurance at legally required levels for the benefit of all employees entering
upon the site as a result of or in connection with their employment by Tenant or
Tenant's general contractor.
C) The original of each policy of insurance required of Tenant
from time to time by this Lease, or a certificate or certified duplicate
thereof, issued by the insurer or insuring organization, shall be delivered by
Tenant to Landlord (i) on or before thirty (30) days prior to occupancy of the
Premises by Tenant during the original and any renewed or extended term hereof,
and (ii) again at ten (10) days prior to the lapse or expiration or termination
of any prior policy which would otherwise occur during such term, renewal or
extension.
31. Right of Access. Landlord reserves the right to enter the Premises
at all reasonable times (and in emergencies at all times) in order to: (i) make
such repairs, alterations or improvements to the Office Building as Landlord
considers necessary or desirable; (ii) have access to underfloor facilities and
access panels to mechanical shafts; (ii) check, calibrate, adjust and balance
controls and other parts of the heating, air conditioning, ventilating and
climate control systems; and (iv) install, maintain, repair or replace pipes,
ducts, conduits, vents and wires leading in, through, over or under the
Premises. Tenant shall not unduly obstruct any pipes, conduits or mechanical or
other electrical equipment so as to prevent reasonable access thereto. Landlord
further reserves unto itself the right to use all exterior walls and roof area.
Landlord shall exercise its rights under this Section 31, to the extent possible
in each circumstance, in a manner which minimizes interference with Tenant's use
and enjoyment of the Premises, including Tenant's decorations or operations
within the Premises. Rent will not abate or be reduced while the maintenance,
repairs, alterations, installations, replacements or improvements are being
made.
32. Rules and Regulations. Landlord shall operate and maintain any
areas designated by Landlord as Common Areas in a manner deemed by Landlord to
be reasonable and appropriate and in the best interests of the office building.
Tenant covenants that the following rules, regulations and such other and
further rules and regulations as landlord may make, being in the landlord's
judgment needful for the safety, care and cleanliness of the building and
premises or for the comfort of tenants shall be faithfully kept, observed and
performed by Tenant and by the agents, clerks, servants and
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<PAGE>
visitors of tenant as follows: a) Ingress-egress. Sidewalks, entries, passages,
hallways, elevators and staircases shall not be obstructed by Tenant or used for
other purposes than ingress or egress. b) No obstruction. Doors, windows, glass
doors and lights that reflect or admit light into halls or other places of
building shall not be covered or obstructed by tenant or its agents. c)
Defacement. Tenant shall not mark, paint, drill into or in any way deface walls,
ceilings, partitions, floors, wood, stone or iron work. d) Signs. No sign, or
notice shall be inscribed, painted or affixed to any part of the outside or
inside of the building except as suite signage and then only of such size, color
and style as landlord shall determine. e) Air- conditioning & heating. Tenant
shall not use any other method of heating or air-conditioning than that as
supplied by Landlord. f) Safes. Landlord shall have right to prescribe the
weight and position of safes. Damage done to building by taking a safe in or out
of building shall be repaired at expense of Tenant. g) Moving hours. Tenant
shall not move freight, furniture or bulky matter of any description into or out
of building between the hours of 9:00 a.m. and 5:00 p.m., Monday through Friday.
33. Carelessness. Tenant shall not cause unnecessary labor by
carelessness and indifference to the preservation of good order and cleanliness
in its premises or the building.
34. Designation. Landlord grants to Tenant and Tenant's Agents, a
non-exclusive license to use the Common Areas in common with others during the
term, subject to the exclusive control and management thereof at all times by
Landlord and subject further to the rules and regulations.
35. Holding Over. If Tenant remains in possession of the Premises after
the end of the Term hereof, there shall be no tacit renewal of this Lease, and
Tenant shall be deemed to be a tenant at sufferance. In such event, Tenant shall
pay to Landlord, for each day Tenant remains in possession of the Premises
without the written consent of Landlord, an amount equal to the Rent for the
last twelve (12) months of the Term, divided by 365-days, and then multiplied by
two. Such amount shall accrue and be due and payable on a daily basis commencing
on the first day following the and of the Term and terminating on the day that
either (i) possession of the Premises is restored to Landlord, or (ii) a now
lease is entered into between Landlord and Tenant. All other obligations of
Tenant under this Lease, other than the payment of Rent (which is payable in
accordance with the foregoing calculation) shall be applicable to Tenant during
the period the Tenant is a Tenant at sufferance.
36. Assignment of Chattels. Tenant pledges and assigns to Landlord all
furniture, fixtures, goods and chattels of said Tenant which shall be brought or
put into said premises as security for payment of rent herein reserved and
tenant agrees that said lien may be enforced by stress, foreclosure, or
otherwise at the election of the Landlord, and does agree to pay reasonable
attorneys' fees, together with all costs and charges thereof incurred by
Landlord.
37. Utilities.
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A) Electricity. The parties acknowledge that the Premises are
separately metered for electricity and the Tenant shall directly pay Florida
Power and Light for said service.
B) Abuse of services. Tenant agrees not to abuse the services
and will turn off lights and equipment after normal working hours.
C) Utility failure. Landlord shall not be liable for failure
to supply such electricity, air-conditioning, heating, water, sewer, that is not
due to gross negligence on its part.
D) Interruption of service. Landlord reserves privilege of
stopping service of water, lighting, air-conditioning and elevators at such
times as may be necessary by reason of accident, repairs, alterations or
improvements until such time as same shall have been completed.
38. Bankruptcy. If Tenant shall become insolvent or if bankruptcy
proceedings shall be begun by or against tenant before the end of said term,
landlord is hereby irrevocably authorized, at Landlord's option, to cancel this
lease for default. Landlord may elect to accept rent from such receiver, trustee
or other judicial officer during the term of occupancy in their fiduciary
capacity without effecting Landlord's right as contained in this contract, but
no receiver, trustee or other judicial officer shall ever have the right, title
or interest in or to the above described property by virtue of this contract.
39. Tenant hereby waives and renounces for himself and family any and
all homestead and exemption rights he may now have, or hereafter under or by
virtue of the constitution and laws of the State of Florida of any obligation or
damage that may accrue under the term of this lease.
40. Successors. The rights and liabilities created by this lease extend
to and bind the successors and assigns of Landlord and the heirs, executors,
administrators and permitted successors and assigns of Tenant. No rights,
however shall inure to the benefit of any Transferee unless the provisions of
Sections 26 and 27 are complied with.
41. Time. Time is of the essence of this Lease. Any time period herein
specified of five (5) days or less shall mean business days; any period in
excess of five (5) days shall mean calendar days.
42. Notices. Any notice, consent or other instrument required or
permitted to be given under this Lease shall be in writing and shall be
delivered in person, or sent by certified mail, return receipt requested,
postage prepaid, or by Federal Express or similar overnight courier service,
addressed (a) if to Landlord, at the address set forth in the introductory
paragraph of this Lease; and (b) if to Tenant, at the Premises. Any such notice
or other instruments shall be deemed to have been given and received on the day
upon which personal delivery is made or, if mailed, then forty-eight (48) hours
following the date of mailing.
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43. Cumulative Rights. The rights of Landlord under the foregoing shall
be cumulative, and failure on part of Landlord to exercise rights given
hereunder shall not operate to forfeit any of said rights.
44. Estoppel Certificate. At any time and from time to time, upon not
less than ten (10) days prior notice by Landlord, the "Superior Lessor," or the
"Superior Mortgagee" (as both are herein after defined) to Tenant, Tenant shall
comply with, execute, acknowledge and deliver in writing addressed to such party
as designated by Landlord or the Superior Lessor or the Superior Mortgagee, as
the case may be (hereinafter collectively called the "Requesting Party"),
certifying to the following: (A) that this Lease is unmodified and in full force
and effect, or if there have been modifications, that the Lease is in full force
and affect, as modified, and stating the modifications; (B) whether the Term has
commenced and Minimum Rent, and Additional Rent have become payable hereunder
and, if so, the dates to which they have been paid; (C) whether or not Landlord
is in default in performance of any of the terms of this Lease, and if so,
specifying each such default of which the signor may have knowledge; (D) such
further information with respect to the Lease or the Premises as the Requesting
Party may reasonably request or require, it being intended that any such
statement delivered pursuant to this Section 44 may be relied upon by any
prospective purchaser of the Office Building or any part thereof or the interest
of Landlord in any part thereof, by any prospective Superior Mortgages or any
prospective Superior Lessor, or by any prospective assignees of such parties.
The failure of Tenant to provide a complete statement in accordance with the
provisions of this Section 44 within the required ten (10) day period shall
constitute a default hereunder.
45. Assignment by Landlord. Landlord shall have the unrestricted right
to sell, lease, convey, encumber or otherwise dispose of the Office Building or
any part thereof and this Lease or any interest of the Landlord in this Lease.
To the extent that the purchaser, assignee or secured party from Landlord
assumes the obligations of Landlord under this Lease, Landlord shall thereupon
and without further agreement be released of all liability under this Lease.
46. Subordination. This lease is subject and subordinate to all present
or future mortgages or dead of trust affecting the demised premises.
47. Entirety. This agreement contains entire and only agreement between
the parties concerning the demised promises. No prior oral or written statements
or representations of any party hereto or any representation of a party hereto
not contained in this instrument shall have any force or affect. This lease can
be modified only IN WRITING, executed by Landlord and Tenant. This agreement
shall not be binding until executed by Landlord and Tenant.
48. Smoking. In keeping up with the passing of Florida's Clean Air Act,
we ask that you do not smoke in your suite, the lobby, elevators, restrooms, or
any of the other common areas and to please go outside of the building to smoke.
Continued violation of this provision after written notice from the Landlord
shall constitute a default of this lease.
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49. Radon Gas. In compliance with Section 404.056, Florida Statutes,
Tenant is hereby made aware of the following: Radon gas is a naturally occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon testing
may be obtained from your county public health unit.
EXECUTED as of the day and year first above written.
WITNESS: LANDLORD:
SANCTUARY OF BOCA, INC.
BY: /S/ Liz Capia
- ---------------------- ----------------------------
Agent or Owner
Title: Leasing Asst
- ---------------------- -----------------------
Date: 3/13/97
-----------------------
WITNESS: TENANT:
HIPPO, INC.
BY: /S/ Jim Dodrill
- ---------------------- ----------------------------
Mr. Jim Dodrill
Title:President
- ---------------------- ----------------------------
Date: 3/7/97
----------------------------
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EXHIBIT "A"
-----------
Floor Plan
15
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EXHIBIT "B"
-----------
LANDLORD IMPROVEMENTS
---------------------
Landlord to paint suite.
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EXHIBIT "C"
-----------
TENANT IMPROVEMENTS
-------------------
None.
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EXHIBIT 10.22
AMENDMENT TO LEASE #1
---------------------
The LANDLORD, SANCTUARY OF BOCA, INC., and the TENANT, HIPPO, INC.,
hereby agree that the Lease for Suite 410 at Tower & Shoppes at Sanctuary, dated
March 7, 1997 shall be amended as follows:
1. The Tenant has been given three (3) additional Garage door
openers for their exclusive use of parking three cars in the
North Garage.
2. Tenant acknowledges that the Security Deposit for the garage
door openers will be returned only upon receipt of each garage
door opener device.
3. The Security Deposit for the Garage door openers is as follows:
<TABLE>
<CAPTION>
<S> <C>
Existing Security for five (5) openers: $250.00
Additional security for three (3) openers: $150.00
-------
Total for 8 garage door openers: $400.00
</TABLE>
4. Except as provided herein, the Lease Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day indicated below:
WITNESSES: LANDLORD:
SANCTUARY OF BOCA, INC.
/S/ Liz Capia
- ---------------------- ----------------------------
By: Owner Agent
- ---------------------- Date: 8/1/97
---------------------
TENANT:
HIPPO, INC.
BY: /S/ Jim Dodrill
- ---------------------- ------------------------
Mr. Jim Dodrill
Title: President
- ---------------------- ----------------------
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EXHIBIT 10.23
AMENDMENT TO LEASE #2
The Landlord, SANCTUARY OF BOCA, INC., and the Tenant, HIPPO, INC. in
consideration of the mutual covenants, conditions and promises set forth herein
hereby agree to modify and amend that certain Lease Agreement thereof dated
March 7, 1997 and Amendment to Lease #1 dated 8/1/97 for the premises described
as Suite 410 in the office building known as Sanctuary Office Tower ("Office
Building"), 440 N. Federal Highway, Boca Raton, Florida 33431 as follows:
1) The lease term for Suites 407 & 410 will be nine (9) months and sixteen
(16) days commencing March 16, 1998 and expiring November 30, 1998.
2) Paragraph 1.01 of the Lease entitled "Premises" will be amended as follows:
Suite 407: Approximately 1129 square feet
Suite 410: Approximately 1523 square feet
------------------------------------------
Total: Approximately 2652 square feel
3) The rent will be as follows:
Suite 407:
March 16, 1998-March 31, 1998 $ 627.00 for the month of March plus tax
April 1, 1998-November 30, 1998 $1,176.50 per month plus FL Sales Tax
Initial Estimated Operating $ 540.98 per month plus FL Sales Tax
Expenses
Suite 410:
----------
March 1, 1998-November 30, 1998 $ 1,586.46 per month plus FL Sales Tax
Initial Estimated Operating $ 729.77 per month plus FL Sales Tax
Expenses
4) The following breakdown of the security deposit:
Suite 407:
----------
Security Deposit due at signing of amendment $ 3,434.06
Suite 410:
----------
Existing Security Deposit transferred from Lease
dated 3/7/97: $ 4,712.42
Eight (8) garage door openers deposit is
transferred from Amendment to Lease #1 dated
8/1/97 $ 400.00
----------
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Total Security Deposit $ 8,546.48
5) The Tenant accepts the premises of Suite 407 in its existing as is
condition.
6) Except as otherwise provided herein, the Lease shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals on the
day and year indicated below.
WITNESSES: LANDLORD: SANCTUARY OF BOCA, INC.
BY: /S/ Elayne Prince
--------------------------
Ms. Elayne Prince
Title: Vice President
--------------------------
Date: 2/2/98
--------------------------
WITNESSES: TENANT: HIPPO, INC.
BY: /S/ Jim Dodrill
--------------------------
Mr. Jim Dodrill
Title: President
--------------------------
Date: 2/2/98
----------------------------
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EXHIBIT 10.24
SUBLEASE AGREEMENT
The parties agree as follows:
Date of this December 1, 1996
Sublease:
Parties to this Overtenant: Tom Rochon
Sublease: Address for notices: 100 Grand Street, 6th floor
You, the Undertenant: Paul H. Berger, c/o Hippo, Inc.
Address for notices: 4400 N. Federal Highway, Suite 210
Boca Raton, Florida 33431
If there are more than one Overtenant or Undertenant,
the words "Overtenant" and "Undertenant" used in this
Sublease includes them.
Information from Landlord: Thomas Rochon Associates
Over-Lease Address for notices: 100 Grand Street, 6th Floor
Overtenant:
Address for notices:
Date of Over-Lease Jan. 1, 1994
Term: From Jan. 1, 1994 to Dec. 31, 1999
A copy of the Over-Lease is attached as an important
part of the Sublease.
Term: 9. __ years: seven months:
Beginning: Jan. 1, 1997 ending: July 31, 1997:
Premises rented: 10. North Space, as shown on Plan Exhibit "A"
5th Floor
Use of premises: 11. The premises may be used for Artist
Living/Working Quarters only.
Rent: 12. The yearly rent is $26,400. You, the Undertenant,
will pay this yearly rent to the Overtenant in twelve
equal monthly payments of $2,200.00. Payments shall
be paid in advance on the first day of each month
during the Term.
Security: 13. The security for the Undertenant's performance is
$2,200.00. Overtenant states that Overtenant has
received it. Overtenant shall hold the security in
accordance with Paragraph __ of the Over-Lease.
Agreement to lease 14. Overtenant sublets the premises to you, the
Undertenant, for the Term.
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and pay rent: Overtenant states that it has the authority to do so.
You, the Undertenant, agree to pay the Rent and other
charges as required in the Sublease. You, the
Undertenant, agree to do everything required of you
in the Sublease.
Notices: 15. All notices in the Sublease shall be sent by
certified mail, "return receipt requested".
Subject to: 16. The Sublease is subject to the Over-Lease. It is
also subject to any agreement to which the Over-Lease
is subject. You, the Undertenant, state that you have
read and initialized the Over-Lease and will not
violate it in any way.
Overtenant's 17. The Over-Lease describes the Landlord's duties.
duties: The Overtenant is not obligated to perform the
Landlord's duties. If the Landlord fails to perform,
you, the Undertenant, must send the Overtenant a
notice. Upon receipt of the notice, the Overtenant
shall then promptly notify the Landlord and demand
that the Over-Lease agreement be carried out. The
Overtenant shall continue the demands until the
Landlord performs.
Consent: 18. If the Landlord's consent to the Sublease is
required, this consent must be received within _____
days from the date of this Sublease. If the
Landlord's consent is not received within this time,
the Sublease will be void. In such event all parties
are automatically released and all payments shall be
refunded to you, the Undertenant.
Adopting the 19. The provisions of the Over-Lease are part of this
Over-Lease and Sublease. All the provisions of the Over-Lease
exceptions: applying to the Overtenant are binding on you, the
Undertenant, except these:
(a) These numbered paragraphs of the Over-Lease shall
not apply:
(b) These numbered paragraphs of the Over-Lease are
changed as follows:
RIDER TO SUBLEASE ITEMS 1-9 ATTACHED HEREWITH:
No authority: 20. You, the Undertenant, have no authority to
contact or make any agreement with the Landlord about
the premises or the Over-Lease. You, the Undertenant,
may not pay rent or other charges to the Landlord,
but only to the Overtenant.
Successors: 21. Unless otherwise stated, the Sublease is binding
on all parties who lawfully succeed to the rights or
take the place of the Overtenant or you, the
Undertenant. Examples are an assign, heir, or a legal
representative such as an executor of your will or
administrator of your estate.
Changes: 22. This sublease can be changed only by an agreement
in writing signed by the parties to the Sublease.
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Signatures:
OVERTENANT:
/s/ Tom Rochon
You, the UNDERTENANT:
Witness: /S/ Paul Berger
Paul H. Berger, Hippo, Inc.
December 27, 1996
STATE OF COUNTY OF ss.:
On ______________, 19__ before me personally appeared
to me known and known to me to be the individual(s) described in and who
executed the foregoing Sublease, and duly acknowledged to me that he executed
the same.
GUARANTY OF PAYMENT WHICH IS PART OF THE SUBLEASE
Date of Guaranty: __________________ 19__
Guarantor
and address:
Reason for 1. I know that the Overtenant would not rent the
Guaranty: premises to the Undertenant unless I guarantee
Undertenant's performance. I have also requested the
Overtenant to enter into the Sublease with the
Undertenant. I have a substantial interest in making
sure that the Overtenant rents the premises to the
Undertenant.
Guaranty: 2. The following is my Guaranty: I guaranty the
full performance of the Sublease by the
Undertenant. This Guaranty is absolute and
without any condition. It includes, but is
not limited to, the payment of rent and
other money charges.
In addition, I agree to these other terms:
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Changes in 3. This Guaranty will not be affected by any change
Sublease have in the Sublease, whatsoever. This includes, but is
no effect: not limited to, any extention of time or renewals.
The Guaranty will be binding even if I am not a party
to these changes.
Waiver of notice: 4. I do not have to be informed about any failure of
performance by Undertenant. I waive notice of
nonpayment or nonperformance.
Performance: 5. If the Undertenant fails to perform under the
Sublease, the Overtenant may require me to perform
without first demanding that the Undertenant perform.
Waiver of 6. I give up my right to trial by jury in
jury trial: any claim related to the Sublease or this Guaranty.
Changes: 7. This Guaranty of payment and performance
can be changed only by written agreement signed by
all parties to the Sublease and Guaranty.
Signatures: /s/ Paul Berger
GUARANTOR:
Witness:
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LEASE AGREEMENT
The Landlord and Tenant agree to lease the Apartment at the Rent and for the
Term stated on these terms:
LANDLORD: Thomas Rochon TENANT: Thomas Rochon Associates
Address for Notices: 100 Grand Street 100 Grand Street
New York, NY 10013 New York, NY
10013
Apartment (and terrace, if any): 5th Floor 100 Grand Street
Lease date: Term: Yearly Rent: $
September __, 1993 beginning: January 1, Monthly Rent: $
1994 Security: $
ending:
Rider: Additional terms on _____ page(s) initialed at the end by the parties
is attached and made a part of this Lease.
8. Use: Legal use only.
9. Failure to give possession.
Landlord shall not be liable for failure to give Tenant possession of the
Apartment on the beginning date of the Term. Rent shall be payable as of the
beginning of the Term unless Landlord is unable to give possession. Rent shall
then be payable as of the date possession is available. Landlord will notify
Tenant as to the date possession is available. The ending date of the Term will
not change.
10. Rent, added rent.
The rent payment for each month must be paid on the first day of that month
at Landlord's address. Landlord need not give notice to pay the rent. Rent must
be paid in full and no amount subtracted from it. The first month's rent is to
be paid when
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Tenant signs this Lease. Tenant may be required to pay other charges to Landlord
under the terms of this Lease. They are to be called "added rent." This added
rent is payable as rent, together with the next monthly rent due. If Tenant
fails to pay the added rent on time, Landlord shall have the same rights against
Tenant as if Tenant failed to pay rent. Payment of rent in installments is for
Tenant's convenience only. If Tenant defaults, Landlord may give notice to
Tenant that Tenant may no longer pay rent in installments. The entire rent for
the remaining part of the Term will then be due and payable.
11. Security.
Tenant has given Security to Landlord in the amount stated above. If Tenant
fully complies with all of the terms of this Lease, Landlord will return the
Security after the Term ends. If Tenant does not fully comply with the terms of
this Lease, Landlord may use the Security to pay amounts owed by Tenant,
including damages. If Landlord sells or leases the Building, Landlord may give
the Security to the buyer or lessee. Tenant will look only to the buyer or
lessee for the return of the Security.
12. Services.
Landlord will supply: (a) heat as required by law, and (b) hot and cold
water for bathroom and kitchen sink. Stopping or reducing of service(s) will not
be reason for Tenant to stop paying rent, to make a money claim or to claim
eviction. Damage to the equipment or appliances supplied by Landlord caused by
Tenant's act or neglect, may be repaired by Landlord at Tenant's expense. The
repair cost will be added rent.
Tenant must pay for all electric, gas, telephone and other utility services
used in the Apartment and arrange for them with the public utility company.
Landlord may stop service of the plumbing, heating, elevator, air cooling
or electrical systems, because of accident, emergency, repairs, or changes until
the work is complete. If unable to supply any service because of labor trouble,
government order, lack of fuel supply or other cause not controlled by Landlord,
Landlord is excused from supplying that service. Service shall resume when
Landlord is able to supply it.
13. Repairs
Tenant must take good care of the Apartment and all equipment and fixtures
in it. Tenant must, at Tenant's cost, make all repairs and replacements whenever
the need
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results from Tenant's act or neglect. If Tenant fails to make a needed repair or
replacement, Landlord may do it. Landlord's expense will be added rent.
14. Alterations.
Tenant must obtain Landlord's prior written consent to install any
paneling, flooring, "built in" decorations, partitions, railings or make
alterations or to paint or wallpaper the apartment. Tenant must not change the
plumbing, ventilating, air conditioning, electric or heating systems. If consent
is given, the alterations and installations shall become the property of
Landlord when completed and paid for, and shall remain with and as part of the
Apartment at the end of the Term. Landlord has the right to demand that Tenant
remove the alterations and installations before the end of the Term. The demand
shall be by notice, given at least 15 days before the end of the Term. Landlord
is not required to do or pay for any work unless stated in this Lease.
15. Fire, accident, defects, damage.
Tenant must give Landlord prompt notice of fire, accident, damage or
dangerous or defective condition. If the Apartment cannot be used because of
fire or other casualty, tenant is not required to pay for the time the Apartment
is unusable. If part of the Apartment cannot be used, Tenant must pay rent for
the usable part. Landlord shall have the right to decide which part of the
Apartment is usable. Landlord need only repair the damaged structural parts of
the Apartment. Landlord is not required to repair or replace any equipment,
fixtures, furnishings or decorations unless originally installed by Landlord.
Landlord is not responsible for delays due to settling insurance claims,
obtaining estimates, labor and supply problems or any other cause not fully
under Landlord's control.
If the fire or other casualty is caused by an act or neglect of Tenant or
guest of Tenant, or at the time of the fire or casualty Tenant is in default in
any term of this Lease, then all repairs will be made at Tenant's expense and
Tenant must pay the full rent with no adjustment. The cost of the repairs will
be added rent.
Landlord has the right to demolish or rebuild the Building if there is
substantial damage by fire or other casualty. Even if the Apartment is not
damaged, Landlord may cancel this Lease within 30 days after the fire or
casualty by giving Tenant notice of Landlord's intention to demolish or rebuild.
The Lease will end 30 days after Landlord's cancellation notice to Tenant.
Tenant must deliver the Apartment to Landlord on or
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before the cancellation date in the notice and pay all rent due to the date of
the fire or casualty. If the Lease is canceled Landlord is not required to
repair the Apartment or Building.
16. Liability.
Landlord is not liable for loss, expense, or damage to any person or
property, unless due to Landlord's negligence. Tenant must pay for damages
suffered and money spent by Landlord relating to any claim arising from any act
or neglect of Tenant. Tenant is responsible for all acts of Tenant's family,
employees, guests or invitees.
17. Landlord may enter.
Landlord may at reasonable times, enter the Apartment to examine, to make
repairs or alterations, and to show it to possible buyers, lenders or tenants.
18. Assignment and sublease.
Tenant must not assign this Lease or sublet all or part of the Apartment or
permit any other person to use the Apartment. If Tenant does, Landlord has the
right to cancel the Lease as stated in the Default section.
19. Subordination.
This Lease and Tenant's rights, are subject and subordinate to all present
and future: (a) leases for the Building or the land on which it stands, (b)
mortgages on the leases or the Building or land, (c) agreements securing money
paid or to be paid by a lender, and (d) terms, conditions, renewals, changes of
any kind and extensions of the mortgages or leases or lender agreements. Tenant
must promptly execute any certificate(s) that Landlord requests to show that
this Lease is so subject and subordinate. Tenant authorizes Landlord to sign
these certificate(s) for Tenant.
20. Condemnation.
If all of the Apartment or Building is taken or condemned by a legal
authority, the Term, and Tenant's rights shall end on the date the authority
takes title to the Apartment or Building. If any part of the Apartment or
Building is taken, Landlord may cancel this Lease on notice to Tenant. The
notice shall set a cancellation date not less than 30 days from the date of the
notice. If the Lease is canceled, Tenant must rent due to that date. The entire
award for any taking belongs to Landlord. Tenant gives Landlord any
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interest Tenant may have to any part of the award. Tenant shall make no claim
for the value of the remaining part of the Term.
21. Tenant's duty to obey laws and regulations.
Tenant must, at Tenant's expense, promptly comply with all laws, orders,
rules, requests, and directions, of all governmental authorities, Landlord's
insurers, Board of Fire Underwriters, or similar groups. Tenant may not do
anything which may increase Landlord's insurance premiums. If Tenant does,
Tenant must pay the increase as added rent.
22. Tenant's defaults and Landlord's remedies.
A. Landlord may give 5 days written notice to Tenant to correct any of the
following defaults:
1. Failure to pay rent or added rent on time.
2. Improper assignment of the Lease, improper subletting all or
part of the Apartment.
3. Improper conduct by Tenant or other occupant of the Apartment.
4. Failure to fully perform any other term of the Lease.
B. If Tenant fails to correct the defaults in section A, within the 5 days,
Landlord may cancel the Lease by giving Tenant a written 3 day notice stating
the date the Term will end. On that date the Term and Tenant's rights in this
Lease automatically end and Tenant must leave the Apartment and give Landlord
the keys. Tenant continues to be responsible for rent, expenses, damages and
losses.
C. If the Lease is canceled, or rent or added rent is not paid on time, or
Tenant vacates the Apartment, Landlord may in addition to other remedies take
any of the following steps:
1. Enter the Apartment and remove Tenant and any person or
property;
2. Use dispossess, eviction or other lawsuit method to take back
the Apartment.
D. If the Lease is ended or Landlord takes back the Apartment, rent and
added rent for the unexpired Term becomes due and payable. Landlord may re-rent
the Apartment and anything in it for any Term. Landlord may re-rent for a lower
rent and give allowances to the new Tenant. Tenant shall be responsible for
Landlord's cost of re-renting. Tenant shall continue to be responsible for rent,
expenses, damages and losses. Any rent received from the re-renting shall be
applied to the reduction of money Tenant
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owes. Tenant waives all rights to return to the Apartment after possession is
given to the Landlord by a Court.
23. Waiver of jury, counterclaim, set off
Landlord and Tenant waive trial by a jury in any matter which comes up
between the parties under or because of this Lease (except for a personal injury
or property damage claim). In a proceeding to get possession of the Apartment,
Tenant shall not have the right to make a counterclaim or set off.
24. Notices.
Any bill, statement or notice must be in writing. If to Tenant, it must be
delivered or mailed to the Tenant at the Apartment. If to Landlord, it must be
mailed to Landlord's address. It will be considered delivered on the day mailed
or if not mailed, when left at the proper address. A notice must be sent by
certified mail. Landlord must send a written notice to Tenant if Landlord's
address is changed.
25. No waiver, illegality
Landlord's acceptance of rent or failure to enforce any term in this Lease
is not a waiver of any of Landlord's rights. If a term in this Lease is illegal,
the rest of this Lease remains in full force.
26. Bankruptcy, insolvency
If (1) Tenant assigns property for the benefit of creditors, (2) Tenants
files a voluntary petition or an involuntary petition is filed against Tenant
under any bankruptcy or insolvency law, or (3) a trustee or receiver of Tenant
or Tenant's property is appointed, Landlord may give Tenant 30 days notice of
cancellation of the Term of the Lease. If any of the above is not fully
dismissed within the 30 days, the Term shall end as of the date stated in the
notice. Tenant must continue to pay rent, damages, losses and expenses without
offset.
27. Rules
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Tenant must comply with Landlord's Rules. Notice of Rules will be posted or
given to Tenant. Landlord need not enforce Rules against other Tenants. Landlord
is not liable to Tenant if another tenant violates the Rules. Tenant receives no
rights under the Rules. Tenant must comply with Co-ops House rules.
28 Representations
Tenant has read this Lease. All promises made by the Landlord are in this
Lease. There are no others.
29 Landlord unable to perform
If due to labor trouble, government order, lack of supply, Tenant's act or
neglect, or any other cause not fully within Landlord's reasonable control
Landlord is delayed or unable to (a) carry out any of the Landlord's promises or
agreements, (b) supply any service to be supplied, (c) make any required repair
or change in the Apartment or Building, or (d) supply any equipment or
appliances, this Lease shall not be ended or Tenant's obligations affected.
30 End of term
At the end of the Term, Tenant must: leave the Apartment clean and in good
condition, subject ordinary wear and tear; remove all of Tenant's property and
all Tenant's installations and decorations; repair all damages to the Apartment
and Building caused by moving; and restore Apartment to its condition at the
beginning of the Term.
31 Space "as is"
Tenant has inspected the Apartment and Building. Tenant states they are in
good order and repair takes the Apartment "as is."
32 Quiet enjoyment and habitability
Subject to the terms of this Lease, as long as Tenant is not in default
Tenant may peaceable and quietly have, hold and enjoy the Apartment for the
Term. Landlord states
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that the Apartment and Building are fit for human living and there is no
condition dangerous to health, life or safety.
33 Landlord's consent
If Tenant requires Landlord's consent to any act and such consent is not
given. Tenant's only right is to ask the Court to force Landlord to give
consent. Tenant agrees not to make any claim against Landlord for money or
subtract any sum from the rent because such consent was not given.
34 Legal Fees
The successful party in a legal action or proceeding between Landlord and
Tenant for non-payment of rent or recovery of possession of the Apartment may
recover reasonable legal fees and costs from the other party.
35 Lease binding on
This Lease is binding on Landlord and Tenant and those that lawfully
succeed to their rights or take their place.
36 Landlord
Landlord means the owner, or the lessee of the Building, or a lender in
possession. Landlord's obligations end when Landlord's interest in the Building
is transferred. Any acts Landlord may do may be performed by Landlord's agent or
employees.
37 Paragraph headings
The Paragraph headings are for convenience only.
38 Changes
The Lease may be changed only by an agreement in writing signed by and
delivered to each party.
