SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: February 29, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No.: 0-10093
GOLFROUNDS.COM, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-3664872
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 Kinnelon Road, Suite 104B, Kinnelon, New Jersey 07405
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(Address of principal executive offices)
(973) 492-3520
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of April 10, 2000, the
issuer had 3,447,496 shares of common stock, par value $.01, per share,
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes _____ No X
<PAGE>
PART I - FINANCIAL INFORMATION
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Item 1. - Financial Statements
GOLFROUNDS.COM, INC.
BALANCE SHEET
(Unaudited)
February 29,
2000
-------------
($000 Omitted)
ASSETS
Current assets:
Cash and cash equivalents $1,881
Prepaid expenses 11
------
Total current assets 1,892
Intangible assets, net of
accumulated amortization of $164 33
Equipment, net of accumulated
depreciation of $2 6
------
Total assets $1,931
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 51
------
Total current liabilities 51
------
Stockholders' equity:
Common stock, $.01 par value,
12,000,000 shares authorized,
2,099,491 shares issued and outstanding 21
Additional capital in excess of par value 3,200
Accumulated deficit ( 1,341)
-------
Total stockholders' equity 1,880
------
Total liabilities and stockholders'
equity $1,931
======
See accompanying notes to financial statements.
2
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GOLFROUNDS.COM, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months
ended February 29 & 28,
2000 1999
---- ----
($000 Omitted,
Except Per Share Data)
Revenues:
Interest $ 25 $ 21
Other 3 -
----- -----
Total revenues 28 21
----- -----
Expenses:
General, administrative and other 167 15
Amortization 50 -
----- -----
Total expenses 217 15
----- -----
Net income (loss) $( 189) $ 6
==== =====
Basic and diluted net income (loss) per share $( .09) $ -
=====
Weighted average number of shares outstanding
(in 000's) 2,099 1,958
===== =====
See accompanying notes to financial statements.
3
<PAGE>
GOLFROUNDS.COM, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the six months
ended February 29 & 28,
2000 1999
---- ----
($000 Omitted,
Except Per Share Data)
Revenues:
Interest $ 47 $ 45
Other 4 -
----- -----
Total revenues 51 45
----- -----
Expenses:
General, administrative and other 244 31
Amortization 99 -
----- -----
Total expenses 343 31
----- -----
Net (loss) income $(292) $ 14
===== =====
Basic and diluted net (loss) income per share $(.14) $ .01
===== =====
Weighted average number of shares outstanding
(in 000's) 2,099 1,963
===== =====
See accompanying notes to financial statements.
4
<PAGE>
GOLFROUNDS.COM, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months
ended February 29 & 28,
2000 1999
---- ----
($000 Omitted,
Except Per Share Data)
Cash flows from operating activities:
Net (loss) income $ (292) $ 14
Adjustments:
Increase in prepaid expenses (3) -
Amortization and depreciation 101 -
Increase in accounts payable
and accrued expenses 42 -
----- -------
Net cash provided by
operating activities (152) 14
--- -------
Cash flows from investing activities - -
Purchase of equipment (3) -
----- -------
Net cash used in investing activities (3) -
----- -------
Cash flows from financing activities - -
Repurchase of common stock - (21)
----- -------
Net cash used in
financing activities - (21)
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Net (decrease) in cash and cash (155) (7)
equivalents
Cash and cash equivalents at beginning
of period 2,036 2,151
------ ------
Cash and cash equivalents at end of period $1,881 $2,144
====== ======
See accompanying notes to financial statements.
5
<PAGE>
GOLFROUNDS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements of GolfRounds.com, Inc.
(the "Company") as of February 29, 2000 and for the six month periods ended
February 29, 2000 and February 28, 1999 reflect all material adjustments that,
in the opinion of management, are necessary for a fair presentation of results
for the interim periods. Certain information and footnote disclosures required
under generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the year-end financial statements and notes thereto included
in the Company's Annual Report on Form 10-KSB for the year ended August 31,
1999, as filed with the Securities and Exchange Commission.
The results of operations for the three- and six-month periods ended
February 29, 2000 and February 28, 1999 are not necessarily indicative of the
results to be expected for the entire fiscal year or for any other period. Prior
year's financial statements have been reclassified to conform to the current
year's presentation.
2. Income Per Share
Income per common share is based on the weighted average number of shares
outstanding. Excluded from the income per share calculations for the three and
six months ended February 29, 2000 are contingently issuable shares that, if
included, would have an antidilutive effect.
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<PAGE>
Item 2. - Management's Discussion and Analysis of Financial Condition
and Results of Operations
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This Form 10-QSB contains forward-looking statements that may involve known
and unknown risks, uncertainties and other factors that may cause the Company's
actual results and performance in future periods to be materially different from
any future periods or performance suggested by these statements.
Overview
The Company had been engaged in the wholesale distribution of aluminum
alloys, steel and other specialty metals until it liquidated its assets in the
fourth quarter of its fiscal year of 1992. In May 1999, the Company became a
publisher of Internet websites through its acquisition of PKG Design, Inc., the
developer and owner of two Internet websites: golfrounds.com and skiingusa.com.
Prior to the acquisition, PKG Design had entered into an agreement with Lycos,
Inc. ("Lycos"), a major Internet guide. Under the agreement, Lycos incorporated
golfrounds.com into the Lycos website so that its customers could use Lycos to
obtain information about golf (the "Lycos Agreement"). The non-interest revenues
have been insignificant and almost all were derived from selling advertisements,
often called banners, to reach Lycos customers. The Lycos Agreement was canceled
by Lycos effective December 5, 1999. On December 2, 1999, the Company entered
into a content licensing and distribution agreement with TicketMaster OnLine -
CitySearch, Inc. ("TMCS"). Under the agreement, TMCS will include the Company's
golf content on the TMCS Internet websites. In exchange, the Company will
receive a portion of net receipts generated from advertising banners,
sponsorships or other devices on the TMCS sites. There can be no assurance that
these revenues will be significant.
The Company's business is characterized by rapid technological change, new
product development and evolving industry standards. Inherent in the Company's
business are various risks and uncertainties, including its limited operating
history, unproven business model and the limited history of commerce on the
Internet.
The Company's success may depend in part upon the emergence of the Internet
as a communications medium, prospective product development efforts and
acceptance of the Company's brand name and products in the marketplace.
The Company was incorporated in 1968 under the laws of the State of
Florida. Its executive offices were located in Miami, Florida until September
1992 when such offices were relocated to Bedminster, New Jersey. In June 1999
the Company reincorporated in the state of Delaware. In April 2000 the Company's
executive offices were relocated to Kinnelon, New Jersey.
Effective on February 3, 2000, Paul O. Koether, John W. Galuchie, Jr. and
Thomas K. Van Herwarde resigned as directors of the Company and Robert H.
Donehew, Larry Grossman and John F. McCarthy, III took office as the new
directors of the Company. The change in composition of the board occurred in
connection with the sale on January 24, 2000 by Messrs. Koether, Galuchie and
Van Herwarde and certain other sellers of 500,000 shares of the Company's common
stock to seven purchasers. Mr. Van Herwarde remains President of the Company. In
connection with the sale, Mr. Koether and several entities he controls gave a
designee of the purchasers irrevocable proxies to vote an additional 449,690
shares of common stock owned by Mr. Koether and the entities he controls.
7
<PAGE>
Results of Operations
Available cash is invested in U.S. Treasury Securities with original
maturities of less than three months. For the six months ended February 29, 2000
interest income was $47,000 compared to $45,000 for the comparable period of the
prior fiscal year.
General, administrative and other expenses were $244,000 for the six months
ended February 29, 2000. Until March 31, 2000, a management fee of $12,500 per
quarter was paid to a company with which the Company was formerly affiliated for
accounting, financial and administrative management. The fee was based on the
former affiliate's estimated costs. On a going-forward basis, management will be
handling these tasks internally and such management fee will no longer be paid.
The remaining general and administrative expenses for the six-month period ended
February 29, 2000 consisted primarily of salary expenses of $62,000, health
insurance expenses of $65,000, legal expenses of $30,000 and stockholder
services expenses of $21,000. Amortization expense of $99,000 was incurred in
connection with the acquisition of PKG Design, Inc. for the six months ended
February 29, 2000.
Until September 1, 1999, the Company self-insured the first $20,000 of
employee medical claims per employee per year. From September 1, 1999 until
March 31, 2000, the Company self-insured the first $50,000 of employee medical
claims per employee per year. Effective as of March 31, 2000, the Company no
longer self-insures its employees' medical claims.
Liquidity and Capital Resources
At February 29, 2000, cash and cash equivalents and working capital were
approximately $1,881,000. U.S. Treasury Securities of approximately $1,766,000
mature at various dates through May 4, 2000 and bear interest rates ranging from
5.11% to 5.7%.
On March 16, 2000, the Company sold an aggregate of 1,333,005 shares of
common stock in a private placement that resulted in $1,566,672 of additional
capital for the Company.
Year 2000 Compliance
The Year 2000 problem is the result of certain computer programs being
written using two digits, rather than four digits, to define the applicable
year. Any computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, or not recognize the
date at all. If not corrected, this could result in system failures or
miscalculations that could result in service or other interruptions. To date, we
have not experienced any significant Year 2000 problems.
Testing and compliance monitoring as part of our Year 2000 program will
continue into 2000 to ensure that system changes and additions are Year 2000
compliant.
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PART II - OTHER INFORMATION
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Item 2. - Changes in Securities
On March 13, 2000, the Company issued five year options to purchase 20,000
shares of its common stock, par value $.01 per share, at a price of $2.5625 per
share, to each of its directors - Robert H. Donehew, John F. McCarthy III, and
Larry Grossman. Also on March 13, 2000, the Company issued 15,000 shares of its
common stock to Robert H. Donehew in consideration for his agreement to serve as
Vice President and Treasurer of the Company. The Company relied upon Section
4(2) of the Securities Act for an exemption from registration for these private
transactions.
On March 16, 2000, the Company sold 1,333,005 shares of common stock, par
value $.01 per share, of the Company, at a purchase price of $1.375 per share
(for aggregate gross proceeds of approximately $1,833,000), to 29 accredited
investors in a private placement offering. M.H. Meyerson & Co., Inc. acted as
the placement agent for the offering and was paid commissions of $128,301.60 and
a non-accountable expense allowance of $54,986.40. M.H. Meyerson also received
five year options to purchase 200,251 shares of the Company's common stock at a
price of $1.50 per share. The Company relied on Section 4(2) of the Securities
Act of 1933 and Rule 506 of Regulation D thereunder for an exemption from
registration for this offering and the issuance of options to M.H. Meyerson.
Item 6. - Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
10.1 Content Licensing and Distribution Agreement, dated
December 2, 1999, between the Company and TicketMaster
OnLine - CitySearch, Inc.*
10.2 Form of option agreement for options issued as of March 13,
2000.
10.3 Form of subscription agreement for private offering.
10.4 Form of agency agreement for private offering.
10.5 Form of placement agent's purchase option for private
offering.
10.6 Form of registration rights agreement between the Company
and certain security holders.
27 Financial Data Schedule.
__________________________________
* To be filed by amendment.
(b) Reports on Form 8-K
On January 19, 2000, the Company filed a report on Form 8-K to
announce, pursuant to Item 1 of Form 8-K, that agreements had
been signed relating to a pending change of control of the
Company.
On February 8, 2000, the Company filed a report on Form 8-K to
announce, pursuant to Item 1 of Form 8-K, that a change of
control of the Company had occurred.
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<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GOLF ROUNDS.COM, INC.
Dated: April 13, 2000 By: /s/ Robert H. Donehew
----------------------
Robert H. Donehew
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
10
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
10.1 Content Licensing and Distribution Agreement, dated December 2, 1999,
between the Company and TicketMaster OnLine - CitySearch, Inc.*
10.2 Form of option agreement for options issued as of March 13, 2000.
10.3 Form of subscription agreement for private offering.
10.4 Form of agency agreement for private offering.
10.5 Form of placement agent's purchase option for private offering.
10.6 Form of registration rights agreement between the Company and certain
security holders.
27 Financial Data Schedule.
__________________________________
* To be filed by amendment.
11
STOCK OPTION AGREEMENT
AGREEMENT, made as of _________ __, 2000, by and between GOLFROUNDS.COM,
INC., a Delaware corporation (the "Company"), and __________________ (the
"Director" or "Holder").
WHEREAS, by written consent dated ________ __, 2000 (the "Grant Date"), the
Board of Directors of the Company authorized the grant to the Director of an
option (the "Option") to purchase an aggregate of 20,000 shares of the
authorized but unissued common stock of the Company, $.01 par value (the "Common
Stock"), conditioned upon the Director's acceptance thereof upon the terms and
conditions set forth in this Agreement; and
WHEREAS, the Director desires to acquire the Option on the terms and
conditions set forth in this Agreement;
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants the Director the Option
to purchase all or any part of an aggregate of 20,000 shares of Common Stock
(the "Option Shares") on the terms and conditions set forth herein.
2. Non-Incentive Stock Option. The Option represented hereby is not
intended to be an Option that qualifies as an "Incentive Stock Option" under
Section 422 of the Internal Revenue Code of 1986, as amended.
3. Exercise Price. The exercise price of the Option shall be $____ per
share, subject to adjustment as hereinafter provided.
4. Exercisability. This Option shall become exercisable on ________ __,
2000, subject to the terms and conditions of this Agreement, and shall remain
exercisable until the close of business on ________ __, 2005 (the "Exercise
Period").
5. Termination Due to Death. Upon the death of the Director, the portion of
the Option, if any, that was exercisable as of the date of death may thereafter
be exercised by the legal representative of the estate or by the legatee of the
Director under the will of the Director, for a period of one year from the date
of such death or until the expiration of the Exercise Period, whichever period
is shorter. The portion of the Option, if any, that was not exercisable as of
the date of death shall immediately terminate upon death.
6. Withholding Tax. Not later than the date as of which an amount first
becomes includible in the gross income of the Director for Federal income tax
purposes with respect to the Option, the Director shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state and local taxes of any kind required by law to be withheld or
paid with respect to such amount. The obligations of the Company pursuant to
this Agreement shall be conditional upon such payment or arrangements with the
Company and the Company shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the Director
from the Company.
7. Adjustments.
(a) In the event of a stock split, stock dividend, combination of shares,
or any other similar change in the Common Stock of the Company as a whole, the
Board of Directors of the Company shall make equitable, proportionate
adjustments in the number and kind of shares covered by the Option and in the
option price hereunder.
(b) In the event of any reclassification or reorganization of the
outstanding shares of Common Stock other than a change covered by subsection (a)
hereof or that solely affects the par value of such shares of Common Stock, or
in the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and that does not result in any reclassification or
<PAGE>
reorganization of the outstanding shares of Common Stock), the Holder shall have
the right thereafter (until the expiration of the right of exercise of this
Option) to receive upon the exercise hereof after such event, for the same
aggregate Exercise Price payable hereunder immediately prior to such
reclassification, reorganization, merger or consolidation, the amount and kind
of consideration receivable by a holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Option immediately prior to such
event. The provisions of this subsection (b) shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
8. Method of Exercise.
8.1 Notice to the Company. The Option shall be exercised in whole or in
part by written notice in substantially the form attached hereto as Exhibit A
directed to the Company at its principal place of business accompanied by full
payment as hereinafter provided of the exercise price for the number of Option
Shares specified in the notice.
8.2 Delivery of Option Shares. The Company shall deliver a certificate
for the Option Shares to the Director as soon as practicable after payment
therefor.
8.3 Payment of Purchase Price.
8.3.1 Cash Payment. The Director shall make cash payments by wire
transfer, certified or bank check or personal check, in each case payable to the
order of the Company. The Company shall not be required to deliver certificates
for Option Shares until the Company has confirmed the receipt of good and
available funds in payment of the purchase price thereof.
8.3.2 Cashless Payment. The Company, in its sole discretion, may
allow the Director to use Common Stock of the Company owned by him or her to pay
the purchase price for the Option Shares by delivery of stock certificates in
negotiable form that are effective to transfer good and valid title thereto to
the Company, free of any liens or encumbrances. Shares of Common Stock used for
this purpose shall be valued at the Fair Market Value of the Company's Common
Stock on the last trading day preceding the date of exercise. "Fair Market
Value", unless otherwise required by any applicable provision of the Internal
Revenue Code of 1986, as amended, and any successor thereto and the regulations
thereunder, means, as of any given date: (i) if the Common Stock is listed on a
national securities exchange or quoted on the Nasdaq National Market or Nasdaq
SmallCap Market, the last sale price of the Common Stock in the principal
trading market for the Common Stock on such date, as reported by the exchange or
Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national
securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap
Market, but is traded in the over-the-counter market, the closing bid price for
the Common Stock on such date, as reported by the OTC Bulletin Board or the
National Quotation Bureau, Incorporated or similar publisher of such quotations;
and (iii) if the fair market value of the Common Stock cannot be determined
pursuant to clause (i) or (ii) above, such price as the Board of Directors shall
determine, in good faith.
8.3.3 Payment of Withholding Tax. Any required withholding tax may be
paid in cash or with Common Stock in accordance with Sections 8.3.1. and 8.3.2.
8.3.4 Exchange Act Compliance. Notwithstanding the foregoing, the
Company shall have the right to reject payment in the form of Common Stock if in
the opinion of counsel for the Company, (i) it could result in an event of
"recapture" under Section 16(b) of the Securities Exchange Act of 1934; (ii)
such shares of Common Stock may not be sold or transferred to the Company; or
(iii) such transfer could create legal difficulties for the Company.
9. Nonassignability. The Option shall not be assignable or transferable
except by will or by the laws of descent and distribution in the event of the
2
<PAGE>
death of the Director. No transfer of the Option by the Director by will or by
the laws of descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice thereof and a
copy of the will and such other evidence as the Company may deem necessary to
establish the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of the Option.
10. Company Representations. The Company hereby represents and warrants
to the Director that:
(i) the Company, by appropriate and all required action, is duly
authorized to enter into this Agreement and consummate all of the
transactions contemplated hereunder; and
(ii) the Option Shares, when issued and delivered by the Company to
the Director in accordance with the terms and conditions hereof, will be
duly and validly issued and fully paid and non-assessable.
11. Director Representations. The Director hereby represents and warrants
to the Company that:
(i) he or she is acquiring the Option and shall acquire the Option
Shares for his or her own account and not with a view towards the
distribution thereof;
(ii) he or she has received a copy of all reports and documents
required to be filed by the Company with the Securities and Exchange
Commission pursuant to the Exchange Act within the last 24 months and all
reports issued by the Company to its stockholders;
(iii) he or she understands that he or she must bear the economic risk
of the investment in the Option Shares, which cannot be sold by him or her
unless they are registered under the Securities Act of 1933 (the
"Securities Act") or an exemption therefrom is available thereunder and
that the Company is under no obligation to register the Option Shares for
sale under the 1933 Act;
(iv) in his or her position with the Company, he or she has had both
the opportunity to ask questions and receive answers from the officers and
directors of the Company and all persons acting on its behalf concerning
the terms and conditions of the offer made hereunder and to obtain any
additional information to the extent the Company possesses or may possess
such infor mation or can acquire it without unreasonable effort or expense
necessary to verify the accuracy of the information obtained pursuant to
clause (ii) above;
(v) he or she is aware that the Company shall place stop transfer
orders with its transfer agent against the transfer of the Option Shares in
the absence of registration under the 1933 Act or an exemption therefrom as
provided herein; and
(vi) The certificates evidencing the Option Shares shall bear the
following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. The shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of ________ __,
2000, a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
12. Restriction on Transfer of Option Shares.
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(a) Anything in this Agreement to the contrary notwithstanding, the
Director hereby agrees that he or she shall not sell, transfer by any means or
otherwise dispose of the Option Shares acquired by him or her without
registration under the Securities Act, or in the event that they are not so
registered, unless (i) an exemption from the Securities Act registration
requirements is available thereunder, and (ii) the Director has furnished the
Company with notice of such proposed transfer and the Company's legal counsel,
in its reasonable opinion, shall deem such proposed transfer to be so exempt.
(b) Anything in this Agreement to the contrary notwithstanding, the
Director hereby agrees that he or she shall not sell, transfer by any means or
otherwise dispose of the Option Shares acquired by him except in accordance with
the Company's policy, if any, regarding the regarding the sale and disposition
of securities owned by employees and/or directors of the Company.
13. Miscellaneous.
13.1 Notices. All notices, requests, deliveries, payments, demands and
other communications that are required or permitted to be given under this
Agreement shall be in writing and shall be either delivered personally or sent
by registered or certified mail, or by private courier, return receipt
requested, postage prepaid to the Company at its principal executive office and
to the Director at his address set forth below, or to such other address as
either party shall have specified by notice in writing to the other. Notice
shall be deemed duly given hereunder when delivered or mailed as provided
herein.
13.2 Stockholder Rights. The Director shall not have any of the rights
of a stockholder with respect to the Option Shares until such shares have been
issued after the due exercise of the Option.
13.3 Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach.
13.4 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. This Agreement
may not be amended except by writing executed by the Director and the Company.
13.5 Binding Effect; Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and, to the extent not
prohibited herein, their respective heirs, successors, assigns and
representatives. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto and as provided above, their
respective heirs, successors, assigns and representatives, any rights, remedies,
obligations or liabilities.
13.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (without regard to choice
of law provisions); provided, however, that all matters relating to or involving
corporate law shall be governed by the Delaware General Corporation Law.
13.7 Headings. The headings contained herein are for the sole purpose
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
GOLFROUNDS.COM, INC. Address:
By:______________________________
Name:
Title:
DIRECTOR: Address:
__________________________________
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EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
________________________
DATE
GolfRounds.com, Inc.
135 Kinnelon Road
Suite 104B
Kinnelon, New Jersey 07405
Attention: Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of _______ __, 2000
("Agreement") with GolfRounds.com, Inc. (the "Company"), I hereby irrevocably
elect to exercise the right to purchase _____ shares of the Company's common
stock, par value $.01 per share ("Common Stock"), which are being purchased for
investment and not for resale.
As payment for my shares, enclosed is (check and complete applicable
box[es]):
|_| a [personal check] [certified check] [bank check] payable to the order
of the Company in the sum of $ ;
|_| confirmation of wire transfer in the amount of $_____________; and/or
|_| With the consent of the Company, a certificate for ____ shares of the
Company's Common Stock, free and clear of any encumbrances, duly
endorsed, having a Fair Market Value (as such term is defined in my
Stock Option Agreement) of $_________.
I hereby represent, warrant to, and agree with, the Company that:
(i) I am acquiring the Option Shares for my own account, for
investment, and not with a view towards the distribution thereof;
(ii) I have received a copy of all reports and documents required to
be filed by the Company with the Commission pursuant to the Securities Exchange
Act of 1934 within the last 24 months and all reports issued by the Company to
its stockholders;
(iii) I understand that I must bear the economic risk of the
investment in the Option Shares, which cannot be sold by me unless they are
registered under the Securities Act of 1933 (the "Securities Act") or an
exemption therefrom is available thereunder and that the Company is under no
obligation to register the Option Shares for sale under the Securities Act;
(iv) I agree that I will not sell, transfer by any means or otherwise
dispose of the Option Shares acquired by me hereby except in accordance with
Company's policy, if any, regarding the sale and disposition of securities owned
by employees and/or directors of the Company;
(v) in my position with the Company, I have had both the opportunity
to ask questions and receive answers from the officers and directors of the
Company and all persons acting on its behalf concerning the terms and conditions
of the offer made hereunder and to obtain any additional information to the
<PAGE>
extent the Company possesses or may possess such information or can acquire it
without unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;
(vi) I am aware that the Company shall place stop transfer orders with
its transfer agent against the transfer of the Option Shares in the absence of
registration under the Securities Act or an exemption therefrom as provided
herein; and
(vii) the certificates evidencing the Option Shares shall bear the
following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. The shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of _______ __,
2000, a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
- ------------------------------ ------------------------------
(Signature) (Address)
- ------------------------------ ------------------------------
(Print Name)
------------------------------
(Social Security Number)
2
Print Name of Subscriber_________________
SUBSCRIPTION AGREEMENT
GolfRounds.com, Inc.
376 Main Street, P.O. Box 74
Bedminster, New Jersey 07921
Ladies and Gentlemen:
1. Subscription; Minimum; Placement Agent. I (sometimes referred to herein
as the "Investor") hereby subscribe for and agree to purchase _______________
shares of common stock, par value $.01 per share ("Common Stock"), of
GolfRounds.com, Inc. ("Company"), a Delaware corporation, at a purchase price of
$1.375 per share on the terms and conditions described herein and in the
Confidential Term Sheet ("Term Sheet"), dated March 3, 2000, together with all
exhibits and any supplements. The minimum subscription is $27,500, but M.H.
Meyerson & Co., Inc. ("Meyerson" or "Placement Agent") and the Company have the
discretion to accept subscriptions for less than the minimum. Meyerson is acting
as the exclusive placement agent for this offering. This offering will be made
on a "best efforts, $1,145,375 minimum, $1,832,875 maximum" basis.
2. Description of the Common Stock. Holders of the common stock are
entitled to dividends as and when declared by the Board of Directors of the
Company from funds legally available for such purpose. However, the Company has
never declared or paid dividends on its common stock and does not intend to do
so for the foreseeable future. Upon liquidation, shares of common stock are
entitled to a pro rata share in any distribution available to holders of common
stock. The holders of common stock have one vote per share on each matter to be
voted upon by stockholders. The common stock is not entitled to cumulative
voting and holders of common stock do not have any pre-emptive rights. All of
the outstanding shares of common stock are, and all of the shares of common
stock issued in this offering will be, validly issued, fully paid and
non-assessable.