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39 Effective date
This Lease is effective when Landlord delivers to Tenant a copy signed by
all parties.
Signatures Landlord and Tenant have signed this Lease as of the date at the top.
LANDLORD: TENANT:
/s/ Thomas Rochon /s/ Thomas Rochon
- -------------------------- --------------------------
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Consent of One-Hundred Grand, Inc.
One-Hundred Grand, Inc. (the Corporation), as the owners of the building known
as and located at 100 Grand Street, New York, New York (the building), consents,
pursuant to paragraph 14 of the Proprietary Lease, to the use by Thomas Rochon
of the 5th Floor of the Building, for legal purposes.
The Corporation also consents, pursuant to paragraph 15 of the Proprietary
Lease, to the subletting by Thomas Rochon of all or a portion of the fifth floor
of the Building as provided herein.
ONE-HUNDRED GRAND, INC.
By: /s/ Thomas Rochon
--------------------------------
Director
By: /s/ Stacy Valla
--------------------------------
Director
By: /s/ William Young
--------------------------------
Director
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HOUSE RULES
(1) The public halls and stairways of the building shall not be obstructed or
used for any purpose other than ingress to and egress from the apartments in the
building, and the fire towers shall not be obstructed in any way.
(2) No patient of any doctor who has offices in the building shall be permitted
to wait in the lobby.
(3) Children shall not play in the public halls, courts, stairways, fire towers
or elevators and shall not be permitted on the roof unless accompanied by a
responsible adult.
(4) No public hall above the ground floor of the building shall be decorated or
furnished by any Lessee in any manner without prior consent of all of the
Lessees to whom such hall serves as a means of ingress and egress; in the event
of disagreement among such Lessees, the Board of Directors shall decide.
(5) No Lessee shall make or permit any distributing noises in the building or do
or permit anything to be done therein which will interfere with the rights,
comfort or convenience of other Lessees. No Lessee shall play upon or suffer to
be played upon any musical instrument or permit to be operated a phonograph or a
radio or television loud speaker in such Lessee's apartment between the hours of
eleven o'clock p.m. and the following eight o'clock a.m. if the same shall
disturb or annoy other occupants of the building. No construction or repair work
or other installation involving noise shall be conducted in any apartment except
on weekdays (not including legal holidays) and only between the hours of 8:30
a.m. and 5:00 p.m.
(6) No article shall be placed in the halls or on the staircase landings or fire
towers, nor shall any be hung or taken from the doors, windows, terraces or
balconies or placed upon the window sills of the building.
(7) No awnings, windows air-conditioning units or ventilators shall be used in
or about the building except such as shall have been expressly approved by the
Lessor or the managing agent, nor shall anything be projected out of the
building without similar approval.
(8) No sign, notice, advertisement or illumination shall be inscribed or exposed
on or at any window or other part of the building, except such as shall have
been approved in writing by the Lessor or the managing agent. (9) No
velocipedes, bicycles, scooters or similar vehicles shall be allowed in a
passenger elevator, and baby carriages and the above-mentioned vehicles shall
not be allowed to stand in the public halls, passageways, areas or courts of the
building.
(10) Messengers and tradespeople shall use such means of ingress and egress as
shall be designated by the Lessor.
(11) Garbage and refuse from the apartments shall be disposed of only at such
times and in such manner as the superintendent or the managing agent of the
building may direct.
(12) Water closets and other water apparatus in the building shall not be used
for any purposes other than those for which they were constructed, nor shall any
sweepings, rubbish, rags or any other article
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be thrown into the water closets. The cost of repairing any damage resulting
from misuse of any water closets or other apparatus shall be paid for by the
Lessee in whose apartment it shall have been caused.
(13) No Lessee shall send any employee of the Lessor out of the building on any
private business of a Lessee.
(14) No pigeons or other birds or animals shall be fed from the window sills,
terraces, balconies or in the yard, court spaces or other public portions of the
building, or on the sidewalk or street adjacent to the building.
(15) No radio or television aerial shall be attached to or hung from the
exterior of the building without the prior written approval of the Lessor or the
managing agent.
(16) No vehicle belonging to a Lessee or to a member of the family or guest,
subtenant or employee of a Lessee shall be parked in such manner as to impede or
prevent ready access to any entrance of the building by another vehicle.
(17) The Lessee shall keep the windows of the apartment clean. In case of
refusal or neglect of the Lessee during 10 days after notice in writing from the
Lessor or the managing agent to clean the windows, such cleaning may be done by
the Lessor, which shall have the right, by its officers or authorized agents, to
enter the apartment for the purpose and to charge the cost of such cleaning to
the Lessee.
(18) Complaints regarding the service of the building shall be made in writing
to the managing agent of the Lessor.
(19) Any consent or approval given under these House Rules by the Lessor shall
be revocable at any time.
(20) No Lessee shall install any plantings on the terrace, balcony or roof
without the prior written approval of the Lessor. Plantings shall be contained
in boxes of wood lined with metal or other material impervious to dampness and
standing on supports at least 2 inches from the terrace, balcony or roof
surface, and if adjoining a wall, at least three inches from such wall. Suitable
weep holes shall be provided in the boxes to draw off water. In special
locations, such as a corner abutting a parapet wall, plantings may be contained
in masonry or hollow tile walls which shall be at least three inches from the
parapet and flashing, with the floor of drainage tiles and suitable weep holes
at the sides to draw off water. It shall be the responsibility of the Lessee to
maintain the containers in good conditions, and the drainage tiles and weep
holes in operating condition.
(21) The agents of the Lessor, and any contractor or workman authorized by the
Lessor, may enter any apartment at any reasonable hour of the day for the
purpose of inspecting such apartment to
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ascertain whether measures are necessary or desirable to control or exterminate
any vermin, insects or other pests and for the purpose of taking such measures
as may be necessary to control or exterminate such vermin, insects or other
pests. If the Lessor takes measures to control or exterminate carpet beetles,
the cost thereof shall be payable by the Lessee, as additional rent.
(22) These House Rules may be added to, amended or repealed at any time by
resolution of the Board of Directors of the Lessor.
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RIDER TO SUBLEASE AGREEMENT
1 North Space can be occupied as living-working space for Paul H. Berger of
Hippo, Inc. Undertenant of South-West Space of 5th Floor.
2 Undertenant to accept leased area "as is" and additional improvements,
additional electrical, telephone, alarms, partitions, ac units, etc., are the
sole responsibility of the Undertenant. Replacement or repair of appliances
shall be the responsibility of the Undertenant. Upon termination of the lease by
the Landlord, Undertenant shall leave space, as received, with reasonable wear
and tear accepted. All alterations, additions or deletions must be improved by
Overtenant prior to the start of the work. Fixtures, air conditioning unit,
lighting, etc. are properties of Overtenant.
3 Elevator is to be locked at all times for security.
4 Undertenant shall pay 35% of Con Edison for the 5th floor which is metered
separately from the rest of the building but shared with other tenants on the
fifth floor. Bills shall be paid to Thomas Rochon Associates within 10 days of
presentation.
5 All tenants of the 5th floor shall maintain common hall. Undertenants of South
Spaces are responsible for maintaining the toilet room adjacent the hall. If
lobby or elevator is abused by undertenant, undertenant shall compensate the
Landlord for damages.
6 All commercial garbage is the responsibility of Undertenant. Undertenant
responsible for exterminators, locks, alarms, cable TV, and telephone.
7 Overtenant agrees to provide Undertenant any notice from the Landlord and/or
Coop which relates to the 5th floor.
8 Undertenant is hereby granted an option to renew this sublease for a
additional one year term for $2300.00 per month in rent provided the Undertenant
is not in default and that the Undertenant notifies the Overtenant by certified
mail two months prior to termination.
9 There will be 5% late fee if rent is received later than the 5th of each
month.
10 Space cannot be sublet and Lease cannot be assigned.
/s/ Thomas Rochon
- ---------------------------
Thomas Rochon Associates
/s/ Paul Berger
- ---------------------------
Paul H. Berger, Hippo, Inc.
Dec. 27, 1996
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Exhibit "A"
Fifth Floor
100 Grand Street
New York, New York 10013
FLOOR MAP
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Exhibit 10.25
SUBLEASE AGREEMENT
The parties agree as follows:
Date of this July 12, 1996
Sublease:
Parties to this Overtenant: Tom Rochon
Sublease: Address for notices: 100 Grand Street, 6th floor
You, the Undertenant: Hippo, Inc. (Paul H.
Berger, Chief Executive
Officer)
Address for notices: 4400 N. Federal Highway,
Boca Raton, Florida 33431
(407) 750-7528
If there are more than one Overtenant or Undertenant
the words "Overtenant" and "Undertenant" used in this
Sublease includes them.
Information from Landlord: Thomas Rochon Associates
Over-Lease Address for notices: 100 Grand Street
Overtenant:
Address for notices:
Date of Over-Lease Jan. 1, 1994
Term: From July 22, 1996 to July 30 1997
A copy of the Over-Lease is attached as an important
part of the Sublease.
Term: 11 One year: 1/4 months: Beginning: July 22, 1996
ending: July 30, 1997
Premises rented: 12. 100 Grand Street New York, NY, 5th Floor
Southwest Space
Use of premises: 13. General Office and Design Studio (space only)
Rent: 14. The yearly rent is $30,000. You, the Undertenant,
will pay this yearly rent to the Overtenant in twelve
equal monthly payments of $2,500.00. Payments shall
be paid in advance on the first day of each month
during the Term.
Security: 15. The security for the Undertenant's performance is
$5,000.00. Overtenant states that Overtenant has
received it. Overtenant shall hold the security in
accordance with Paragraph __ of the Over-Lease.
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Agreement to lease 16. Overtenant sublets the premises to you, the
and pay rent: Undertenant, for the Term. Overtenant states that it
has the authority to do so. You, the Undertenant,
agree to pay the Rent and other charges as required
in the Sublease. You, the Undertenant, agree to do
everything required of you in the Sublease.
Notices: 17. All notices in the Sublease shall be sent by
certified mail, "return receipt requested."
Subject to: 18. The Sublease is subject to the Over-Lease. It is
also subject to any agreement to which the Over-Lease
is subject. You, the Undertenant, state that you have
read and initialized the Over-Lease and will not
violate it in any way.
Overtenant's 19. The Over-Lease describes the Landlord's duties.
duties: The Overtenant is not obligated to perform the
Landlord's duties. If the Landlord fails to perform,
you, the Undertenant, must send the Overtenant a
notice. Upon receipt of the notice, the Overtenant
shall then promptly notify the Landlord and demand
that the Over-Lease agreement be carried out. The
Overtenant shall continue the demands until the
Landlord performs.
Consent: 20. If the Landlord's consent to the Sublease is
required, this consent must be received within _____
days from the date of this Sublease. If the
Landlord's consent is not received within this time,
the Sublease will be void. In such event all parties
are automatically released and all payments shall be
refunded to you, the Undertenant.
Adopting the 21. The provisions of the Over-Lease are part of this
Over-Lease and Sublease. All the provisions of the Over-Lease
exceptions: applying to the Overtenant are binding on you, the
Undertenant, except these:
(a) These numbered paragraphs of the Over-Lease shall
not apply:
(b) These numbered paragraphs of the Over-Lease are
changed as follows:
RIDER TO SUBLEASE ITEMS ATTACHED HEREWITH:
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RIDER TO SUBLEASE AGREEMENT
1. Space cannot be occupied by more than 8 people. No cooking or sleeping in
leased space. Sound and noise must conform to House Rules.
2. Undertenant to accept leased area 'as is' and additional improvements,
additional electrical, telephone, alarms, partitions, ac units, etc., are the
sole responsibility of the Undertenant. Upon termination of the lease by the
Landlord, Undertenant shall leave space, as received, with reasonable wear and
tear accepted. All alterations, additions or deletions must be approved by
Overtenant prior to the start of the work. Fixtures, air conditioning unit,
lighting, etc. are properties of Overtenant.
3. Elevator is to be locked at all times for security.
4. Undertenant shall pay 50% of Con Edison for the 5th floor which is metered
separately from the rest of the building but shared with other tenants on the
5th floor. Bills shall be paid to Thomas Rochon Associates within 10 days of
presentation.
5. All tenants of the 5th floor shall maintain common hall. Undertenant is
responsible for maintaining the toilet room adjacent the hall. If lobby or
elevator is abused by undertenant, undertenant shall compensate the Landlord for
the damages.
6. All commercial garbage is the responsibility of Undertenant. Undertenant
responsible for exterminators, locks, alarms, cable TV, and telephone.
7. Overtenant agrees to provide Undertenant any notice from the Landlord and/or
Coop which relates to the 5th floor.
8. Undertenant is hereby granted an option to renew this sublease for a
additional two year term for $2665.00 per month in rent provided the Undertenant
is not in default and that the Undertenant notifies the Overtenant by certified
mail two months prior to termination.
9. There will be a 5% late fee if rent is received later than the 5th day of
each month.
10. Space cannot be sublet and Lease cannot be assigned.
/S/ Thomas Rochon
- --------------------------
Thomas Rochon Associates
/S/ Paul Berger, CEO
- --------------------------
Hippo, Inc. 7/12/96
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LEASE AGREEMENT
The Landlord and Tenant agree to lease the Apartment at the Rent and for the
Term stated on these terms:
<TABLE>
<CAPTION>
<S> <C> <C>
LANDLORD: Thomas Rochon TENANT: Thomas Rochon Associates
Address for Notices: 100 Grand Street 100 Grand Street
New York, N.Y. 10013 New York, New York 10013
</TABLE>
Apartment (and terrace, if any): 5th Floor at 100 Grand Street
Lease date: Term: Yearly Rent: $
September __, 1993 beginning: January 1, 1994 Monthly Rent: $
ending: 1999 Security: $
Rider: Additional terms on _____ page(s) initialed at the end by the parties
is attached and made a part of this Lease.
1. Use: Legal use only.
2. Failure to give possession
Landlord shall not be liable for failure to give Tenant possession of the
Apartment on the beginning date of the Term. Rent shall be payable as of the
beginning of the Term unless Landlord is unable to give possession. Rent shall
then be payable as of the date possession is available. Landlord will notify
Tenant as to the date possession is available. The ending date of the Term will
not change.
3. Rent, added rent
The rent payment for each month must be paid on the first day of that
month at Landlord's address. Landlord need not give notice to pay the rent. Rent
must be paid in full and no amount subtracted from it. The first month's rent is
to be paid when Tenant signs this Lease. Tenant may be required to pay other
charges to Landlord under the terms of this Lease. They are to be called "added
rent." This added rent is payable as rent, together with the next monthly rent
due. If Tenant fails to pay the added rent on time, Landlord shall have the same
rights against Tenant as if Tenant failed to pay rent. Payment of rent in
installments is for Tenant's convenience only. If Tenant defaults, Landlord may
give notice to Tenant that Tenant may no longer pay rent in installments. The
entire rent for the remaining part of the Term will then be due and payable.
4. Security
Tenant has given Security to Landlord in the amount stated above. If
Tenant fully complies with all of the terms of this Lease, Landlord will return
the Security after the Term ends. If Tenant does not fully comply with the terms
of this Lease, Landlord may use the Security to pay amounts owed by Tenant,
including damages. If Landlord sells or leases the Building, Landlord may give
the Security to the buyer or lessee. Tenant will look only to the buyer or
lessee for the return of the Security.
5. Services
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Landlord will supply: (a) heat as required by law, and (b) hot and cold
water for bathroom and kitchen sink. Stopping or reducing of service(s) will not
be reason for Tenant to stop paying rent, to make a money claim or to claim
eviction. Damage to the equipment or appliances supplied by Landlord caused by
Tenant's act or neglect, may be repaired by Landlord at Tenant's expense. The
repair cost will be added rent.
Tenant must pay for all electric, gas, telephone and other utility
services used in the Apartment and arrange for them with the public utility
company.
Landlord may stop service of the plumbing, heating, elevator, air cooling
or electrical systems, because of accident, emergency, repairs, or changes until
the work is complete. If unable to supply any service because of labor trouble,
Government order, lack of fuel supply or other cause not controlled by Landlord,
Landlord is excused from supplying that service. Service shall resume when
Landlord is able to supply it.
6. Repairs
Tenant must take good care of the Apartment and all equipment and
fixtures in it. Tenant must, at Tenant's cost, make all repairs and replacements
whenever the need results from Tenant's act or neglect. If Tenant fails to make
a needed repair or replacement, Landlord may do it. Landlord's expense will be
added rent.
7. Alterations
Tenant must obtain Landlord's prior written consent to install any
paneling, flooring, "built in" decorations, partitions, railings or make
alterations or to paint or wallpaper the apartment. Tenant must not change the
plumbing, ventilating, air conditioning, electric or heating systems. If consent
is given, the alterations and installations shall become the property of
Landlord when completed and paid for, and shall remain with and as part of the
Apartment at the end of the Term. Landlord has the right to demand that Tenant
remove the alterations and installations before the end of the Term. The demand
shall be by notice, given at least 15 days before the end of the Term. Landlord
is not required to do or pay for any work unless stated in this Lease.
8. Fire, accident, defects, damage
Tenant must give Landlord prompt notice of fire, accident, damage or
dangerous or defective condition. If the Apartment cannot be used because of
fire or other casualty, tenant is not required to pay for the time the Apartment
is unusable. If part of the Apartment cannot be used, Tenant must pay rent for
the usable part. Landlord shall have the right to decide which part of the
Apartment is usable. Landlord need only repair the damaged structural parts of
the Apartment. Landlord is not required to repair or replace any equipment,
fixtures, furnishings or decorations unless originally installed by Landlord.
Landlord is not responsible for delays due to settling insurance claims,
obtaining estimates, labor and supply problems or any other cause not fully
under Landlord's control.
If the fire or other casualty is caused by an act or neglect of Tenant or
guest of Tenant, or at the time of the fire or casualty Tenant is in default in
any term of this Lease, then all repairs will be made at Tenant's expense and
Tenant must pay the full rent with no adjustment. The cost of the repairs will
be added rent.
Landlord has the right to demolish or rebuild the Building if there is
substantial damage by fire or other casualty. Even if the Apartment is not
damaged, Landlord may cancel this Lease within 30 days after the fire or
casualty by giving Tenant notice of Landlord's intention to demolish or rebuild.
The Lease will end 30 days
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<PAGE>
after Landlord's cancellation notice to Tenant. Tenant must deliver the
Apartment to Landlord on or before the cancellation date in the notice and pay
all rent due to the date of the fire or casualty. If the Lease is canceled
Landlord is not required to repair the Apartment or Building.
9. Liability
Landlord is not liable for loss, expense, or damage to any person or
property, unless due to Landlord's negligence. Tenant must pay for damages
suffered and money spent by Landlord relating to any claim arising from any act
or neglect of Tenant. Tenant is responsible for all acts of Tenant's family,
employees, guests or invitees.
10. Landlord may enter
Landlord may at reasonable times, enter the Apartment to examine, to make
repairs or alterations, and to show it to possible buyers, lenders or tenants.
11. Assignment and sublease
Tenant must not assign this Lease or sublet all or part of the Apartment
or permit any other person to use the Apartment. If Tenant does, Landlord has
the right to cancel the Lease as stated in the Default section.
12. Subordination
This Lease and Tenant's rights, are subject and subordinate to all
present and future: (a) leases for the Building or the land on which it stands,
(b) mortgages on the leases or the Building or land, (c) agreements securing
money paid or to be paid by a lender, and (d) terms, conditions, renewals,
changes of any kind and extensions of the mortgages or leases or lender
agreements. Tenant must promptly execute any certificate(s) that Landlord
requests to show that this Lease is so subject and subordinate. Tenant
authorizes Landlord to sign these certificate(s) for Tenant.
13. Condemnation
If all of the Apartment or Building is taken or condemned by a legal
authority, the Term, and Tenant's rights shall end on the date the authority
takes title to the Apartment or Building. If any part of the Apartment or
Building is taken, Landlord may cancel this Lease on notice to Tenant. The
notice shall set a cancellation date not less than 30 days from the date of the
notice. If the Lease is canceled, Tenant must deliver the Apartment [ILLEGIBLE]
rent due to that date. The entire award for any taking belongs to Landlord.
Tenant gives Landlord any interest Tenant may have to any part of the award.
Tenant shall make no claim for the value of the remaining part of the Term.
14. Tenant's duty to obey laws and regulations
Tenant must, at Tenant's expense, promptly comply with all laws, orders,
rules, requests, and directions, of all governmental authorities, Landlord's
insurers, Board of Fire Underwriters, or similar groups. Tenant may not do
anything which may increase Landlord's insurance premiums. If Tenant does,
Tenant must pay the increase as added rent.
15. Tenant's defaults and Landlord's remedies
A. Landlord may give 5 days written notice to Tenant to correct any of
the following defaults:
1. Failure to pay rent or added rent on time.
2. Improper assignment of the Lease, improper subletting all or
part of the Apartment.
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<PAGE>
3. Improper conduct by Tenant or other occupant of the Apartment.
4. Failure to fully perform any other term in the Lease.
B. If Tenant fails to correct the defaults in section A, within the 5
days, Landlord may cancel the Lease by giving Tenant a written 3 day notice
stating the date the Term will end. On that date the Term and Tenant's rights in
this Lease automatically end and Tenant must leave the Apartment and give
Landlord the keys. Tenant continues to be responsible for rent, expenses,
damages and losses.
C. If the Lease is cancelled, or rent or added rent is not paid on time,
or Tenant vacates the Apartment, Landlord may in addition to other remedies take
any of the following steps:
1. Enter the Apartment and remove Tenant and any person or
property;
2. Use dispossess, eviction or other lawsuit method to take back
the Apartment.
D. If the Lease is ended or Landlord takes back the Apartment, rent and
added rent for the unexpired Term becomes due and payable. Landlord may re-rent
the Apartment and anything in it for any Term. Landlord may re-rent for a lower
rent and give allowances to the new Tenant. Tenant shall be responsible for
Landlord's cost of re-renting. Landlord's cost shall include the cost of
repairs, decorations, broker's fee, attorney's fees, advertising and preparation
for renting. Tenant shall continue to be responsible for rent, expenses, damages
and losses. Any rent received from the re-renting shall be applied to the
reduction of money Tenant owes. Tenant waives all rights to return to the
Apartment after possession is given to the Landlord by a Court.
16. Waiver of jury, counterclaim, set off
Landlord and Tenant waive trial by a jury in any matter which comes up
between the parties under or because of this Lease (except for a personal injury
or property damage claim). In a proceeding to get possession of the Apartment,
Tenant shall not have the right to make a counterclaim or set off.
17. Notices
Any bill, statement or notice must be in writing. If to Tenant, it must
be delivered or mailed to the Tenant at the Apartment. If to Landlord, it must
be mailed to Landlord's address. It will be considered delivered on the day
mailed or if not mailed, when left at the proper address. A notice must be sent
by certified mail. Landlord must send a written notice to Tenant if Landlord's
address is changed.
18. No waiver, illegality
Landlord's acceptance of rent or failure to enforce any term in this
Lease is not a waiver of any of Landlord's rights. If a term in this Lease is
illegal, the rest of this Lease remains in full force.
19. Bankruptcy, insolvency
If (1) Tenant assigns property for the benefit of creditors, (2) Tenants
files a voluntary petition or an involuntary petition is filed against Tenant
under any bankruptcy or insolvency law, or (3) a trustee or receiver of Tenant
or Tenant's property is appointed, Landlord may give Tenant 30 days notice of
cancellation of the Term of the Lease. If any of the above is not fully
dismissed within the 30 days, the Term shall end as of the date stated in the
notice. Tenant must continue to pay rent, damages, losses and expenses without
offset.
20. Rules
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Tenant must comply with Landlord's Rules. Notice of Rules will be posted
or given to Tenant. Landlord need not enforce Rules against other Tenants.
Landlord is not liable to Tenant if another tenant violates the Rules. Tenant
receives no rights under the Rules. Tenant must comply with Co-ops House rules.
21. Representations
Tenant has read this Lease. All promises made by the Landlord are in this
Lease. There are no others.
22. Landlord unable to perform
If due to labor trouble, government order, lack of supply, Tenant's act
or neglect, or any other cause not fully within Landlord's reasonable control
Landlord is delayed or unable to (a) carry out any of the Landlord's promises or
agreements, (b) supply any service to be supplied, (c) make any required repair
or change in the Apartment or Building, or (d) supply any equipment or
appliances, this Lease shall not be ended or Tenant's obligations affected.
23. End of term
At the end of the Term, Tenant must: leave the Apartment clean and in
good condition, subject ordinary wear and tear; remove all of Tenant's property
and all Tenant's installations and decorations; repair all damages to the
Apartment and Building caused by moving; and restore Apartment to its condition
at the beginning of the Term.
24. Space "as is"
Tenant has inspected the Apartment and Building. Tenant states they are
in good order and repair takes the Apartment "as is."
25. Quiet enjoyment and habitability
Subject to the terms of this Lease, as long as Tenant is not in default
Tenant may peaceable and quietly have, hold and enjoy the Apartment for the
Term. Landlord states that the Apartment and Building are fit for human living
and there is no condition dangerous to health, life or safety.
26. Landlord's consent
If Tenant requires Landlord's consent to any act and such consent is not
given, Tenant's only right is to ask the Court to force Landlord to give
consent. Tenant agrees not to make any claim against Landlord for money or
subtract any sum from the rent because such consent was not given.
27. Legal Fees
The successful party in a legal action or proceeding between Landlord and
Tenant for non-payment of rent or recovery of possession of the Apartment may
recover reasonable legal fees and costs from the other party.
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28. Lease binding on
This Lease is binding on Landlord and Tenant and those that lawfully
succeed to their rights or take their place.
29. Landlord
Landlord means the owner, or the lessee of the Building, or a lender in
possession. Landlord's obligations end when Landlord's interest in the Building
is transferred. Any acts Landlord may do may be performed by Landlord's agent or
employees.
30. Paragraph headings
The Paragraph headings are for convenience only.
31. Changes
The Lease may be changed only by an agreement in writing signed by and
delivered to each party.
32. Effective date
This Lease is effective when Landlord delivers to Tenant a copy signed by
all parties.
Signatures Landlord and Tenant have signed this Lease as of the date at the top.
LANDLORD: TENANT:
/S/ Thomas Rochon /S/ Thomas Rochon
- ------------------------------ ----------------------------------
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<PAGE>
HOUSE RULES
(1) The public halls and stairways of the building shall not be obstructed or
used for any purpose other than ingress to and egress from the apartments in the
building, and the fire towers shall not be obstructed in any way.
(2) No patient of any doctor who has offices in the building shall be permitted
to wait in the lobby.
(3) Children shall not play in the public halls, courts, stairways, fire towers
or elevators and shall not be permitted on the roof unless accompanied by a
responsible adult.
(4) No public hall above the ground floor of the building shall be decorated or
furnished by any Lessee in any manner without the prior consent of all of the
Lessees to whom such hall shall serve as a means of ingress and egress; in the
event of disagreement among such Lessees, the Board of Directors shall decide.
(5) No Lessee shall make or permit any disturbing noises in the building or do
or permit anything to be done therein which will interfere with the rights,
comfort or convenience of other Lessees. No Lessee shall play upon or suffer to
be played upon any musical instrument or permit to be operated a phonograph or a
radio or television loud speaker in such Lessee's apartment between the house of
eleven o'clock p.m. and the following eight o'clock a.m. if the same shall
disturb or annoy other occupants of the building. No construction or repair work
or other installation involving noise shall be conducted in any apartment except
on weekdays (not including legal holidays) and only between the hours of 8:30
a.m. and 5:00 p.m.
(6) No article shall be placed in the halls or on the staircase landings or fire
towers, nor shall anything be hung or shaken from the doors, windows, terraces
or balconies or placed upon the window sills of the building.
(7) No awnings, window air-conditioning units or ventilators shall be used in or
about the building except such as shall have been expressly approved by the
Lessor or the managing agent, nor shall anything be projected out of the
building without similar approval.
(8) No sign, notice, advertisement or illumination shall be inscribed or exposed
on or at any window or other part of the building, except as shall have been
approved in writing by the Lessor or the managing agent.
(9) No velocipedes, bicycles, scooters or similar vehicles shall be allowed in a
passenger elevator, and baby carriages and the above-mentioned vehicles shall
not be allowed to stand in the public halls, passageways, areas or courts of the
building.
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(10) Messengers and tradespeople shall use such means of ingress and egress as
shall be designated by the Lessor.
(11) Garbage and refuse from the apartments shall be disposed of only at such
times and in such manner as the superintendent or the managing agent of the
building may direct.
(12) Water closets and other water apparatus in the building shall not be used
for any purposes other than those for which they were constructed, nor shall any
sweepings, rubbish, rags or any other article be thrown into the water closets.
The cost of repairing any damage resulting from misuse of any water closets or
other apparatus shall be paid for by the Lessee in whose apartment it shall have
been caused.
(13) No Lessee shall send any employee of the Lessor out of the building on any
private business of a Lessee.
(14) No pigeons or other birds or animals shall be fed from the window sills,
terraces, balconies or in the yard, court spaces or other public portions of the
building, or on the sidewalk or street adjacent to the building.
(15) No radio or television aerial shall be attached to or hung from the
exterior of the building without the prior written approval of the Lessor or the
managing agent.
(16) No vehicle belonging to a Lessee or to a member of the family or guest,
subtenant or employee of a Lessee shall be parked in such manner as to impede or
prevent ready access to any entrance of the building by another vehicle.
(17) The Lessee shall keep the windows of the apartment clean. In case of
refusal or neglect of the Lessee during 10 days after notice in writing from the
Lessor or the managing agent to clean the windows, such cleaning may be done by
the Lessor, which shall have the right, by its officers or authorized agents, to
enter the apartment for the purpose and to charge the cost of such cleaning to
the Lessee.
(18) Complaints regarding the service of the building shall be made in writing
to the managing agent of the Lessor.
(19) Any consent or approval given under these House Rules by the Lessor shall
be revocable at any time.
(20) No Lessee shall install any plantings on the terrace, balcony or roof
without the prior written approval of the Lessor. Plantings shall be contained
in boxes of wood lined with metal or other material impervious to dampness and
standing on supports at least 2 inches from the terrace, balcony or roof
surface, and if adjoining a wall, at least three inches from such wall. Suitable
weep holes shall
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<PAGE>
be provided in the boxes to draw off water. In special locations, such as a
corner abutting a parapet wall, plantings may be contained in masonry or
hollow tile walls which shall be at least three inches from the parapet and
flashing, with the floor of drainage tiles and suitable weep holes at the
sides to draw off water. It shall be the responsibility of the Lessee to
maintain the containers in good conditions, and the drainage tiles and weep
holes in operating condition.
(21) The agents of the Lessor, and any contractor or workman authorized by the
Lessor, may enter any apartment at any reasonable hour of the day for the
purpose of inspecting such apartment to ascertain whether measures are necessary
or desirable to control or exterminate any vermin, insects or other pests and
for the purpose of taking such measures as may be necessary to control or
exterminate such vermin, insects or other pests. If the Lessor takes measures to
control or exterminate carpet beetles, the cost thereof shall be payable by the
Lessee, as additional rent.
(22) These House Rules may be added to, amended or repealed at any time by
resolution of the Board of Directors of the Lessor.
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Consent of One-Hundred Grand, Inc.
One-hundred Grand, Inc. (the Corporation), as the owners of the building known
as and located at 100 Grand Street, New York, New York (the building), consents,
pursuant to paragraph 14 of the Proprietary Lease, to the use by Thomas Rochon
of the 5th Floor of the Building, for legal purposes
The Corporation also consents, pursuant paragraph 15 of the Proprietary Lease,
to the subletting by Thomas Rochon of all or a portion of the fifth floor of the
Building as provided herein.
ONE HUNDRED GRAND, INC.
By: /S/ Thomas Rochon
------------------------------------
Director, 6th Floor
By: /S/ Stacy Valla
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Director, 3rd Floor
By: /S/ William Young
------------------------------------
Director, 2nd Floor
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EXHIBIT 10.26
Chou Golf Design Labs, Inc.
Research, Development and Consulting Contract
This Agreement (the "Agreement") is entered into and effective as of
October 8, 1996, between Hippo, Inc. a corporation organized and existing under
the laws of the state of Delaware with its principal place of business at 4400
North Federal Highway, Suite 210, Boca Raton, Florida ("Hippo") and Chou Golf
Design Labs, Inc., a corporation existing under the laws of the State of
Pennsylvania with its principal place of business at 3260 Horizon Drive, King of
Prussia, Pennsylvania ("Chou"). In consideration of the mutual promises and
covenants contained in this Agreement, Hippo and Chou agree as follows:
1. Scope of Work
Chou shall perform research and development, engineering, consulting,
product testing and development tasks, hereinafter collectively referred to as
"Work" for Hippo during the term of this Agreement. In that capacity, Chou will
design, develop, source, and test at Hippo's direction such products which may
include, but are not limited to: golf clubs, golf club heads, shafts, grips, and
ferrules "Golf Equipment". Chou will also design, develop, source, and test at
Hippo's direction new methods of design, sourcing and manufacturing of golf
equipment and new materials used in the production, manufacturing of or assembly
of golf equipment. During the term of this Agreement, Chou shall use his best
efforts in performing the Work.