3. Purchase.
3.1 Escrow Account. I (i) hereby tender instructions for the transfer of
funds in the amount indicated above from my account at Meyerson or (ii) have
instructed my bank to wire funds in the amount indicated above from my account
at such bank to the order of "CST&T AAF - GolfRounds.com, Inc." I hereby tender
two manually executed copies of this Subscription Agreement, a completed and
executed copy of my Confidential Purchaser Questionnaire and a completed and
executed copy of my NASD Questionnaire.
3.2 Offering Period. This offering will continue until March 31, 2000,
unless such date is extended, without notice to the Investor, by mutual consent
of Meyerson and the Company, to a date not later than April 30, 2000
("Termination Date"). Prior to the earlier of a Closing (as defined in Section 5
hereof) or the Termination Date, my cash, check or wire transfer delivered
herewith will be held in escrow by Continental Stock Transfer & Trust Company,
<PAGE>
as escrow agent, subject to the terms and conditions herein. If subscriptions
for at least 833,000 shares of Common Stock are not received and accepted by the
Company by the Termination Date, my payment will be returned to me without
interest or deduction.
4. Acceptance or Rejection of Subscription. The Company and Meyerson have
the right to reject this subscription for the Common Stock, in whole or in part
for any reason and at any time prior to the Closing (as defined in Section 5
below) with respect to my subscription, notwithstanding prior receipt by me of
notice of acceptance of my subscription. In the event of the rejection of this
subscription, my subscription payment will be promptly returned to me without
interest or deduction and this Subscription Agreement shall have no force or
effect. In the event my subscription is accepted and there is a Closing, my
subscription proceeds shall be released to the Company and the certificates
representing the shares of Common Stock will be promptly delivered to me.
5. Closing and Delivery of Common Stock. An initial closing ("Initial
Closing") may occur at the office of Graubard Mollen & Miller ("GM&M") at any
time prior to the Termination Date and after the sale by the Company of at least
833,000 shares of Common Stock, as determined jointly by the Company and
Meyerson. After the Initial Closing, subsequent closings with respect to the
sale of additional shares of Common Stock may take place at any time prior to
the Termination Date (each such closing, together with the Initial Closing,
being referred to as the "Closing"). The Common Stock subscribed for herein
shall not be deemed issued to or owned by me until two copies of this
Subscription Agreement have been executed by me and countersigned by the Company
and a Closing with respect to my subscription has occurred.
6. Disclosure. This offering is limited to accredited investors as defined
in Section 2(15) of the Securities Act of 1933, as amended ("Securities Act"),
and Rule 501 promulgated thereunder, and is being made without registration
under the Securities Act in reliance upon the exemptions contained in Sections
3(b), 4(2) and/or 4(6) of the Securities Act and applicable state securities
laws. I acknowledge receipt of the Term Sheet and all exhibits listed therein
and represent that I have carefully reviewed and understand the Term Sheet and
its exhibits. I have received all information and materials regarding the
Company that I have requested.
7. Registration Rights; Lock-Up.
7.1 Registration in 13 Months.
(a) Grant of Right. The Company agrees to file a registration statement
under the Securities Act for the resale of the common stock sold in the offering
contemplated by the Term Sheet (the "Registrable Securities") not later than 13
months after the Initial Closing and to use its best efforts to have such
registration statement declared effective promptly thereafter. The Company's
obligation to file a registration statement pursuant to this Section 7.1 shall
be deemed to have been fulfilled if and to the extent that prior to the date
that is 13 months after the Initial Closing the Registrable Securities are
included on a registration statement filed by the Company pursuant to Section
7.2 below.
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<PAGE>
(b) Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, but the Investors shall pay any and all
underwriting commissions and the fees and expenses of any legal counsel selected
by the Investors to represent them in connection with the sale of the
Registrable Securities. The Company agrees to use its best efforts to qualify or
register the Registrable Securities in such States as are reasonably requested
by the holders ("Holders") thereof; provided, however, that in no event shall
the Company be required to register the Registrable Securities in a State in
which such registration would cause (i) the Company to be obligated to register
or be licensed to do business in such State, or (ii) the principal stockholders
of the Company to be obligated to escrow their shares of capital stock of the
Company. The Company shall cause any registration statement filed pursuant to
the rights granted under Section 7.1(a) to remain effective, and any State
qualifications or registrations obtained or filed pursuant to this Section
7.1(b) to continue in effect, for a period of at least nine consecutive months
from the date that the Holders of the Registrable Securities covered by such
registration statement are first given the opportunity to sell all of such
securities.
7.2 "Piggy-Back" Registration.
(a) Grant of Right. In addition to the right of registration set forth in
Section 7.1, the Holders shall have the right until the date that is five years
after the date of the Initial Closing to include the Registrable Securities as
part of any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) under the Securities
Act or pursuant to Form S-8 or any equivalent form), provided, however, that if,
in the written opinion of the Company's managing underwriter or underwriters, if
any, for such offering, the inclusion of the Registrable Securities, when added
to the securities being registered by the Company or the selling stockholder(s),
will exceed the maximum amount of the Company's securities that can be marketed
(i) at a price reasonably related to their then current market value, or (ii)
without materially and adversely affecting the entire offering, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holders until 90 days after the registration statement for such offering
has become effective and provided further that, if any securities are registered
for sale on behalf of other stockholders in such offering and such stockholders
have not agreed to defer such sale until the expiration of such 90 day period,
the number of securities to be sold by all stockholders in such public offering
during such 90 day period shall be apportioned pro rata among all such selling
stockholders, including all Holders of the Registrable Securities, according to
the total amount of securities of the Company owned by said selling
stockholders, including all Holders of the Registrable Securities.
(b) Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel selected by the
Holders to represent them in connection with the sale of the Registrable
Securities. In the event of such a proposed registration, the Company shall
furnish the then Holders of outstanding Registrable Securities with not less
than 30 days' written notice prior to the proposed date of filing of such
registration statement. Such notice shall continue to be given for each
registration statement filed by the Company until the earlier of (i) such time
as all of the Registrable Securities have been sold by the Holders thereof or
(ii) the expiration of the "piggy- back" rights provided for herein. The Holders
of the Registrable Securities shall exercise the "piggy-back" rights provided
for herein by giving written notice within 20 days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggy-back"
rights to remain effective for a period of at least nine consecutive months from
the date that the Holders of the Registrable Securities covered by such
registration statement are first given the opportunity to sell all of such
-3-
<PAGE>
securities. Notwithstanding the provisions of this Section 7.2, the Company
shall have the right at any time after it shall have given written notice of its
intention to file a registration statement (irrespective of whether a written
request for inclusion of any Registrable Securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
7.3 General Terms.
(a) Indemnification. The Company shall indemnify the Holder(s) of the
Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in (i)
such registration statement; or (ii) any application or other document or
written communication (in this Section 7.3 collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Registrable Securities under
the securities laws thereof or filed with the Securities and Exchange Commission
("Commission"), any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
the Holder(s) by or on behalf of the Holder(s) expressly for use in such
registration statement or in any application, as the case may be. The Company
agrees promptly to notify the Holder(s) of the commencement of any litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Registrable Securities or
in connection with the registration statement or any application. The Holder(s)
and their successors and assigns shall severally, and not jointly, indemnify the
Company, against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holders, with respect
to such Holders, in writing, for specific inclusion in such registration
statement or any application.
(b) Elimination of Registration Rights. Notwithstanding anything to the
contrary in Section 7.2, no Holders shall be entitled to have their Registrable
Securities registered under the Securities Act if, in the opinion of counsel to
the Company, they may be sold without restriction pursuant to Rule 144(k)
promulgated under the Securities Act and any restrictive legends under the
Securities Act are removed from the certificates representing such securities
and any stop transfer order for such certificates is removed.
-4-
<PAGE>
(c) Successors and Assigns. The registration rights granted to the
Holders inure to the benefit of all the Holders' successors, heirs, pledgees,
assignees, transferees and purchasers of the Registrable Securities.
(d) Documents Delivered to Holders. The Company shall furnish to each
Holder participating in any of the foregoing offerings that are underwritten and
to each underwriter of any such offering, if any, a signed counterpart,
addressed to such Holder or underwriter, of (i) an opinion of counsel to the
Company, dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting agreement related thereto), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and a letter dated the date of the closing under the underwriting agreement)
signed by the independent public accountants who have issued a report on the
Company's financial statements included in such registration statement, in each
case covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities. The Company shall also deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc.
(e) Underwriting Agreement. The Company shall enter into an underwriting
agreement with the underwriter representing the Holders whose Registrable
Securities are being registered pursuant to Section 7.1 in connection with an
underwritten offering. Such underwriter must be reasonably acceptable to the
Company. Such agreement shall be reasonably satisfactory in form and substance
to the Company, each Holder and such underwriter, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the underwriter.
The Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Registrable Securities and may, at their option,
require that any or all the representations, warranties and covenants of the
Company to or for the benefit of such underwriter shall also be made to and for
the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriter except as they may relate to such Holders, their shares and their
intended methods of distribution.
(f) Documents to be Delivered by Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company requesting
information customarily sought of selling security holders.
-5-
7.4 Lock-up. I agree that, notwithstanding the registration rights set
forth in this Section 7, the Shares offered hereby may not be sold or otherwise
transferred until the date that is one year after the date of the Initial
Closing, unless (i) Meyerson, in its sole discretion, agrees to the sale of all
or part of such securities at an earlier date and (ii) if I am a Pennsylvania
resident, I comply with ss. 204.11 of the Pennsylvania Blue Sky Regulations. The
parties hereto agree that Meyerson is a third-party beneficiary of this
Subscription Agreement and that no modification of the "lock-up" provisions
contained in this Section 7.4 may be made without the prior written consent of
Meyerson.
8. Investor Representations and Warranties. I acknowledge, represent and
warrant to, and agree with, the Company and the Placement Agent as follows:
(a) I am aware that the Common Stock is a speculative investment that
involves a high degree of risk of loss of my entire investment. I have read and
fully understand the Term Sheet, including the section entitled "Risk Factors".
I acknowledge and fully understand the nature of the risks involved in
purchasing the Common Stock.
(b) I acknowledge and am aware that despite its organization in 1968 the
Company is essentially in the startup stage, has not yet derived sufficient
revenues from its current business operations to maintain operations and has
incurred losses since the commencement of its current business operations in May
1999. I acknowledge that there is no assurance as to the future performance of
the Company.
(c) I acknowledge that, notwithstanding the Company's commitment herein,
there can be no assurance that the Company will file any registration statement
for the securities I am purchasing, that such registration statement, if filed,
will be declared effective or, if declared effective, that the Company will be
able to keep it effective until I sell the securities registered thereon.
(d) I am purchasing the Common Stock for my own account for investment
and not with a view to or for sale in connection with the distribution of the
Common Stock, nor with any present intention of selling or otherwise disposing
of all or any part of the Common Stock. I understand that there is no market at
present and there may not be any market in the future for the Common Stock. I
agree that (i) the purchase of the Common Stock is a long-term investment, (ii)
I may have to bear the economic risk of investment for an indefinite period of
time because the Common Stock has not been registered under the Securities Act
and, notwithstanding the Company's commitment herein, may not be registered and,
cannot be resold, pledged, assigned, or otherwise disposed of unless it is
subsequently registered under said Securities Act and under applicable
securities laws of certain states or an exemption from such registration is
available. I understand that, except as set forth herein, the Company is under
no obligation to register the Common Stock or to assist me in complying with any
exemption from such registration under the Securities Act or any state
securities laws. I hereby authorize the Company to place a legend denoting the
restrictions on the shares of Common Stock to be issued.
(e) I recognize that the Common Stock, as an investment, involves a high
degree of risk including, but not limited to, the risk of economic losses from
operations of the Company and the total loss of my investment. I am qualified by
my knowledge and experience to evaluate investments of this type. I believe that
the investment in the Common Stock is suitable for me based upon my investment
objectives and financial needs, and I have adequate means for providing for my
-6-
<PAGE>
current financial needs and contingencies and have no need for liquidity with
respect to my investment in the Company. The investment in the Company does not
constitute my complete portfolio.
(f) I have been given access to full and complete information regarding
the Company and have utilized such access to my satisfaction for the purpose of
obtaining information in addition to, or verifying information included in, the
Term Sheet and exhibits thereto, and I have either met with or been given
reasonable opportunity to meet with officers of the Company for the purpose of
asking questions of, and receiving answers from, such officers concerning the
terms and conditions of the offering of the Common Stock and the business and
operations of the Company and to obtain any additional information, to the
extent reasonably available.
(g) I have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Common Stock and have obtained, in my judgment, sufficient information from
the Company to evaluate the merits and risks of an investment in the Company. I
have not utilized any person as my purchaser representative as defined in
Regulation D in connection with evaluating such merits and risks.
(h) I have relied solely upon my own investigation in making a decision
tp invest in the Company.