2. Compensation
2.1 In full consideration of Chou's performance of the Work under this
Agreement, Hippo shall pay Chou as follows:
(a) During the period from October 1, 1996 to September 30, 1997 Chou
shall be paid a monthly fee of $6,250.00. However, this fee will be credited
against royalties (if any) should they become owed to Chou under paragraph
2.1(b).
(b) Chou shall receive royalties at the rate of 2% of the Cost of
Goods sold on any product developed by Chou for Hippo and sold by Hippo to third
party customers for cumulative sales of each individual product line (based on
Cost of Goods) of $1.00 to $20,000,000.00 and 1% of the Cost of Goods Sold over
and above cumulative sales of $20,000,000.00.
(c) All monthly payments due under Paragraph 2.1(a) shall be made on
or before the last day of each month.
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(d) All royalty payment by Hippo shall be made quarterly, payable
within 45 days after each calendar quarter ending on the last of March,
June, September and December and based on sales by Hippo during the quarter for
which Hippo has received payment.
(e) "Cost of Goods" means the aggregate amount incurred by Hippo for
finished goods as either (i) the aggregate amount charged by the appropriate
manufacturer or supplier of the finished goods or (ii) in the case of goods
assembled by Hippo, the aggregate amount charged by the appropriate manufacturer
or supplier of the components, such as golf club heads, shafts or grips, plus
the aggregate amount of other costs associated with the assembly of such
components and the manufacture of the finished goods; in either case less
deductions for any taxes, duties and charges, however, designated, imposed by
any government or governmental agency, authority or subdivision thereof in
connection with the manufacture, assembly or sale of the goods.
2.2 Hippo shall reimburse Chou for travel expenses incurred by Chou at the
written request of Chou and approved by Hippo.
3. Chou's Warranties
3.1 Chou represents and warrants that it has disclosed to Hippo any
existing or contemplated activity which might involve a conflict of interest and
it will recognize and avoid any situation that might involve a conflict of
interest.
3.2 Chou represents and warrants that (i) it is authorized to enter into
and perform this Agreement, and (ii) it is subject to no contract or agreement
with any person, corporation or government agency or other entity that will, in
any manner, impede or prevent Chou from giving, and Hippo from receiving, the
benefit of the Work to be performed under this Agreement.
3.3 Chou represents and warrants that no information to be disclosed to
Hippo in performance of this Agreement was or will be acquired by Chou (i)
pursuant to any relationship in which Chou was obligated to hold such
information in confidence for the benefit of any third party or (ii) by any
unlawful or otherwise improper means.
3.4. Chou represents and warrants that no information, software, materials,
Golf Equipment Developments or other products delivered to Hippo under this
Agreement will infringe upon, conflict with or violate any patent rights,
copyrights, trade secrets or other proprietary rights of any person or entity.
3.5 Chou will indemnify Hippo and hold it harmless from and against all
losses, liabilities and claims that may arise out of or on account of any breach
of Chou's representations, warranties and covenants set forth in this Agreement.
4. Rights in Intellectual Property
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4.1 Chou agrees that all discoveries, inventions, ideas, concepts,
software, research and other information, processes, products, methods, designs,
developments and improvements (whether or not patentable or subject to copyright
protection), relating to or arising out of any of the Work, that are written,
made, conceived, developed or reduced to practice by Chou, whether alone or
jointly with others, (hereinafter collectively referred to as Developments)
during the term of this Agreement will be disclosed solely to Hippo. Chou
further agrees that Hippo has the right to independently and exclusively review
and test all Developments for a period of one hundred twenty (120) days after
their disclosure to Hippo ("Test Period").
4.2 Chou agrees that upon written notice from Hippo within thirty (30) days
after the expiration of the Test Period of Hippo's desired ownership of any
Development, Chou agrees to assign to Hippo all of Chou's right, title and
interest throughout the world in and to all Developments and to anything
tangible which evidences, incorporates, constitutes, represents or records any
Development. Chou agrees that to the extent the copyright laws of the United
States shall apply to the Developments, the Developments shall constitute work
made for hire under such copyright laws and hereby assigns and, to the extent
any such assignment cannot be made at present, it hereby agrees to assign to
Hippo all copyrights patents and other proprietary rights it may have in any
such development, together with the right to file for and/or own wholly without
restriction United States and foreign patents, trademarks, and copyrights with
respect thereto.
4.3 Hippo agrees to use its best efforts to manufacture and produce for
commercial distribution any Development assigned to Hippo within twenty (20)
months of the assignment by Chou to Hippo. Should Hippo fail to use its best
efforts to produce or manufacture for commercial distribution any Development
during the twenty (20) month period, upon written request from Chou, all rights
in said Development will be assigned by Hippo to Chou.
4.4 Chou agrees to, and hereby does assign to Hippo all of is right, title
and interest throughout the world in and to all products described in Appendix A
attached hereto and incorporated herein by reference (hereinafter collectively
referred to as "Hosel Products") and to anything tangible which evidences,
incorporates, constitutes, represents or records any Hosel Product. Chou agrees
that to the extent the copyright laws of the United States shall apply to the
Hosel Products, the Hosel Products shall constitute work made for hire under
such copyright laws and hereby assigns and, to the extent any such assignment
cannot be made at present, it hereby agrees to assign to Hippo all copyrights,
patents and other proprietary rights it may have in any such development,
together with the right to file for an/or own wholly without restriction United
States and foreign patents, trademarks, and copyrights with respect thereto.
Chou further agrees that the originals and all copies of all notebooks, disks,
tapes, computer programs, reports, proposals and other documents and materials
evidencing, incorporating, constituting, representing or recording any Hosel
Product shall be the sole property of Hippo.
4.5 Chou agrees that compensation for any Development by Chou, assigned to
Hippo shall be that compensation described in Section 2.1(b).
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4.6 Chou hereby undertakes, without payment of any consideration to Hippo
in addition to the compensation described in Section 2.1 (i) promptly disclose
developments to Hippo; (ii) assist Hippo in every reasonable manner to obtain
patents or copyrights thereon in any and all such countries for Hippo's benefit;
(iii) to execute all such patent applications, patent or copyright assignments
and other lawful documents, and to take all such other actions, as Hippo may
request to obtain for Hippo all right, title and interest in and to any of the
Developments or otherwise to carry out the purposes of this Agreement.
The out-of-pocket cost of prosecuting patent applications and obtaining
copyright registration shall be borne by Hippo.
4.7 It is understood that Sections 4.1, 4.2 and 7 of this Agreement apply,
without limitation, to any and all oral communications and writings, including,
without limitation, notes, drawings, specifications, schematics, flow charts,
software algorithms, and engineering, sales, marketing and financial plans, and
studies and reports that are prepared, compiled or acquired by Chou during the
term of this Agreement that relate to or arise out of any of the Work.
5. Non-Disclosure and Confidentiality
5.1 Chou acknowledges that in the course of performing work for Hippo, it
will receive information about, and access to, trade secrets and other
confidential and proprietary information (including, without limitation, the
information, software and materials described in Section 4 of this Agreement)
which are vital to the competitive position and success of Hippo. Hippo
acknowledges that during the term of this Agreement it will receive information
about, and access to, trade secrets and other confidential and proprietary
information (including, without limitation, the information, software and
materials described in Section 4 of this Agreement) which are vital to the
competitive position and success of Chou.
5.2 The Confidential Information will only be used for the purpose of
completing the Work and such Confidential Information will be kept confidential
by Chou and Hippo, except that the Confidential Information or portions thereof
may be disclosed to Chou's or Hippo's representatives who need to know such
Information and who agree to be bound by this Agreement.
5.3 Without Hippo's prior written consent, for a period of five years
following the disclosure of Confidential Information to Chou, neither Chou nor
its representatives will disclose to any person such Information, the fact that
such Information has been made available or that Chou is providing the Work,
except as required by law and then only with prompt prior written notice to us.
5.4 Without Chou's prior written consent, for a period of five years
following the disclosure of Confidential Information to Hippo, neither Hippo nor
its representatives will disclose to any person such Information, the fact that
such Information has been made available or that Hippo is contracting the Work,
except as required by law and then only with prompt prior written notice to us.
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5.5 This Agreement does not apply to such portions of the Confidential
Information which (i) are or become generally available to the public (other
than as a result of a disclosure by Chou or Chou's representatives), (ii) Chou
can show were available to Chou on a non-confidential basis prior to their
disclosure to Chou by Hippo from a source other than Hippo or one of its
representatives which is entitled to disclose it or (iii) Chou can show it
become available to Chou on a non-confidential basis from a source other than
Hippo or its representatives, provided that such source is not known by Chou or
Chou's representatives to be bound by a confidentiality agreement with Hippo or
otherwise prohibited from transmitting the information to Chou by a contractual,
fiduciary or other legal obligation.
5.6 This Agreement does not apply to such portions of the Confidential
Information which (i) are or become generally available to the public (other
than as a result of a disclosure by Hippo or Hippo's representatives), (ii)
Hippo can show were available to Hippo on a non-confidential basis prior to
their disclosure to Hippo by Hippo from a source other than Chou or one of its
representatives which is entitled to disclose it or (iii) Hippo can show it
become available to Hippo on a non-confidential basis from a source other than
Chou or its representatives, provided that such source is not known by Hippo or
Hippo's representatives to be bound by a confidentiality agreement with Chou or
otherwise prohibited from transmitting the information to Hippo by a
contractual, fiduciary or other legal obligation.
5.7 In the event Chou or anyone to whom Chou supplies Confidential
Information to become legally compelled to disclose any of the Confidential
Information, Chou will provide Hippo with prompt written notice of such event so
that Hippo may seek a protective order or other appropriate remedy. In the event
that such protective order or other remedy is not obtained, Chou agrees to
furnish only that portion of the Confidential Information which, in the opinion
of counsel, Chou is legally compelled to disclose and upon Hippo's request will
exercise Chou's best efforts to obtain reliable assurances that confidential
treatment will be accorded the Confidential Information.
5.8 In the event Hippo or anyone to whom Hippo supplies Confidential
Information to, become legally compelled to disclose any of the Confidential
Information, Hippo will provide Chou with prompt written notice of such event so
that Chou may seek a protective order or other appropriate remedy. In the event
that such protective order or other remedy is not obtained, Hippo agrees to
furnish only that portion of the Confidential Information which, in the opinion
of counsel, Hippo is legally compelled to disclose and upon Chou request will
exercise Hippo's best efforts to obtain reliable assurances that confidential
treatment will be accorded the Confidential Information.
5.9 The Term "Confidential Information" as used throughout this Agreement
shall mean all Developments and all trade secrets, confidential or proprietary
information and other data or information (and any tangible evidence, record or
representation thereof), whether prepared, conceived or developed by an employee
or consultant of Hippo (including Chou) or received by Hippo from an outside
source, which is in the possession of Hippo (whether or not the property of
Hippo) and which is maintained in secrecy or confidence by Hippo or which might
permit Hippo or any of its customers
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to obtain a competitive advantage over competitors who do not have access to
such Developments, trade secrets, confidential or proprietary information, or
other data or information.
6. Relationship of the Parties
In performing the Work under this Agreement, Chou will at all times act as
an independent contractor. This Agreement shall not constitute Chou an agent or
legal representative of Hippo for any purpose whatsoever and creates no
relationship of employment, principal and agent, partnership or joint ventures.
Chou shall have no authority to bind Hippo or to create any express or implied
obligation for Hippo, and Chou shall not hold itself out as having such
authority. Chou shall have full responsibility for payment of, and shall pay,
all compensation, social security, unemployment, withholding and other taxes and
charges for all persons engaged by it in the performance of services hereunder,
as and when the same become due and payable, and Hippo shall have no obligation
to pay or make available any employee benefit to Chou or any person employed by
or associated with Chou.
7. Term and Termination
7.1 Hippo may terminate this Agreement by sending written notice of
termination to Chou at any time after Chou fails or neglects to perform any of
its obligations hereunder, including, without limitation, the timely performance
of the Work, or otherwise after Chou's breach of any provision hereof, such
notice to be effective immediately upon sending. Following any such termination,
Hippo shall have no further obligation to Chou.
7.2 Chou may terminate this Agreement by sending written notice of
termination to Hippo at any time after Hippo fails or neglects to perform any of
its obligations hereunder, including Hippo's breach of any provision hereof,
such notice to be effective immediately upon sending. Following any such
termination, Chou shall have no further liability or obligation to Hippo.
7.3 This Agreement shall terminate automatically if a petition in
bankruptcy or seeking reorganization is filed by or against Chou, if an
assignment for the benefit of creditors is made by Chou or if a receiver is
appointed to take charge of all or part of Chou's assets or properties.
7.4 This Agreement shall terminate automatically if a petition in
bankruptcy or seeking reorganization is filed by or against Hippo, if an
assignment for the benefit of creditors is made by Hippo or if a receiver is
appointed to take charge of all or part of Hippo's assets or properties.
7.5 Hippo and Chou understand and agree that their obligations under
Sections 2.1(b), 3, 4, 5 and 8 hereof and this Section 7 shall survive and shall
not be affected by any expiration or earlier termination of this Agreement.
8 Miscellaneous
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8.1 Any notice required or permitted to be given under this Agreement shall
be given in writing and sent by certified or overnight mail to the party.
8.2 This Agreement sets forth the entire agreement and understanding
between the parties with respect to the subject matter hereof, and supersedes
all prior oral and written agreements and understandings between them relating
thereto.
8.3 It is understood that the majority of work performed by Chou under this
Agreement will be performed by Art Chou. This Agreement will automatically be
terminated should Art Chou no longer be a full time employee of Chou or should
Art Chou no longer perform the majority of the Work under this Agreement. Chou
shall not delegate or assign any of its rights, duties or obligations hereunder.
Any purported assignment or delegation thereof by Chou shall be void and
ineffective.
8.4 Chou acknowledges and agrees that in the event of any breach of this
Agreement, the Hippo would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly agreed that Hippo, in
addition to any other remedy to which it may be entitled at law or in equity,
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and/or to compel specific performance of this
Agreement.
8.5 This Agreement shall be governed by, and construed and enforced in
accordance with the internal laws of the State of Florida and may be executed in
any number of counterparts, each of which shall, when executed, be deemed to be
an original and all of which shall be deemed to be one and the same instrument.
Any action on this Agreement shall be litigated in the courts of the State of
Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
Chou Golf Design Labs, Inc. Hippo
/S/ Art Chou /S/ Paul Berger 10/9/96
- --------------------------- ------------------------------------
By: Art Chou By: Paul Berger
----------------------- -----------------------------
Its: President Its: CEO
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EXHIBIT 10.27
Chou Golf Design Labs, Inc.
Research, Development and Consulting Contract
Contract Amendment
This Amendment to the Research, Development and Consulting Contract
("Amendment") effective as of January 1, 1997, is entered into by and between
Hippo, Inc. a corporation organized and existing under the laws of the State of
Delaware with its principal place of business at 4400 North Federal Highway,
Suite 410, Boca Raton, Florida ("Hippo") and Chou Golf Design Labs, Inc., a
corporation existing under the laws of the State of Pennsylvania with its
principal place of business at 3260 Horizon Drive, King of Prussia, Pennsylvania
("Chou").
In consideration of the mutual promises, covenants and undertakings herein
contained and for other good and valuable consideration by each of the other
given, receipt of which is hereby mutually acknowledged, the parties hereby
agree that the Research, Development and Consulting Contract effective as of
October 8, 1996 entered into by Hippo and Chou ("Contract") shall be amended as
of January 1, 1997 as follows:
1. Section 2.1(a) shall be deleted in its entirety and replaced with the
following paragraph:
During the period from January 1, 1997 to December 31, 1998 Chou shall be
paid a monthly fee of $12,500.00.
2. Section 2.1(f) shall be added as follows:
Subject to the terms and conditions set forth herein, Chou shall receive
options to purchase 20,000 shares of Common Stock of Hippo, Inc. at a price of
$0.25 per share. These options are subject to vest as follows: 10,000 shares
shall vest on December 31, 1997 subjected to this Contract being in effect and
10,000 shall vest on December 31, 1998 upon final performance of this contract.
3. This Amendment shall be construed and enforced in accordance with the
laws of the State of Florida without regard to its principles of conflict of
law.
4. As amended hereby, the Contract shall hereafter continue in full force
and effect in accordance with its terms.
IN WITNESS WHEREOF the parties have hereto executed this Amendment as of
the date first written above.
Chou Golf Design Labs, Inc. Hippo, Inc.
By: /S/ Art Chou By: /S/ Paul Berger
------------------------- ---------------------------
Title: President Title: CEO
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Date: May 4, 1997 Date: April 21, 1997
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APPENDIX A
HiPPO INSENT HOSEL
DESCRIPTION AND BENEFITS
Inset in golf clubs is the distance from the heel most side of the
hosel to the heel most portion of the club head. In most clubs there is no
distance between the two as there is no inset.
It is believed that the movement of the hosel "in" toward the center of
the club head (therefore the term "inset") provides the following performance
benefits:
a. By reducing the distance between the centerline of the
shaft and the center of gravity (CG), the moment of
inertia (MOI) is reduced and causes the club face to
return to square or close faster than a conventional hosel
placement. This feature helps the average golfer, who has
the tendency to leave the face open at impact and
therefore hit the ball to the right, square the club face
and hit straighter shots.
b. The reduced MOI also increases the stability of the head
on impact, creating more solid shots and therefore more
distance on off center hits.
The HiPPO Inset Hosel moves the hosel, the maximum distance toward the
CG allowed (.625 in.) by the USGA in order to provide the maximum benefit.
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Appendix A
"DESIGNS"
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EXHIBIT 10.28
AGREEMENT
This agreement ("Agreement") is made by and between Glen Day ("Player") and
Outlook Sports Technology, Inc. ("Company") as of the 1st day of January 1998 in
the following circumstances:
Background
Player is an expert professional golfer who plays and intends to play in
golf tournaments and exhibitions throughout the Territory, as hereafter defined,
and whose endorsement of products and services has commercial value. Company is
engaged in the business of golf club manufacturing and distribution. Company and
Player desire to work together in the development, advertisement, promotion and
sale of Company's golf product and equipment during the Term of this Agreement,
all in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties do hereby AGREE as follows:
1.Definitions. For purposes of this Agreement the following terms shall have the
following meanings:
a."Endorsed Product" shall mean Tegra golf products, more specifically,
woods and irons, headcovers, umbrella, towel and golf apparel.
b."Player Endorsement" shall mean the name, photograph, message, voice,
initials, likeness or signature of Player, or any words and/or sounds, and/or
symbols, and/or graphic representations which identify Player and/or his name,
identity or likeness.
c."Official Events" shall mean U.S. PGA TOUR officially sanctioned events,
plus the British Open (including practice rounds and pro-ams).
d."Major Tournament" shall mean any one of the Masters Tournament, the U.S.
Open, the British Open and the PGA Championship.
e."Territory" shall mean the entire world.
f."Company Driver" shall mean the "Tegra" brand driver.
g."Trademark" shall mean the Company's Tegra, T design, Tegra T design and
other marks (whether registered or unregistered) forming a part of the Tegra
line of products and services offered by the Company.
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2.Management Representation. Player acknowledges and represents that he has
appointed International Golf Partners, Inc. as his exclusive management
representative in this Agreement. Company and Player agree that International
Golf Partners, Inc. shall be deemed to be the exclusive management
representative of Player for the purposes of this Agreement and that all
payments, notices, statements or other documents required or permitted to be
given hereunder shall be sent directly to Player in care of International Golf
Partners, Inc., as specified in Section 14 below.
3.Term of Agreement. This Agreement shall commence as of the date first written
above and shall extend for three (3) years, through December 31, 2000 ("Term").
4.Responsibility of Player. Player agrees to fulfill the following
responsibilities with respect to the development, advertisement and promotion of
the product during the Term (Endorsed Services):
a.Use of Endorsed Product. Company agrees to provide Player from time to
time, as reasonably needed by Player during the Term, a reasonable quantity of
the Endorsed Products at no cost for Player's use hereunder. Player specifically
agrees that no Endorsed Product supplied to Player shall be sold or traded to a
third party.
i.Year 1998 Player agrees to wear Company headwear, carry Company golf
staff bag, headcovers, towels, and umbrella and wear the Company apparel in all
Official Events and other golf related events. In addition, Player agrees to use
his best efforts to use the Company Driver and Tegra irons.
ii.Years 1999 & 2000 Player agrees to use Company Driver and
Company branded irons. In addition, Player agrees to wear Company headwear,
carry Company golf staff bag, headcovers, towels, and umbrella and wear the
Company apparel in all Official Events and other golf related events.
b.Subject to Sections 4.1A and 4.1B of this Agreement, Player shall in all
circumstances, wear and use the Endorsed Products whenever he is competing,
practicing or playing in golf related activities and at teaching and coaching
sessions. The Company acknowledges and agrees that if Player represents his
country in a special team event where there are specific products analogous to
or competitive with the Endorsed Products that are required to be worn and/or
used which are not Endorsed Products, the Player may wear and/or use such
products during such event. In addition, the Player agrees that in all
appropriate circumstances he shall wear and/or use the Endorsed Products during
golf related press and/or television interviews. Player specifically agrees to
wear a golf hat or visor and golf shirt of the Company (or ones that prominently
display the Trademark) during television interviews, press interviews and awards
ceremonies other than specified above.
c.Player agrees to make himself available, on an annual basis, at the
Company's request, on three days (for a maximum of eight hours per day) for the
purposes of making appearances including public or promotional appearances on
behalf of the Company. Player also agrees to make himself available at the
Company's request for two photography sessions of four hours in length each for
the
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purposes of photography for the Company's advertising or promotional
material. The Company shall reimburse the Player for all first-class travel
expenses incurred in connection with these appearance dates.
5.Endorsement. Player agrees to endorse the Endorsed Product during the Term and
to permit Company to use Player Endorsement during the Term as follows:
a.Permitted Uses. Company shall have the exclusive right and license to
use, reproduce and to distribute the Player Endorsement during the Term,
throughout the Territory and for purposes of advertising, promoting, marketing,
sales and distribution of Endorsed Product, including, without limitation, use
on label and packaging and in print, broadcast, electronics and any other media
now known or hereafter created, subject to the quality control provisions set
forth in the following section.
b.Exclusivity. The Player Endorsement rights granted hereby shall be
exclusive with respect to the Endorsed Product only. The parties acknowledge and
agree that all proprietary rights in and to the Player Endorsement shall be and
remain vested in Player except to the extent of the license expressly granted
herein.
c.Player expressly agrees that the right to use the Player Endorsement will
not be granted to anyone other than the Company for use within the Territory
during the Term in connection with advertisement, promotion, sale or
distribution of a product or products analogous to or competitive with Endorsed
Products.
6.Quality Control. All uses by Company of the Player Endorsement shall be
subject to the prior approval of Player. Company agrees to submit all proposed
uses of the Player Endorsement to Player reasonably in advance of the time
intended for first use. Player shall have a period of five (5) business days
from the date of receiving notice of any proposed use of the Player Endorsement
to either approve or disapprove thereof. If Player fails to act within the five
(5) business-day period, he will be deemed to have approved the proposed use.
Company acknowledges and agrees that its right to produce, promote and
distribute materials incorporating the Player Endorsement shall cease upon
expiration of this Agreement, except those materials that have been distributed
outside of Company provided that in the event of early termination of this
Agreement, Company shall have ninety (90) days after termination of this
Agreement to exhaust advertising and other materials which may include the
Player Endorsement. Player agrees that company is authorized to advertise "Win
Ads" without Player's advance approval. Player agrees not to disapprove
Company's material unreasonably, and in case of disapproval to provide specific
basis of the disapproval to Company.
7.Official Events. Player agrees to play in not less than 20 Official Events
during each year of the Term. In the event Player plays in less than the stated
number of Official Events in a year, the applicable retainer fee shall be
prorated based on the number of Official Events actually played. In the event of
any overpayment by Company to Player, Player shall promptly refund the amount of
such overpayment to Company.
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8.Fees. Subject to the terms of this Agreement, Company agrees to pay Player the
following fees and bonuses during the Term:
<TABLE>
<CAPTION>
<S> <C> <C>
a.Retainer Fees: 1998 $ 50,000 (plus stock shares, see 8.2 below)
------------- 1999 $150,000
2000 $160,000
</TABLE>
b.Stock Shares. As additional compensation for the services and rights
provided by Player and upon execution of this agreement, Player shall receive
30,000 shares of the Company's common stock, valued at par value $0.01 per
share. Company agrees that in the event the shares do not have a minimum value
of $60,000 at the date of initial public offering (IPO) of the Company's stock,
Company agrees to pay the difference between such date's valuation and $60,000
to Player in cash compensation or gifting additional shares of Company stock no
later than thirty days following the date of the IPO. All references to share or
option numbers and exercise prices herein do not reflect the Company's
contemplated 3:1 reverse split of its common stock.
c.Tournament Bonuses:
i.Driver Bonus. In 1998, Company agrees to pay Player $1,000
for each Official Event that Player uses Company Driver. In addition, Company
agrees to pay Player $5,000 if Player should switch to using Company Driver in
Official Events prior to March 1, 1998.
ii.PGA Tour Victories
1) Player using Company Driver: Company agrees to pay Player
$15,000 and 5,000 stock options @ $2.00 per option for each
tournament victory (up to 3) in Official Events during 1998
or 1999.
2) Player not using Company Driver: Company agrees to pay
Player $25,000 for each tournament victory (up to 3).
3) 4th and subsequent PGA Tour victories and victories after
1/1/00: Company agrees to pay Player $25,000 for each
victory.
iii."Major" win bonuses
1) In "Major" Tournaments where Player uses Company Driver in
1998 and 1999, Company agrees to pay Player $75,000 and
12,500 stock options @ $2.00 per option for each victory.
2) In "Major" Tournaments where Player is not using Company
Driver in 1998, Company agrees to pay Player $100,000 for
each Major victory.
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3) Beginning in year 2000, Player will be compensated $100,000
for each "Major" Tournament victory.
iv.Money list Company agrees to pay Player the corresponding
amount if Bonus is earned on the year end Official PGA Tour Money List.
<TABLE>
<S> <C> <C>
#1 $100,000
#2-10 $ 50,000
#11-20 $ 40,000
#21-30 $ 30,000
</TABLE>
v.Player of the Year Company agrees to pay Player $50,000 if
Player should be named "PGA Tour Player of the Year".
vi.Ryder Cup/Presidents Cup Company agrees to pay Player
$25,000 if Player should be named to the Ryder Cup or Presidents Cup teams.
d.Payments: In 1998, Company agrees to pay Retainer Fee in three
installments on April 1, July 1, and Oct. 1. Beginning in 1999, company agrees
to pay Retainer Fee quarterly (Jan 1, April 1, July 1, and Oct. 1). Company
agrees to pay Tournament bonuses earned within thirty (30) days of the receipt
of an invoice identifying the particular bonus amount earned. In the case when
stock options are earned, said options will be exercisable up to five (5) years
of date of issuance.
9.Information and Promotion. During the Term of this Agreement, Player agrees to
use his best efforts when possible to promote and further the sale of Endorsed
Product. Player also agrees and promises to use best efforts to keep Company
informed as to any information Player acquires relating to the Company and
Company's products including, without limitation, information on performance and
including information obtained from other professional golfers.
10.No Waiver. Failure of either party to complain of any act or omission on the
part of the other party, no matter how long the same may continue, shall not be
deemed to be a waiver by either part of its rights under this Agreement.
11.Relationship of the Parties. This Agreement shall not constitute or be
considered a partnership, employer-employee relationship, join venture, or
agency between the parties hereto nor by or between any of their employees or
agents.
12.Binding Effect. Subject to the provisions of this Agreement governing
assignment, this Agreement shall be binding upon and to inure to the benefit of
the successors of the parties hereto.
13.Severance. If any term, covenant, condition or provision of this Agreement or
the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or application of such
term of provision to any person or circumstance other than
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<PAGE>
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term, covenant, condition or provision of this Agreement shall
be valid and shall be enforced to the fullest extent provided by law.
14.Notice. Notice by any party is deemed given when mailed, postage paid,
certified or registered, return receipt requested (Federal Express, DHL,
Airborne, US Overnight Mail and UPS Overnight are also applicable), addressed to
the other parties at the address appearing below:
To Player: Glen Day
c/o International Golf Partners, Inc.
3300 PGA Blvd., Suite 990
Palm Beach Gardens, FL 33410
To Company: Outlook Sports Technology, Inc.
4400 N. Federal Hwy., Suite 410
Boca Raton, FL 33431
Attn: Jim Dodrill, President
Either party may, by written notice to the other, change the address to
which any such communications shall be sent. After notice of such
change has been received, any communications shall be sent directly to
such party at such changed address.
15.Authority. Each of the parties hereby represents and warrants to the other
that it has the right, power and legal authority to enter into and fully perform
this Agreement in accordance with its terms and that this Agreement when
executed and delivered by the parties will be a legal, valid and binding
obligation enforceable against the parties in accordance with its terms.
16.Modification. No modification or waiver of any provisions of this Agreement
shall be effective unless made in writing and signed by all parties.
17.Indemnification. Company agrees to fully indemnify and hold Player harmless
from and against any claim based upon or involving alleged misrepresentation by
Company of the Endorsed Services as provided pursuant to this Agreement. Company
shall have the right to reasonably select the attorney to defend Player in an
matter falling within Company's indemnification obligation and to receive,
monitor and audit any bills relating to such defense.
Player agrees to fully indemnify and hold harmless Company from and
against any and all damages arising out of or in any way related to
third party claims or government fines or penalties based on the (1)
negligent or willful acts or omissions of the Player in relation to the
activities described in the Agreement not at the direction of the
Company, (2) any loss of or damage to property, personal injury or
death resulting from the negligent or willful services of the Player
hereunder, or (3) any breach by Player of any obligation to be
performed or any
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<PAGE>
other agreement or representation made by Player herein except to the
extent such damages arise from the gross negligence or willful neglect
of Company.
18.Assignment. Neither Player nor Company shall have the right to grant
sublicenses hereunder or to otherwise assign, alienate, transfer, encumber or
hypothecate any of its rights or obligations hereunder, except as set forth
herein: (1) Player shall have the right to assign the financial benefits hereof,
and Company hereby consents to such assignment upon receipt by Company of
written notice thereof from Player; (2) Company shall have the right to grant
sublicenses hereunder or to otherwise assign, alienate, transfer, encumber or
hypothecate any of it's rights or obligations hereunder, if prior written
consent is obtained from Player, which consent will not be unreasonably
withheld; (3) Company may assign this Agreement and all rights and obligations
hereunder to a purchaser or substantially all of the assets of the Company's
business associated with the Trademarks or any successor entity in a corporate
reorganization or any entity under common ownership or control.
19.Termination.
a.Either party may terminate this Agreement in the event the other party
breaches any of its obligations under this Agreement and such breach continues
uncured for more than thirty (30) days after written notice thereof is given to
the breaching party by the other party, or in the event the other party becomes
insolvent, or a proceeding under any bankruptcy law is filed by or against the
other party, or the other party admits in writing its inability to pay its debts
as they fall due. Such right of termination is in addition to any other remedy
the non breaching party may have and shall not waive the party's right to
damages for any breach.
b.Player agrees that Company shall have the right to immediately terminate
this Agreement upon written notice to Player or to Player's representative:
i.In the event of Player's death during the contract period, or
ii.In the event Player is convicted of a felony, or
iii.If player has committed, or shall commit, any act, or has,
or in the future becomes involved in any situation or occurrence including but
not limited to the use of or other association with drugs or excessive alcohol,
or otherwise tending to bring himself and/or Company and/or Endorsed Product
into public disrepute, contempt, scandal, or ridicule, or tending to shock,
insult, or offend the people of this nation or another nation, or any class or
group thereof, or reflecting unfavorably upon Company's reputation or products,
or is charged with the commission or any act or thing which is an offense
involving moral turpitude under Federal, State or local law.
Company agrees to pay Player on a pro-rated basis for any work
performed by Player prior to termination of this Agreement.
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<PAGE>
c.Player shall have the right to terminate this Agreement immediately upon
private written notice to Company in the event of the occurrence of any of the
following contingencies:
i.If Company is adjudicated as insolvent, declares bankruptcy or
fails to continue its business of selling Endorsed Products; or
ii.If Company fails to make payment to Player of any sums due
pursuant to this Agreement within thirty (30) days following the date such
payment is due hererunder, provided that Company is notified in writing of such
nonpayment by Player or his authorized representative and such payment is not
made within ten (10) days following such notification.
d.In the event of termination under 19.2 or 19.3 above, the parties agree
that the Base Compensation due Player shall be pro-rated to the effective date
of termination. Furthermore, Company agrees that any bonuses earned by Player
under 8.2 prior to the effective date of termination shall be paid in full
within thirty (30) days of such effective date of termination.
20.Terms of Agreement Confidential. It is hereby agreed that the specific terms
and conditions of this Agreement, including but not limited to the financial
terms, and the duration are strictly confidential and shall not be divulged to
any third parties, other than those having a need for disclosure in connection
with the normal business affairs of the parties without the prior written
consent of both Company and Player, unless otherwise required by law to be
disclosed or unless disclosed in connection with the prosecution of defense of
an arbitration proceeding brought under this agreement.
21.Entire Agreement. This Agreement and the exhibits referred to herein, which
are incorporated herein by this reference, constitutes the entire agreement
between the parties with respect to this subject matter covered by this
Agreement. The Agreement may not be amended, changed or modified except by a
writing duly executed by both parties hereof. Each party understands and hereby
represents and acknowledges to the other that no understanding, agreement,
inducement, or promise has been made other than as set forth in this agreement
and that this agreement supersedes any and all prior understandings, agreements,
representations, promises or inducements, whether oral or written, not set forth
in, referred to in, or reserved or preserved in this agreement.
22.Applicable Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Florida without regard to its principles of
conflicts of law. Any action on this Agreement or arising out of its terms and
conditions shall be instituted and litigated in the courts of the State of
Florida, County of Palm Beach. In accordance, the parties submit to the
jurisdiction and venue of the State of Florida and agree and acknowledge that
such a forum shall be a convenient forum for resolution of their questions,
disputes and other differences.
IN AGREEMENT, to the foregoing the parties set their hands below as of the date
first written above.
8
<PAGE>
By: /S/ Glen Day By:/S/ Jim Dodrill
--------------------------- --------------------------------
Glen Day Outlook Sports Technology, Inc.
Date: 2-16-98 Date: Feb., 1998
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<PAGE>
EXHIBIT 10.29
HIPPO, INC.
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
3 Purpose of the Plan.
This 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") of
Hippo, Inc., a Delaware corporation (the "Company"), is designed to provide
additional incentive to present and future officers and other employees of the
Company and of its subsidiary corporations and to certain other individuals
providing services to or acting as directors of the Company or any such
subsidiary corporation by affording them an opportunity to acquire or increase
their proprietary interest in the Company through the acquisition of shares of
its Common Stock. The Company intends that this purpose will be effected by the
granting of incentive stock options ("Incentive Stock Options") as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
non- qualified stock options ("Non-Qualified Options"; Incentive Stock Options
and Non-Qualified Options being hereinafter collectively referred to as
"Options") under the Plan which afford such officers, employees or other
individuals an opportunity to acquire or increase their proprietary interest in
the Company through the acquisition of shares of its Common Stock. The Company
intends that Incentive Stock Options issued under the Plan will qualify as
"incentive stock options" as defined in Section 422 of the Code and the terms of
the Plan shall be interpreted in accordance with this intention. The terms
"parent corporation" and "subsidiary corporation" shall have the respective
meanings set forth in Section 424 of the Code.
4 Administration.
The Plan shall be administered by the Board of Directors of the Company (the
"Board"). All questions of interpretation and application of the Plan, of
Options granted hereunder, and of the value of shares of Common Stock subject to
an Option, shall be subject to the determination, which shall be final and
binding, of a majority of the Board.
5 Option Shares.
The stock subject to the Options and other provisions of the Plan shall be
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock"). The total amount of the Common Stock with respect to which Options may
be granted shall not exceed in the aggregate 500,000 shares; provided, however,
that the class and aggregate number of shares that may be subject
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<PAGE>
to Options granted hereunder shall be subject to adjustment in accordance
with the provisions of paragraph 18 hereof. Such shares may be treasury
shares or authorized but unissued shares.
In the event that any outstanding Option for any reason shall expire or
terminate prior to exercise, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option under the
Plan.
6 Authority to Grant Options.
The Board may grant Incentive Stock Options from time to time to such
eligible persons (as described in paragraph 6 hereof) as it shall determine.
Each holder of an outstanding Option hereunder shall be referred to herein as an
"Optionee." Subject to any applicable limitations set forth in the Plan or
established from time to time by the Board, the number of shares of Common Stock
to be covered by any Option shall be as determined by the Board.
7 Limitations on Vesting.
The aggregate fair market value (determined as of the time the Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
the Plan and any other plans of the Company or any parent or subsidiary of the
Company (as such terms are defined in Section 424 of the Code) for the issuance
of Incentive Stock Options shall not exceed $100,000.
8 Eligibility.
Incentive Stock Options under the Plan may be granted only to officers and
other employees of the Company. Non-Qualified Options may be granted to officers
or other employees of the Company or of any subsidiary corporation and to such
consultants, directors and other persons who render services to the Company or
to any subsidiary corporation (regardless of whether they are employees) as the
Board shall determine from time to time.
No Incentive Stock Option shall be granted to an individual who, at the time
the Option is granted, owns (including ownership attributed pursuant to Section
424 of the Code) more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any subsidiary corporation or parent
corporation of the Company (a greater-than-ten-percent-stockholder");
notwithstanding the above, a "greater-than-ten-percent-stockholder" may be
granted an Incentive Stock Option provided that the purchase price per share
shall not be less than one hundred ten percent (110%) of the fair market value
of the Common Stock at the time such Option is granted, and further provided
that no such Option shall be exercisable to any extent after the expiration of
five (5) years from the date it is granted.
9 Option Price.
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<PAGE>
The price at which shares may be purchased pursuant to Options shall be
specified by the Board at the time the Option is granted and shall not be less
than the par value of the underlying Common Stock at the time of grant. In the
case of Incentive Stock Options, such price shall not be less than one hundred
percent (100%) (one hundred and ten percent (110%) in the case of a
"greater-than- ten-percent-stockholder") of the fair market value of the shares
of Common Stock on the date the Incentive Stock Option is granted, such fair
market value to be determined in accordance with procedures to be established by
the Board.
10 Duration of Options.
The Board in its discretion may provide that an Option shall be exercisable
during any specified period of time from the date such Option is granted, but in
the case of an Incentive Stock Option, such period shall not exceed ten (10)
years (five years in the case of a "greater-than-ten- percent-stockholder") from
the date of grant.
11 Amount Exercisable.
Each Option may be exercised, so long as it is valid and outstanding, from
time to time in part or as a whole, subject to any limitations with respect to
the number of shares for which the Option may be exercised at a particular time
and to such other conditions as the Board in its discretion may specify upon
granting the Option.
12 Certain Rights of the Company.
The Board may in its discretion provide upon the grant of any Option
hereunder that the Company shall have an option to repurchase all or any number
of shares purchased upon exercise of such Option upon such terms and conditions
as are determined by the Board or a right of first refusal in connection with
the subsequent transfer of any or all of such shares. The repurchase price per
share payable by the Company shall be such amount or be determined by such
formula as is fixed by the Board at the time the Option for the shares subject
to repurchase was granted. In the event the Board shall grant Options subject to
the Company's repurchase option or right of first refusal, the certificates
representing the shares purchased pursuant to such Option shall carry a legend
satisfactory to counsel for the Company referring to the Company's repurchase
option or right of first refusal.
13 "Lockup" Agreement.
The Board may in its discretion specify upon granting an Option that upon
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, the Optionee shall agree in writing that for a period
of time (not to exceed 180 days) from the effective date of any registration of
securities of the Company the Optionee will not sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any shares
issued pursuant to the exercise of such Option, without the prior written
consent of the Company or such underwriters, as the case may be.
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<PAGE>
14 Exercise of options.
Options shall be exercised by the delivery of written notice to the Company
setting forth the number of shares with respect to which the Option is to be
exercised, together with (a) cash, certified check, bank draft or postal or
express money order payable to theorder of the Company for an amount equal to
the option price of such shares, or (b) with the consent of the Board, other
shares of Common Stock of the Company having a fair market value equal to the
option price of such shares, or (c) with the consent of the Board, a combination
of (a) and (b), and specifying the address to which the certificates for such
shares are to be mailed. For the purpose of the preceding sentence, the fair
market value of the shares of Common Stock so delivered to the Company shall be
the fair market value as determined in good faith by the Board. As promptly as
practicable after receipt of such written notification and payment, the Company
shall deliver to the Optionee certificates for the number of shares with respect
to which such Option has been so exercised, issued in the Optionee's name;
provided, however, that such delivery shall be deemed effected for all purposes
when the Company or a stock transfer agent of the Company shall have deposited
such certificates in the United States mail, addressed to the Optionee, at the
address specified by the Optionee pursuant to this paragraph.
The Board may, in its discretion, provide upon the grant of any Option
hereunder that the purchase price for any or all the shares purchased upon
exercise of such Option may be paid on an installment basis, to the extent
lawful, upon such terms as the Board shall have specified at the time the
relevant Option was granted. In the event the Board shall grant an Option
permitting purchases of shares on an installment basis, the certificates
representing any shares purchased pursuant to such Option shall carry a legend
satisfactory to counsel for the Company referring to such installment purchase.
15 Transferability of Options.
Options shall not be assigned, pledged, hypothecated or otherwise
transferred by the Optionee otherwise than by will or under the laws of descent
and distribution, and shall not be subject to execution, attachment or similar
process. During the Optionee's lifetime, Options shall be exercisable only by
the Optionee.
16 Termination of Options.
The Board in its discretion may provide that a Non-Qualified Option shall
terminate prior to its expiration date upon such terms and conditions as the
Board may determine at the time of the grant of such Option. Except as may be
otherwise expressly provided herein, Incentive Stock Options shall terminate on
the earliest of
(i) the date of expiration thereof,
(ii) immediately upon termination of the employment relationship
between the Company and the Optionee for cause as determined by the Company, or
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<PAGE>
(iii) thirty (30) days after termination of the employment relationship
between the Company and the Optionee without cause other than as a result of
death or retirement in good standing from the employ of the Company for reasons
of age or disability under the then-established rules of the Company; provided,
however, that during any period after such termination of employment before
termination of an Optionee's Incentive Stock Option, the Optionee shall have the
right to exercise such Option only to the extent that the Optionee was entitled
to exercise such Option immediately prior to such termination of employment.
As used in this paragraph 14, "cause" shall mean (a) any material breach by
the Optionee of any agreement to which the Optionee and the Company are both
parties, (b) any act (other than retirement) or omission to act by the Optionee
which may have a material and adverse effect on the Company's business or on the
Optionee's ability to perform services for the Company, including, without
limitation, the commission of any crime (other than ordinary traffic
violations), or (c) any material misconduct or material neglect of duties by the
Optionee in connection with the business or affairs of the Company or any
affiliate of the Company.
Whether authorized leave of absence or absence on military or government
service shall constitute termination of the employment relationship between the
Company and the Optionee shall be determined by the Board at the time thereof.
In the event of the death of an Optionee while in the employ of the Company
and before the date of expiration of such Optionee's Incentive Stock Option,
such Incentive Stock Option shall terminate on the earlier of such date of
expiration or 180 days following the date of such death. After the death of the
Optionee, the Optionee's executors, administrators or any person or persons to
whom the Optionee's Incentive Stock Option may be transferred by will or by the
laws of descent and distribution shall have the right, at any time prior to such
termination, to exercise such Incentive Stock Option to the extent that the
Optionee was entitled to exercise such Incentive Stock Option immediately prior
to the Optionee's death.
If, before the date of expiration of any Incentive Stock Option, the
relevant Optionee shall be retired in good standing from the employ of the
Company for reasons of age or disability under the then-established rules of the
Company, the Incentive Stock Option shall terminate on the earlier of such date
of expiration or 90 days after the date of such retirement. In the event of such
retirement, the Optionee shall have the right prior to the termination of such
Incentive Stock Option to exercise the Incentive Stock Option to the extent that
the Optionee was entitled to exercise such Incentive Stock Option immediately
prior to such retirement.
An employment relationship between the Company and the Optionee shall be
deemed to exist during any period in which the Optionee is employed by the
Company or by any subsidiary corporation.
17 Requirements of Law.
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<PAGE>
The Company shall not be required to sell or issue any shares under any
Option if the issuance of such shares shall constitute a violation by the
Optionee or by the Company of any provisions of any law or regulation of any
governmental authority. In addition, in connection with the Securities Act of
1933, as now in effect or hereafter amended (the "Act"), upon exercise of any
Option, the Company shall not be required to issue such shares unless the
Company has received evidence satisfactory to it to the effect that the holder
of such Option will not transfer such shares except pursuant to a registration
statement in effect under the Act or unless an opinion of counsel satisfactory
to the Company has been received by the Company to the effect that such
registration is not required in connection with any such transfer. Any
determination in this connection by the Board shall be final, binding and
conclusive. In the event the shares issuable on exercise of an Option are not
registered under the Act or under the securities laws of each relevant state,
the Company may imprint on the certificates representing such shares the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act or any such state securities law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any state and may not be pledged, hypothecated, sold or otherwise
transferred unless the registration requirements of such Act and all such
laws have been complied with or unless the Corporation has received an
opinion of counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that such registration is not required for
such transfer."
The Company may, but shall in no event be obligated to, register any
securities covered by the Plan pursuant to the Act; and in the event any shares
are so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any affirmative action
in order to cause the exercise of an Option or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority.
18 No Rights as Stockholder.
No Optionee shall have rights as a stockholder with respect to shares
covered by the Optionee's Option unless and until the Option shall have been
exercised pursuant to the terms thereof and the Company shall have issued and
delivered certificates representing the shares to the Optionee and, except as
otherwise provided in paragraph 18 hereof, no adjustment for dividends, or
otherwise, shall be made if the record date therefor is prior to the date of
issuance of such certificate.
19 No Employment Obligation.
The granting of any Option shall not impose upon the Company any obligation
to employ or continue to employ, or to retain or continue to retain the services
of, any Optionee; and the right of the Company to terminate the employment of
any officer or other employee, or the services of any consultant or other
individual, shall not be diminished or affected by reason of the fact that an
Option has been granted to, or exercised by, such officer, employee, consultant
or other individual.
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<PAGE>
20 Changes in the Company's Capital Structure.
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any issue of
bonds, debentures, preferred or prior preference stock or other capital stock
ahead of or affecting the Common Stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class, and price per share of stock subject to outstanding Options
hereunder shall be appropriately adjusted in such a manner as to entitle an
Optionee to receive upon exercise of an Option, for the same aggregate
consideration, the same total number and class of shares as the Optionee would
have received as a result of the event requiring the adjustment had the Optionee
exercised such Option in full immediately prior to such event; and (ii) the
number and class of shares with respect to which Options may be granted under
the Plan shall be adjusted by substituting for the total number of shares of
Common Stock then reserved for issuance under the Plan that number and class of
shares of stock that the owner of an equal number of outstanding shares of
Common Stock immediately prior to the event requiring adjustment would own as
the result of such event.
After a merger of one or more corporations with or into the Company or after
a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, each Optionee shall, at no additional cost, be
entitled upon exercise of an outstanding Option to receive in lieu of the shares
of Common Stock as to which such Option was exercisable immediately prior to
such event, the number and class of shares of stock or other securities, cash or
property (including, without limitation, shares of stock or other securities of
another corporation or Common Stock) to which such Optionee would have been
entitled pursuant to the terms of the merger or consolidation if, immediately
prior to such merger or consolidation, such Optionee had been the holder of
record of a number of shares of Common Stock equal to the number of shares as to
which such Option shall be so exercised.
If the Company is merged with or into or consolidated with another
corporation under circumstances where the stockholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent (50%) of the voting
power of the Company or the surviving or resulting corporation, as the case may
be, or if shares representing fifty percent (50%) or more of the voting power of
the Company are transferred to an Unrelated Third Party, as hereinafter defined,
or if the Company is liquidated, or sells
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<PAGE>
or otherwise disposes of substantially all its assets while unexercised Options
remain outstanding under the Plan, (i) subject to the provisions of clause (ii)
below, after the effective date of such merger, consolidation, transfer,
liquidation, sale or disposition, as the case may be (the "Transaction"), each
Optionee shall at no extra cost be entitled upon exercise of an outstanding
Option, to receive, in lieu of the shares of Common Stock as to which such
Option was exercisable immediately prior to the Transaction, the number and
class of shares of stock or other securities, cash or property (including,
without limitation, shares of stock or other securities of another corporation
or Common Stock) to which such Optionee would have been entitled pursuant to the
terms of the Transaction, if, immediately prior to the Transaction, such
Optionee had been the holder of record of a number of shares of Common Stock
equal to the number of such shares as to which such Option shall be so
exercised; or (ii) the Board may accelerate the time for exercise of all
unexercised and unexpired Options so that from and after a date prior to the
effective date of the Transaction specified by the Board, such Options shall be
exercisable in full; provided that (x) notice of such acceleration shall be
given to each Optionee, (y) each Optionee shall have the right to exercise all
unexercised and unexpired Options in full prior to the effective date of the
Transaction and (z) to the extent not so exercised, all of such Options shall be
cancelled immediately prior to such effective date; and provided further, that
the Board may not accelerate unexercised and unexpired Options pursuant to this
clause (ii) if to do so would adversely affect pooling of interests treatment
intended to be effected in connection with the Transaction.
"Unrelated Third Party" shall mean any person who is not, on the date of
adoption of this Plan by the Board, a holder of stock of any class or preference
or any stock option of the Company.
Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.
21 Amendment or Termination of the Plan.
The Board may amend, revise or terminate this Plan at any time and from time
to time, except that the class of employees eligible to receive Options and the
aggregate number of shares issuable pursuant to this Plan shall not be changed
or increased, other than by operation of paragraph 18 hereof, without the
consent of the stockholders of the Company.
22 Written Agreement.
Each Option granted hereunder shall be embodied in a written option
agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the President or the Treasurer of the Company for and on
behalf of the Company and in its name.
8
<PAGE>
Such an option agreement shall contain such other provisions as the Board in its
discretion shall deem advisable at the time of the grant; provided that no
provision of such option agreement shall be inconsistent with any term or
condition of the Plan and no provision of such option agreement shall cause any
Incentive Stock Option granted under the Plan to fail to qualify as an incentive
stock option within the meaning of Section 422 of the Code. Option agreements
need not be identical.
23 Effective Date and Duration of the Plan.
The Plan shall become effective upon its adoption by the Board. Options may
not be granted under the Plan more than ten (10) years after such effective
date. The Plan shall terminate (i) when the total amount of the Common Stock
with respect to which Options may be granted shall have been issued upon the
exercise of Options or (ii) by action of the Board pursuant to paragraph 19
hereof, whichever shall first occur.
9
<PAGE>
24 Non-Exclusivity of the Plan: Non-Uniform Determinations.
Neither the adoption of the Plan by the Board nor the approval of the Plan
by the stockholders of the Company shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including without limitation the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
The Board's determinations under the Plan need not be uniform and may be
made by it selectively among persons who receive or are eligible to receive
options under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Board shall be entitled,
among other things, to make non-uniform and selective determinations, and to
enter into non-uniform and selective option agreements, as to (i) the persons to
receive Options under the Plan, (ii) the terms and provisions of Options, (iii)
the exercise by the Board of its discretion in respect of the exercise of
Options pursuant to the terms of the Plan, and (iv) the treatment of leaves of
absence pursuant to paragraph 14 hereof.
25 Governing Law.
This Plan and all Options granted hereunder shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State of
Delaware without regard to its principles of conflicts of laws.
10
<PAGE>
EXHIBIT 10.30
Date:
---------------------
INCENTIVE STOCK OPTION GRANTED
by
OUTLOOK SPORTS TECHNOLOGY, INC.
(hereinafter called the "Company")
to
----------------------
(hereinafter called the "Holder")
under the
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
WITNESSETH:
For valuable consideration, the receipt of which is hereby acknowledged, the
Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the Holder
is hereby given the right and option to purchase from the Company at the option
price of $_______ per share an aggregate of __________ shares of Common Stock of
the Company, $.01 par value, at the time and in the manner hereinafter stated.
The Holder shall have the right and option to purchase hereunder any or all
of such shares as follows:
1
<PAGE>
Except as otherwise provided herein, such right and option to purchase shares
shall terminate seven years from the date hereof.
This option shall be exercised by the delivery of written notice to the
Company setting forth the number of shares with respect to which the option is
to be exercised, together with (a) cash, certified check, bank draft or postal
or express money order payable to the order of the Company for an amount equal
to the option price of such shares, or (b) with the consent of the Board of
Directors of the Company (the "Board"), shares of Common Stock of the Company
having a fair market value equal to the option price of such shares, or (c) with
the consent of the Board, a combination of (a) and (b), and specifying the
address to which the certificates for such shares are to be mailed. For the
purpose of the preceding sentence, the fair market value of the shares of Common
Stock so delivered to the Company shall be the fair market value thereof as
determined in good faith by the Board.
SECOND: As a condition precedent to any exercise of this option, the Holder
(or if any other individual or individuals are exercising this option, such
individual or individuals) shall deliver to the Company an investment letter in
form and substance satisfactory to the Company's counsel which shall contain,
among other matters, a statement in writing that the option is then being
exercised only with a view to investment in, and not with a view to the
disposition of, the shares with respect to which the option is then being
exercised; that the Holder and/or his attorneys, accountants, and/or advisors
have fully investigated the Company and the business and financial conditions
concerning it and have knowledge of the Company's then current corporate
activities and financial condition; and that the Holder believes that the nature
and amount of the shares being purchased by him are consistent with his
investment objectives, abilities and resources. The condition and restriction
imposed by this paragraph and any investment representation made pursuant to
this paragraph shall be inoperative at any time when there shall be an effective
registration statement under the Securities Act of 1933 covering the stock
subject to this option or acquired through the exercise of this option.
THIRD: As promptly as practicable after receipt of the written notice and
payment described in paragraph FIRST and, if required as a condition to
exercise, the investment letter described in paragraph SECOND, the Company shall
deliver or cause to be delivered to the Holder (or if any other individual or
individuals are exercising this option, to such individual or individuals) at
the address specified pursuant to paragraph FIRST hereof a certificate or
certificates for the number of shares with respect to which the option is then
being exercised, registered in the name or names of the individual or
individuals exercising the option, either alone or jointly with another person
or persons with rights of survivorship, as the individual or individuals
exercising the option shall prescribe in writing to the Company at or prior to
such purchase; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent shall have deposited
such certificate or certificates in the United States mail, addressed to the
Holder (or such individual or individuals) at the address so specified; and
provided further that if any law or regulation or order of the Securities and
Exchange Commission or other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
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<PAGE>
this option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificates for such shares shall
be extended until such action shall be taken and completed, it being understood
that the Company shall have no obligation to take and complete any such action.
FOURTH: The existence of this option shall not affect in any way the right
or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any issue of
bonds, debentures, preferred or prior preference stock or other capital stock
ahead of or affecting the Common Stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then the number,
class, and price per share of stock subject to this option shall be
appropriately adjusted in such a manner as to entitle the Holder to receive upon
exercise of this option, for the same aggregate consideration, the same total
number and class of shares as the Holder would have received as a result of the
event requiring the adjustment had the Holder exercised this option in full
immediately prior to such event.
After a merger of one or more corporations with or into the Company, or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, the Holder shall, at no additional cost, be
entitled upon exercise of this option to receive in lieu of the shares of Common
Stock as to which this option was exercisable immediately prior to such event,
the number and class of shares of stock or other securities, cash or property
(including, without limitation, shares of stock or other securities of another
corporation or Common Stock) to which the Holder would have been entitled
pursuant to the terms of the merger or consolidation if, immediately prior to
such merger or consolidation, the Holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as to which this
option shall be so exercised.
If the Company is merged with or into or consolidated with another
corporation under circumstances where stockholders of the Company immediately
prior to such merger or consolidation do not own after such merger or
consolidation shares representing at least fifty percent (50%) of the voting
power of the Company or the surviving or resulting corporation, as the case may
be, or if shares representing fifty percent (50%) or more of the voting power of
the Company are transferred to an Unrelated Third Party, as hereinafter defined,
or if the Company is liquidated, or sells or otherwise disposes of substantially
all its assets while this option remains outstanding,
3
<PAGE>
(i) subject to the provisions of clause (ii) below, after the effective date of
such merger, consolidation, liquidation, sale or disposition, as the case may be
(the "Transaction"), the Holder of this option shall at no extra cost be
entitled, upon exercise of this option, to receive, in lieu of the shares of
Common Stock as to which this option was exercisable immediately prior to the
Transaction, the number and class of shares of stock or other securities, cash
or property (including, without limitation, shares of stock or other securities
of another corporation or Common Stock) to which the Holder would have been
entitled pursuant to the terms of the Transaction if, immediately prior to such
event, the Holder had been the holder of record of a number of shares of Common
Stock equal to the number of such shares as to which this option shall be so
exercised; or (ii) the Board may accelerate the time for exercise of this
option, so that from and after a date prior to the effective date of the
Transaction specified by the Board, this option shall be exercisable in full;
provided that (x) notice of such acceleration shall be given to the Holder, (y)
the Holder shall have the right to exercise this option in full prior to the
effective date of the Transaction and (z) to the extent not so exercised, this
option shall be cancelled immediately prior to such effective date; and provided
further that the Board may not accelerate this option to the extent it is
unexercised and unexpired if to do so would adversely affect pooling of
interests treatment intended to be effected in connection with the Transaction.
"Unrelated Third Party" shall mean any person who is not, as of the date of
adoption by the Board of the 1996 Incentive and Non-Qualified Stock Option Plan,
a holder of stock of any class or preference or any stock option of the Company.
Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this option.
FIFTH: No person shall, by virtue of the granting of this option to the
Holder, be deemed to be a holder of any shares purchasable under this option or
to be entitled to the rights or privileges of a holder of such shares unless and
until this option has been exercised with respect to such shares and they have
been issued pursuant to that exercise of this option.
The granting or exercise of this option shall not impose upon the Company
any obligation to employ or to continue to employ the Holder, and the right of
the Company to terminate the employment of the Holder shall not be diminished or
affected by reason of the fact that this option has been granted to, or
exercised by, the Holder.
The Company shall, at all times while any portion of this option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued stock or reacquired shares, a sufficient number of shares of its Common
Stock to satisfy the requirements of this option; shall comply with the terms of
this option promptly upon exercise of the option rights; and shall pay all fees
or
4
<PAGE>
expenses necessarily incurred by the Company in connection with the issuance and
delivery of shares pursuant to the exercise of this option.
SIXTH: This option is not transferable by the Holder otherwise than by will
or the laws of descent and distribution.
This option is exercisable, during the Holder's lifetime, only by the
Holder, and by such Holder only while the Holder is an employee of the Company,
except that in the event the employment of the Holder terminates for any reason,
other than for cause as determined by the Company and other than in the event of
death or retirement in good standing from the employ of the Company for reasons
of age or disability under the then established rules of the Company, this
option shall terminate on the earlier of its expiration date and a date thirty
(30) days after such termination of employment, and after such termination of
employment the Holder shall have the right, at any time prior to such
termination of this option, to exercise this option to the extent the Holder was
entitled to exercise this option immediately prior to such termination of
employment. As used in this paragraph, "cause" shall mean (a) any material
breach by the Holder of any agreement to which the Holder and the Company are
both parties, (b) any act (other than retirement) or omission to act by the
Holder which may have a material and adverse effect on the Company's business or
on the Holder's ability to perform services for the Company, including, without
limitation, the commission of any crime (other than ordinary traffic
violations), or (c) any material misconduct or material neglect of duties by the
Holder in connection with the business or affairs of the Company or any
affiliate of the Company.
In the event of the retirement of the Holder in good standing from the
employ of the Company for reasons of age or disability under the
then-established rules of the Company before the expiration date of this option,
this option shall terminate on the earlier of its expiration date and a date
ninety (90) days after the Holder's retirement. After such retirement the Holder
shall have the right, at any time prior to such termination, to exercise this
option to the extent the Holder was entitled to exercise such option immediately
prior to such retirement. An employment relationship between the Company and the
Holder shall be deemed to exist during any period in which the Holder is
employed by the Company or by any subsidiary corporation of the Company.
In the event of the death of the Holder while in the employ of the Company
and before the expiration date of this option, this option shall terminate on
the earlier of its expiration date and a date one hundred eighty (l80) days
after the Holder's death. After the death of the Holder, the Holder's executors,
administrators or any person or persons to whom this option may be transferred
by will or by the laws of descent and distribution shall have the right, at any
time prior to such termination, to exercise such option to the extent the Holder
was entitled to exercise such option immediately prior to the Holder's death.
SEVENTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered by hand or by mail to the
President of the Company,
5
<PAGE>
4400 North Federal Highway, Suite 410, Boca Raton, Florida 33431 or such other
address as the Company may hereafter designate.
Any notice to be given to the Holder hereunder shall be deemed sufficient if
addressed to and delivered in person to the Holder at the Holder's address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
EIGHTH: This option is subject to all laws, regulations and orders of any
governmental authority which may be applicable thereto and, notwithstanding any
of the provisions hereof, the Holder agrees that the Holder will not exercise
the option granted hereby nor will the Company be obligated to issue or sell any
shares of stock hereunder if the exercise thereof or the issuance or sale of
such shares, as the case may be, would constitute a violation by the Holder or
the Company of any such law, regulation or order or any provision thereof. The
Company shall not be obligated to take any affirmative action in order to cause
the exercise of this option or the issuance of shares pursuant hereto to comply
with any such law, regulation, order or provision.
This option is and shall be subject in every respect to the provisions of
the 1996 Incentive and Non-Qualified Stock Option Plan of the Company, as
amended from time to time, which is incorporated herein by reference and made a
part hereof.
NINTH: By exercising this option, the Holder shall be deemed to agree to the
following procedure with respect to the Company's shares obtained through such
exercise: Upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, the Holder shall agree in
writing that for a period of time (not to exceed 180 days) from the effective
date of any registration of securities of the Company the Holder will not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares issued pursuant to the exercise of this option, without
the prior written consent of the Company or such underwriters, as the case may
be.
TENTH: This option shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed in
its name and on its behalf as of the date first above written.
ATTEST: OUTLOOK SPORTS TECHNOLOGY, INC.
By:
- ---------------------------- --------------------------------
Secretary Chairman of the Board
6
<PAGE>
EXHIBIT 10.31
Date:
-------------------------
NON-QUALIFIED STOCK OPTION GRANTED
by
HIPPO, INC.
(hereinafter called the "Company")
to
-------------------
(hereinafter called the "Holder")
WITNESSETH:
For valuable consideration, the receipt of which is hereby acknowledged, the
Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the Holder
is hereby given the right and option to purchase from the Company at the option
price of $______ per share an aggregate of _________ shares of Common Stock of
the Company, $.01 par value, at the time and in the manner hereinafter stated.
Except as otherwise provided herein, such right and option to purchase shares
shall terminate seven years from the date hereof.
This option shall be exercised by the delivery of written notice to the
Company setting forth the number of shares with respect to which the option is
to be exercised, together with (a) cash, certified check, bank draft or postal
or express money order payable to the order of the Company for an amount equal
to the option price of such shares, or (b) with the consent of the Board of
Directors of the Company (the "Board"), shares of Common Stock of the Company
having a fair market value equal to the option price of such shares, or (c) with
the consent of the Board, a combination of
1
<PAGE>
(a) and (b), and specifying the address to which the certificates for such
shares are to be mailed. For the purpose of the preceding sentence, the fair
market value of the shares of Common Stock so delivered to the Company shall be
the fair market value thereof as determined in good faith by the Board.
SECOND: As a condition precedent to any exercise of this option, the Holder
(or if any other individual or individuals are exercising this option, such
individual or individuals) shall deliver to the Company an investment letter in
form and substance satisfactory to the Company's counsel which shall contain,
among other matters, a statement in writing that the option is then being
exercised only with a view to investment in, and not with a view to the
disposition of, the shares with respect to which the option is then being
exercised; that the Holder and/or his attorneys, accountants, and/or advisors
have fully investigated the Company and the business and financial conditions
concerning it and have knowledge of the Company's then current corporate
activities and financial condition; and that the Holder believes that the nature
and amount of the shares being purchased by him are consistent with his
investment objectives, abilities and resources. The condition and restriction
imposed by this paragraph and any investment representation made pursuant to
this paragraph shall be inoperative at any time when there shall be an effective
registration statement under the Securities Act of 1933 covering the stock
subject to this option or acquired through the exercise of this option.