(i) I have received no representation or warranty from the Company or the
Placement Agent or any of their respective officers, directors, employees or
agents in respect of my investment in the Company and I have received no
information (written or otherwise) from them relating to the Company or its
business other than as set forth in the Term Sheet. I am not participating in
the offer as a result of or subsequent to: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television, radio or the Internet or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising.
(j) I have had full opportunity to ask questions and to receive
satisfactory answers concerning the offering and other matters pertaining to my
investment and all such questions have been answered to my full satisfaction. In
addition, as required by Section 517.061(11)(a)(3), Florida Statutes and by Rule
3-500.05(a) thereunder, if I am a Florida resident I may have, at the offices of
the Company, at any reasonable hour, after reasonable notice, access to the
materials set forth in the Rule that the Company can obtain without unreasonable
effort or expense.
(k) I have been provided an opportunity to obtain any additional
information concerning the offering and the Company and all other information to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense.
(l) I am an "accredited investor" as defined in Section 2(15) of the
Securities Act and in Rule 501 promulgated thereunder.
(m) I understand that (i) the Common Stock has not been registered under
the Securities Act or the securities laws of certain states in reliance on
specific exemptions from registration, (ii) no securities administrator of any
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<PAGE>
state or the federal government has recommended or endorsed this offering or
made any finding or determination relating to the fairness of an investment in
the Company, and (iii) the Company is relying on my representations and
agreements for the purpose of determining whether this transaction meets the
requirements of the exemptions afforded by the Securities Act and certain state
securities laws.
(n) I have been urged to seek independent advice from my professional
advisors relating to the suitability of an investment in the Company in view of
my overall financial needs and with respect to the legal and tax implications of
such investment.
(o) If the Investor is a corporation, company, trust, employee benefit
plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it
is authorized and qualified to become an Investor in the Company and the person
signing this Subscription Agreement on behalf of such entity has been duly
authorized by such entity to do so.
(p) I hereby acknowledge and am aware that except for any rescission
rights that may be provided under applicable laws, I am not entitled to cancel,
terminate or revoke this subscription, and any agreements made in connection
herewith shall survive my death or disability.
(q) My responses to the questions in my Purchaser Questionnaire and my
NASD Questionnaire delivered herewith to the Company are true and correct.
9. Indemnification. I hereby agree to indemnify and hold harmless the
Company and Meyerson, as Placement Agent, their respective officers, directors,
stockholders, employees, agents, and attorneys against any and all losses,
claims, demands, liabilities, and expenses (including reasonable legal or other
expenses, including reasonable attorneys' fees and other expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever
incurred by the indemnified party in any action or proceeding between the
indemnitor and the indemnified party or between the indemnified party and any
third party or otherwise) incurred by each such person in connection with
defending or investigating any such claims or liabilities, whether or not
resulting in any liability to such person, to which any such indemnified party
may become subject under the Securities Act, under any other statute, at common
law or otherwise, insofar as such losses, claims, demands, liabilities and
expenses (a) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact made by me and contained in this
Subscription Agreement or my Purchaser Questionnaire, or (b) arise out of or are
based upon any breach by me of any representation, warranty, or agreement made
by me contained herein, or (c) arise out of or are based upon any material
misstatement or omission in my Purchaser Information. Meyerson is a third-party
beneficiary of this Section 9 and this Section 9 may not be modified or amended
without the prior written agreement of Meyerson.
10. Severability; Remedies. In the event any parts of this Subscription
Agreement are found to be void, the remaining provisions of this Subscription
Agreement shall nevertheless be binding with the same effect as though the void
parts were deleted.
11. Governing Law and Jurisdiction. This Subscription Agreement will be
deemed to have been made and delivered in New York City and will be governed as
to validity, interpretation, construction, effect and in all other respects by
the internal laws of the State of New York. The Company hereby (i) agrees that
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<PAGE>
any legal suit, action or proceeding arising out of or relating to this
Subscription Agreement shall be instituted exclusively in New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York, (ii) waives any objection to the venue of any
such suit, action or proceeding and the right to assert that such forum is not a
convenient forum for such suit, action or proceeding, (iii) irrevocably consents
to the jurisdiction of the New York State Supreme Court, County of New York, and
the United States District Court for the Southern District of New York in any
such suit, action or proceeding, (iv) agrees to accept and acknowledge service
of any and all process that may be served in any such suit, action or proceeding
in New York State Supreme Court, County of New York or in the United States
District Court for the Southern District of New York and (v) agrees that service
of process upon it mailed by certified mail to its address shall be deemed in
every respect effective service of process upon it in any suit, action or
proceeding.
12. Counterparts. This Subscription Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
13. Benefit. This Subscription Agreement shall be binding upon and inure to
the benefit of the parties hereto (and Meyerson to the extent it is a
third-party beneficiary hereof) and their respective heirs, executors, personal
representatives, successors and assigns. Meyerson shall be deemed to be a
third-party beneficiary with respect to any sections hereof that so state or
that otherwise indicate that Meyerson would be entitled to rely on the
representations, warranties or covenants made by me therein.
14. Notices. All notices, offers, acceptance and any other acts under this
Subscription Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by overnight
courier service, by confirmed facsimile or, if mailed, postage prepaid, by
certified mail (return receipt requested), and shall be effective three days
after being placed in the mail if mailed, or upon receipt or refusal of receipt,
if delivered personally or by courier or confirmed telecopy, in each case
addressed to a party. The addresses for such communications shall be:
Investor: At the address designated on the signature page of this
Subscription Agreement.
The Company: GolfRounds.com, Inc.
376 Main Street, P.O. Box 74
Bedminster, New Jersey 07921
Attn: John F. McCarthy, III, Chief Executive Officer
Fax: (202)
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<PAGE>
In either case, with copies to:
Hartman & Craven LLP
460 Park Avenue
New York, New York 10022
Attention: Edward I. Tishelman
Fax: (212) 223-9911
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Attention: David Alan Miller
Fax: (212) 818-8881
or to such other address as any of them, by notice to the others may designate
from time to time.
15. Oral Evidence. This Subscription Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior oral and written agreements between the parties hereto with
respect to the subject matter hereof. This Subscription Agreement may not be
changed, waived, discharged, or terminated orally but, rather, only by a
statement in writing signed by the party or parties against which enforcement or
the change, waiver, discharge or termination is sought.
16. Section Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part, any of the terms or
provisions of this Subscription Agreement.
17. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall survive the
delivery of, and the payment for, the Common Stock.
18. Acceptance of Subscription. The Company may accept this Subscription
Agreement at any time for all or any portion of the Common Stock subscribed for
by executing a copy hereof as provided and notifying me within a reasonable time
thereafter.
Residents of All States: In making an investment decision, investors must
rely on their own examination of the Company and the terms of the offering,
including the merits and risks involved. The shares of Common Stock offered
hereby have not been registered under the Securities Act, as amended, or the
securities laws of any state and are being offered and sold in reliance on
exemptions from the registration requirements of said Act and such laws. The
Common Stock is subject to restriction on transferability and resale and may not
be transferred or resold except as permitted under said Act and such laws
pursuant to registration or exemption therefrom. Investors should be aware that
they will be required to bear the financial risks of this investment for an
indefinite period of time. The Common Stock has not been approved or disapproved
-10-
<PAGE>
by the Securities and Exchange Commission, any state securities commission or
other regulatory authority, nor have any of the foregoing authorities passed
upon or endorsed the merits of the offering or the accuracy or adequacy of the
Term Sheet. Any representation to the contrary is unlawful.
FOR FLORIDA RESIDENTS: These securities have not been registered under the
Securities Act of 1933, as amended, or the Florida Securities Act, by reason of
specific exemptions thereunder relating to the limited availability of the
offering. These securities cannot be sold, transferred, or otherwise disposed of
to any person or entity unless subsequently registered under the Securities Act
of 1933, as amended, or the Securities Act of this State, if such registration
is required.
Pursuant to Section 517.061(11) of the Florida Securities Act, when sales
are made to five (5) or more persons in Florida, any sale made pursuant to
Subsection 517.061(11) of the Florida Securities Act shall be voidable by such
Florida purchaser either within three days after the first tender of
consideration is made by the purchaser to the issuer, an agent of the issuer, or
an escrow agent, or within three days after the availability of the privilege is
communicated to such purchaser, whichever occurs later.
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<PAGE>
Manner in Which Title is to be Held. (check one)
-----------------------------------
____ Individual Ownership
____ Community Property
____ Joint Tenant with Right of Survivorship (both parties must sign)
____ Partnership
____ Tenants in Common
____ Corporation
____ Trust
____ Other (please indicate)
INDIVIDUAL INVESTORS ENTITY INVESTORS
- ------------------------- ----------------------
Signature (Individual) Name of Entity, If Any
------------------------
*Signature
Signature (all record holders should sign) Its: ________________________
Title
- ------------------------- ------------------------------
Names Typed or Printed Names Typed or Printed
Address to Which Correspondence Address to Which Correspondence
Should be Directed Should be Directed
- ------------------------- -------------------------
- ------------------------- -------------------------
- ------------------------- -------------------------
City, State and Zip Code City, State and Zip Code
- ------------------------- -------------------------
Social Security Number Tax Identification Number
* If Common Stock is being subscribed for by any entity, the Certificate of
the Signatory on the next page must also be completed.
- ------------------------------------------------------------------------------
The foregoing subscription is accepted and the Company hereby agrees to be bound
by its terms.
GOLFROUNDS.COM, INC.
Dated: , 2000 By:_________________________
------------------- Name:
Title:
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<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Common Stock is being subscribed for by an entity)
I, __________________________, the ________________________________
(name of signatory) (title)
of
-----------------------------------------------------------------------, a
(name of entity)
- ----------------------------------------------------------------------------
(type of entity)
hereby certify that the above entity is duly empowered and authorized to
purchase the Common Stock and that I am duly empowered and authorized by the
entity to execute the Subscription Agreement on its behalf.
IN WITNESS WHEREOF, I have executed this Certificate this ____ day of
_________, 2000.
(Signature)
-13-
GOLFROUNDS.COM, INC.
AGENCY AGREEMENT
As of March 3, 2000
M.H. Meyerson & Co., Inc.
525 Washington Boulevard
Jersey City, New Jersey 07303-0260
Gentlemen:
GolfRounds.com, Inc., a Delaware corporation ("Company"), proposes to offer
for sale in a private placement ("Offering") a minimum of 833,000 shares of
common stock, par value $.01 per share ("Common Stock"), and a maximum of
1,333,000 shares of Common Stock, at a purchase price of $1.375 per share. The
shares of Common Stock ("Shares") will be offered on a "best efforts, $1,145,375
minimum, $1,832,875 maximum" basis, in accordance with Section 4(2) and/or 3(b)
of the Securities Act of 1933, as amended ("Securities Act"), and Rules 501
through 506 of Regulation D ("Reg D") promulgated thereunder, only to
"accredited investors," as defined in Reg D. The minimum subscription amount
will be $27,500, but you may accept subscriptions for amounts less than $27,500
in your discretion and with the Company's consent.
The Shares have the terms and conditions reflected in the Company's
Confidential Term Sheet dated March 3, 2000 to be delivered to each purchaser of
Shares ("Term Sheet"). The Term Sheet, together with all exhibits thereto, will
be referred to herein as the "Offering Documents."
1. Appointment of Placement Agent; The Offering Period.
1.1 Appointment of Placement Agent. M.H. Meyerson & Co., Inc. ("Meyerson"
or "Placement Agent") is hereby appointed exclusive Placement Agent of the
Company during the offering period herein specified ("Offering Period") for the
purpose of assisting the Company in placing the Shares with purchasers who are
qualified accredited investors ("Subscribers"). The Placement Agent hereby
accepts such agency and agrees to assist the Company in placing Shares with the
Subscribers. The Placement Agent's agency hereunder is not terminable by the
Company except upon termination of the Offering or breach by the Placement Agent
of its material obligations hereunder.
1.2 Offering Period. The Offering Period shall commence on the day the
Offering Documents are first made available to the Placement Agent by the
Company and shall continue until March 31, 2000; provided, however, that the
Offering Period may be extended until a date not later than April 30, 2000 by
mutual decision of the Placement Agent and the Company without notice to any
Subscriber (the last day of the Offering Period, as it may be extended, is
referred to as the "Termination Date"). If, at any time during the Offering
Period, subscriptions for at least $1,145,375 of Shares have been received and
<PAGE>
accepted (and funds in payment therefor have cleared), then, upon the mutual
consent of the Company and the Placement Agent, a closing ("Initial Closing")
shall take place with respect to such accepted subscriptions and the Company
shall continue the offering until all of the Shares are sold or the Termination
Date, whichever occurs first. After the Initial Closing, subsequent closings
with respect to accepted subscriptions for additional Shares may take place at
any time during the Offering Period as may be mutually determined by the Company
and the Placement Agent (the Initial Closing and any subsequent closing each
will be referred to herein as a "Closing"). If subscriptions for at least
$1,145,375 of Shares are not received and accepted (and funds in payment
therefor cleared) by the Termination Date, then the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction.
1.3 Placement Agent's Purchase Option. The Company hereby agrees to issue
and sell to the Placement Agent (and/or its designees) an option ("Placement
Agent's Purchase Option") to purchase, at an initial exercise price of $1.50 per
share, an aggregate of that number of Shares ("Placement Agent's Shares") as
shall equal 15% of the aggregate number of Shares sold in the Offering. At each
Closing, the Company shall issue that portion of the Placement Agent's Purchase
Option that corresponds to the number of shares sold at such Closing and the
Placement Agent shall pay the Company an amount equal to $.0005 for each share
covered by the portion of the Placement Agent's Purchase Option issued at such
Closing. The Placement Agent's Shares shall be identical to the Shares sold in
the Offering. The Placement Agent's Purchase Option shall be exercisable for a
period of five years commencing on the date of the Initial Closing.
1.4 Offering Documents. The Company will provide the Placement Agent with a
sufficient number of copies of the Offering Documents and the forms of
subscription agreement ("Subscription Agreement") and Confidential Purchaser
Questionnaire to be executed by each purchaser for delivery to potential
Subscribers and such other information, documents and instruments that the
Placement Agent deems reasonably necessary to act as Placement Agent hereunder
and to comply with the rules, regulations and judicial and administrative
interpretations respecting compliance with applicable state and federal statutes
related to the Offering.
1.5 Segregation of Funds. Each subscriber for Shares shall tender to the
Placement Agent a wire transfer or check payable to the order of "CST AAF -
GolfRounds Escrow Account" in the amount of the investment subscribed for, which
funds shall be held in escrow by Continental Stock Transfer & Trust Company, as
escrow agent, in accordance with Rules 10b-9 and 15c2-4 promulgated under the
Securities Exchange Act of 1934 ("Exchange Act"), as set forth in the Offering
Documents.
1.6 No Firm Commitment. The Company understands and acknowledges that the
undertaking by the Placement Agent pursuant to this Agreement is not a "firm
commitment" offering and that the Placement Agent is not obligated in any way to
purchase or sell the Shares offered hereby.
1.7 Participation by Selected Dealers. The Placement Agent may engage other
persons that are members of the National Association of Securities Dealers, Inc.
("NASD") or registered representatives of such members to assist the Placement
Agent in the Offering (each such person being hereinafter referred to as a
"Selected Dealer") and the Placement Agent may allow such persons such part of
the compensation and payment of expenses payable to the Placement Agent
hereunder as the Placement Agent shall determine.
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<PAGE>
2. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Placement Agent and the Selected Dealers upon the execution
of this Agreement and again at each Closing as follows:
2.1 Due Incorporation and Qualification. The Company has been duly
incorporated, is validly existing and is in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the business, operations, assets, financial
condition or prospects of the Company ("Material Adverse Effect"). The Company
has all requisite corporate power and authority necessary to own or hold its
properties and conduct its business as described in the Offering Documents.
2.2 Authorized Capital. The Company is authorized to issue 12,000,000
shares of Common Stock. 2,099,491 shares of Common Stock are currently issued
and outstanding. All of the issued and outstanding shares of Common Stock have
been duly and validly authorized and issued and are fully paid and
non-assessable. None of the holders of such outstanding shares of Common Stock
are subject to personal liability solely by reason of being such a holder. The
offers and sales of such outstanding shares of Common Stock were at all relevant
times either registered under the Securities Act and the applicable state
securities or Blue Sky laws or exempt from such registration.
2.3 No Preemptive Rights; Options; Registration Rights. To the Company's
best knowledge, (a) except as set forth on Schedule 2.3, there are no preemptive
or other rights to subscribe for or purchase, or any restriction upon the voting
or transfer of, any shares of Common Stock or other securities of the Company,
under the Certificate of Incorporation or By-Laws of the Company or under any
agreement or other outstanding instrument to which the Company is a party or by
which it is bound; (b) the Company does not have outstanding any option,
warrant, convertible security, or other right permitting or requiring it to
issue, or otherwise to purchase or convert any obligation into, shares of Common
Stock or other securities of the Company and the Company has not agreed to issue
or sell any shares of Common Stock or other securities of the Company; and (c)
no holder of any of the Company's securities has any "piggyback" or demand
registration rights. Schedule 2.3 sets forth any registration rights held by any
holders of the Company's securities to the Company's best knowledge.
2.4 Financial Statements. To the Company's best knowledge, (a) the
financial statements of the Company included in the Offering Documents
("Financials") fairly present the financial position and results of operations
of the Company at the dates thereof and for the periods covered thereby,
subject, in the case of interim periods, to year-end adjustments and normal
recurring accruals, and (b) the Company has no material liabilities or
obligations, contingent, direct, indirect or otherwise except (i) as set forth
in the latest balance sheet included in the Financials or the footnotes thereto
(the date of such balance sheet being referred to as the "Balance Sheet Date"),
and (ii) those incurred in the ordinary course of business since the Balance
Sheet Date.
2.5 No Material Adverse Changes. To the Company's best knowledge, except as
otherwise stated in the Offering Documents, since the Balance Sheet Date, there
has not been any change in the condition, financial or otherwise, of the Company
that could result, singly or in the aggregate, in a prospective Material Adverse
Effect on the Company, except in each case as described in or contemplated by
the Term Sheet.
3
<PAGE>
2.6 Subsidiaries. The Company has no subsidiaries and has no interest in,
shares of capital stock of or right to acquire an interest in or shares of
capital stock of any other corporation, limited liability company, partnership
or other entity.
2.7 Taxes. To the Company's best knowledge, (a) the Company has filed all
federal tax returns and all state and municipal and local tax returns (whether
relating to income, sales, franchise, withholding, real or personal property or
other types of taxes) required to be filed under the laws of the United States
and applicable states, and has paid in full all taxes that have become due
pursuant to such returns or claimed to be due by any taxing authority or
otherwise due and owing; provided, however, that the Company has not paid any
tax, assessment, charge, levy or license fee that it is contesting in good faith
and by proper proceedings and adequate reserves for the accrual of same are
maintained if required by generally accepted accounting principles; and (b) the
Company has withheld, collected and paid all levies, assessments, license fees
and taxes to the extent required. As used herein, "tax" or "taxes" include all
taxes, charges, fees, levies or other assessments imposed by any Federal, state,
local, or foreign taxing authority, including, without limitation, income,
premium, recapture, credit, excise, property, sales, use, occupation, service,
service use, leasing, leasing use, value added, transfer, payroll, employment,
license, stamp, franchise or similar taxes (including any interest earned
thereon or penalties or additions attributable thereto).
2.8 Finder's Fees; Other Underwriters. To the Company's best knowledge, (a)
the Company is not obligated to pay a finder's fee to anyone in connection with
the introduction of the Company to the Placement Agent or the consummation of
the Offering contemplated hereunder; and (b) during the 12 month period ending
on the date of this Agreement, the Company did not pay or issue any monies,
securities or other compensation to any member of the NASD or to any affiliate
or associate of such a member or to any other person in consideration for such
person raising funds for the Company or providing financial or public relations
consulting services to the Company, except as set forth on Schedule 2.8.
2.9 No Pending Actions. To the Company's best knowledge, there are no
actions, suits, proceedings, claims or hearings of any kind or nature existing
or pending (or, to the best knowledge of the Company, threatened) or, to the
best knowledge of the Company, any investigations or inquiries, before or by any
court, or other governmental authority, tribunal or instrumentality (or, to the
Company's best knowledge, any state of facts that would give rise thereto),
pending or threatened against the Company, or involving the properties of the
Company, that might result in any Material Adverse Effect or that might
adversely affect the transactions or other acts contemplated by this Agreement
or the validity or enforceability of this Agreement.
2.10 Private Offering Exemption; Offering Documents. To the Company's best
knowledge, the Offering Documents do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Shares, and the Placement
Agent's Purchase Option, conform in all material respects to the descriptions
thereof contained in the Offering Documents. Assuming that (i) a proper Form D
is filed in accordance with Rule 503 of Reg D, (ii) the offer and the sale of
the Shares by the Placement Agent was made in compliance with Rule 502(c) of Reg
D and/or Section 4(2) of the Securities Act, and (iii) the representations of
the Subscribers in the Subscription Agreements signed by them are true and
correct (which facts will not be independently verified by the Company), the
sale of Shares in the Offering is exempt from registration under the Securities
Act and is in compliance with Reg D.
4
<PAGE>
2.11 Due Authorization. The Company has full right, power and authority to
enter into this Agreement, the Subscription Agreements and the Placement Agent's
Purchase Option, to issue the Shares and the Placement Agent's Shares and to
perform all of its obligations hereunder and thereunder. This Agreement has
been, and the Subscription Agreements and the Placement Agent's Purchase Option,
when executed and delivered, will have been, duly authorized by all necessary
corporate action and no further corporate action or approval is or will be
required for their respective execution, delivery and performance. This
Agreement constitutes, and the Subscription Agreements and the Placement Agent's
Purchase Option, upon execution and delivery will constitute, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as the enforceability thereof may be limited by bankruptcy or
other laws now or hereafter in effect relating to or affecting creditors' rights
generally, (ii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought,
and (iii) that the enforceability of the indemnification and contribution
provisions of the respective agreements may be limited by the federal and state
securities laws and public policy.
2.12 Non-Contravention; Consents. The Company's execution and delivery of
this Agreement, the Subscription Agreements and the Placement Agent's Purchase
Option, and the incurrence of the obligations herein and therein set forth, and
the consummation of the transactions contemplated herein and therein will not
(i) conflict with, or constitute a breach of, or a default under, the
certificate of incorporation or by-laws of the Company, or any contract, lease
or other agreement or instrument to which the Company is a party or in which the
Company has a beneficial interest or by which the Company is bound; (ii) violate
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business (collectively, "Laws"), except
where such violation(s) would not, singly or in the aggregate, result in a
Material Adverse Effect; or (iii) have any effect on any permit, certification,
registration, approval, consent, license or franchise (collectively, "Permits")
necessary for the Company to own or lease and operate any of its properties or
to conduct its business, except for such effects as would not, singly or in the
aggregate, have a Material Adverse Effect. No consent, Permit, approval,
authorization, order of, or filing with, any court or governmental authority or
any other third party is required to consummate the transactions contemplated by
this Agreement, the Subscription Agreements and the Placement Agent's Purchase
Option, and the issuance of the Shares and the Placement Agent's Shares, except
that the offer and sale of the Shares and the Placement Agent's Shares in
certain jurisdictions may be subject to the provisions of the securities or Blue
Sky laws of such jurisdictions.
2.13 Valid Issuances. The Shares and the Placement Agent's Shares have been
duly and validly authorized and, when issued and delivered in accordance with
the terms of the Subscription Agreements or the Placement Agent's Purchase
Option, as the case may be, will be duly and validly issued, fully paid and
non-assessable. The holders of the Shares will not be subject to personal
liability by reason of being such holders and will not be subject to the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. All corporate action required to be
taken for the authorization, issuance and sale of the Shares and the Placement
Agent's Shares has been duly and validly taken.
2.14 No Right to Purchase. To the Company's best knowledge, the issuance of
the Shares in the Offering and upon exercise of the Placement Agent's Purchase
Option will not give any holder of any of the Company's outstanding shares of
Common Stock, options, warrants or other convertible securities or rights to
5
<PAGE>
purchase securities of the Company (i) the right to purchase any additional
shares of Common Stock or any other securities of the Company, or (ii) the right
to purchase any securities at a reduced price.