THIRD: As promptly as practicable after receipt of the written notice and
payment described in paragraph FIRST and, if required as a condition to
exercise, the investment letter described in paragraph SECOND, the Company shall
deliver or cause to be delivered to the Holder (or if any other individual or
individuals are exercising this option, to such individual or individuals) at
the address specified pursuant to paragraph FIRST hereof a certificate or
certificates for the number of shares with respect to which the option is then
being exercised, registered in the name or names of the individual or
individuals exercising the option, either alone or jointly with another person
or persons with rights of survivorship, as the individual or individuals
exercising the option shall prescribe in writing to the Company at or prior to
such purchase; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent shall have deposited
such certificate or certificates in the United States mail, addressed to the
Holder (or such individual or individuals) at the address so specified; and
provided further that if any law or regulation or order of the Securities and
Exchange Commission or other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificates for such shares shall
be extended until such action shall be taken and
2
<PAGE>
completed, it being understood that the Company shall have no obligation to take
and complete any such action.
The Holder acknowledges that he has been advised to consult his tax adviser
with respect to the tax consequences of the grant and exercise of this option.
If federal, state or local law shall require that the Company withhold or pay in
connection with exercise of this option any taxes or other charges, then the
Company shall be entitled either (a) as an additional condition precedent to any
exercise of this option, to require that the Holder pay to the Company in cash
at the time of exercise an amount equal to the amount of any such taxes or
charges or (b) to deduct such amount from payments of any kind otherwise due to
the Holder.
FOURTH: The existence of this option shall not affect in any way the right
or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any issue of
bonds, debentures, preferred or prior preference stock or other capital stock
ahead of or affecting the Common Stock or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then the number,
class, and price per share of stock subject to this option shall be
appropriately adjusted in such a manner as to entitle the Holder to receive upon
exercise of this option, for the same aggregate consideration, the same total
number and class of shares as the Holder would have received as a result of the
event requiring the adjustment had the Holder exercised this option in full
immediately prior to such event.
After a merger of one or more corporations with or into the Company, or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, the Holder shall, at no additional cost, be
entitled upon exercise of this option to receive in lieu of the shares of Common
Stock as to which this option was exercisable immediately prior to such event,
the number and class of shares of stock or other securities, cash or property
(including, without limitation, shares of stock or other securities of another
3
<PAGE>
corporation or Common Stock) to which the Holder would have been entitled
pursuant to the terms of the merger or consolidation if, immediately prior to
such merger or consolidation, the Holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as to which this
option shall be so exercised.
If the Company is merged with or into or consolidated with another
corporation under circumstances where stockholders of the Company immediately
prior to such merger or consolidation do not own after such merger or
consolidation shares representing at least fifty percent (50%) of the voting
power of the Company or the surviving or resulting corporation, as the case may
be, or if shares representing fifty percent (50%) or more of the voting power of
the Company are transferred to an Unrelated Third Party, as hereinafter defined,
or if the Company is liquidated, or sells or otherwise disposes of substantially
all its assets while this option remains outstanding, after the effective date
of such merger, consolidation, liquidation, sale or disposition, as the case may
be (the "Transaction"), the Holder of this option shall at no extra cost be
entitled, upon exercise of this option, to receive, in lieu of the shares of
Common Stock as to which this option was exercisable immediately prior to the
Transaction, the number and class of shares of stock or other securities, cash
or property (including, without limitation, shares of stock or other securities
of another corporation or Common Stock) to which the Holder would have been
entitled pursuant to the terms of the transaction if, immediately prior to such
event, the Holder had been the holder of record of a number of shares of Common
Stock equal to the number of such shares as to which this option shall be so
exercised.
"Unrelated Third Party" shall mean any person who is not, as of the date of
adoption by the Board of the 1996 Incentive and NonQualified Stock Option Plan,
a holder of stock of any class or preference or any stock option of the Company.
Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this option.
FIFTH: No person shall, by virtue of the granting of this option to the
Holder, be deemed to be a holder of any shares purchasable under this option or
to be entitled to the rights or privileges of a holder of such shares unless and
until this option has been exercised with respect to such shares and they have
been issued pursuant to that exercise of this option.
4
<PAGE>
The granting or exercise of this option shall not impose upon the Company
any obligation to employ or to continue to employ the Holder or to have or
continue the Holder in any other position at the Company, and the right of the
Company to terminate the employment of the Holder or to remove the Holder from
any other position at the Company shall not be diminished or affected by reason
of the fact that this option has been granted to, or exercised by, the Holder.
The Company shall, at all times while any portion of this option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued stock or reacquired shares, a sufficient number of shares of its Common
Stock to satisfy the requirements of this option; shall comply with the terms of
this option promptly upon exercise of the option rights; and shall pay all fees
or expenses necessarily incurred by the Company in connection with the issuance
and delivery of shares pursuant to the exercise of this option.
SIXTH: This option is not transferable by the Holder otherwise than by will
or the laws of descent and distribution, and is exercisable, during the Holder's
lifetime, only by the Holder.
In the event of the death of the Holder and before the expiration date of
this option, this option shall terminate on the earlier of its expiration date
and a date one hundred eighty (180) days after the Holder's death. After the
death of the Holder, the Holder's executors, administrators or any person or
persons to whom this option may be transferred by will or by the laws of descent
and distribution shall have the right, at any time prior to such termination, to
exercise such option to the extent the Holder was entitled to exercise such
option immediately prior to the Holder's death.
SEVENTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered by hand or by mail to the
President of the Company, 4400 North Federal Highway, Suite 410, Boca Raton,
Florida 33431 or such other address as the Company may hereafter designate.
Any notice to be given to the Holder hereunder shall be deemed sufficient if
addressed to and delivered in person to the Holder at the Holder's address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
EIGHTH: This option is subject to all laws, regulations and orders of any
governmental authority which may be applicable thereto and, notwithstanding any
of the provisions hereof, the Holder agrees that the Holder will not exercise
the option granted hereby nor will the Company be obligated to issue or sell any
shares of stock hereunder if the exercise thereof or the issuance or sale of
such shares, as the case may be, would constitute a violation by the
5
<PAGE>
Holder or the Company of any such law, regulation or order or any provision
thereof. The Company shall not be obligated to take any action in order to cause
the exercise of this option or the issuance of shares pursuant hereto to comply
with any such law, regulation, order or provision.
NINTH: By exercising this option, the Holder shall be deemed to agree to the
following procedure with respect to the Company's shares obtained through such
exercise: Upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, the Holder shall agree in
writing that for a period of time (not to exceed 180 days) from the effective
date of any registration of securities of the Company the Holder will not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares issued pursuant to the exercise of this option, without
the prior written consent of the Company or such underwriters, as the case may
be.
TENTH: This option shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed in
its name and on its behalf as of the date first above written.
HIPPO, INC.
By:
---------------------------------
Chairman of the Board
ATTEST:
- -----------------------------
Secretary
6
<PAGE>
EXHIBIT 10.32
OUTLOOK SPORTS TECHNOLOGY, INC.
1998 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE
This 1998 Incentive and Nonqualified Stock Option Plan (the "Plan") of
Outlook Sports Technology, Inc. (the "Company"), is designed to provide
additional incentive to executives and other key employees of the Company, and
any parent or subsidiary of the Company, and to certain other individuals
providing services to or acting as directors of the Company or any such parent
or subsidiary. The Company intends that this purpose will be effected by the
granting of incentive stock options ("Incentive Stock Options") as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("Nonqualified Options") under the Plan which afford
such executives, key employees or other individuals an opportunity to acquire or
increase their proprietary interest in the Company through the acquisition of
shares of its Common Stock. The Company intends that Incentive Stock Options
issued under the Plan will qualify as "incentive stock options" as defined in
Section 422 of the Code and the terms of the Plan shall be interpreted in
accordance with this intention. As used in the Plan the terms "parent" and
"subsidiary" shall have the respective meanings set forth in Section 424 of the
Code.
SECTION 2. ADMINISTRATION
2.1 The Plan Administrator. The Plan shall be administered by the Plan
Administrator (the "Plan Administrator"), which shall consist of the Board of
Directors of the Company (the "Board") or, if appointed by the Board, a
committee consisting of at least two "Disinterested Directors." As used herein,
the term Disinterested Director means any director of the Company who (i) is not
a current employee of the Company or a member of an "affiliated group," as such
term is defined in Section 1504(a) of the Code, which includes the Company (an
"Affiliate"), (ii) is not a former employee of the Company or any Affiliate who
receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the Company's or any Affiliate's taxable
year (iii) has not been an officer of the Company or any Affiliate; and (iv)
does not receive remuneration from the Company or any Affiliate, either directly
or indirectly, in any capacity other than as a director. If the Plan is not
administered by the Board, none of the members of the Plan Administrator shall
be an officer or other employee of the Company. It is the intention of the
Company that the Plan, if not administered by the Board, shall be administered
by a committee having two or more "Non-Employee Directors" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "1934
Act"), but the authority and validity of any act taken or not taken by the Plan
Administrator shall not be affected if any person administering the Plan is not
a Non-Employee Director. Except as specifically reserved to the Board under the
terms of the Plan, the Plan Administrator shall have full and final authority to
operate, manage and administer the Plan on
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behalf of the Company. Action by the Plan Administrator shall require the
affirmative vote of a majority of all members thereof.
2.2 Powers of the Plan Administrator. Subject to the terms and conditions of
the Plan, the Plan Administrator shall have the power:
2.2.1 to determine from time to time the persons eligible to receive
options and the options to be granted to such persons under the Plan and to
prescribe the terms, conditions, restrictions, if any, and provisions (which
need not be identical) of each option granted under the Plan to such persons;
2.2.2 to construe and interpret the Plan and options granted thereunder
and to establish, amend, and revoke rules and regulations for administration of
the Plan. In this connection, the Plan Administrator may correct any defect or
supply any omission, or reconcile any inconsistency in the Plan, or in any
option agreement, in the manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective. All decisions and determinations by
the Plan Administrator in the exercise of this power shall be final and binding
upon the Company and optionees;
2.2.3 to make, in its sole discretion, changes to any outstanding
option granted under the Plan, including: (i) to reduce the exercise price, (ii)
to accelerate the vesting schedule or (iii) to extend the expiration date; and
2.2.4 generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
SECTION 3. STOCK
3.1 Stock to be Issued. The stock subject to the options granted under the
Plan shall be shares of the Company's authorized but unissued common stock,
without par value (the "Common Stock"), or shares of the Company's Common Stock
held in treasury. The total number of shares that may be issued pursuant to
options granted under the Plan shall not exceed an aggregate of 800,000 shares
of Common Stock; provided, however, that the class and aggregate number of
shares which may be subject to options granted under the Plan shall be subject
to adjustment as provided in Section 8 hereof.
3.2 Expiration, Cancellation or Termination of Option. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
3.3 Limitation on Grants. In no event may any Plan participant be granted
options with respect to more than 100,000 shares of Common Stock in any calendar
year. The number of shares of Common Stock issuable pursuant to an option
granted to a Plan participant in a calendar year that is subsequently forfeited,
cancelled or otherwise terminated shall continue to
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count toward the foregoing limitation in such calendar year. In addition, if the
exercise price of an option is subsequently reduced, the transaction shall be
deemed a cancellation of the original option and the grant of a new one so that
both transactions shall count toward the maximum shares issuable in the calendar
year of each respective transaction.
SECTION 4. ELIGIBILITY
4.1 Persons Eligible. Incentive Stock Options under the Plan may be granted
only to officers and other employees of the Company or any parent or subsidiary
of the Company. Nonqualified Options may be granted to officers or other
employees of the Company or any parent or subsidiary of the Company, and to
members of the Board and consultants or other persons who render services to the
Company or any such parent or subsidiary (regardless of whether they are also
employees); provided, however, that options may be granted to members of the
Board who are neither employees of the Company or any such parent or subsidiary
nor consultants who provide economic consulting services to or in conjunction
with the Company or any such parent or subsidiary ("Outside Directors") only as
provided in Section 4.4.
4.2 Greater-Than-Ten-Percent Stockholders. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Company or any parent or subsidiary (a "greater-than-ten-percent
stockholder"), unless such Incentive Stock Option provides that (i) the purchase
price per share shall not be less than one hundred ten percent of the fair
market value of the Common Stock at the time such option is granted, and (ii)
that such option shall not be exercisable to any extent after the expiration of
five years from the date it is granted.
4.3 Maximum Aggregate Fair Market Value. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year (under the Plan and any other plans of the
Company or any parent or subsidiary for the issuance of incentive stock options)
shall not exceed $100,000 (or such greater amount as may from time to time be
permitted with respect to incentive stock options by the Code or any other
applicable law or regulation). Any option granted in excess of the foregoing
limitation shall be specifically designated as being a Nonqualified Option.
4.4 Option Grants to Outside Directors.
4.4.1 Grant of Options Upon Election to Board. Each Outside Director
joining the Board at or subsequent to the meeting of the Company's stockholders
at which the Plan is approved (the "Approval Meeting") shall automatically be
granted, upon such Outside Director so joining the Board, an initial
Nonqualified Option to purchase 10,000 shares of Common Stock. Such Nonqualified
Option shall vest and become exercisable in three equal annual installments
cumulatively beginning on the first anniversary of the date of grant.
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4.4.2 Grant of Options Upon Re-Election to Board or Continuation on the
Board. Each Outside Director who shall be re-elected by the stockholders of the
Company to the Board at or subsequent to the Approval Meeting shall
automatically be granted, immediately following the meeting of stockholders at
which such Outside Director shall be re-elected, a Nonqualified Option to
purchase 5,000 shares of Common Stock. In addition, each Outside Director whose
term of office shall not expire at any annual meeting of stockholders or special
meeting in lieu thereof subsequent to the Approval Meeting and who shall remain
an Outside Director after such meeting shall automatically be granted,
immediately following such meeting, a Nonqualified Option to purchase 5,000
shares of Common Stock. Each Nonqualified Option described in this Section
4.4(b) shall vest and become exercisable in full on the first anniversary of the
date of grant.
4.4.3 Purchase Price. The purchase price per share of Common Stock
under each Nonqualified Option granted pursuant to this Section 4.4 shall be
equal to the fair market value of the Common Stock on the date the Nonqualified
Option is granted, such fair market value to be determined in accordance with
the provisions of Section 6.3.
4.4.4 Expiration. Each Nonqualified Option granted to an Outside
Director under this Section 4.4 shall expire on the fifth anniversary of the
date of grant.
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
5.1 Termination of Employment. The Plan Administrator in its discretion may
provide that a Nonqualified Option shall terminate prior to its expiration date
upon such terms and conditions as the Plan Administrator may determine at the
time of the grant of such option. Except as may be otherwise expressly provided
herein, Incentive Stock Options shall terminate on the earliest of:
5.1.1 the date of expiration thereof;
5.1.2 immediately upon the termination of the optionee's employment
with or performance of services for the Company (or any parent or subsidiary of
the Company) by the Company (or any such parent or subsidiary) for cause (as
determined by the Company or such parent or subsidiary); or
5.1.3 thirty (30) days after termination of the optionees's employment
with or performance of services for the Company (or any parent or subsidiary of
the Company) by the Company (or any such parent or subsidiary) without cause
other than as a result of death or retirement in good standing from the employ
of the Company for reasons of age or disability under the then-established rules
of the Company; provided, however, that during any period after such termination
of employment before termination of an optionee's Incentive Stock Option, the
optionee shall have the right to exercise such option only to the extent that
the optionee was entitled to exercise such Option immediately prior to such
termination of employment.
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An employment relationship between the Company (or any parent or subsidiary
of the Company) and the optionee shall be deemed to exist during any period in
which the optionee is employed by the Company (or any such parent or
subsidiary). Whether authorized leave of absence, or absence on military or
government service, shall constitute termination of the employment relationship
between the Company (or any parent or subsidiary of the Company) and the
optionee shall be determined by the Plan Administrator at the time thereof.
As used herein, "cause" shall mean (x) any material breach by the optionee
of any agreement to which the optionee and the Company (or any parent or
subsidiary of the Company) are both parties, (y) any act or omission to act by
the optionee which may have a material and adverse effect on the business of the
Company (or any such parent or subsidiary) or on the optionee's ability to
perform services for the Company (or any such parent or subsidiary), including,
without limitation, the commission of any crime (other than ordinary traffic
violations), or (z) any material misconduct or material neglect of duties by the
optionee in connection with the business or affairs of the Company (or any such
parent or subsidiary) or any affiliate of the Company (or any such parent or
subsidiary).
5.2 Death or Retirement of Optionee. In the event of the death of the holder
of an option that is subject to Section 5.1.3 above prior to termination of the
optionee's employment with or performance of services for the Company (or any
parent or subsidiary of the Company) and before the date of expiration of such
option, such option shall terminate on the earlier of such date of expiration or
180 days following the date of such death. After the death of the optionee, his
executors, administrators or any person or persons to whom his option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior to such termination, to exercise the option to the
extent the optionee was entitled to exercise such option at the time of his
death.
If, before the date of the expiration of an option that is subject to
Section 5.1.3 above, the optionee shall be retired in good standing from the
Company for reasons of age or disability under the then established rules of the
Company, the option shall terminate on the earlier of such date of expiration or
ninety (90) days after the date of such retirement. In the event of such
retirement, the optionee shall have the right prior to the termination of such
option to exercise the option to the extent to which he was entitled to exercise
such option immediately prior to such retirement.
SECTION 6. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Plan Administrator shall
from time to time deem appropriate. Such provisions or conditions may include,
without limitation, restrictions on transfer, repurchase rights, or such other
provisions as shall be determined by the Plan Administrator; provided, however,
that such additional provisions shall not be inconsistent with any term or
condition of the Plan and such additional provisions shall not cause any
Incentive Stock Option granted under the Plan to fail to qualify as an incentive
stock option within the meaning of Section 422 of the Code.
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Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
6.1 Expiration of Option. Notwithstanding any other provision of the Plan or
of any option agreement, each option shall expire on the date specified in the
option agreement, which date shall not, in the case of an Incentive Stock
Option, be later than the tenth anniversary (fifth anniversary in the case of a
greater-than-ten-percent stockholder) of the date on which the option was
granted or as specified in Section 5 of this Plan.
6.2 Exercise. Each option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the option may be exercised at a
particular time and to such other conditions as the Plan Administrator in its
discretion may specify upon granting the option.
6.3 Purchase Price. The purchase price per share under each option shall be
determined by the Plan Administrator at the time the option is granted;
provided, however, that the option price of any Incentive Stock Option shall
not, unless otherwise permitted by the Code or other applicable law or
regulation, be less than the fair market value of the Common Stock on the date
the option is granted (110% of the fair market value in the case of a
greater-than-ten-percent stockholder) and the purchase price of any Nonqualified
Option shall not be less than 85% of the fair market value of the Common Stock
on the date the option is granted. For the purpose of the Plan the fair market
value of the Common Stock shall be the closing price per share on the date of
grant of the option as reported by a nationally recognized stock exchange, or,
if the Common Stock is not listed on such an exchange, as reported by the
National Association of Securities Dealers Automated Quotation System ("Nasdaq")
National Market System or, if the Common Stock is not listed on the Nasdaq
National Market System, the mean of the bid and asked prices per share on the
date of grant of the option or, if the Common Stock is not traded
over-the-counter, the fair market value as determined by the Plan Administrator.
6.4 Transferability of Options. Options shall not be transferable by the
optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during his lifetime, only by the optionee.
6.5 Rights of Optionees. No optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any option unless and until
the option shall have been exercised pursuant to the terms thereof, and the
Company shall have issued and delivered certificates representing such shares to
the optionee.
6.6 Certain Rights of the Company. The Plan Administrator may in its
discretion provide upon the grant of any option hereunder that the Company shall
have an option to repurchase upon such terms and conditions as determined by the
Plan Administrator all or any number of shares purchased upon exercise of such
option or a right of first refusal in connection with subsequent transfer of any
or all of such shares. The repurchase price per share payable by the Company
shall be such amount or be determined by such formula as is fixed by the Plan
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Administrator at the time the option for the shares subject to repurchase is
granted. In the event the Plan Administrator shall grant options subject to the
Company's repurchase option or right of first refusal, the certificates
representing the shares purchased pursuant to such option shall carry a legend
satisfactory to counsel for the Company referring to the Company's repurchase
option or right of first refusal.
6.7 "Lockup" Agreement. The Plan Administrator may in its discretion specify
upon granting an option that upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, the optionee
shall agree in writing that for a period of time (not to exceed 180 days) from
the effective date of any registration of securities of the Company, the
optionee will not sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any shares issued pursuant to the exercise
of such option, without the prior written consent of the Company or such
underwriters, as the case may be.
SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
7.1 Method of Exercise. Any option granted under the Plan may be exercised
by the optionee by delivering to the Company on any business day a written
notice specifying the number of shares of Common Stock the optionee then desires
to purchase and specifying the address to which the certificates for such shares
are to be mailed (the "Notice"), accompanied by payment for such shares.
7.2 Payment of Purchase Price. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made either by (i) cash
or check equal to the option price for the number of shares specified in the
Notice, or (ii) with the consent of the Plan Administrator, other shares of
Common Stock which (a) either have been owned by the optionee for more than six
(6) months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (b) have a fair market value on the date of
surrender not greater than the aggregate option price of the shares as to which
such option shall be exercised, (iii) with the consent of the Plan
Administrator, delivery of such documentation as the Plan Administrator and the
broker, if applicable, shall require to effect an exercise of the option and
delivery to the Company of the sale or loan proceeds required to pay the option
price, (iv) with the consent of the Plan Administrator, such other consideration
which is acceptable to the Plan Administrator and which has a fair market value
equal to the option price of such shares, or (v) with the consent of the Plan
Administrator, a combination of (i), (ii), (iii) or (iv). For the purpose of the
preceding sentence, the fair market value per share of Common Stock so delivered
to the Company shall be determined in the manner specified in Section 6.3. As
promptly as practicable after receipt of the Notice and accompanying payment,
the Company shall deliver to the optionee certificates for the number of shares
with respect to which such option has been so exercised, issued in the
optionee's name; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent of the Company shall
have deposited such certificates in the United States mail, addressed to the
optionee, at the address specified in the Notice.
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SECTION 8. CHANGES IN COMPANY'S CAPITAL STRUCTURE
8.1 Rights of Company. The existence of outstanding options shall not affect
in any way the right or power of the Company or its stockholders to make or
authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of Common
Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other capital stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
8.2 Recapitalizations, Stock Splits and Dividends. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment had he exercised his
option in full immediately prior to such event; (ii) the number and class of
shares with respect to which options may be granted under the Plan; and (iii)
the number and class of shares set forth in Sections 3.3 and 4.4, shall be
adjusted by substituting for the total number of shares of Common Stock then
reserved for issuance under the Plan that number and class of shares of stock
that the owner of an equal number of outstanding shares of Common Stock
immediately prior to the event requiring adjustment would own as the result of
such event.
8.3 Merger without Change of Control. After a merger of one or more
corporations with or into the Company or after a consolidation of the Company
and one or more corporations in which the stockholders of the Company
immediately prior to such merger or consolidation own after such merger or
consolidation shares representing at least fifty percent (50%) of the voting
power of the Company or the surviving or resulting corporation, as the case may
be, each holder of an outstanding option shall, at no additional cost, be
entitled upon exercise of such option to receive in lieu of the shares of Common
Stock as to which such option was exercisable immediately prior to such event,
the number and class of shares of stock or other securities, cash or property
(including, without limitation, shares of stock or other securities of another
corporation or Common Stock) to which such holder would have been entitled
pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, such holder had been the
holder of record of a number of shares of Common Stock equal to the number of
shares for which such option shall be so exercised.
8.4 Change of Control. If the Company is merged with or into or consolidated
with another corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
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more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or if the Company is liquidated, or sells or
otherwise disposes of substantially all of its assets to another corporation
while unexercised options remain outstanding under the Plan, then in such event
either:
8.4.1 subject to the provisions of Section 8.4.3 below, after the
effective date of such merger, consolidation, liquidation, sale or disposition,
as the case may be, each holder of an outstanding option shall be entitled, upon
exercise of such option, to receive, in lieu of the shares of Common Stock as to
which such option was exercisable immediately prior to such event, the number
and class of shares of stock or other securities, cash or property (including,
without limitation, shares of stock or other securities of another corporation
or common stock) to which such holder would have been entitled pursuant to the
terms of the merger, consolidation, liquidation, sale or disposition if,
immediately prior to such event, such holder had been the holder of a number of
shares of Common Stock equal to the number of shares as to which such option
shall be so exercised;
8.4.2 the Plan Administrator may accelerate the time for exercise of
some or all unexercised and unexpired options so that from and after a date
prior to the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, specified by the Plan Administrator such
accelerated options shall be exercisable in full; or
8.4.3 all outstanding options may be canceled by the Plan
Administrator as of the effective date of any such merger, consolidation,
liquidation, sale or disposition provided that (x) notice of such cancellation
shall be given to each holder of an option and (y) each holder of an option
shall have the right to exercise such option to the extent that the same is then
exercisable or, if the Plan Administrator shall have accelerated the time for
exercise of all unexercised and unexpired options, in full during the 10-day
period preceding the effective date of such merger, consolidation, liquidation,
sale or disposition.
8.5 Adjustments to Common Stock Subject to Options. Except as hereinbefore
expressly provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock then subject to outstanding options.
8.6 Miscellaneous. Adjustments under this Section 8 shall be determined by
the Plan Administrator, and such determinations shall be conclusive. No
fractional shares of Common Stock shall be issued under the Plan on account of
any adjustment specified above.
SECTION 9. GENERAL RESTRICTIONS
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9.1 Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
9.2 Compliance with Securities Laws. The Company shall not be required to
sell or issue any shares under any option if the issuance of such shares shall
constitute a violation by the optionee or by the Company of any provision of any
law or regulation of any governmental authority. In addition, in connection with
the Securities Act of 1933, as now in effect or hereafter amended (the "Act"),
upon exercise of any option, the Company shall not be required to issue such
shares unless the Plan Administrator has received evidence satisfactory to it to
the effect that the holder of such option will not transfer such shares except
pursuant to a registration statement in effect under such Act or unless an
opinion of counsel satisfactory to the Company has been received by the Company
to the effect that such registration is not required. Any determination in this
connection by the Plan Administrator shall be final, binding and conclusive. In
the event the shares issuable on exercise of an option are not registered under
the Act, the Company may imprint upon any certificate representing shares so
issued the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with the Act and with applicable
state securities laws:
The shares of stock represented by this certificate have not been registered
under the Securities Act of 1933 or under the securities laws of any State
and may not be pledged, hypothecated, sold or otherwise transferred except
upon such registration or upon receipt by the Corporation of an opinion of
counsel satisfactory to the Corporation, in form and substance satisfactory
to the Corporation, that registration is not required for such sale or
transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority.
9.3 Employment Obligation. The granting of any option shall not impose upon
the Company (or any parent or subsidiary of the Company) any obligation to
employ or continue to employ any optionee; and the right of the Company (or any
such parent or subsidiary) to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
option has been granted to him/her.
9.4 Withholding Tax. Whenever under the Plan shares of Common Stock are to
be delivered upon exercise of an option, the Company shall be entitled to
require as a condition of
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delivery that the optionee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirements related thereto.
SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may modify, revise or terminate this Plan at any time
and from time to time, except that (i) the class of persons eligible to receive
options and the aggregate number of shares issuable pursuant to this Plan shall
not be changed or increased, other than by operation of Section 8 hereof,
without the consent of the stockholders of the Company and (ii) the provisions
of Section 4.4 shall not be amended more than once every six (6) months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, or the rules thereunder.
SECTION 11. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon its adoption by the Board of Directors.
No option may be granted under the Plan after the tenth anniversary of the
effective date. The Plan shall terminate (i) when the total amount of Common
Stock with respect to which options may be granted shall have been issued upon
the exercise of options or (ii) by action of the Board of Directors pursuant to
Section 10 hereof, whichever shall first occur.
* * * * *
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EXHIBIT 10.35
Mony Life Insurance Company of America will pay
the benefits provided in this Policy, subject to all
the policy provisions
Insured:
PAUL H BERGER
Policy Number: B6009-75-96 J
Policy Date: 8-15-1996
Initial Specified Amount: $500,000
Issue Age: 28
Date of Issue: 8-15-1996
Class:
Preferred Class - Nonsmoker
Brief Description
THIS IS A FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95 POLICY. Specified Amount may
be increased or decreased. Net premiums may be allocated to one or more
sub-accounts of the Variable Account or to the Guaranteed Interest Account
(GIA). If the values have been sufficient to continue the Policy in force: death
proceeds are payable in event of death before Age 95; surrender value is payable
if Insured is living at Age 95. Some benefits reflect investment results.
Flexible premiums until Age 95. Nonparticipating (no dividends payable).
Important Notice(s)
The amount or the duration of the Death Benefit (or both) may increase or
decrease depending on investment results. But the Death Benefit will never be
less than the Specified Amount in force less any debt. See Death Proceeds -
Death Benefit Options section to determine death proceeds.
The fund value in the Variable Account increases or decreases depending on
investment results. There is no guaranteed minimum fund value, cash value or
surrender value. See Fund Value, Cash Value, Surrender and Sub-Account Unit
Value sections.
Right to Return Policy - This Policy may be returned to us during a period that
starts with its delivery and ends on the latest of: (a) 10 days after its
delivery to the rightsholder; (b) 45 days after Part I of the application is
signed; and (c) 10 days after we mail or deliver a Notice of Withdrawal Right.
The Policy may be returned by delivery or mail, along with a written notice to
cancel it, to our Home Office, a local office of ours, or to the Agent who sold
it. We will then promptly refund any premiums
1
<PAGE>
paid. Notice given by mail and return of the Policy by mail are effective on
being postmarked, properly addressed and postage prepaid. The Policy will be
considered never to have been issued.
2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section
- -------
<S> <C>
1 Schedule of Benefits, Premiums and Charges
2 Guaranteed Monthly Insurance Rates
3 Variable Account, the Funds and Sub-Accounts
4 Will Pay
5 Definitions
6 Dates and Policy Periods
7 Death Proceeds - Death Benefit Options
8 Premiums
9 Grace Period
10 Reinstatement
11 Beneficiary
12 Rights
13 Optional Policy Changes
14 Transfers
15 The Variable Account
16 The GIA
17 Cash Value
18 Fund Value
19 Fund Charge
20 Sub-Account Unit Value
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Section
- -------
<S> <C>
21 Monthly Deduction
22 Cost of Insurance
23 Insurance Rate
24 Continuation of Insurance
25 Basis of Calculation
26 Surrender
27 Partial Surrender
28 Loans
29 Loan Account
30 General Provisions
31 Settlement Options
- Endorsements, if any
- Riders, if any
- Application
</TABLE>
4
<PAGE>
1. SCHEDULE OF BENEFITS, PREMIUMS AND CHARGES
FLEXIBLE PREMIUM VARIABLE LIFE POLICY
DEATH BENEFIT OPTION 2 IN EFFECT SPECIFIED AMOUNT IN FORCE - $500,000 -
INITIAL SPECIFIED AMOUNT (THE SPECIFIED AMOUNT IN FORCE MAY NEVER BE LESS
THAN $100,000) MONTHLY INSURANCE RATES FOR INITIAL SPECIFIED AMOUNT - SEE
SECTION 2
FIRST PREMIUM $650.00
SCHEDULED PREMIUMS - $650.00 AT POLICY MONTH INTERVALS MEASURED FROM 8-15-1996.
GUIDELINE PREMIUM LIMITATION AS OF POLICY DATE $50,169.75
GUARANTEED INTEREST ACCOUNT LIMITATION - (SEE PREMIUM SECTION) $250,000
NUMBER OF GUARANTEED FREE TRANSFERS DURING A POLICY YEAR - 4
CHARGE ON EXCESS TRANSFERS: CURRENT - $0 (SUBJECT TO CHANGE; SEE TRANSFERS
SECTION)
GUARANTEED MAXIMUM - $25
DAILY MORTALITY AND EXPENSE RISK CHARGE .002055% (0.75% ANNUALLY)
SALES CHARGE - 4% OF EACH PREMIUM RECEIVED DURING YEARS 1 THROUGH 10
2% OF EACH PREMIUM RECEIVED DURING YEARS 11 THROUGH 20
PREMIUM TAX CHARGE - 2% OF EACH PREMIUM RECEIVED SUBJECT TO CHANGE BASED UPON
CHANGES IN APPLICABLE STATE TAX LAWS OR COST TO THE COMPANY.