2.15 No Regulatory Problems. The Company (i) has not filed a registration
statement that is the subject of any pending proceeding or examination under
Section 8 of the Securities Act, and is not and has not been the subject of any
refusal order or stop order thereunder; (ii) is not subject to any pending
proceeding under Rule 258 of the Securities Act or any similar rule adopted
under Section 3(b) of the Securities Act, or to an order entered thereunder;
(iii) has not been convicted of any felony or misdemeanor in connection with the
purchase or sale of any security or involving the making of any false filing
with the Commission; (iv) is not, to its best knowledge, subject to any order,
judgment, or decree of any court of competent jurisdiction temporarily or
preliminarily restraining or enjoining, or any order, judgment, or decree of any
court of competent jurisdiction permanently restraining or enjoining, the
Company from engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security or involving the making of any false
filing with the Securities and Exchange Commission ("Commission"); and (v) is
not, to its best knowledge, subject to a United States Postal Service false
representation order entered under Section 3005 of Title 39, United States Code
or a temporary restraining order or preliminary injunction entered under Section
3007 of Title 39, United States Code, with respect to conduct alleged to have
violated Section 3005 of Title 39, United States Code. To the Company's
knowledge, none of the Company's directors, officers, or beneficial owners of 10
percent or more of any class of its equity securities (i) has been convicted of
any felony or misdemeanor in connection with the purchase or sale of any
security, involving the making of a false filing with the Commission, or arising
out of the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, or investment advisor; (ii) is subject to any order, judgment
or decree of any court of competent jurisdiction temporarily or preliminarily
enjoining or restraining, or is subject to any order, judgment or decree of any
court of competent jurisdiction permanently enjoining or restraining, such
person from engaging in or continuing any conduct or practice in connection with
the purchase or sale of any security, or involving the making of a false filing
with the Commission, or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer, or investment adviser;
(iii) is subject to an order of the Commission entered pursuant to Section
15(b), 15B(a) or 15B(c) of the Exchange Act, or is subject to an order of the
Commission entered pursuant to Section 203(e) or (f) of the Investment Advisers
Act of 1940; (iv) is suspended or expelled from membership in, or suspended or
barred from association with a member of, an exchange registered as a national
securities exchange pursuant to Section 6 of the Exchange Act, an association
registered as a national securities association under Section 15A of the
Exchange Act, or a Canadian securities exchange or association for any act or
omission to act constituting conduct inconsistent with just and equitable
principles of trade; or (v) is subject to a United States Postal Service false
representation order entered under Section 3005 of Title 39, United States Code,
or is subject to a restraining order or preliminary injunction entered under
Section 3007 of Title 39, United States Code, with respect to conduct alleged to
have violated Section 3005 of Title 39, United States Code.
2.16 Material Contracts; No Defaults. To the Company's best knowledge,
Schedule 2.16 hereto contains a true and complete list of all contracts,
agreements, instruments, indentures, mortgages, loans, leases, licenses,
arrangements or undertakings of any nature, written or oral, of the Company that
involve future payments, performance or services, development of products, or
delivery of goods or materials to or by the Company of an aggregate amount or
value in excess of $25,000 or that otherwise are material to the business or
prospects of the Company (collectively, "Contracts"). The Company has furnished
the Placement Agent with true, correct and complete copies (or where oral,
written descriptions) of all Contracts, including all exhibits, schedules,
amendments, supplements, modifications and waivers thereto. To the Company's
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<PAGE>
best knowledge, except as set forth on Schedule 2.16, each of the Contracts is
in full force and effect, the Company has performed in all material respects all
of its obligations thereunder and is not in default thereunder, and no party to
a Contract has made a claim to the effect that the Company has failed to perform
any obligations thereunder. To the knowledge of the Company, there is no plan,
intention, or indication of any contracting party to a Contract to cause
termination, cancellation or modification of such Contract or to reduce or
otherwise change its activity thereunder so as to adversely affect in any
material respect the benefits derived or expected to be derived therefrom by the
Company. The Company does not know of the occurrence of any event or the
existence of any state of facts that with notice or the passage of time or both
could cause it to be in default.
2.17 Conduct of Business; Compliance with Law. The Company has all
requisite corporate power and authority, and, to its best knowledge, has all
necessary Permits, to own or lease its properties and conduct its business as
described in the Offering Documents, except where the failure to have such
Permits would not have a Material Adverse Effect. To its best knowledge, (a) the
Company has been operating its business in compliance with all such Permits,
except where such noncompliance would not have a Material Adverse Effect, (b)
the disclosures in the Offering Documents concerning the effects of federal,
state and local regulation on the Company's business as currently contemplated
are correct in all material respects and do not omit to state a material fact,
and (c) the Company is in compliance with all Laws except where noncompliance,
singly or in the aggregate, would not have a Material Adverse Effect. The
Company is not in violation of any term or provision of its certificate of
incorporation or by-laws.
2.18 Title to Property; Insurance. To its best knowledge, the Company has
good and marketable title to, or valid and enforceable leasehold estates in, all
items of real and personal property (tangible and intangible) owned or leased by
it, free and clear of all liens, encumbrances, claims, security interests,
defects and restrictions of any material nature whatsoever, except such as would
not, singly or in the aggregate, have a Material Adverse Effect. The Company has
adequately insured its properties against loss or damage by fire or other
casualty and maintains such insurance in adequate amounts.
2.19 Intangibles. The Company owns or possesses or, to its knowledge, can
acquire "off-the-shelf" on an as needed basis, the requisite licenses or rights
to use all trademarks, service marks, service names, trade names, patents and
patent applications, and copyrights (collectively, "Intangibles") to be used by
the Company in its proposed business as described in the Term Sheet, and all
such Intangibles, except for "off-the-shelf" licenses, are listed on Schedule
2.19. There is no claim or action by any person pertaining to, or proceeding
pending or, to the Company's knowledge, threatened and the Company has not
received any notice of conflict with, the asserted rights of others that
challenges the exclusive right (except that "off-the-shelf" licenses may be
non-exclusive) of the Company with respect to any Intangibles used in the
conduct of the Company's proposed business except as described in the Offering
Documents. To the best of the Company's knowledge, the Intangibles and the
Company's proposed services and processes do not infringe on any intangibles
held by any third party. To the best of the Company's knowledge, no others have
infringed upon the Intangibles of the Company.
2.20 Management Team. To the Company's knowledge, the background and other
information concerning the officers and directors of the Company previously
furnished to the Placement Agent is true and accurate in all material respects.
2.21 Employee Matters. To the Company's best knowledge, (a) the Company has
generally enjoyed a satisfactory employer-employee relationship with its
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<PAGE>
employees and is in compliance in all material respects with all federal, state
and local laws and regulations respecting the employment of its employees and
employment practices, terms and conditions of employment and wages and hours
relating thereto, except where noncompliance, singly or in the aggregate, would
not have a Material Adverse Effect, (b) there are no pending investigations
involving the Company by any government Department of Labor or any other
governmental agency responsible for the enforcement of employment laws and
regulations, (c) there is no unfair labor practice charge or complaint against
the Company pending before a Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any predecessor entity, (d) no questions concerning
representation exist respecting the employees of the Company and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company, and (e) no grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company, if any.
3. Representations and Warranties of the Placement Agent and Selected Dealers.
The Placement Agent, and each Selected Dealer that the Placement Agent may from
time to time appoint, by signing the Selected Dealer Agreement, severally
represents and warrants as follows:
3.1 Due Incorporation. Such Placement Agent or Selected Dealer is duly
incorporated and validly existing and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation for the
transaction of business and is in good standing in each jurisdiction where the
failure to be so qualified would have a material adverse effect on the business
of such Placement Agent or Selected Dealer.
3.2 Broker/Dealer Registration. Such Placement Agent or Selected Dealer is
registered as a broker-dealer under Section 15 of the Exchange Act.
3.3 Good Standing. Such Placement Agent or Selected Dealer is a member in
good standing of the NASD.
3.4 Sale In Certain Jurisdictions. Sales of Shares by such Placement Agent
or Selected Dealer will be made only in such jurisdictions in which (i) the
Placement Agent or Selected Dealer is a registered broker-dealer or where an
applicable exemption from such registration exists and (ii) the Offering and
sale of Shares is registered under, or is exempt from, applicable registration
requirements.
3.5 Compliance with Laws. Offers and sales of Shares by the Placement Agent
or Selected Dealer will be made in compliance with the provisions of Rule 502(c)
of Reg D and/or Section 4(2) of the Securities Act, and the Placement Agent or
Selected Dealer will furnish to each investor a copy of the Offering Documents
prior to accepting any payments for Shares.
4. Closing.
4.1 Closing. The Closing shall take place at the offices of GM&M, 600 Third
Avenue, New York, New York 10016. At the Closing, payment for the Shares issued
and sold by the Company (by certified check or wire transfer payable to the
order of the Company), less the amount deductible by the Placement Agent
pursuant to Section 4.4 hereof, shall be made against delivery of certificates
representing the Shares.
4.2 Deliveries at Closing. At each Closing, and as a condition to each
Closing, the Company shall deliver or cause to be delivered to the Placement
Agent:
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4.2.1 Opinion of Counsel. The opinion of GM&M, dated as of the date of the
Closing, substantially to the effect that:
(i) The Company has been duly organized and is validly existing as a
corporation and is in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power to own or lease its properties and
conduct its business as described in the Term Sheet.
(ii) Based on a review of the Company's certificate of incorporation,
the Company is authorized to issue 12,000,000 shares of Common Stock. To such
counsel's knowledge, all issued and outstanding securities of the Company have
been duly authorized and validly issued; the holders thereof are not subject to
personal liability by reason of being such holders; and none of such securities
was issued in violation of any statutory preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company. To
such counsel's knowledge, the outstanding options and warrants to purchase
shares of Common Stock set forth on Schedule 2.3 constitute the valid and
binding obligations of the Company, enforceable in accordance with their terms.
(iii) Except as set forth on Schedule 2.3 to this Agreement, there are
no statutory preemptive or other statutory rights to subscribe for or purchase,
or any restriction upon the voting or transfer of, or, to such counsel's
knowledge, any other rights to subscribe for or purchase from the Company any
shares of Common Stock of the Company, or, to such counsel's knowledge, any such
right or restriction under the certificate of incorporation or by-laws of the
Company or under any agreement or other outstanding instrument to which the
Company is a party or by which it is bound. To such counsel's knowledge, except
as set forth on Schedule 2.3, (i) no holders of any securities of the Company or
of any options, warrants or securities of the Company exercisable for or
convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the
Securities Act or to include any such securities in a registration statement to
be filed by the Company; and (ii) the issuance of the Shares in the Offering,
and the issuance of the Placement Agent's Shares upon exercise of the Placement
Agent's Purchase Option, will not give any holder of any of the Company's
outstanding securities or rights to purchase shares of Common Stock the right to
purchase any additional shares of Common Stock and/or the right to purchase
shares at a reduced price.
(iv) Assuming that (a) a proper Form D is filed in accordance with Rule
503 of Reg D, (b) the offer and the sale of the Shares was made in compliance
with Rule 502(c) of Reg D, and (c) the representations of the Subscribers in the
Subscription Agreements signed by them are true and correct (which facts have
not been independently verified by counsel), the sale of the Shares is exempt
from registration under the Securities Act and is in compliance with Reg D.
(v) The certificates representing the Shares are in proper legal form.
(vi) The Company has all requisite corporate power and authority to
enter into this Agreement, the Subscription Agreements and the Placement Agent's
Purchase Option, to carry out the provisions and conditions thereof and to issue
the Shares and the Placement Agent's Shares. No consents, approvals,
authorizations or orders of, and no filing with, any court or governmental
agency or body (other than such as may be required under the Securities Act and
applicable Blue Sky laws) is required for the valid offer, authorization,
9
<PAGE>
issuance, sale and delivery of the Shares and the Placement Agent's Shares and
the consummation of the transactions contemplated by the Offering Documents.
(vii) The Shares have been duly authorized and validly issued and the
holders thereof are not subject to personal liability by reason of being such
holders. This Agreement, the Subscription Agreements and the Placement Agent's
Purchase Option have been duly and validly authorized, executed and delivered by
the Company, and will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (b) as
enforceability of any indemnification and contribution provisions may be limited
under the federal and state securities laws and public policy, and (c) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(viii) To such counsel's knowledge, the execution, delivery and
performance by the Company of this Agreement, the Subscription Agreements and
the Placement Agent's Purchase Option, the issuance and sale of the Shares and
the Placement Agent's Shares, the consummation of the transactions contemplated
hereby and thereby and the compliance by the Company with the terms and
provisions hereof and thereof, do not and will not, with or without the giving
of notice or the lapse of time, or both, (a) conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or modification of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to the
terms of, any material mortgage, deed of trust, note, indenture, loan, contract,
commitment or other material agreement or instrument known to such counsel to
which the Company is a party or by which the Company or any of its properties or
assets may be bound, (b) result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company, or (c) violate any
Law, except where such violation would not have a Material Adverse Effect.
(ix) To such counsel's knowledge, no default exists in the due
performance and observance of any term, covenant or condition of any Contract,
except such defaults that, singly or in the aggregate, would not have a Material
Adverse Effect. To such counsel's knowledge, the Company is not in violation of
any term or provision of its certificate of incorporation or by-laws. To such
counsel's knowledge, the Company is not currently in violation of any Law,
except where such violation would not have a Material Adverse Effect.
(x) To such counsel's knowledge, except as described in the Offering
Documents, including the Financials, there are no claims, actions, suits,
hearings, investigations, inquiries or proceedings of any kind or nature, before
or by any court, governmental authority, tribunal or instrumentality, domestic
or foreign, pending or threatened against or affecting the Company or involving
the properties of the Company that may result in any material adverse change in
the business, properties or financial condition of the Company, or that may
adversely affect the transactions or other acts contemplated by this Agreement
or the validity or enforceability of this Agreement.
The opinion will also contain the following statements by counsel: In the
course of the preparation of the Offering Documents, such counsel has
participated in discussions with officers of the Company. Nothing has come to
such counsel's attention that has caused such counsel to believe that the
Offering Documents contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
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<PAGE>
statements therein, in light of the circumstances under which they were made,
not misleading (except that such counsel need not express any opinion as to (i)
the Financials and other financial or statistical data contained in the Offering
Documents or (ii) intellectual property matters, including with respect to the
Intangibles).