FEDERAL TAX CHARGE - 1.25% OF EACH PREMIUM RECEIVED SUBJECT TO CHANGE BASED UPON
CHANGES IN APPLICABLE FEDERAL TAX LAWS OR COST TO THE COMPANY.
ADMINISTRATIVE EXPENSE CHARGE - $25.00 PER MONTH DURING THE FIRST POLICY YEAR -
$0. PER MONTH ON AND AFTER THE FIRST POLICY ANNIVERSARY - BOTH AMOUNTS ARE
INCLUDED AS APPLICABLE IN THE MONTHLY DEDUCTION ON A MONTHLY ANNIVERSARY DAY.
MINIMUM MONTHLY PREMIUM - $282.08 (SEE SECTION 9. GRACE PERIOD FOR EXPLANATION
AND FOR EFFECT OF ANY INCREASE IN SPECIFIED AMOUNT.)
UNDER THE TERMS OF THE POLICY, THE SCHEDULED PREMIUM SHOWN ABOVE MAY NOT
CONTINUE THE POLICY IN FORCE TO AGE 95 EVEN IF THIS AMOUNT IS PAID AS SCHEDULED.
THE PERIOD FOR WHICH THE POLICY WILL CONTINUE WILL DEPEND ON: THE AMOUNT OF
PREMIUMS PAID; CHANGES IN SPECIFIED AMOUNT AND DEATH BENEFIT OPTIONS; CHANGES
5
<PAGE>
IN INTEREST CREDITED EXPENSES, FUND PERFORMANCE AND MORTALITY DEDUCTIONS;
DEDUCTIONS FOR RIDERS AND ANY BENEFITS AND PARTIAL SURRENDERS AND POLICY LOANS.
ELECTION OF THE GUARANTEED DEATH BENEFIT RIDER CAN PROVIDE FOR GUARANTEED
CONTINUATION OF THE POLICY AND SOME RIDERS IF CERTAIN REQUIREMENTS ARE MET.
IA FUND CHARGE
THE FUND CHARGE FOR THE INITIAL SPECIFIED AMOUNT IS THE APPLICABLE PERCENTAGE
(SHOWN IN THE TABLE BELOW) OF THE SUM OF A PLUS B AS FOLLOWS:
A. ADMINISTRATIVE FUND CHARGE: $2,000.00
B. SALES FUND CHARGE - DURING THE FIRST 5 POLICY YEARS A SALES FUND CHARGE IS
GENERATED BASED ON THE FOLLOWING:
DURING POLICY YEARS 1 AND 2 - LESSER OF AMOUNT DESCRIBED IN (i) AND (ii)
BELOW. DURING POLICY YEARS 3 THROUGH 5 - AMOUNT DESCRIBED IN (i) BELOW:
-(i) 75% OF EACH PREMIUM RECEIVED UNTIL THE TOTAL OF ALL PREMIUMS
RECEIVED EQUALS $3,385.00.
-(ii) 26% OF EACH PREMIUM RECEIVED UNTIL THE TOTAL OF ALL PREMIUMS
RECEIVED EQUALS $8,776.25 PLUS 6% OF EACH PREMIUM RECEIVED IN EXCESS
OF THAT AMOUNT UNTIL THE TOTAL EXCESS RECEIVED EQUALS $17,552.50 PLUS
5% OF EACH PREMIUM RECEIVED IN EXCESS OF THAT AMOUNT.
AFTER THE 5TH POLICY ANNIVERSARY, NO ADDITIONAL SALES FUND CHARGE IS GENERATED
(THE ABOVE PERCENTAGES DO NOT APPLY TO PREMIUMS RECEIVED AFTER THAT ANNIVERSARY
EVEN IF THE TOTAL OF ALL PREMIUMS RECEIVED DOES NOT EQUAL THE AMOUNT SHOWN IN
(i) ABOVE). BEGINNING WITH THE 5TH POLICY ANNIVERSARY, THE AMOUNT OF THE SALES
FUND CHARGE GENERATED UP TO THAT DATE AND THE AMOUNT OF THE ADMINISTRATIVE FUND
CHARGE SHOWN ABOVE BOTH DECLINE EACH POLICY YEAR IN ACCORDANCE WITH THE TABLE
BELOW.
<TABLE>
<CAPTION>
POLICY YEAR APPLICABLE % POLICY YEAR APPLICABLE %
- ----------- ------------ ----------- ------------
<S> <C> <C> <C>
1 100% 9 60%
2 100 10 50
3 100 11 40
4 100 12 30
5 100 13 20
6 90 14 10
7 80 15 AND LATER 0
8 70
</TABLE>
SEE FUND CHARGE SECTION FOR THE EFFECT OF ANY CHANGE IN SPECIFIED AMOUNT.
6
<PAGE>
2. GUARANTEED MONTHLY INSURANCE RATES FOR INITIAL SPECIFIED AMOUNT. RATES ARE
PER $1,000 OF AMOUNT AT RISK - SEE COST OF INSURANCE SECTION.
<TABLE>
<CAPTION>
INSUREDS INSUREDS
ATTAINED ATTAINED
AGE RATE AGE RATE
-------- ------ --------- -----
<S> <C> <C> <C>
28 .12 62 1.28
29 .12 63 1.43
30 .12 64 1.59
31 .12 65 1.77
32 .13 66 1.96
33 .13 67 2.17
34 .13 68 2.40
35 .14 69 2.64
36 .15 70 2.92
37 .16 71 3.29
38 .17 72 3.61
39 .18 73 4.02
40 .19 74 4.50
41 .21 75 5.02
42 .22 76 5.57
43 .24 77 6.15
44 .26 78 6.76
45 .28 79 7.41
46 .30 80 8.13
47 .32 81 8.93
48 .35 82 9.86
49 .38 83 10.91
50 .41 84 12.07
51 .45 85 13.32
52 .49 86 14.64
53 .54 87 16.01
54 .59 88 17.43
55 .65 89 18.89
56 .72 90 20.43
57 .79 91 22.08
58 .87 92 23.89
59 .96 93 25.96
60 1.06 94 28.66
61 1.17
</TABLE>
3. Variable Account, Funds and Sub-Accounts (see Variable Account section for
further information)
7
<PAGE>
The Variable Account is MONY America Variable Account L and includes the
sub-accounts listed below.
The sub-accounts available for investment purposes, and the corresponding
portfolios of the applicable funds are:
<TABLE>
<CAPTION>
Sub-Account Applicable Fund
----------- ---------------
<S> <C>
Intermediate Term Bond MONY Series Fund, Inc.
Long Term Bond MONY Series Fund, Inc.
Money Market MONY Series Fund, Inc.
Government Securities MONY Series Fund, Inc.
High Yield Bond Enterprise Accumulation Trust
International Growth Enterprise Accumulation Trust
Equity Enterprise Accumulation Trust
Small Cap Enterprise Accumulation Trust
Managed Enterprise Accumulation Trust
</TABLE>
The MONY Series Fund, Inc. is organized under the laws of Maryland. The
Enterprise Accumulation Trust is organized under the laws of Massachusetts. Each
fund is registered with the Securities and Exchange Commission (SEC) as an open
end, diversified management investment company under the Investment Company Act
of 1940.
4. Will Pay
We will pay the death proceeds to the Beneficiary upon receipt of due proof
of the Insured's death before Age 95 and while this Policy is in force. We will
pay any surrender value to the Insured if living at Age 95. Payment in any case
will be subject to all the provisions of this Policy.
5. Definitions
"We", "us" and "our" refer to MONY Life Insurance Company of America.
8
<PAGE>
"Home Office" means our administrative office at 1740 Broadway, New York, N.Y.
10019. "Home Office" also includes our Operations Center at One MONY Plaza,
Syracuse, New York 13202.
"Specified Amount in force" is the Initial Specified Amount, adjusted for any
increases or decreases in Specified Amount.
"GIA" is the Guaranteed Interest Account (see the GIA section for additional
information).
"Monthly Anniversary Day" means the first day of each policy month. But, if that
day is not a Valuation Date for all sub-accounts, the Monthly Anniversary Day
will be deemed to be the next following Valuation Date.
"Unit" is the measure by which the value of this Policy's interest in a
sub-account is determined.
"Valuation Date" is each day that the New York Stock Exchange is open for
trading or any other day on which there is sufficient trading in the securities
of a portfolio of a Fund (see Section 3) to affect materially the Unit value of
that sub-account of the Variable Account.
"Attained age" during the first policy year means age at nearest birthday on the
Policy Date. During each succeeding policy year, "attained age" means age at
nearest birthday on the policy anniversary on which that policy year commenced.
"Age 95" means the policy anniversary nearest the Insured's 95th birthday.
6. Dates and Policy Periods
Where dates are shown, the numbers stand for month, day and year, in that order.
Months, years and anniversaries are measured from the Policy Date, if no other
method is stated. The Policy Date is shown on Page 1. Each policy month starts
on the same date in each calendar month as that specified in the Policy Date. If
the Policy Date is the 29th, 30th or 31st of a month, there will be some
calendar months when there is no same date. For those months the policy month
will start on the last day of the calendar month.
7. Death Proceeds-Death Benefit Options
Death Proceeds -The proceeds payable to the beneficiary upon our receipt of due
proof of the death of the Insured while this Policy is in force will be the sum
of:
- - the Death Benefit; and
- - any insurance provided by any additional benefit rider then in force on the
Insured's life on the date of death.
LESS:
9
<PAGE>
- - any debt due us on this Policy reduced by any unearned loan interest; and
- - if death occurs during any period for which a monthly deduction has not been
made, any monthly deduction that may apply to that period, including the
deduction for the month of death.
Interest will be paid on death proceeds paid in one sum. We will determine the
interest rate for each year, and this rate will not be less than 2 3/4%
annually. Interest will be paid from the date of the Insured's death to the date
of payment.
Death Benefit - (If a Waiver of Monthly Deduction Benefit rider is part of this
Policy, and if Death Benefit Option I is in effect, it will automatically change
to Death Benefit Option 2 under the terms and conditions set forth in the second
paragraph of that rider.)
If Death Benefit Option 1 is in effect on the date of death, the Death Benefit
is the greater of:
(a) the Specified Amount in force on the date of death, plus the increase, if
any, in the fund value since the last Monthly Anniversary Day; and
(b) the fund value on the date of death, plus the applicable percentage (see
below) of the fund value on the last Monthly Anniversary Day.
If Death Benefit Option 2 is in effect on the date of death, the Death Benefit
is the greater of:
(a) the Specified Amount in force on the date of death, plus the fund value on
the date of death;
and
(b) the fund value on the date of death, plus the applicable percentage (see
below) of the fund value on the last Monthly Anniversary Day.
The applicable percentage of the fund value used to determine the Death Benefit
payable is:
<TABLE>
<CAPTION>
Insured's Attained
Age Applicable Percentage
on Date of Death of Fund Value
------------------- ----------------------
<S> <C>
40 or under 150%
41-45 150% less 7% for each year
over attained age 40
46-50 115% less 6% for each year
over attained age 45
51-55 85% less 7% for each year
over attained age 50
56-60 50% less 4% for each year
over attained age 55
61-65 30% less 2% for each year
over attained age 60
66-70 20% less 1% for each year
over attained age 65
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Insured's Attained
Age Applicable Percentage
on Date of Death of Fund Value
------------------- ----------------------
<S> <C>
71-74 15% less 2% for each year
over attained age 70
75-90 5%
91-94 5% less 1% for each year
over attained age 90
</TABLE>
8. Premiums
Payment of Premiums - Premiums after the first are payable to us at our Home
Office or at any local office to a person authorized by us to accept them, but
only in exchange for a receipt signed by our Treasurer and by the person
receiving the payment. We shall accept premiums after the first (shown in
Section 1) subject to limitations as described below. But we shall not accept
any part of a payment as a premium if that part would result in the sum of
cumulative premiums paid, less any partial surrenders and their fees, being in
excess of the guideline premium limitation that then applies to the Policy.
We reserve the right to reject all or a portion of any scheduled or unscheduled
premium payment if part (b) of either Death Benefit Option 1 or Death Benefit
Option 2 is in effect or would be in effect if such a payment had been accepted
by us.
Guideline Premium Limitation - The guideline premium limitation that applies to
the Policy at any time will never be more than as determined in accordance with
Section 7702 of the Internal Revenue Code of 1986 as now or later amended or any
further amendment of such Code superseding or modifying that section. The
guideline premium limitation that applies to the Policy on the Policy Date is
shown in Section 1. Changes in the Specified Amount in force, the Death Benefit
Option in effect or an additional benefit provided by rider will change the
guideline premium limitation. In the event of any such change we reserve the
right to reduce the Policy's cash value so that the guideline premium limitation
that applies to the Policy is not violated. The amount by which the cash value
is so reduced will be refunded in cash. The endorsement issued to reflect any
such change will include the revised guideline premium limitation that then
applies to the Policy.
Limit on Premium Payments Allocated to the GIA - We shall return to the
rightsholder any part of a premium payment requested for allocation to the GIA
if: (a) the fund value in the GIA equals or exceeds the GIA Limitation shown in
Section 1; or (b) acceptance of that part payment would cause the fund value in
the GIA to exceed such Limitation.
Net Premium - A net premium is the premium paid, less the sales charge, premium
tax charge and federal tax charge shown in Section 1.
Premiums Received Before or at Delivery of the Policy - The first full net
premium must be paid before or at delivery of the Policy and will be allocated
to the Money Market sub-account on the later of the Policy Date and the
Valuation Date that coincides with or next follows the Date the premium
11
<PAGE>
is received at our Operations Center. If the Policy is not accepted at delivery,
any premium paid will be returned without interest.
Allocation of Net Premiums Received After Delivery of the Policy - Any net
premium received after delivery of the Policy and before the end of the period
under the "Right to Return Policy" provision (see page 1) will be allocated to
the Money Market sub-account:
At the end of the "Right to Return Policy" period if the Policy has not been
returned under the terms of that provision, the fund value in the Money Market
sub-account will then be transferred to the sub-account or sub-accounts of the
Variable Account and/or the GIA in accordance with the most recent scheduled
premium allocation election on record, unless there is no allocation on record.
In that case the fund value will not then be transferred from the Money Market
sub-account.
After the "Right to Return Policy" period ends, any net premiums received will
be allocated either: (a) to one or more sub-accounts of the Variable Account
and/or the GIA in accordance with the scheduled premium allocation then in
effect for the Policy; or (b) if there is no such allocation in effect, to the
Money Market sub-account.
An unscheduled premium may be otherwise allocated, if a specific request is so
made for that premium (see Unscheduled Premiums below).
Net premiums are allocated on the Valuation Date that coincides with, or next
follows, the date the premium is received at our Operations Center. Allocations
must be made in whole percentages. If the GIA or a sub-account is to receive any
allocation, the allocation must be at least 10% of the net premium. The
allocation election on record may be changed by written notice to us at our
Operations Center. A change will take effect within 7 days after we receive that
notice.
Scheduled Premiums - We shall send reminder notices for the payment of the
scheduled premiums shown in Section 1. The amount and interval of payment of
scheduled premiums may be changed upon written request. But the new payment
interval must satisfy our rules in use at the time of the change.
Unscheduled Premiums - Additional premium payments of at least $250 may be made
at any time. We reserve the right to limit the total amount of unscheduled
premiums paid during any 12 consecutive calendar months to an amount that
assures that the sum of cumulative premiums paid, less any partial surrenders
and their fees, is not in excess of the guideline premium limitation that
applies to the Policy. An unscheduled premium may be allocated by amount as well
as by percentage. If a specific allocation is not requested or is requested
incorrectly, then the net premium will be allocated in accordance with the most
recent scheduled premium allocation on record, unless there is no allocation
election on record. In that case the unscheduled net premium will be allocated
to the Money Market sub-account. A specific allocation for an unscheduled
premium will not change the allocation on record for scheduled premiums.
9. Grace Period
12
<PAGE>
Minimum Monthly Premium - The Minimum Monthly Premium on the Policy Date is
shown in Section 1.
A. Applicable During the First 2 Policy Years the Policy is in Force - If the
sum of all premiums paid, less any partial surrenders (and their fees) and
less any debt, on the Monthly Anniversary Day is smaller than the sum of
each Minimum Monthly Premium times the number of in force policy months
during which that premium was applicable, we shall send notice of
insufficient premium. A grace period of 61 days from the date of that notice
will be allowed for payment of any balance needed on the Monthly Anniversary
Day to cover the Minimum Monthly Pre mium for the following month plus an
amount equal to 2 Minimum Monthly Premiums, or if greater, the number of
Minimum Monthly Premiums until the next scheduled premium due date.
B. Applicable after the Policy is in Force 2 or More Policy Years - If the cash
value, less any debt, on the Monthly Anniversary Day is not enough to cover
the monthly deduction (see Monthly Deduction section) for the following
month, we shall send notice of insufficient value. A grace period of 61 days
from the date of that notice will be allowed for payment of: (a) any balance
needed for the monthly deduction plus; (b) an amount equal to 2 monthly
deductions or, if greater, the number of monthly deductions until the next
scheduled premium due date.
If the payment described in A or B above, as applicable, is not received within
the grace period, the Policy will end at the end of the grace period and any
remaining surrender value will be refunded.
10. Reinstatement
If the Policy ends at the end of the grace period, the Policy may be reinstated.
But this may only be done within 5 years after the Monthly Anniversary Day
immediately before the start of the grace period. We shall need:
(a) evidence satisfactory to us that the Insured is insurable.
(b) payment of a premium large enough to cover:
(i) the balance needed as described in subsection A or B of Grace Period,
whichever is ap plicable (see Section 9 above); and
(ii) an amount sufficient to keep the Policy in force for at least 3 months
from the re instatement date.
(c) payment or reinstatement of any debt due us on the Policy, plus payment of
interest on any reinstated debt from the date of reinstatement to the next
policy anniversary at the rate which applies to policy loans on the date of
reinstatement.
(d) reinstatement of any fund charge that would have been outstanding on the
date of reinstatement had the Policy remained in force.
The reinstatement date will be the Monthly Anniversary Day that coincides with,
or immediately pre cedes, the date the application for reinstatement is approved
by us.
13
<PAGE>
11. Beneficiary
Determination of Beneficiary - The beneficiary is as set forth in the
application for this Policy unless otherwise provided by endorsement. Any
reference in any beneficiary designation to a beneficiary living or surviving
will, unless otherwise provided, mean living on the earlier of: (a) the day due
proof of the Insured's death is received by us at our Home Office: and (b) the
14th day after the Insured's death. The share of the death proceeds of any
beneficiary who is not living on that earlier day will be payable to the
remaining beneficiaries. Payment will be made in the manner provided for in that
designation. If no beneficiary is then living and unless otherwise provided, the
death proceeds will be payable to the Insured's executors or administrators.
Change of Beneficiary - Beneficiary changes may be made during the Insured's
lifetime by written notice to us at our Home Office. A change will take effect
as of the date the notice was signed. But we must first accept and record this
change at our Home Office. And this change will be subject to any payment made
by us or action taken by us before receipt of the notice at our Home Office. The
Policy need not be returned for us to endorse the change unless we ask for it.
12. Rights
During the Insured's lifetime, all rights under this Policy belong exclusively
as set forth in the application for this Policy unless otherwise provided by
endorsement. These rights include the right to change the beneficiary and to
assign. Also included are all other rights, benefits, options, and privileges
which are given by this Policy or allowed by us.
13. Optional Policy Changes
The following changes may be requested by writing to us at our Home Office. We
shall issue an endorsement to the Policy to reflect any such change.
Increasing the Specified Amount - (Increases are not available: (a) before the
second policy anniversary; (b) on or after the policy anniversary nearest the
Insured's 81st birthday; or (c) if the monthly deduction is being waived under
the terms of a waiver of Monthly Deduction Benefit rider). To increase the
Specified Amount in force, a supplemental application must be submitted, subject
to evidence satisfactory to us that the Insured is insurable. Any increase must
be at least $10,000. The increase will take effect on the Monthly Anniversary
Day that coincides with, or next follows, the date on which we approve it.
Any increase in Specified Amount may be cancelled on the latest of: (a) 10 days
after we deliver the endorsement reflecting that increase to the rightsholder;
(b) 45 days after part 1 of the application for that increase was signed; and
(c) 10 days after we mail or deliver a Notice of Withdrawal Right to the
rightsholder. The increase will be cancelled as of its effective date upon
receipt of written notice to cancel it at our Operations Center. We will issue
an endorsement to reflect the cancellation. Within 7 days after the notice is
received: (1) we will credit the Policy's fund value with the amount of any
14
<PAGE>
monthly deductions attributable to the increase; and (2) any outstanding fund
charge will be adjusted, if necessary, so that it will be as though the increase
had not occurred. The amount in (1) will be allocated among the sub-accounts as
if it were a scheduled premium (see Premiums section). But, upon written
request, such amount may instead be paid in cash.
At any time during the first 24 months after the date an increase in Specified
Amount in force takes effect, the amount of fund value in the sub-accounts may
be transferred to the GIA as described in the "Exchange Transfer to the GIA"
provision (see Transfers section).
Decreasing the Specified Amount - (Decreases are not available before the second
policy anniversary). Any decrease in the Specified Amount in force must be at
least $10,000. The decrease will take effect on the Monthly Anniversary Day that
coincides with, or next follows, the date on which we approve it. The decrease
will be applied as follows:
(a) first, to reduce the amount provided by the most recent increase in
Specified Amount;
(b) next, to reduce the next most recent increases successively;
(c) finally, to reduce the Initial Specified Amount.
We will reject any requested decrease if that decrease would result in a
Specified Amount which is less than the Specified Amount we then allow or if the
resulting Fund Value would be less than the product of: (a) the number of months
to the next policy anniversary, times (b) the monthly deduction. (See Fund
Charge Section for the effect of decrease on Fund Value.)
Changing the Death Benefit Option - Any change in Death Benefit Option will take
effect on the Monthly Anniversary Day that coincides with, or next follows, the
date on which we approve the request to change the Option. If the change is from
Option 2 to Option 1, the Specified Amount in force will not be changed. If the
change if from Option 1 to Option 2, the Specified Amount in force will be
decreased by the amount of the fund value on the Monthly Anniversary Day on
which the change in Option takes effect. But, the Specified Amount in force
after the decrease cannot be less than the minimum Specified Amount we then
allow. We reserve the right to request evidence satisfactory to us that the
Insured is insurable for a change from Option 1 to Option 2.
14. Transfers
Transfers Among the Sub-Accounts and the GIA - After the "Right to Return
Policy" period has expired, fund value may be transferred among the sub-accounts
and/or to or from the GIA upon request.
Transfers to the GIA - We will reject any part of a transfer to the GIA if the
fund value in the GIA equals or exceeds the GIA Limitation shown in Section 1
or, if that part of the requested transfer would cause the fund value in the GIA
to exceed such Limitation. Any portion of a requested transfer which is rejected
will be retained in the sub-accounts in the same proportion as the transfer
amount allocated against each sub-account bears to the total transfer amount.
15
<PAGE>
Transfers from the GIA - A transfer of fund value from the GIA to any of the
sub-accounts may be made once each policy year. A request for such transfer must
be received by us at our Operations Center on or within 30 days after a policy
anniversary. We will reject any part of a requested transfer from the GIA if
that part would exceed the greater of: (a) 25% of the fund value held in the GIA
on the Date the transfer would take effect; or (b) $5,000.
A transfer transaction which does not move fund value from the GIA will take
effect on the Valuation Date that coincides with, or next follows the date the
request is received at our Operations Center. A transfer transaction which moves
fund value from the GIA will take effect on: (a) the policy anniver sary; or (b)
if later (subject to above provisions), the Valuation Date that coincides with
or next follows the date the request is received at our Operations Center.
Transfer Charge - All transfers included in a request are considered one
transaction. The number of guaranteed free transfers which may be made during a
policy year and the charge for transfers in excess of that number during that
year are shown in Section 1. We reserve the right to increase, decrease or
eliminate the charge but it will never be more than the guaranteed maximum shown
in Section 1.
Any applicable transfer charges are allocated against the GIA and/or the
sub-accounts from which the fund values are being transferred. The charge
allocated against the GIA or any sub-account will be in the same proportion that
the amount being transferred from the GIA or any sub-account bears to the total
amount being transferred. But, if there is insufficient fund value in the GIA or
any sub-account to provide for its proportionate share of the charge, then the
entire charge will be allocated against the GIA and/or each sub-account from
which funds are transferred in the same proportion that the fund value held in
the GIA and each sub-account bears to the fund value in the GIA and all
sub-accounts from which funds are transferred.
Exchange Transfer to the GIA - At any time during the first 24 months after the
date, of issue of the Policy or within 24 months after the effective date of an
increase in specified amount, the entire amount of fund value in the
sub-accounts may be transferred to the GIA. Election of this exchange transfer
will change this Policy to a policy which is not dependent upon the investment
results of a separate account.
There will be no transfer charge for an exchange transfer and the GIA limitation
will be waived. On the date an exchange transfer takes effect, the premium
allocation will be changed to the GIA only.
15. The Variable Account
The variable benefits under this Policy are provided through investments we make
in the Variable Ac count. This is an investment account established and
maintained by us, separate from our general account or other separate accounts.
It is used for our flexible premium variable life policies and, if permitted by
law, may be used for other policies or contracts.
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We own the assets in the Variable Account. Assets equal to the reserves and
other liabilities of the Variable Account will not be charged with liabilities
that arise from any other business we conduct. We may from time to time transfer
to our general account assets which exceed the reserves and other liabilities of
the Variable Account.
The Variable Account is registered with the Securities and Exchange Commission
(SEC) as a unit investment trust under the Investment Company Act of 1940. It is
also governed by the laws of the state of Arizona. We may, to the extent
permitted by applicable laws and regulations, make these changes: (a) the
Variable Account may be operated as a management company under the Investment
Company Act of 1940; or (b) the Variable Account may be deregistered under that
Act if registration is no longer required; or (c) the Variable Account may be
combined with any of our other separate accounts.
Sub-Accounts - We use the assets of each separate sub-account to buy shares in a
corresponding portfolio of the applicable fund. (See Section 3).
We reserve the right to establish new sub-accounts or eliminate one or more
sub-accounts if marketing needs, tax considerations or investment conditions
warrant. Any new sub-accounts may be made avail able to existing contracts on a
basis to be determined by us. If any of these changes are made, we may by
appropriate endorsement change the Contract to reflect the change.
Income and realized and unrealized gains or losses from assets of each
sub-account are credited to or charged against that sub-account without regard
to income, gains or losses in the other sub-accounts, our general account or any
other separate accounts. We reserve the right to credit or charge a sub-account
in a different manner if required, or appropriate, by reason of a change in the
law.
We will value the assets of each sub-account on each Valuation Date after the
assets in its corresponding fund portfolio have been valued on that Date.
Portfolio Changes - If, in our judgment, a portfolio no longer suits the
purposes of the Policy due to a change in its investment objectives or
restrictions, we may substitute shares of another portfolio that fund or shares
of another investment fund. But, we will notify the rightsholder before doing so
and, to the extent required by law, we will get prior approval from SEC and the
Arizona Insurance Department. Such approval process is on file with the Arizona
Insurance Department. We also will get any other required approvals.
16. The GIA
The GIA is an account which is part of our general account. The general account
consists of all of our assets except those held by the Variable Account and
other separate accounts maintained by us. The guaranteed annual interest rate
that applies in the calculation of the fund value in the GIA is 5% (0.013368%,
compounded daily). Interest in excess of the guaranteed rate may be applied in
the
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calculation of that fund value in a manner determined by us. We may use
different rates of interest for different portions of the fund value in the GIA.
After the 10th policy anniversary the annual interest rates that apply in the
calculation of the fund value in the GIA on a given date will be .5% higher than
the rate applicable to policies of the same type which have not yet reached
their 10th policy anniversary. This increase is based on current expectations as
to mortality, investment earnings, persistency and expenses and is not
guaranteed.
17. Cash Value
The cash value of this Policy at any time is the fund value, less the fund
charge.
18. Fund Value
1. The fund value of this Policy on the Policy Date is
(a) the net premiums received by us on or before the Policy Date; less
(b) the monthly deduction due on the Policy Date
Thereafter, fund value calculations are made on Valuation Dates. If a fund value
calculation has to be made for a day that is not a Valuation Date, then we shall
use the Valuation Date that next follows that day.
2. The fund value of this Policy on a Valuation Date is determined as follows:
(a) Determine the Policy's fund value in each sub-account on that Valuation Date
by multiplying the number of Units credit to the sub-account for the Policy
before the purchase or redemption of any Units on that Date by its Unit
value on that Date.
(b) Determine the amount of any refund by multiplying the fund value in each
sub-account by .04167% (.5% annually). This refund is determined and
allocated to each sub-account on each Monthly Anniversary Day after the 10th
policy anniversary. It is based on current expectations as to mortality,
investment earnings, persistency and expenses and is not guaranteed.
(c) Total the fund value in each sub-account on that Valuation Date.
(d) Add the fund value in the GIA on that Valuation Date; this is the
accumulated value with interest of net premiums allocated, and amounts
transferred, to the GIA before that Date, decreased by any allocations
against the GIA before that Date for (i) any amounts transferred to Loan
Account; (ii) any amounts transferred to the sub-accounts and applicable
transfer charge; (iii) any partial surrender and its fee; and (iv) any
monthly deductions.
(e) Add any amounts in Loan Account on that Date.
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(f) Add interest credit on the Date on the amounts in (e) since the last Monthly
Anniversary Day.
(g) Add any net premiums received on that Valuation Date.
(h) Deduct any partial surrender, and its fee, made on that Valuation Date.
(i) Deduct any monthly deduction to be made on that Valuation Date.
3. The fund value of this Policy on a Monthly Anniversary Day for the purpose of
determining the cost of insurance and the cost of any waiver of monthly
deduction rider on that Day is determined as follows:
(a) Determine the Policy's fund value on that Day as described in items (a)
through (h) in subsection 2 of this section.
(b) Deduct the monthly deduction (excluding the cost of insurance and cost of
any waiver of monthly deduction rider if applicable; see Monthly Deduction
section).
19. Fund Charge
The fund charge for the Initial Specified Amount is shown in Section 1A. A new
fund charge will be determined for each increase in Specified Amount and will be
provided in the endorsement issued to reflect that increase. The fund charge for
the Specified Amount in force reflects any charge attributable to the Initial
Specified Amount and to each increase in Specified Amount.
For purposes of calculating fund charges after an increase in Specified Amount,
premiums are allocated to the Initial Specified Amount and each increase in
Specified Amount in the same proportion that the annual guideline premium
increment for the Initial Specified Amount and each increase in Specified Amount
bears to the total annual guideline premium.
Any decrease in Specified Amount requested by the rightsholder or made by us as
a result of a partial surrender or change in Death Benefit Option, will result
in a portion of the outstanding fund charge (if any) being assessed against the
fund value. The amount of fund charge assessed will be the pro-rata portion of
the fund charge attributable to each part of the Specified Amount in force being
decreased. Any fund charge assessed will be allocated against the sub-accounts
and/or the GIA in the same manner as monthly deductions.
A full surrender will result in all of the outstanding fund charge (if any)
being assessed against the sur render proceeds.
20. Sub-Account Unit Value
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The unit value of each sub-account on its first Valuation Date was set at $10.
The unit value of each sub-account on any subsequent Valuation Date is obtained
by subtracting (b) from (a) and dividing the result by (c), where:
(a) is. The per share net asset value on the Valuation Date of the applicable
fund portfolio in which the sub-account invests times the number of
such shares held in the sub-account before the purchase or redemption
of any shares on that Date.
(b) is. The mortality/expense risk charge accrued as of that Valuation Date.
The daily mortality/expense risk charge is a percentage (shown in
Section 1) of the sub-account's net asset value on the previous
Valuation Date. (If the previous day was not a Valuation Date, then
the daily mortality/expense risk charge accrued is the percentage
shown in Section 1 times the number of days since the last Valuation
Date times the sub-account's net asset value on that last Valuation
Date.)
(c) is. The total number of Units held in the sub-account on the Valuation Date
before the purchase or redemption of any Units on that Date.
21. Monthly Deduction
The monthly deduction on a Monthly Anniversary Day for the following policy
month is (a), plus (b), plus (c), where:
(a) is the cost of insurance (see Cost of Insurance section below).
(b) is the cost of any additional benefits provided by rider.
(c) is the administrative charge (as shown in Section 1).
Any monthly deduction to be made before the end of the "Right to Return Policy"
period (see page 1) will be allocated against the Money Market sub-account.