4.2.2 Officers' Certificate. A certificate of the Company, signed by two
executive officers thereof, stating (a) that the representations and warranties
contained in Section 2 hereof are true and accurate at the Closing as applied to
the Company with the same effect as though expressly made at the Closing, (b)
that the Company has complied with all covenants and agreements required to be
complied with as of the Closing, and (c) there has been no Material Adverse
Effect since the commencement of the Offering.
4.2.3 Subscription Agreements. Subscription Agreements signed by the
Company and each of the Subscribers.
4.2.4 Certificates. The certificates representing the Shares.
4.2.5 Consents. Consents of any parties required to consummate this
Offering.
4.2.6 Other Documents. Such other closing documents as shall be
reasonably requested by the Placement Agent or its counsel.
4.3 Conditions.
4.3.1 Conditions to the Placement Agent's Obligations. The obligations of
the Placement Agent under this Agreement shall be subject to the following
conditions:
(i) All representations and warranties of the Company set forth in this
Agreement shall be true and accurate as of the date of each Closing with the
same effect as though expressly made at each Closing;
(ii) The Company has complied with all covenants and agreements
required to be complied with as of the date of each Closing;
(iii) The Company has obtained all consents of third parties required
to be obtained in connection with this Offering; and
(iv) there shall be no action, lawsuit, administrative or other
proceeding pending or threatened that seeks to enjoin the transactions
contemplated by this Agreement.
4.3.2 Conditions to Company's Obligations. The obligations of the Company
under this Agreement shall be subject to the conditions that:
(i) The representations and warranties of the Placement Agent set forth
in Sections 3.4 and 3.5 are true and accurate as of the date of each Closing
with the same effect as though expressly made at each Closing; and
(ii) There shall be no action, lawsuit, administrative or other
proceeding pending or threatened that seeks to enjoin the transactions
contemplated by this Agreement.
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4.4 Placement Agent's Fees and Expenses. At each Closing, the Company shall
pay to the Placement Agent a commission equal to 7% of the gross proceeds of the
Offering and shall deliver the Placement Agent's Purchase Option to the
Placement Agent. At each Closing, the Company shall also pay to the Placement
Agent a non-accountable expense allowance equal to 3% of the gross proceeds of
such Closing. All the foregoing amounts and any other expenses to be paid
pursuant to Section 5.3 are payable at the Placement Agent's direction directly
to the parties who are owed same by deduction from the aggregate purchase price
of the Shares sold.
5. Covenants. The Company covenants and agrees that:
5.1 Amendments to Offering Documents. Until the Offering has been completed
or terminated, if there shall occur any event relating to or affecting, among
other things, the Company or any affiliate, or the proposed operations of the
Company as described in the Offering Documents, as a result of which it is
necessary, in the reasonable opinion of GM&M or counsel for the Placement Agent,
to amend or supplement the Offering Documents in order that the Offering
Documents will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, the
Company shall immediately prepare and furnish to the Placement Agent a
reasonable number of copies of an appropriate amendment of or supplement to the
Offering Documents, in form and substance satisfactory to counsel for the
Placement Agent.
5.2 Use of Proceeds. The net proceeds of the Offering will be used for such
purposes as may be reasonably acceptable to the Placement Agent and described in
the Term Sheet.
5.3 Expenses of Offering and Other Expenses. The Company shall be
responsible for, and shall pay, all fees, disbursements and expenses incurred in
connection with the Offering, including, but not limited to, the Company's legal
and accounting fees and disbursements, the costs of preparing, printing, mailing
and delivering, and filing, where necessary, the Offering Documents and all
amendments and supplements thereto (all in such quantities as the Placement
Agent may reasonably require), preparing and printing the certificates for the
Shares, and the Placement Agent's Purchase Options, including any transfer or
other taxes payable thereon, and the costs of any "due diligence" meetings held
by the Company as requested by the Placement Agent.
5.4 Further Assurances. The Company will take such actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions con templated hereby.
5.5 Accuracy of Representations and Warranties. The Company hereby agrees
that, prior to the Termination Date or the Closing, as the case may be, it will
not enter into any transaction or take any action, and will use its best efforts
to prevent the occurrence of any event, that could result in any of its
representations, warranties or covenants contained in this Agreement or any of
the Offering Documents not to be true and correct, or not to be performed as
contemplated, at and as of the time immediately after the occurrence of such
transaction or event.
5.6 Registration Rights. As additional consideration for this Agreement and
the transactions contemplated hereby, and as set forth in each Subscriber's
Subscription Agreement and the Placement Agent's Purchase Option, the Company
agrees with the Placement Agent and will agree with each Subscriber to register
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<PAGE>
the Shares and the Placement Agent's Shares for resale. All expenses of
registration (exclusive of underwriting discounts and commissions) shall be
borne by the Company.
6. Indemnification and Contribution.
6.1 Indemnification of the Placement Agent by the Company. The Company
agrees to indemnify and hold harmless the Placement Agent and each person, if
any, who controls the Placement Agent within the meaning of the Securities Act
and/or the Exchange Act against any losses, claims, damages or liabilities,
joint or several, to which such Placement Agent or controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Offering Documents, or (B) in any blue sky application or
other document executed by the Company specifically for blue sky purposes or
based upon any other written information furnished by the Company or on its
behalf to any state or other jurisdiction in order to qualify any or all of the
Shares under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) any breach
by the Company of any of its representations, warranties or covenants contained
herein or in any of the Offering Agreements, or (iii) the omission or alleged
omission by the Company to state in the Offering Documents or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and will reimburse the Placement Agent and each such
controlling person for any legal or other expenses reasonably incurred by the
Placement Agent or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action, whether arising out
of an action between the Placement Agent and the Company or the Placement Agent
and a third party; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information regarding the Placement Agent that is furnished to the
Company by the Placement Agent specifically for inclusion in the Offering
Documents or any such Blue Sky Application or (ii) any breach by the Placement
Agent of the representations, warranties or covenants contained herein
(together, (i) and (ii) above are referred to as the "Placement Agent
Non-Indemnity Events").
6.2 Indemnification of the Company by the Placement Agent. The Placement
Agent agrees to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Securities Act and/or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which the Company or such controlling person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any Non- Indemnity Event; and will reimburse the Company and each such
controlling person for any legal or other expenses reasonably incurred by the
Company or such controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action, provided that such loss,
claim, damage or liability is found ultimately to arise out of or be based upon
any Placement Agent Non-Indemnity Event.
6.3 Indemnification of the Selected Dealers by the Company. The Company
agrees to indemnify and hold harmless each Selected Dealer and each person, if
any, who controls a Selected Dealer within the meaning of the Securities Act
and/or the Exchange Act against any losses, claims, damages or liabilities,
joint or several, to which such Selected Dealer or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
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damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Offering Documents, or (B) in any Blue Sky Application,
(ii) any breach by the Company of any of its representations, warranties or
covenants contained herein or in any of the Offering Agreements, or (iii) the
omission or alleged omission by the Company to state in the Offering Documents
or in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and will reimburse each Selected Dealer
and each such controlling person for any legal or other expenses reasonably
incurred by such Selected Dealer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action,
whether arising out of an action between such Selected Dealer and the Company or
such Selected Dealer and a third party; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon (i) an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information regarding such Selected Dealer specifically
for inclusion in the Offering Documents or any such Blue Sky Application or (ii)
any breach by such Selected Dealer of the representations, warranties or
covenants contained herein together, (i) and (ii) above are referred to as the
"Selected Dealer Non-Indemnity Events").
6.4 Indemnification of the Company by the Selected Dealers. The Selected
Dealers, severally and not jointly, agree to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
the Securities Act and/or the Exchange Act against any losses, claims, damages
or liabilities, joint or several, to which the Company or such controlling
person may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any Selected Dealer Non-Indemnity Event; and will
reimburse the Company and each such controlling person for any legal or other
expenses reasonably incurred by the Company or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action, provided that such loss, claim, damage or liability is
found ultimately to arise out of or be based upon any Selected Dealer
Non-Indemnity Event.
6.5 Procedure. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 6, notify in writing the in demnifying party of the
commencement thereof; and the omission so to notify the indemnifying party will
relieve the indemnifying party from any liability under this Section 6 as to the
particular item for which indemnification is then being sought, but not from any
other liability that it may have to any indemnified party. In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may wish, jointly with any other
indemnifying party, similarly notified, to assume the defense thereof, with
counsel who shall be to the reasonable satisfaction of such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
6.6 Contribution. If the indemnification provided for in this Section 6 is
unavailable to any indemnified party (other than as a result of the failure to
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notify the indemnifying party as provided in Section 6.5 hereof) in respect to
any losses, claims, damages, liabilities or expenses referred to therein, then
the indemnifying party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified party, as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand, and the Placement Agent or Selected Dealer, on the other hand,
from the Offering, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above, but also the
relative fault of the Company, on the one hand, and of the Placement Agent or
Selected Dealer, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or expenses
as well as any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Placement Agent or Selected
Dealer, on the other hand, shall be deemed to be in the same proportion as the
total proceeds from the Offering (net of sales commissions and the
nonaccountable expense allowance, but before deducting other expenses) received
by the Company bear to the commissions and nonaccountable expense allowance
received by the Placement Agent or Selected Dealer. The relative fault of the
Company, on the one hand, and the Placement Agent or Selected Dealer, on the
other hand, will be determined with reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, on the one
hand, and the Placement Agent or Selected Dealer, on the other hand, and their
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
6.7 Equitable Considerations. The Company, the Placement Agent and each
Selected Dealer agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
6.8 Attorneys' Fees. The amount payable by a party under this Section 6 as
a result of the losses, claims, damages, liabilities or expenses referred to
above will be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim (including, without limitation, fees and disbursements of counsel
incurred by an indemnified party in any action or proceeding between the
indemnifying party and indemnified party or between the indemnified party and
any third party or otherwise).
7. Termination by Placement Agent. The Placement Agent will have the right to
terminate this Agreement by giving written notice as herein specified, at any
time, at or prior to the Closing: (a) if the Company shall have failed, refused,
or been unable to perform any of its obligations hereunder, or breached any of
its representations or warranties hereunder; or (b) if, in the Placement Agent's
opinion, there has occurred an event materially and adversely affecting the
value of the Common Stock.
8. Notices. Any notice hereunder shall be in writing and shall be effective when
delivered in person or by facsimile transmission and mailed by certified
mail, postage prepaid, return receipt requested, to the appropriate party or
parties, at the following addresses: if to the Placement Agent, to M.H. Meyerson
& Co., Inc., 525 Washington Boulevard, Jersey City, New Jersey 07303- 0260,
Attention: Mr. Ronald I. Heller (Fax No. (201) 459-9458); with a copy to Hartman
& Craven LLP, 460 Park Avenue, New York, New York 10022-1987, Attention: Edward
I. Tishelman, Esq. (Fax No. (212) 688-2870); if to the Company, to
GolfRounds.com, Inc., 376 Main Street, Bedminster, New Jersey 07921, Attention:
Robert H. Donehew, Director (Fax No. (770) 984-2720);
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<PAGE>
with a copy to Graubard Mollen & Miller, 600 Third Avenue, New York, New York
10016, Attention: David Alan Miller, Esq. (Fax No. (212) 818-8881); or, in each
case, to such other address as the parties may hereinafter designated by like
notice.
9. Parties. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. Neither party may
assign this Agreement or its obligations hereunder without the prior written
consent of the other party. This Agreement is intended to be, and is, for the
sole and exclusive benefit of the parties hereto and the persons described in
Sections 6.1 through 6.4 hereof and their respective successors and assigns, and
for the benefit of no other person, and no other person will have any legal or
equitable right, remedy or claim under, or in respect of this Agreement.
10. Amendment and/or Modification. Neither this Agreement, nor any term or
provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
11. Further Assurances. Each party to this Agreement will perform any and all
acts and execute any and all documents as may be necessary and proper under the
circumstances in order to accomplish the intents and purposes of this Agreement
and to carry out its provisions.
12. Validity. In case any term of this Agreement will be held invalid, illegal
or unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement will not in any way be affected thereby.
13. Waiver of Breach. The failure of any party hereto to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or right,
or of any other covenants or agreements, and the same will be and remain in full
force and effect.
14. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
there are no representations, inducements, promises or agreements, oral or
otherwise, not embodied in this Agreement. Any and all prior discussions,
negotiations, commitments and understanding relating to the subject matter of
this Agreement are superseded by it.
15. Counterparts. This Agreement may be executed in counterparts and each of
such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.