Monthly deductions made after the end of the "Right to Return Policy" period
will be allocated against the GIA and/or each sub-account on the same basis that
scheduled premiums are then allocated. However, if on any Monthly Anniversary
Day there is insufficient fund value in the GIA and/or a sub-account to provide
for its share of the monthly deduction, the monthly deduction will be allocated
against the GIA and/or each sub-account in the same proportion that the Policy's
fund value held in the GIA and/or each sub-account bears to the Policy's fund
value in the GIA and all sub-accounts on that Day.
22. Cost of Insurance
The cost of insurance is determined on a monthly basis on a Monthly Anniversary
Day. It is determined separately for each of the following, in the order shown:
(a) the Initial Specified Amount; and
(b) each increase in Specified Amount, successively, in the order in which it
took effect; and
(c) either (i) or (ii) below, depending upon the Death Benefit Option in effect
on the Monthly Anniversary Day:
(i) if Death Benefit Option I is in effect and if the Death Benefit that
would have been payable in the event of the Insured's death on that Day
is greater than the Specified
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Amount then in force, the difference between that Death Benefit and
that Specified Amount;
(ii) if Death Benefit Option 2 is in effect and if the Death Benefit that
would have been payable in the event of the Insured's death on that Day
is the fund value plus the applicable percentage of that value, the
difference between that Death Benefit less the fund value on that Day
and the Specified Amount then in force. (The applicable per centage of
the fund value is defined in Death Proceeds - Death Benefit Options
section.)
The cost of insurance on a Monthly Anniversary Day for each of (a), (b), (c)(i)
and (c)(ii) above is calculated by multiplying its insurance rate (see Insurance
Rate section below) by its Amount At Risk (defined below). The insurance rate
that applies to (c)(i) and (c)(ii) is same as the rate that applies to the most
recent increase in Specified Amount. (If there has been no increase, the rate
for the Initial Specified Amount applies.)
The "Amount At Risk" on the Monthly Anniversary Day is the difference between
(1) and (2), where: (1) is the Death Benefit that would have been payable in
the event of the Insured's death on that Day; and (2) is the fund value on
that Day determined as described in subsection 3 of the Fund Value section.
The Policy's fund value on the Monthly Anniversary Day is applied in the
order shown to (a), (b) and, if applicable, (c)(i) or (c)(ii) above, to
determine the Amount At Risk for each. If the fund value when so applied
equals or exceeds the Initial Specified Amount, there is no Amount At Risk
for that Initial Specified Amount and no cost of insurance for it. If the
fund value when so applied equals or exceeds the Initial Specified Amount
plus any increase in Specified Amount, there is no Amount At Risk for that
increase and no cost of insurance for it.
23. Insurance Rate
The insurance rate is based on the Insured's sex, age on the Policy Date, number
of years since the Policy Date, and class of risk. "Class of risk" for the
Initial Specified Amount is the class of risk to which the Insured belonged on
the Policy Date and is shown on Page 1.
The insurance rate for any optional increase in Specified Amount will be based
on the Insured's sex, age on the effective date of the increase number of years
since that date and "Class of Risk" on that date.
Each year we shall review the monthly insurance rates to determine if any change
should be made Monthly insurance rates will be based on our expectations as to
future; (a) mortality; (b) investment earnings; (c) expenses, and (d)
persistency. But, we guarantee that the insurance rates for the Initial
Specified Amount will never be more than the rates shown in the Guaranteed
Monthly Insurance Rates for Initial Specified Amount table in Section 2. And,
insurance rate for any optional increase in Specified Amount will never be more
than the guaranteed rates provided by us at the time the increase takes effect.
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All guaranteed rates are based on the 1980 Commissioners Standard Ordinary
Smoker of Non-Smoker Mortality Tables as applicable (for issue ages under 18,
there is no smoker/nonsmoker adjustment), with interest at the rate of 5% a year
(0.013368%, compounded daily) with appropriate increase for rated risk. Any
change in insurance rates will be on a uniform basis for insureds of the same
class. Changes in rates and the way in which they are determined will be filed
with the insurance supervisory official of the state in which the Policy is
delivered.
24. Continuation of Insurance
If premium payments are not continued, the Policy will be continued only as long
as stated in (a) or (b) below, as applicable: (a) during the first 2 policy
years, as long as the sum of all premiums paid less any partial surrenders (and
their fees) and less any debt is equal to or greater than that sum of each
Minimum Monthly Premium times the number of in force policy months during which
that premium was applicable; or (b) after the Policy is in force 2 or more
policy years, as long as the cash value less any debt is sufficient to cover any
monthly deductions (See Section 9 Grace Period.)
This Continuation of Insurance provision will not continue the Policy beyond Age
95. Nor will it continue any additional benefit rider beyond its date for
termination.
25. Basis of Calculation
The method of determining cash value, fund charge and sales charge has been
filed with the insurance supervisory official of the state in which this Policy
is delivered. Cash values are not less than the minimum values required by the
law of the state in which the Policy is delivered.
26. Surrender
The Policy may be surrendered at any time during the Insured's lifetime for its
surrender value, which is its cash value, less any debt reduced by any unearned
loan interest.
27. Partial Surrender
A partial surrender of this Policy may be made after the second policy
anniversary for any amount of at least $500 which, with its fee (see below), is
less than the Policy's surrender value on the date of the partial surrender. A
partial result may not result in a Specified Amount in force less than the
minimum we then allow. Nor may it result in a remaining surrender value of less
than $500. We reserve the right to limit the number of partial surrenders to 12
during a policy year.
A partial surrender fee equal to the lesser of: (a) $25; and (b) 2% of the
amount of the partial surrender will apply to each partial surrender. The amount
of a partial surrender, plus its fee, will be deducted from the fund value of
the Policy on the date of the partial surrender. The fee will be retained by us.
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Allocation of Partial Surrenders - Any partial surrenders (and their fees) will
be allocated against: (a) one or more sub-accounts; (b) the GIA and one or more
sub-accounts; or (c) if there is no cash value in any sub-account, the GIA.
Partial surrender amounts allocated against the subaccounts in accordance with
(a) or (b) above, will be as requested by written notice to us at our Operations
Center. Allocations against the GIA in accor dance with (b) above will be
subject to a maximum amount which bears the same proportion to the total amount
being surrendered as the amount of fund value held in the GIA bears to the fund
value in the GIA and all sub-accounts on the date of the partial surrender.
Allocations will take effect on the Valu ation Date that coincides with, or next
follows, the date the request is received at our Operations Center.
Partial surrender allocations may be by either amount or percentage. Allocations
by percentage must be in whole percentages (totaling 100%) and at least 10% of
the partial surrender must be allocated against the GIA or any sub-account
included in an allocation. We shall not accept an allocation request if that
request is incorrect or if there is insufficient fund value in the GIA or any
sub-account to provide for the requested allocation against it. But, if an
allocation is not requested then the entire amount of the partial surrender will
be allocated against the GIA and each sub-account in the same proportion that
the fund value held in the GIA and each sub-account bears to the fund value in
the GIA and all sub-accounts.
Any partial surrender fee will be allocated against the GIA and/or any
sub-accounts in the same proportion as the amount of the partial surrender
allocated against the GIA and each sub-account bears to the total amount
surrendered. But if there is insufficient fund value in the GIA or any
sub-account to provide for its proportionate share of the fee, then the entire
fee will be allocated against the GIA and each subaccount from which fund value
is being surrendered in the same proportion that the fund value held in the GIA
and each sub-account bears to the fund value in the GIA and all sub-accounts
from which fund value is being surrendered.
If Death Benefit Option 1 is in effect on the day on which a partial surrender
is made, we shall then reduce the amount of the Death Benefit payable on that
day by the amount of the partial surrender, plus its applicable fee. If the
amount of that reduced Death Benefit is less than the Specified Amount in force
on that day, then the Specified Amount in force on that day will be decreased as
of that day to equal the amount of that reduced Death Benefit. But the amount of
partial surrender cannot result in a Specified Amount in force less than the
minimum Specified Amount we then allow.
Preferred partial surrender amount - After the second policy anniversary, one or
more partial sur renders may be made during each policy year without application
of a fund charge (see Fund Charge section), up to a total surrender amount for
that year of: 10% of the Policy's cash value on the date of the first surrender
made during that year. Partial surrenders may be made only to the extent
surrender value is available. We reserve the right ht to limit the number of
partial surrenders made. under this Preferred partial surrender amount provision
to 12 during any policy year.
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28. Loans
Loans for not less than the minimum amount of $250 may be obtained at any time
while this Policy has a loan value. A proper assignment of this Policy to us
will be needed. The loan value is up to 90% of the cash value less any debt on
the date of the loan.
Loan Interest - Loan interest at an annual rate of 5.4% will be charged in
advance on new or outstand ing loans, including a loan continued after any
reinstatement of the Policy. Loan interest will accrue from day to day between
policy anniversaries and will be payable in advance on the date of the loan and
on each policy anniversary. Any interest not paid when due will be added to the
loan and bear interest at the 5.4% annual rate.
Miscellaneous Provisions - The Policy will be the sole security for any policy
loan. But it need not be given to us for endorsement unless we ask for it.
Any reference to debt means total loan principal under this Policy plus any loan
interest due and unpaid on a policy anniversary.
If ever the debt exceeds the cash value, this Policy will end. But we must first
give at least 61 days notice of insufficient value.
Any debt may be repaid in whole or part before the Insured's death.
Any notice referred to in this "Loans" section will be mailed to the last known
address of the rightsholder and any assignee of record.
Any debt may be allocated against: (a) one or more of the sub-accounts; or (b)
the GIA and one or more of the sub-accounts; or (c) if there is no fund value in
any sub-account, the GIA.
Allocations of debt against the sub-accounts in accordance with (a) or (b) above
may be as requested in a notice satisfactory to us. Allocations against the GIA
in accordance with (b) above will be subject to a maximum amount which bears the
same proportion to the total amount of the loan as the amount of fund value held
in the GIA bears to the fund value in the GIA and all sub-accounts on the date
of the loan. Allocations will take effect on the Valuation Date that coincides
with, or next follows, the date the request for the loan is received at our
Operations Center.
Allocations may be by either amount or percentage. Allocations by percentage
must be in whole percentages (totaling 100%) and at least 10% of the loan amount
must be allocated against the GIA or any sub-account included in an allocation.
We shall not accept an allocation request if that request is incorrect or if
there is insufficient fund value in the GIA or any sub-account to provide for
the requested allocation against it. But, if an allocation is not requested then
the entire amount of the loan will be allocated against the GIA and each
sub-account in the same proportion that the fund value held in the GIA and each
sub-account bears to the fund value in the GIA and all sub-accounts.
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Any debt repayment and any applicable unearned loan interest will be allocated
to the GIA and/or the sub-accounts in accordance with the scheduled premium
allocation then in effect (see Premiums section).
29. Loan Account
The loan account is a portion of the Policy's fund value which was transferred
from the GIA or the sub- accounts to secure any outstanding debt plus any
interest on such portion. On each Monthly Anniversary Day we credit interest on
the Loan Account. The loan account will earn interest at a rate not less than 5%
per year.
After the 10th policy anniversary the annual interest rate applicable to the
Loan Account will be .5% higher than the rate applicable to policies of the same
type which have not yet reached their 10th anniversary. This increase is based
on current expectations as to mortality, investment earnings, persistency and
expenses and is not guaranteed.
If the entire debt is repaid on a date which is not a Monthly Anniversary Day,
we determine the interest earned on the Loan Account from the preceding Monthly
Anniversary Day to the date that payment was received by us at our Operations
Center. This interest will be allocated on the date of repayment among the GIA
and/or the sub-accounts in accordance with the most recent scheduled premium
allocation on record (see Premium section).
30. General Provisions
The Contract -- This Policy has been issued in consideration of the application
and of the payment of the first premium shown in Section I. The application
(copy attached) is a part of the Policy. The Policy and the application (and any
supplemental applications for optional increases in Specified Amount) are the
entire contract.
Statements in Application -- All statements made in the application will be
considered to be representations. They are not warranties. No statement may be
used to make this Policy invalid or to deny a claim under it, unless the
statement is contained in the written application. And, a copy of the
application for this Policy must have been attached to it as issue.
Incontestability -- This Policy will be incontestable after it has been in force
during the lifetime of the Insured for 2 years from its date of issue, except as
to any provision for benefits in case of total disability. But, any optional
interest in Specific Amounts or any reinstatement will be incontestable only
after the increase or reinstatement has been in force during the lifetime of the
Insured for 2 years from the date it took effect.
Misstatement of Age or Sex -- If the Insured's age or sex has been misstated,
the amount of any Death Benefit will be sum of (a) and (b), where:
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(a) is the fund value on the date of death;
(b) is the Amount At Risk on the last Monthly Anniversary Day, multiplied by the
ratio of the insurance rate on the last Monthly Anniversary Day based on the
incorrect age or sex to the insurance rate that would have applied on that
Day based on the correct age or sex.
Suicide Exclusion -- In case of the suicide of the Insured, sane or insane,
within 2 years of the date of the issue of the Policy, or within 2 years of the
date of any restatement, the amount payable by us will be limited to the amount
of the premiums paid less: (a) any debt; and (b) any partial surrenders and
their fees.
But, in the case of suicide of the Insured, sane or insane, within 2 years of
the date any optional increase in Specified Amount took effect the amount
payable by us with respect to that increase will be limited to its cost.
Assignment - We shall not be charged with notice of assignment of any interest
in this Policy until the assignment (or a copy) is received at our Home Office.
We are not responsible as to the validity or effect of any assignment. We may
rely solely on the statement of the assignment as to the amount of his or her
interest. All assignments will be subject to any debt on this Policy. The
interest of any beneficiary or other person will be subordinate to any
assignment, whenever made. The assignee will receive any sum payable to the
extent of his or her interest.
Policy Payment - In any settlement of this Policy, by reason of death,
surrender, or otherwise, we may require the return of the Policy. Also, any debt
on this Policy will be deducted when we determine the proceeds.
Due proof of death or total disability must be submitted to us at our Operations
Center on forms furnished by us. These forms can be obtained from any local
office of ours, or from our Operations Center.
Relationships - Relationships used in any beneficiary or other designation will
refer to the Insured unless the wording indicates otherwise.
Authority - No change in this Policy will be valid until it is approved by one
of our executive officers. This approval must be endorsed on or attached to this
Policy. No agent or other person has authority to accept representations or
information not in the written application. Nor may that person change this
Policy or waive any of its provisions.
Postponement of Certain Payments or Transfers - We will usually pay any amount
payable on surrender, partial surrender or loan within 7 days after we receive
written request for the payment at our Operations Center. We will usually pay
any death proceeds within 7 days after we receive due proof of death. But, any
payment involving a determination of fund value may be postponed in any case
whenever:
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(a) the New York Stock Exchange is closed (except for customary weekend and
holiday closings), or trading on the New York Stock Exchange is restricted
as determined by the Securities and Exchange Commission (SEC);
(b) the SEC by order permits postponement for the protection of policyholders;
or
(c) the SEC determines that a state of emergency exists, so that valuation of
the assets of the Variable Account or disposal of securities is not
reasonably practicable.
Transfers among sub-accounts, and allocations to and against sub-accounts also
may be postponed under the circumstances described in (a), (b) and (c) above.
Reports - We will send a report at least annually to the rightsholder showing
the then current status of the Policy. It will show since the last report:
premiums received; expense charges (including any transfer charges); cost of
insurance and any riders; interest earned on any debt; interest on fund value in
GIA; and any partial surrenders (and fees).
It will also show as of the current and prior report dates: Death Benefit;
Specified Amount; cash value; fund value; sub-account Unit values; fund value in
GIA; outstanding fund charge; any debt; interest earned on Loan Account; and any
other information required by state law or regulation.
We will also send to the rightsholder any reports required by the Investment
Company Act of 1940.
Projection of Benefits and Values - We shall provide a projection of
illustrative future benefits and values at any time after the first policy
anniversary upon: (a) written request; and (b) payment of a service fee. The fee
will be the one then in effect for this service. The illustration will be based
on: (a) requested assumptions as to Specified Amount, Death Benefit Option and
scheduled premiums; and (b) any other assumptions that are needed and that we
agree to.
Nonparticipation - We pay no dividends on this Policy.
31. Settlement Options
Instead of being paid in one sum, any death or surrender proceeds payable under
this Policy to a natural person in his or her own right may be settled under one
of the options below. But the payments under the option chosen must be made to
that person (the payee). And, the amount of death or surrender proceeds must be
at least $1,000.
Options Available -
1. Interest Income - Interest on the proceeds held by us at the rate set by us
for each year. This rate will not be less than 2.3/4% a year.
2. Income for Specified Period - Income for the number of years chosen, based
on the table below. This table shows the monthly income for each $1,000 of
proceeds. Payments may be increased by additional interest as we may
determine for each year.
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Option 2 Table
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Years 1 2 3 4 5 6 7 8 9 10
- --------------------------------------------------------------------------------------------------------------------------------
Amount $84.37 42.76 28.89 21.96 17.80 15.03 13.06 11.58 10.42 9.50
- --------------------------------------------------------------------------------------------------------------------------------
Years 11 12 13 14 15 16 17 18 19 20
- --------------------------------------------------------------------------------------------------------------------------------
Amount $8.75 8.13 7.60 7.15 6.76 6.41 6.11 5.85 5.61 5.39
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Single Life Income -- Income for a period certain and during the balance of
the payee's lifetime. The period certain chosen may be: (a) 0, 10 or 20 years;
or (b) the period required for the total income payments to equal the proceeds
(refund period certain). The amount of income will be figured by us on the date
the proceeds become payable. This amount will be at least as much as the
applicable amount based on the Option 3 table at the end of the Settlement
Options section. The minimum income amounts shown in that table are based on the
1983 Table a (discrete functions, without projections for future mortality) with
3 1/2% interest.
If the income based on the period certain elected is the same as the income
provided by another available longer period or periods certain, we will deem an
election to have been made on the longest period certain.
3A. Joint Life Income -- Income during the joint lifetime of the payee and
another person. Income will continue during the balance of the survivor's
lifetime. The type of income chosen may give a survivor's income equal to: (a)
the income amount payable during the joint lifetime; or (b) two-thirds of that
income amount.
The amount of income payable during the joint lifetime will be figured by us on
the date the proceeds become payable. This amount will be at least as much as
the applicable amount based on the Option 3A table at the end of the Settlement
Options section. The minimum income amounts shown in that table are based on the
1983 Table a (discrete functions, without projections for future mortality) with
3 1/2% interest. If a person for whom option 3A is chosen dies before the first
income amount is payable, the survivor will receive settlement instead under
Option 3 with 10 years certain.
4. Income of Specified Amount -- Income, of the amount chosen, for as long as
the proceeds and interest last. But, the amount chosen may not be less each year
then 10% of the proceeds. Interest will be credited annually on the balance of
the proceeds at the rate for each year set by us. This rate will not be less
than 2 3/4% a year.
Other Settlement Options -- The proceeds may be settled under any other option
agreed to by us.
Choice of Settlement -- During the Insured's lifetime, one of the above options
may be chosen for proceeds payable by reason of his or her death. Or, a prior
choice may be changed. The choice or
28
<PAGE>
change will be subject to the same conditions and will take effect in the same
way as a change of beneficiary.
The payee of any proceeds payable in one sum but not yet paid may instead choose
one of the options. This must be done by written notice to us at our Home Office
not more than 1 month after the proceeds become payable.
Payment Provisions -- A supplementary contract will be issued when the proceeds
are settled under one of these options. The contract will set forth the terms of
the settlement. The contract date will be the date of the Insured's death if:
(a) the proceeds settled are death proceeds; and (b) the settlement was chosen
during the Insured's lifetime. In all other cases the contract will bear the
date the proceeds become payable.
Payment will be made monthly unless quarterly, semi-annual or annual payments
are asked for when the option is chosen. But, if payments of the chosen
frequency would be less than $25 each, we may use a less frequent payment basis.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
To obtain the amount of other than monthly payments,
multiply the monthly payment by the appropriate factor. Ann. Semi-Ann. Quarterly
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPTION 2 11.85 5.97 2.99
- -------------------------------------------------------------------------------------------------------------------
OPTION 3 - 0 Years Certain 11.68 5.90 2.97
- -------------------------------------------------------------------------------------------------------------------
OPTION 3 - 20 Years Certain, or Refund Period Certain 11.80 5.95 2.99
- -------------------------------------------------------------------------------------------------------------------
OPTION 3 - 10 Years Certain, or OPTION 3A 11.74 5.92 2.97
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The first payment under Option 2, 3, 3A, or 4 will be due as of the contract
date. The first payment under Option 1 will be due 1, 3, 6, or 12 months after
that date, depending on the frequency of payment.
Before we pay under Option 3 or 3A, we shall need proof of age which satisfies
us. After the contract date, unless otherwise provided in the settlement
approved by us at the time it was chosen, any settlement under Option 1, 2, 3,
or 4 will end at the payee's death. The amount stated below for that option will
then be paid in one sum to the payee's executors or administrators.
Option 1 or 4 -- Any unpaid proceeds and interest to the date of death.
Option 2 or 3 -- The amount which, with compound annual interest, would have
provided any future income payments for: (a) the specified period (Option 2); or
(b) the specified period certain (Option 3). This interest will be at the rate
or rates we assumed in computing the amount of income.
Option 3 - Minimum Monthly Income Per $1,000 of Proceeds
29
<PAGE>
The life income shown is based on the payee's age at nearest birthday on the due
date of the first income payment.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
10 Years Certain 20 Years Certain 10 Years Certain 20 Years Certain 10 Years Certain
Male Female AGE Male Female Male Female AGE Male Female Male Female AGE
AGE Female
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$3.21 $3.14 10* $3.20 $3.13 $3.74 $3.56 35 $3.71 $3.55 $5.42 $4.93 60
- ---------------------------------------------------------------------------------------------------------------
3.22 3.15 11 3.21 3.14 3.78 3.59 36 3.75 3.58 5.54 5.04 61
- ---------------------------------------------------------------------------------------------------------------
3.23 3.16 12 3.23 3.15 3.82 3.62 37 3.78 3.61 5.67 5.14 62
- ---------------------------------------------------------------------------------------------------------------
3.24 3.17 13 3.24 3.17 3.86 3.65 38 3.82 3.64 5.80 5.25 63
- ---------------------------------------------------------------------------------------------------------------
3.26 3.18 14 3.25 3.18 3.90 3.69 39 3.85 3.67 5.94 5.37 64
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
3.27 3.19 15 3.27 3.19 3.94 3.72 40 3.89 3.70 6.08 5.50 65
- ---------------------------------------------------------------------------------------------------------------
3.29 3.20 16 3.28 3.20 3.99 3.76 41 3.93 3.73 6.23 5.63 66
- ---------------------------------------------------------------------------------------------------------------
3.30 3.22 17 3.30 3.21 4.04 3.80 42 3.98 3.77 6.38 5.77 67
- ---------------------------------------------------------------------------------------------------------------
3.32 3.23 18 3.31 3.23 4.09 3.84 43 4.02 3.81 6.54 5.92 68
- ---------------------------------------------------------------------------------------------------------------
3.34 3.24 19 3.33 3.24 4.14 3.88 44 4.06 3.84 6.71 6.07 69
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
3.36 3.26 20 3.35 3.25 4.20 3.92 45 4.11 3.88 6.88 6.23 70
- ---------------------------------------------------------------------------------------------------------------
3.37 3.27 21 3.37 3.28 4.25 3.97 46 4.16 3.93 7.05 6.40 71
- ---------------------------------------------------------------------------------------------------------------
3.39 3.29 22 3.38 3.28 4.31 4.02 47 4.21 3.97 7.22 6.58 72
- ---------------------------------------------------------------------------------------------------------------
3.41 3.30 23 3.40 3.30 4.38 4.07 48 4.26 4.01 7.40 6.76 73
- ---------------------------------------------------------------------------------------------------------------
3.43 3.32 24 3.42 3.32 4.44 4.12 49 4.31 4.06 7.57 6.95 74
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
3.46 3.34 25 3.45 3.33 4.51 4.18 50 4.37 4.11 7.75 7.15 75
- ---------------------------------------------------------------------------------------------------------------
3.48 3.36 26 3.47 3.35 4.58 4.24 51 4.42 4.16 7.92 7.34 76
- ---------------------------------------------------------------------------------------------------------------
3.50 3.38 27 3.49 3.37 4.66 4.30 52 4.48 4.21 8.09 7.54 77
- ---------------------------------------------------------------------------------------------------------------
3.53 3.40 28 3.52 3.39 4.74 4.36 53 4.54 4.27 8.26 7.74 78
- ---------------------------------------------------------------------------------------------------------------
3.56 3.42 29 3.54 3.41 4.82 4.43 54 4.60 4.32 8.42 7.94 79
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
3.58 3.44 30 3.57 3.43 4.91 4.51 55 4.66 4.38 8.57 8.14 80+
- ---------------------------------------------------------------------------------------------------------------
3.61 3.46 31 3.59 3.45 5.00 4.58 56 4.72 4.44
- ---------------------------------------------------------------------------------------------------------------
3.64 3.49 32 3.62 3.48 5.10 4.66 57 4.78 4.51
- ---------------------------------------------------------------------------------------------------------------
3.67 3.51 33 3.65 3.50 5.20 4.75 58 4.85 4.57
- ---------------------------------------------------------------------------------------------------------------
3.71 3.54 34 3.68 3.52 5.31 4.84 59 4.91 4.64
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* and under
<TABLE>
<CAPTION>
20 Years Certain 0 Years Certain
Male Female Female Male
- -------------------------------------------
<S> <C> <C> <C> <C>
$4.97 $4.71 $3.46 25 $3.34
- -------------------------------------------
5.04 4.77 3.59 30 3.44
- -------------------------------------------
5.10 4.84 3.75 35 3.57
- -------------------------------------------
5.16 4.91 3.96 40 3.73
- -------------------------------------------
5.22 4.98 4.22 45 3.93
- -------------------------------------------
- -------------------------------------------
5.28 5.05 4.56 50 4.20
- -------------------------------------------
5.33 5.12 4.99 55 4.54
- -------------------------------------------
5.38 5.19 5.57 60 5.00
- -------------------------------------------
5.43 5.25 6.39 65 5.64
- -------------------------------------------
5.48 5.32 7.53 70 6.53
- -------------------------------------------
5.52 5.38
- -------------------------------------------
5.55 5.43
- -------------------------------------------
5.59 5.48
- -------------------------------------------
5.62 5.53 Refund Period
5.64 5.57 Certain
Male AGE Female
- -------------------------------------------
5.66 5.60 $3.44 25 $3.33
- -------------------------------------------
5.68 5.63 3.56 30 3.42
- -------------------------------------------
5.70 5.66 3.70 35 3.54
- -------------------------------------------
5.71 5.68 3.88 40 3.69
- -------------------------------------------
5.72 5.70 4.11 45 3.87
- -------------------------------------------
- -------------------------------------------
5.73 5.71 4.38 50 4.1
- -------------------------------------------
4.73 55 4.40
- -------------------------------------------
5.18 60 4.78
- -------------------------------------------
5.76 65 5.28
- -------------------------------------------
6.52 70 5.94
- -------------------------------------------
</TABLE>
* and under
30
<PAGE>
+ and over
The minimum income for any age not shown in the 0 Years Certain and Refund
Period Certain columns is calculated on the same mortality and interest
assumptions as the minimum income for the ages shown and will be quoted on
request.
Option 3A - Minimum Monthly Income Per $1,000 of Proceeds
The income shown is based on the ages (at nearest birthday on the due date of
the first income payment) of the 2 persons during whose joint lifetime payments
are to be made.
Same Income Continued to Survivor Two-Thirds of Income Continued to Survivor
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AGE AGE
OF AGE OF MALE OF AGE OF MALE
FEMALE 50 55 60 65 70 FEMALE 50 55 60 65 70
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
50 $3.89 $3.98 $4.04 $4.09 $4.13 50 $4.20 $4.35 $4.51 4.69 $4.89
- ------------------------------------------------------------------------------------------------------
55 4.03 4.16 4.27 4.36 4.42 55 4.36 4.54 4.73 4.95 5.18
- ------------------------------------------------------------------------------------------------------
60 4.16 4.34 4.51 4.66 4.78 60 4.55 4.76 4.99 5.25 5.53
- ------------------------------------------------------------------------------------------------------
65 4.27 4.51 4.76 4.99 5.20 65 4.76 5.01 5.29 5.62 5.97
- ------------------------------------------------------------------------------------------------------
70 4.37 4.66 4.99 5.34 5.67 70 4.99 5.28 5.63 6.04 6.49
- ------------------------------------------------------------------------------------------------------
</TABLE>
The minimum income for any other combination of ages or for 2 persons of the
same sex are calculated on the same mortality and interest assumptions as the
minimum income for the combinations of ages shown and will be quoted on request.
Endorsements
(Endorsements may be made only by us. Any on this page were made when this
Policy was issued, if we do not state otherwise.)
SOME DEFINITIONS AND PROVISIONS FOR BENEFICIARY AND RIGHTS
DESIGNATIONS
A. Wherever used in any Beneficiary or Rights designation the following terms
shall mean:
1. "Estate" means the court appointed fiduciary (executor, administrator
or personal representative) for the decedent's estate.
2. "Will" means the instrument probated as the last will and testament.
3. "Children Per Stirpes" means that if a designated child dies leaving
children, such of said children as shall be living shall take the share
of such deceased child, divided equally.
31
<PAGE>
4. "Trust" means an agreement of trust made by and between a settlor (or
grantor) and a trustee, under a specific date.
5. "Guardian" means that person appointed by a court of competent
jurisdiction to administer and manage the property (estate) of another
person ("ward," often an infant).
6. "Equal Rights" or "Equally in Rights" means "as shall be living,
jointly".
7. "Issue" or "Heirs" is deemed to mean "Children Per Stirpes." As stated
in number 3 above.
8. "And/or" or "Or" means "as shall be living, equally".
B. The Flexible Plan Settlement is not available as a settlement option.
/s/ David S. Waldman
- -------------------------------
Secretary
89504
32
<PAGE>
Rider attached to and forming a part of Policy (or Contract) issued by MONY Life
Insurance Company of America B6009-75-96
Endorsements
(Endorsements may be made only by us. Any on this page were made when this
Policy was issued, if we do not state otherwise.)
BENEFICIARY
The beneficiary is:
Hippo Inc., or its successors as said Corporation interest may appear. The
balance, if any, or the entire death proceeds if said Corporation, or its
successors shall have no interest shall be payable to sister, Johanna Gordon, if
living, if not, mother, Sandra Berger, if living. The Company may rely solely on
the statement of said Corporation, or its successors as to the amount of said
Corporation's interest.
MONY LIFE INSURANCE COMPANY OF AMERICA
/s/ David S. Waldman
- ------------------------------
Secretary
RIGHTS: During the Insured's lifetime, all rights belong exclusively to Hippo
Inc., or its successors except that the rights so far as concern the interest of
any beneficiary other than said Corporation, or its successors to change the
beneficiary, to elect a settlement option subject to the provisions of the
policy, and to change or revoke such an election belong exclusively to the
Insured and the right to assign and the right to change this designation of
rights belong exclusively to the Insured jointly with said Corporation, or its
successors. The interest of any beneficiary other than said Corporation, or its
successors shall be subordinate to the interest of said Corporation, or its
successors.
No agreement between the Insured and Corporation shall vary the terms of this
Contract or be otherwise binding on The Company. The Company shall be fully
protected and discharged in any dealing or settlement, in accordance with the
policy provisions, with any person designated as rightsholder without regard to
the terms or validity of the agreement,
MONY LIFE INSURANCE COMPANY OF AMERICA
57521
/s/ David S. Waldman
- ------------------------------
33
<PAGE>
Secretary
34
<PAGE>
I represent the statements and answers in this application to be true and
complete to the best of my knowledge and belief. I offer them to the appropriate
MONY Company to induce it to issue the policy or policies and to accept the
payment of premiums thereunder.
I agree that: (1) Payment of the first premium, if after the application date
below, will mean that I represent that such statements and answers would be the
same if made at the time of such payment; (2) no one but an Executive Officer of
the Company may change any contract or waive any of its provisions; (3) when
coverage takes effect: if a policy is issued exactly as applied for and required
cost has been received, the policy will take effect on the date we authorize its
delivery or on any later requested Policy Date. If a policy is issued either (a)
other than as applied for, or (b) exactly as applied for but any required cost
remains unpaid, the policy will take effect on the date it is delivered,
provided its delivery and payment of any required cost are made while each
person to be insured is living. But, in any case, a policy will not take effect
for any of these situations before the date indicated: (a) for a Purchase Option
election (Question 19), the Option Date; (b) for the exercise of a Term
Conversion (Question 21); (c) for a Government Allotment authorization, its
Policy Date, "Required Cost" in the case of a Purchase Option election or a Term
Conversion is the full first premium. In any other case, "required cost" is the
amount necessary to put the policy in force; (4) acceptance of any policy issued
will ratify any correction in or amendment to the application noted by the
Company in the space provided "FOR HOME OFFICE USE ONLY," in Section E of the
application. A copy of the application attached to the policy will be sufficient
notice of the change made. If the laws where the application is made so require,
any change of amount, class of risk, age at issue, plan of insurance or benefits
must be ratified in writing.
Under the penalties of perjury, I certify that:
- - The number shown under Question 1 or 14 on Part 1 of the application is the
correct taxpayer identification number of the rightsholder (or the
rightsholder is waiting for a number to be issued).
- - I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding (does not apply to real estate
transactions, mortgage interest paid, the acquisition or abandonment of
secured property, contribution to an individual retirement arrangement
(IRA), and payments other than interest and dividends).
For Underwriting and claim purposes, I permit:
- - Any physician or other medical practitioner, hospital, clinic, other
medically related facility, consumer reporting agency, or the Medical
Information Bureau (MIB) to give medical record information regarding me to
the Company or any of its reinsurers. The data includes findings on medical
care; psychiatric or psychological care or examinations; or surgery. Also,
any insurer or reinsurer may give the company medical data described above
and data about current or pending insurance I may have.
35
<PAGE>
- - The Company to get consumer reports; and motor vehicle reports about me.
- - Any employer, business associate, financial institution, insurer,
government unit or MIB, Inc. to give the Company any data that they may
have about my occupation, avocations, driving record, finances, insurance
coverage, general reputation and aviation activities (i.e., "personal
information").
I understand that:
- - A photocopy or facsimile transmission copy of this form will be as valid as
the original. My consent to get medical record information and personal
information about me will end two years from the date shown below. I may at
any time, however, revoke my permission to get any data protected by 42 CFR
Part 2 or any other Federal or State law or regulation which provides for
such revocation. Any action taken before revocation, however, will be
valid.
- - I have been given a copy of "MONY's Information Practices and The
Underwriting Process," including notices regarding consumer reports, and
MIB, Inc. I know that I have a right to get a copy of this form.
- - My records are protected under federal and state law and cannot be disclosed
without my written consent unless otherwise provided by law. I further
understand that the specific types of information to be disclosed may, if
applicable, include: diagnosis, prognosis, and treatment for physical and/or
emotional illness, including treatment of alcohol or substance abuse for any
admissions; diagnosis, prognosis, and treatment of HIV infection, including
HIV test results; and diagnosis, prognosis and treatment for any
communicable disease or serious communicable disease or infection, including
sexually transmitted diseases.
- - All or part of the data which the Company gets may be sent to MIB. It may
also be disclosed to and used by any Company reinsurer, employee or
contractor who performs any business service on any insurance I may have
applied for or have with the Company.
Signed at (City and State): on , 19 .
------------------------ --------------- ---
X X
--------------------------- --------------------------------------
Signature of Insured Signature of Spouse - if to be Insured
Signature of Applicant (if other than Insured), who agrees to be bound by the
representations and agreements in this and in any other part of this
application. In the case of the exercise of a purchase option election or a
conversion privilege, applicant means the owner of such right (other than the
Insured).
X
--------------------------- --------------------------------------
Signature of: Applicant
--- --------------------------------------
Owner (Rightsholder) Address
---
X
-------------------------------------
Signature of Parent or Legal Guardian
36
<PAGE>
(if Insured is under age 15)
37
<PAGE>
EXHIBIT 10.36
SETTLEMENT AGREEMENT AND RELEASE
THIS AGREEMENT is made this 4th day of May, 1998 (the "Effective Date")
by and between Hippo Holdings Ltd f/k/a Thacker Group Limited, a United Kingdom
corporation registered no. 2907101 having a business address at
Burton-Upon-Trent, Staffordshire, England (hereinafter referred to as "HH") and
Outlook Sports Technology, Inc. f/k/a Hippo, Inc., a Delaware corporation,
having a business address at 4400 North Federal Highway, Suite 410, Boca Raton,
FL 33431 (hereinafter referred to as "Outlook").
WHEREAS, an exclusive license agreement, effective as of January 1,
1996, was executed by Hippo, Inc. and Thacker Group Limited involving rights in
and to certain Licensed Marks as defined therein (hereinafter the "License
Agreement");
WHEREAS, the parties have been involved in negotiations relating to an
assumption on the part of Outlook of certain endorsement agreements between HH,
Ian Woosnam and Co. Ltd., Ian Woosnam USA, Inc., Ian Woosnam individually and
his caddie Philip Morbey (collectively, the "Endorsement Agreements");
WHEREAS, Outlook has ordered from a number of different manufacturers
(the "Hippo Manufacturers") products including club heads and golf bags bearing
the "Hippo" name and mark and/or the design of a hippopotamus, as well as shafts
and grips to be used in the assembly of finished "Hippo" clubs, which are in
various stages of completion ("Inventory");
WHEREAS, the parties wish to terminate the License Agreement and
resolve their differences over financial obligations associated with the
Endorsement Agreements;
NOW THEREFORE, in consideration of the mutual promises, covenants and
undertakings herein contained and for other good and valuable consideration by
each of the other given, receipt of which is hereby mutually acknowledged,
subject to the conditions set forth in Article VII hereof, the parties hereby
agree as follows:
ARTICLE I.
Termination of License Agreement
I.1 The License Agreement, including all rights, obligations,
privileges and licenses granted thereunder, is hereby terminated, canceled and
revoked as of the Effective Date of this Agreement.
I.2 With the exception of Paragraph 8 related to Outlook's right to
defend itself in litigation, Paragraph 9 related to indemnification and
defensive litigation, and, Paragraph 18 related to non-
1
<PAGE>
disclosure, it is agreed and understood by the parties that note of the
provisions of the License Agreement shall survive the termination of same.
ARTICLE II.
Termination of Use of Marks
II.1 Outlook shall immediately cease and desist from all further use of
the name and mark "Hippo", "Howson", the design of a hippopotamus (the "Marks")
and any colorable variants of the Marks, except as provided in Article V below.
II.2 At the termination of the Transition Period, Outlook shall
immediately refrain from holding itself out, expressly or impliedly, as having
any connection, association, license, sponsorship or other affiliation with HH
in the United States, Canada or elsewhere in the world.
II.3 Outlook represents and wan-ants that Exhibit A contains a true and
accurate listing of all products bearing the "Hippo" name and mark, and/or the
design of a hippopotamus, which it has in its possession, custody and/or control
(the "Products").
II.4 Outlook further represents and warrants that Exhibit B contains a
true and accurate listing of any monies owed by Outlook to Vendors or other
third parries for any Products in its custody, possession and/or control, and
for that Product which has been sold but not paid for as of the Effective Date.
ARTICLE III.
Assignment of Inventory
III.1 Outlook shall hereby assign, transfer and deliver to HH, and HH
hereby agrees to assume all of the following liabilities and obligations of
Outlook with respect to the Inventory: (i) all Inventory and (ii) to the extent
listed on Exhibit C hereto, all liabilities and obligations of Outlook arising
under agreements (the "Vendor Agreements") with the Vendors for Inventory (the
"Assumed Obligations").
III.2 Outlook represents and warrants that Exhibit C appended hereto
contains a complete and accurate listing, including the number of pieces, the
vendor, pricing and purchase order number(s), of all Inventory located anywhere
in the world, and of each Vendor Agreement.
III.3 Outlook represents and warrants that it delivered to the HH a
correct and complete copy of each written Vendor Agreement listed on Exhibit C
(as amended to date) and a written summary setting forth the terms and
conditions of each oral Vendor Agreement referred to on Exhibit C. With respect
to each such Vendor Agreement: (i) the Vendor Agreement is legal, valid,
binding, enforceable, and in full force and effect; and (ii) other than delays
in payment by Outlook no party is in breach or default and no event has occurred
which with notice or lapse of
2
<PAGE>
time would constitute a breach or default or permit termination, modification,
or acceleration, under the agreement; and (iii) no party has repudiated any
provision of the Vendor Agreement.
III.4 The assumption by HH under Section O hereof of the Assumed
Obligations shall not enlarge any rights or remedies of any third parties under
any contracts or arrangements with Outlook, except to the extent the other
parries to the Assumed Obligations may become able to enforce such obligations
against HH.
III.5 Except as expressly provided herein, HH does not assume and is
not liable, and HH will not assume and shall not be liable and HH shall not be
deemed to have assumed or be liable, for any agreements, obligations or
liabilities of Outlook or of any predecessor of any kind or nature whatsoever,
whether fixed or inchoate, known or unknown, liquidated or unliquidated, secured
or unsecured, contingent or otherwise.
III.6 The assumption by HH contained in Section O hereof is made
subject to and with the benefit of the respective representations, warranties,
covenants, terms, conditions and provi sions otherwise contained herein.
ARTICLE IV.
Obligations of Hippo Holdings Ltd.
IV.1 HH shall pay Outlook the sum of $133,319-00 US on or before May 8,
1998, which is equivalent to the remainder of the advance royalty payment made
by Outlook at the inception of the License Agreement.
IV.2 HH shall pay Outlook the sum of $70,000.00 US by May 25,1998.
IV.3 HH shall return to Outlook all shares of common stock in Hippo,
Inc. which were received by Thacker Group Limited, and/or any individuals
associated with Thacker Group Limited, as part of the negotiations surrounding
the License Agreement
IV.4 HH will no longer have any seats on the Advisory Board of Outlook,
and any financial obligations to such former members shall be born by HH.
IV.5 HH agrees to pay Outlook the sum of $155,287, $99,168 US of which
will be paid on or before May 8, 1998 for the purchase of all of the Products in
its custody, control or possession in the United States, and including all
"Hippo" samples, point-of-purchase items and trade show materials with the
remainder due subject to confirmation of existence of certain True Temper and
Rubberon product in Asia and paid on or before May 15, 1998.
IV.6 HH agrees to waive its claim against Outlook for reimbursement of
sums paid by HH during the third quarter of 1997 pursuant to the Endorsement
Agreements, and the portion the Woosnam bonus insurance paid to ESIX by HH in
1997.
3
<PAGE>
IV.7 For a period of thirty-six (36) months from the Effective Date, HH
shall not approach any employees of Outlook for employment with HH. HH agrees to
notify Outlook in the event HH is approached by an employee of Outlook for
employment with HH.
ARTICLE V.
Transition Period in the United States
V.1 Outlook agrees to assist HH with its sales, administration and
management requirements associated with developing an independent dependent for
the marketing and sale of products under the Marks in the United States. HH
agrees to pay Outlook the sum of $5,000 US, per month, for these support
activities. The length of rime needed for these support services will be
determined solely by HH, but shall not exceed six (6) months, and can be
terminated at its discretion with seven (7) days prior notice to Outlook (the
"Transition Period").
V.2 HH agrees to pay a commission of 8% of wholesale to Outlook on the
currently pending orders, and any other orders obtained during the Transition
Period.
V.3 Outlook agrees to fully and completely identify to HH, in writing,
the details of all of its marketing and sales efforts of products under the
Marks, including, but not limited to, the disclosure of existing accounts, leads
on new customers, suppliers, manufacturers, advertising and promotional program
and materials, pricing strategy and any other information necessary or helpful
to the conduct of HH's new business in the United States.
ARTICLE VI.
Mutual Releases
VI.1. Other than Outlook's obligations created by this Agreement, HH
fully and forever releases and discharges Outlook and its respective officers,
directors principals, agents, attorneys, employees, parents, affiliates,
successors and assigns (collectively referred to as "Outlook Releasees"), of and
from any and all responsibilities, duties, obligations, claims, demands, debts,
sums of money, accounts or causes of action or actions, costs, losses, damages
or liabilities of whatsoever character, nature, kind or designation in law or in
equity, absolute or contingent, matured or unmatured, suspected or unsuspected,
known or unknown which HH or anyone claiming under, by or through it now has or
could ever have or become entitled to assert against any of the Outlook
Releasees.
VI.2. Other than HH's obligations created by this Agreement, Outlook
fully and forever releases and discharges HH and its respective officers,
directors, principals, agents, attorneys, employees, parents, affiliates,
successors and assigns (collectively referred to as "HH Releasees"), of and from
any and all responsibilities, duties, obligations, claims, demands, debts, sums
of money, accounts or causes of action or actions, costs, losses, damages or
liabilities of whatsoever character, nature, kind or designation in law or in
equity, absolute or contingent, matured or unmatured,
4
<PAGE>
suspected or unsuspected, known or unknown which Outlook or anyone claiming
under, by or through it now has or could ever have or become entitled to assert
against any of the HH Releasees.
ARTICLE VII.
Condition Precedent
The covenants of each party hereto shall be expressly conditioned upon
(i) the receipt by HH from each Vendor of a letter agreement to amend the
respective Vendor Agreements, in the form set out in the attached Exhibit D
hereto, and (ii) the representations and warranties of each party hereto being
true and correct on the date of the fulfillment of the condition set forth in
clause (i) hereof.
ARTICLE VIII.
Miscellaneous
VIII.1. In the event that any portion of this Agreement is declared
invalid or unenforceable for any reason, such portion is deemed severable
therefrom and the remainder of this Agreement will be deemed to be and will be
made fully valid and enforceable.
VIII.2. This Agreement constitutes the entire agreement of the parties
hereto and cancels, terminates and supersedes any and all prior representations
and agreements relating to the subject matter hereof.
VIII.3. None of the provisions of this Agreement may be waived or
modified except by a writing signed by all of the parties of this Agreement.
VIII.4. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns. No assignment by
either party shall be effective unless it is the result or sale of all or
substantially all of the assets of the assigner, and the assignee shall
expressly assume in writing a performance of all terms and provisions of this
Agreement to be performed by the assigning party.
VIII.5. This Agreement may be executed in any number of copies by the
different parties hereto on separate counterparts. Executed separate
counterparts shall have the same force and effect as the original of this
Agreement. When all of the parties hereto have executed either the original copy
or one or more of the separate counterparts, this Agreement shall be deemed
executed as of, and the effective date of this Agreement shall be, the date of
the last signature.
VIII.6. Both parties agree that they will do all things and execute all
documents as may be considered necessary or desirable to give full effect to the
terms and conditions of this Agreement.
VIII.7. This Agreement shall be interpreted in accordance with and
under the laws of the State of Florida.
5
<PAGE>
IN WITNESS OF, the parties hereby execute this Agreement, in
duplicate through their duly authorized representatives below.
HIPPO HOLDINGS LTD f/k/a OUTLOOK SPORTS TECHNOLOGY, INC.
THACKER GROUP LIMITED f/k/a HIPPO, INC.
(Registered No. 2907101)
BY: /s/ Graham Jackson By: /s/Jim Dodrill
---------------------------------------- ------------------------------
Name/Title:Graham Jackson, Managing Director Name/Title:Jim Dodrill, President
-------------------------------- ----------------------
Date: 4 May 1998 Date:4 May 1998
---------------------------------------- ----------------------------
6
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
{List of "Products")
7
<PAGE>
Hippo Inventory as of 04/28/98
<TABLE>
<CAPTION>
QTY COST TOTAL
<S> <C> <C> <C> <C>
H15125100 Hippo Jr. Set RH Age 5-9 no bag 5 23.61 118.05
H15125200 Hippo Jr. Set RH Age 10-14 no bag 7 23.61 165.27
H1513500 Hippo Jr. Drivers RH Age 10-14 6.48 0
H1513501 Hippo Jr. Drivers RH Age 5-9 6.48 0
H15135100 Hippo Jr. Set RH Age 5-9 Irons,Wood, Putter, Bag 28.99 0
H15135200 Hippo Jr. Set RH Age 10-14 Irons, Wood, Putter, Bag 28.99 0
H1513610 Hippo Jr. 5/6 Iron Age 5-9 23 4.25 97.75
H1513810 Hippo Jr. 7/8 Iron Age 5-9 23 4.25 97.75
H1513910 Hippo Jr. 9/W Iron Age 5-9 23 4.25 97.75
H1513550 Hippo Jr. Putters RH 10-14 4.38 0
H1513551 Hippo Jr. Putters RH 5-9 4.38 0
H15145100 Hippo Jr. Set LH Age 5-9 Irons, Wood, Putter, Bag 28.99 0
H15145200 Hippo Jr. Set LH Age 10-14 Irons, Wood, Putter, Bag 28.99 0
H20131154 Hippo SC2 Iron SW Mens RH Graph Powerflex 9.39 0
H20131164 Hippo SC2 Iron SW Mens RH Steel 11 6.52 71.72
H20133854 Hippo SC2 Irons 3-PW Mens RH Graph Powerflex 75.17 0
H20133864 Hippo SC2 Irons 3-PW Mens RH Steel 52.15 0
H20141154 Hippo SC2 Iron SW Mens LH Graph Powerflex 9.40 0.00
H20141164 Hippo SC2 Iron SW Mens LH Steel 57 6.52 371.64
H20143854 Hippo SC2 Irons 3-PW Mens LH Graph Powerflex 75.17 0
H20143864 Hippo SC2 Irons 3-PW Mens LH Steel 68 52.15 3546.20
H20234855 Hippo SC2 Irons 4-SW Ladies RH Graph Easyflex 75.17 0
H20234865 Hippo SC2 Irons 4-SW Ladies RH Steel 89 52.15 4641.35
H20244855 Hippo SC2 Irons 4-SW Ladies LH Graph Easyflex 75.17 0
H20244865 Hippo SC2 Irons 4-SW Ladies LH Steel 47 6.52 306.44
H24131156 Hippo SC2 Tour Nickel Iron SW Mens RH Graph 10.38 0
H24131166 Hippo SC2 Tour Nickel Iron SW Mens RH Steel 89 6.86 610.54
H24133851 Hippo SC2 Tour Nickel Irons 3-PW Mens RH Graph Firm 83.01 0
H24133853 Hippo SC2 Tour Nickel Irons 3-PW Mens RH Graph Reg 83.01 0
H24133862 Hippo SC2 Tour Nickel Irons 3-PW Mens RH Steel Stiff 44 54.85 2413.40
H24133863 Hippo SC2 Tour Nickel Irons 3-PW Mens RH Steel Reg 52 54.85 2852.20
H24141156 Hippo SC2 Tour Nickel Iron SW Mens LH Graph 10.38 0
H24141166 Hippo SC2 Tour Nickel Irons SW Mens LH Steel 73 6.86 500.78
H24143851 Hippo SC2 Tour Nickel Irons 3-PW Mens LH Graph Firm 83.01 0
H24143853 Hippo SC2 Tour Nickel Irons 3-PW Mens LH Graph Reg 83.01 0
H24143862 Hippo SC2 Tour Nickel Irons 3-PW Mens LH Steel Stiff 24 54.85 1316.4
H24143863 Hippo SC2 Tour Nickel Irons 3-PW Mens LH Steel Reg 52 54.85 2852.2
H28130154 Hippo SC2 Wood #1 Mens RH Graph Powerflex 17.06 0
H28130164 Hippo SC2 Wood #1 Mens RH Steel 14.18 0
H28130354 Hippo SC2 Wood #3 Mens RH Graph Powerflex 17.06 0
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
QTY COST TOTAL
<S> <C> <C> <C> <C>
H28130364 Hippo SC2 Wood #3 Mens RH Steel 14.18 0
H28130554 Hippo SC2 Wood #5 Mens RH Graph Powerflex 17.06 0
H28130564 Hippo SC2 Wood #5 Mens RH Steel 14.18 0
H28130754 Hippo SC2 Wood #7 Mens RH Graph Powerflex 17.06 0
H28130764 Hippo SC2 Wood #7 Mens RH Steel 14.18 0
H28140154 Hippo SC2 Wood #1 Mens LH Graph Powerflex 14 17.06 238.84
H28140164 Hippo SC2 Wood #1 Mens LH Steel 14.18 0
H28140354 Hippo SC2 Wood #3 Mens LH Graph Powerflex 19 17.06 324.14
H28140364 Hippo SC2 Wood #3 Mens LH Steel 14.18 0
H28140554 Hippo SC2 Wood #5 Mens LH Graph Powerflex 27 17.06 460.62
H28140564 Hippo SC2 Wood #5 Mens LH Steel 14.18 0
H28140754 Hippo SC2 Wood #7 Mens LH Graph Powerflex 8 17.06 136.48
H28140764 Hippo SC2 Wood #7 Mens LH Steel 14.18 0
H28230155 Hippo SC2 Wood #1 Ladies RH Graph Easyflex 17.06 0
H28230165 Hippo SC2 Wood #1 Ladies RH Steel 14.18 0
H28230355 Hippo SC2 Wood #3 Ladies RH Graph Easyflex 17.06 0
H28230365 Hippo SC2 Wood #3 Ladies RH Steel 14.18 0
H28230555 Hippo SC2 Wood #5 Ladies RH Graph Easyflex 17.06 0
H28230565 Hippo SC2 Wood #5 Ladies RH Steel 14.18 0
H28230755 Hippo SC2 Wood #7 Ladies RH Graph Easyflex 17.06 0
H28230765 Hippo SC2 Wood #7 Ladies RH Steel 14.18 0
H28240155 Hippo SC2 Wood #1 Ladies LH Graph Easyflex 17.06 0
H28240165 Hippo SC2 Wood #1 Ladies LH Steel 14.18 0
H28240355 Hippo SC2 Wood #3 Ladies LH Graph Easyflex 17.06 0
H28240365 Hippo SC2 Wood #3 Ladies LH Steel 14.18 0
H28240555 Hippo SC2 Wood #5 Ladies LH Graph Easyflex 17.06 0
H28240565 Hippo SC2 Wood #5 Ladies LH Steel 14.18 0
H28240755 Hippo SC2 Wood #7 Ladies LH Graph Easyflex 5 17.06 85.3
H28240765 Hippo SC2 Wood #7 Ladies LH Steel 14.18 0
H30131156 Hippo Beast Iron SW Mens RH Graph 19.35 0
H30131166 Hippo Beast Iron SW Mens RH Steel 15.82 0
H30133851 Hippo Beast Irons 3-PW Mens RH Graph Firm 53 154.78 8203.34
H30133853 Hippo Beast Irons 3-PW Mens RH Graph Reg 6 154.78 928.68
H30133862 Hippo Beast Irons 3-PW Mens RH Steel Stiff 32 126.61 4051.52
H30133863 Hippo Beast Irons 3-PW Mens RH Steel Reg 35 126.61 4431.35
H38130151 Hippo Beast Wood #1 Mens RH Graph Firm 57.53 0
H38130153 Hippo Beast Wood #1 Mens RH Graph Reg 57.53 0
H38130351 Hippo Beast Wood #3 Mens RH Graph Firm 57.53 0
H38130353 Hippo Beast Wood #3 Mens RH Graph Reg 57.53 0
H38130551 Hippo Beast Wood #5 Mens RH Graph Firm 57.53 0
H38130553 Hippo Beast Wood #5 Mens RH Graph Reg 5 57.53 287.65
H44135666 Hippo Tour Ni Wedges 56* Mens RH Steel 5 6.89 34.45
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
QTY COST TOTAL
<S> <C> <C> <C> <C>
H44136066 Hippo Tour Ni Wedges 60* Mens RH Steel 7 6.89 48.23
H44145666 Hippo Tour Ni Wedges 56* Mens LH Steel 45 6.89 310.05
H44146066 Hippo Tour Ni Wedges 60* Mens LH Steel 33 6.89 227.37
H590101 Hippo Headcover Slack #1 1.70 0.00
H590103 Hippo Headcover Black #3 1 1.70 1.70
H590105 Hippo Headcover Black #5 1 1.70 1.70
H590107 Hippo Headcover Black #7 65 1.70 110.50
H60130134 Hippo PI Putter #1 Mens RH 34" Steel 118 6.05 713.9
H60130135 Hippo PI Putter #1 Mens RH 35" Steel 51 6.05 308.55
H60130234 Hippo Pi Putter #2 Mens RH 34" Steel 118 6.05 713.9
H60130235 Hippo PI Putter #2 Mens RH 35" Steel 69 6.05 417.45
H60130334 Hippo PI Putter #3 Mens RH 34" Steel 116 6.05 701.8
H60130335 Hippo PI Putter #3 Mens RH 35" Steel 61 6.05 369.05
H60140434 Hippo Pi Putter #4 Mens LH 34" Steel 33 6.05 199.65
H60140435 Hippo PI Putter #4 Mens LH 35" Steel 19 6.05 114.95
H60130134 Hippo HMF Putter #1 Mens RH 34" Steel 108 4.44 479.52
H65130135 Hippo HMF Putter #1 Mens RH 35" Steel 4.44 0
H65130234 Hippo HMF Putter #2 Mens RH 34" Steel 120 4.44 532.8
H65130235 Hippo HMF Putter #2 Mens RH 35" Steel 4.44 0
H65130334 Hippo HMF Putter #3 Mens RH 34" Steel 74 4.44 328.56
H65130335 Hippo HMF Putter #3 Mens RH 35" Steel 4.44 0
H65140434 Hippo HMF Putter #4 Mens LH 34" Steel 4.44 0
H65140435 Hippo HMF Putter #4 Mens LH 35" Steel 4.44 0
H6010200 Hippo Junior Bag 1486 7.45 11070.70
TE6010200 Tour Eagle Junior Bag 900 6.25 5625.00
TOTAL $61517.19
----------------
</TABLE>
10
<PAGE>
EXHIBIT B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
{List of monies owed Vendors or other third parties}
11
<PAGE>
EXHIBIT B
---------
Vitality $41,120
Pacific $66,326
Kunnan* $111,552.50
Fuk Kan $6,290
*a portion of this amount is still in the possession of Sun Golf
12
<PAGE>
EXHIBIT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
{List of Inventory including number of pieces,
vendor, pricing and purchase order number(s)}
{List of Vendor Agreements}
13
<PAGE>
<TABLE>
<CAPTION>
P. 0. # Vendor Item Quantity Cost Total Cost
(per item)
<S> <C> <C> <C> <C> <C> <C>
NEN Shafts Co.
15-1021 & 10-1083 A 15400 $3.85 $59,290.00
15-1020 & 10-1072 B 42065 $3.85 $161,950.25
15-1020 & 10-1072 C 12800 $4.85 $62,080.00
10-1072 D 1000 $2.00 $2,000.0 0
Sun Golf, Inc.
15-1016 & 10-1080 A 800 $24.00 $19,200.00 GT and JW believe that 15-1016
15-1017 & 10-1080 B 600 $24.00 $14,400.00 and 15-1017 were not prodcued.
10-1080 C 250 $3.00 $750.00
15-1016 & 10-1080 D 1075 $3.00 $3,225.00
15-1016 & 10-1080 E 1075 $3.00 $3,225.00
10-1077 F 2400 $38.00 $91,200.00
15-1014 & 15-1015 G 2050 $36.00 $73,800.00
& 10-1077 G 2050 $38.00 $77,900.00
15-1014 & 10-1077 H 1500 $3.00 $4,500.00
15-1014 & 10-1077 I 1500 $3.00 $4,500.00
Reach Golf
15-1013 A 650 $4.90 $3,185.00
15-1012 B 6750 $1.75 $11,812.50
15-1012 C 2250 $1.75 $3,937.50
TNN Sports
15-1002,1003 & 10-1075A A 10700 $8.00 $85,600.00
15-1002,1003 & 10-1075A B 3350 $8.00 $26,800.00
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
P. 0. # Vendor Item Quantity Cost Total Cost
(per item)
<S> <C> <C> <C> <C> <C> <C>
duplicate entry C
15-1004 & 10-1087A D 2650 $8.00 $21,200.00
15-1004 & 10-1087A E 550 $8.00 $4,400.00
15-1005 F 2500 $3.00 $7,500.00
15-1005 G 550 $3.00 $1,650.00
15-1006 H 1650 $3.00 $4,950.00
15-1006 I 200 $3.00 $600.00
15-1007 J 6500 $6.50 $42,250.00
15-1008 K 3750 $3.00 $11.250.00
15-1008 L 3250 $1.40 $4,550.00
15-1008 M 3250 $1.40 $4,550.00
15-1008 N 3250 $1.40 $4,550.00
15-1008 O 3750 $1.40 $5,250.00
15-1009 P 4500 $1.70 $7,650.00
15-1009 Q 1500 $1.70 $2,550.00
Jean Wang
15-1026 A 6500 $1.50 $9,750.00
15-1024 B 9250 $1.50 $13,875.00
15-1024 C 3250 $1.50 $4,875.00
Fuk Kan
15-1025 A 3450 $0.80 $2,760.00
10-1085 H headcover 7575 $1.70 never confirmed by vendor
10-1085 H putter cover 900 $0.70 never confirmed by vendor
10-1085 TE headcover 2500 $1.50 never confirmed by vendor
True Temper
15-1022 & 15-1023 A 5250 $1.80 $9,450.00 all official P.O.'s are void
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
P. 0. # Vendor Item Quantity Cost Total Cost
(per item)
<S> <C> <C> <C> <C> <C> <C>
15-1022 & 15-1023 B 11700 $1.45 $16,965.00 and TT is not holding the goods
15-1022 & 15-1023 C 4050 $1.45 $5,872.50 TT is holding $22,252.50 in
15-1022 D 9600 $1.45 $13,920.00 shafts, see attached list
15-1022 E 1500 $2.50 $3,750.00
15-1022 F 17850 $1.00 $17,850.00
Rubberon
15-1019 & 10-1081 A 11850 $0.45 $5,332.50 GT and JW believe that 15-1018
15-1019 & 10-1081 B 8750 $0.45 $3,937.50 and 15-1019 were not made.
15-1019 & 10-1081 C 7900 $0.45 $3,555.00 We received no confirmation on
15-1018 & 10-1071 D 18000 $0.45 $8,100.00 these two orders. 10-1071
15-1018 & 10-1071 E 4500 $0.45 $2,025.00 and 10-1081 have been made.
15-1018 & 10-1071 F 16500 $0.45 $7,425.00
15-1018 & 10-1071 G 17800 $0.45 $8,010.00
10-1081 RP-15 putter 3100 $0.45 $1,395.00
no logo
Winner Golf
15-1011 A 1500 $6.20 $9,300.00
Tornado
15-1032 H jr Tube/Quiv 4500 $7.25 $32,625.00
15-1032 H adult stay 1000 $19.50 $19,500.00
15-1032 H 9.5 in staff 200 $52.00 $10,400.00
15-1032 TE jr Tube/Quiv 650 $6.75 $4,387.50
15-1033 H jr Tube/Quiv 3500 $7.25 $25,375.00
15-1033 H adult stay 2000 $19.50 $39,000.00
15-1033 H 95 in staff 50 $52.00 $2,600.00
15-1033 TE jr Quiv 400 $6.75 $2,700.00
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
P. 0. # Vendor Item Quantity Cost Total Cost
(per item)
<S> <C> <C> <C> <C> <C> <C>
Vitality
We believe that HH is already purchasing all SC2 iron sets
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
P. 0. # Vendor Item Quantity Cost Total Cost
(per item)
<S> <C> <C> <C> <C> <C> <C>
Rapport
10-1064 65 gram shaft 5870 $4.90 $28,763.00
10-1064 78 gram shaft 4215 $4.10 $17,281.50
10-1065 TE 78 gram shaft 2175 $4.10 $8,917.50
Pacific
</TABLE>
HH has received all purchase orders placed by Outlook with Pacific. HH has also
received outlook's advice regarding negotiating with this vendor. HH has also
agreed to pay off the debt detailed as Exhibit B to this Agreement.
18
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Company: None
----------------------------
1
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated June 9, 1998 relating
to the financial statements of Outlook Sports Technology, Inc., which appears
in such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Miami, Florida
June 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUTLOOK
SPORTS TECHNOLOGY, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 1,367
<SECURITIES> 0
<RECEIVABLES> 167,700
<ALLOWANCES> 35,000
<INVENTORY> 417,058
<CURRENT-ASSETS> 650,792
<PP&E> 201,644
<DEPRECIATION> 11,455
<TOTAL-ASSETS> 1,005,055
<CURRENT-LIABILITIES> 5,707,474
<BONDS> 0
0
0
<COMMON> 23,241
<OTHER-SE> 4,765,660
<TOTAL-LIABILITY-AND-EQUITY> 1,005,055
<SALES> 741,120
<TOTAL-REVENUES> 741,120
<CGS> 859,317
<TOTAL-COSTS> 5,190,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244,648
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,693,651
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
</TABLE>