16. Law. This Agreement will be deemed to have been made and delivered in New
York City and will be governed as to validity, interpretation, construction,
effect and in all other respects by the internal law of the State of New York,
without regard to principles of conflicts of law. The Company and the Placement
Agent each (i) agree that any legal suit, action or proceeding arising out of or
relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection to the venue of any
such suit, action or proceeding, and the right to assert that such forum is an
inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company and the Placement Agent further agree to accept and
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acknowledge service of any and all process that may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and
agree that service of process upon either of them mailed by certified mail to
their respective addresses shall be deemed in every respect effective service of
process in any such suit, action or proceeding.
17. Representations, Warranties and Covenants to Survive Delivery. The
respective representations, indemnities, agreements, covenants, warranties and
other statements of the Company and the Placement Agent shall survive execution
of this Agreement and delivery of the Shares and/or the termination of this
Agreement prior thereto.
If you find the foregoing is in accordance with our understanding, kindly
sign and return to us a counterpart hereof, whereupon this instrument along with
all counterparts will become a binding agreement between us.
Very truly yours,
GOLFROUNDS.COM, INC.
By:____________________________
AGREED:
M.H. MEYERSON & CO., INC.
By:______________________________
17
THE REGISTERED HOLDER OF THIS PURCHASE OPTION, BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION
EXCEPT AS HEREIN PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, MARCH 15, 2005.
PURCHASE OPTION
For the Purchase of
_______ Shares of Common Stock
of
GOLFROUNDS.COM, INC.
(A Delaware Corporation)
1. Purchase Option.
---------------
THIS CERTIFIES THAT, in consideration of $________ and other good and
valuable consideration duly paid by or on behalf of _______________________
("Holder"), as registered owner of this Purchase Option, to GolfRounds.com, Inc.
("Company"), Holder is entitled, at any time or from time to time at or after
March 16, 2000 ("Commencement Date"), and at or before 5:00 p.m., Eastern time,
March 15, 2005 ("Expiration Date"), but not thereafter, to subscribe for,
purchase and receive, in whole or in part, up to ______________ shares of common
stock, par value $.01 per share ("Common Stock"), of the Company. The shares of
Common Stock are sometimes collectively referred to herein as the "Securities."
If the Expiration Date is a day on which banking institutions are authorized by
law to close, then this Purchase Option may be exercised on the next succeeding
day that is not such a day in accordance with the terms herein. During the
period ending on the Expiration Date, the Company agrees not to take any action
that would terminate this Purchase Option. This Purchase Option is one of a
series of Purchase Options of even date herewith. This Purchase Option is
initially exercisable at $1.50 per share of Common Stock purchased; provided,
however, that upon the occurrence of any of the events specified in Section 6
hereof, the rights granted by this Purchase Option, including the exercise price
and the number of shares to be received upon such exercise, shall be adjusted as
therein specified. The term "Exercise Price" shall mean the initial exercise
price or the adjusted exercise price, depending on the context.
2. Exercise.
--------
2.1. Exercise Form. In order to exercise this Purchase Option, the exercise
form attached hereto must be duly executed and completed and delivered to the
Company, together with this Purchase Option and payment of the Exercise Price in
cash or by certified check or official bank check for the shares of Common Stock
being purchased. If the subscription rights represented hereby shall not be
exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this
Purchase Option shall become null and be void without further force or effect,
and all rights represented hereby shall cease and expire.
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2.2. Legend. Each certificate for Securities purchased under this Purchase
Option shall bear a legend substantially as follows unless such Securities have
been registered under the Securities Act of 1933, as amended ("Securities Act"):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or applicable
state securities laws. The securities may not be sold, pledged or
transferred in the absence of such registration or an exemption
therefrom under said Act and such laws, supported by an opinion of
counsel, reasonable satisfactory to the Company and its counsel, that
such registration is not required.
2.3. Conversion Right.
2.3.1. Determination of Amount. In lieu of the payment of the Exercise
Price in the manner required by Section 2.1, the Holder shall have the right
(but not the obligation) to convert any exercisable but unexercised portion of
this Purchase Option into Common Stock ("Conversion Right") as follows: upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any portion of the Exercise Price in cash)
that number of shares of Common Stock equal to the quotient obtained by dividing
(x) the "Value" (as defined below) of the portion of the Purchase Option being
converted by (y) the Market Price (as defined below). The "Value" of the portion
of the Purchase Option being converted shall equal the remainder derived from
subtracting (a) the Exercise Price multiplied by the number of shares of Common
Stock underlying the portion of this Purchase Option being converted from (b)
the Market Price of the Common Stock multiplied by the number of shares of
Common Stock underlying the portion of this Purchase Option being converted. As
used herein, the term "Market Price" at any date shall be deemed to be the
average last reported sale price of the Common Stock for the five trading days
immediately preceding such date, as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange or if any such exchange on which the Common Stock is listed
is not the principal trading market for the Common Stock, the average last
reported sale price of the Common Stock for the five trading days immediately
preceding such date as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the Nasdaq National Market or the Nasdaq
SmallCap, or, if applicable, the OTC Bulletin Board, or if the Common Stock is
not listed or admitted to trading on the Nasdaq National Market or the Nasdaq
SmallCap or OTC Bulletin Board or similar organization, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it.
2.3.2. Exercise of Conversion Right. The Conversion Right may be
exercised by the Holder on any business day on or after the Commencement Date
and not later than the Expiration Date by delivering this Purchase Option to the
Company with a duly executed exercise form attached hereto with the conversion
section completed.
3. Transfer.
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3.1. General Restrictions. The registered Holder of this Purchase Option,
by its acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Purchase Option to anyone except upon compliance with, or
pursuant to exemptions from, applicable securities laws. In order to make any
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permitted assignment, the Holder must deliver to the Company the assignment form
attached hereto duly executed and completed, together with this Purchase Option
and payment of all transfer taxes, if any, payable in connection therewith. The
Company shall immediately transfer this Purchase Option on the books of the
Company and shall execute and deliver a new Purchase Option or Purchase Options
of like tenor to the appropriate assignee(s) expressly evidencing the right to
purchase the aggregate number of shares of Common Stock purchasable hereunder or
such portion of such number as shall be contemplated by any such assignment.
3.2. Restrictions Imposed by the Securities Act. This Purchase Option and
the Securities underlying this Purchase Option shall not be transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Purchase Option or the Securities, as the case may be, may be
transferred pursuant to an exemption from registration under the Securities Act
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Purchase Option or Securities, as the case may be, has been
filed by the Company and declared effective by the Securities and Exchange
Commission ("Commission") and is in compliance with applicable state law.
4. New Purchase Options to be Issued.
---------------------------------
4.1. Partial Exercise or Transfer. Subject to the restrictions in Section 3
hereof, this Purchase Option may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Purchase Option for cancellation, together with the duly executed
exercise or assignment form and funds sufficient to pay any Exercise Price
and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Purchase Option of like tenor to this Purchase Option in
the name of the Holder evidencing the right of the Holder to purchase the
aggregate number of shares of Common Stock purchasable hereunder as to which
this Purchase Option has not been exercised or assigned.
4.2. Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Purchase Option and
of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Purchase Option of like tenor and date. Any such new Purchase
Option executed and delivered as a result of such loss, theft, mutilation or
destruction shall constitute a substitute contractual obligation on the part of
the Company.
5. Registration Rights.
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5.1. Demand Registration.
5.1.1. Grant of Right. The Company, upon written demand ("Initial Demand
Notice") of the Holder(s) of at least 51% ("Majority Holders") of the shares of
Common Stock underling the Purchase Options (the "Registrable Securities"),
agrees to register, on one occasion, all or any portion of the Registrable
Securities requested by the Majority Holders in the Initial Demand Notice. On
such occasion, the Company will file a Registration Statement covering the
Registrable Securities within 60 days after receipt of the Initial Demand Notice
and use its best efforts to have such registration statement declared effective
promptly thereafter. The demand for registration may be made at any time during
a period of thirteen months beginning on the Commencement Date. The Company
covenants and agrees to give written notice of its receipt of any Initial Demand
Notice by any Holder(s) to all other registered holders of the Registrable
Securities within 10 days from the date of the receipt of any such Initial
Demand Notice.
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5.1.2. Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, but the Holders shall pay any and all
underwriting commission and the expense of any legal counsel selected by the
Holders to represent them in connection with the sale of the Registrable
Securities. The Company agrees to use its best efforts to cause the filing
required herein to become effective promptly and to qualify or register the
Registrable Securities in such States as are reasonably requested by the
Holder(s); provided, however, that in no event shall the Company be required to
register the Registrable Securities in a State in which such registration would
cause (i) the Company to be obligated to register or license to do business in
such State, or (ii) the principal stockholders of the Company to be obligated to
escrow their shares of capital stock of the Company. The Company shall cause any
registration statement filed pursuant to the demand rights granted under Section
5.1.1 to remain effective for a period of at least nine consecutive months from
the date that the Holders of the Registrable Securities covered by such
registration statement are first given the opportunity to sell all of such
securities.
5.2. "Piggy-Back" Registration.
5.2.1. Grant of Right. In addition to the demand right of registration
set forth in Section 5.1, the Holders shall have the right until the date that
is seven years after the date of the Closing to include the Registrable
Securities as part of any other registration of securities filed by the Company
(other than in connection with a transaction contemplated by Rule 145(a)
promulgated under the Securities Act or pursuant to Form S-8 or any equivalent
form), provided, however, that if, in the written opinion of the Company's
managing underwriter or underwriters, if any, for such offering, the inclusion
of the Registrable Securities, when added to the securities being registered by
the Company or the selling stockholder(s), will exceed the maximum amount of the
Company's securities that can be marketed (i) at a price reasonably related to
their then current market value, or (ii) without materially and adversely
affecting the entire offering, the Company shall nevertheless register all or
any portion of the Registrable Securities required to be so registered but such
Registrable Securities shall not be sold by the Holders until 90 days after the
registration statement for such offering has become effective and provided
further that, if any securities are registered for sale on behalf of other
stockholders in such offering and such stockholders have not agreed to defer
such sale until the expiration of such 90 day period, the number of securities
to be sold by all stockholders in such public offering during such 90 day period
shall be apportioned pro rata among all such selling stockholders, including all
holders of the Registrable Securities, according to the total amount of
securities of the Company owned by said selling stockholders, including all
holders of the Registrable Securities.
5.2.2. Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, including any filing fees payable to the
NASD, but the Holders shall pay any and all underwriting commissions and the
expenses of any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities. In the event of such a
proposed registration, the Company shall furnish the then holders of outstanding
Registrable Securities with not less than thirty days' written notice prior to
the proposed date of filing of such registration statement. Such notice shall
continue to be given for each registration statement filed by the Company until
the earlier of (i) such time as all of the Registrable Securities have been sold
by the holders thereof or (ii) the expiration of the "piggy-back" rights
provided for herein. The holders of the Registrable Securities shall exercise
the "piggy-back" rights provided for herein by giving written notice, within
twenty days of the receipt of the Company's notice of its intention to file a
registration statement. The Company shall cause any registration statement filed
pursuant to the above "piggy-back" rights to remain effective for a period of at
least nine consecutive months from the date that the Holders of the Registrable
Securities covered by such Registration Statement are first given the
opportunity to sell all of such securities. Notwithstanding the provisions of
this Section 5.2, the Company shall have the right at any time after it shall
have given written
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<PAGE>
notice of its intention to file a registration statement (irrespective of
whether a written request for inclusion of any Registrable Securities shall have
been made) to elect not to file any such proposed registration statement, or to
withdraw the same after the filing but prior to the effective date thereof.
5.3. General Terms.
5.3.1. Indemnification.
(a) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement hereunder and any
underwriter or person deemed to be an underwriter under the Act and each person,
if any, who controls such Holders or underwriters or persons deemed to be
underwriters within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense or liability (including all reasonable attorneys' fees
and other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject under the
Act, the Exchange Act or otherwise, arising from such registration statement.
The Holder(s) of the Registrable Securities to be sold pursuant to such
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such Holders,
in writing, for specific inclusion in such registration statement.
(b) If any action is brought against a party hereto, ("Indemnified
Party") in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and the
Indemnifying Party shall assume the defense of such action, including the
employment and fees of counsel reasonably satisfactory to the Indemnified Party.
Such Indemnified Party shall have the right to employ its or their own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or (ii) the Indemnifying Party shall not have
employed counsel to defend such action, or (iii) such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which may result in a conflict between the Indemnified Party and
the Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
in any of which events, the reasonable fees and expenses of not more than one
additional firm of attorneys designated in writing by the Indemnified Party
shall be borne by the Indemnifying Party. Notwithstanding anything to the
contrary contained herein, if the Indemnified Party shall assume the defense of
such action as provided above, the Indemnifying Party shall not be liable for
any settlement of any such action effected without its written consent.
(c) If the indemnification or reimbursement provided for hereunder is
finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence of
such Indemnified Party), then the Indemnifying Party agrees, in lieu of
indemnifying such Indemnified Party, to contribute to the amount paid or payable
by such Indemnified Party (i) in such proportion as is appropriate to reflect
the relative benefits received, or sought to be received, by the Indemnifying
Party on the one hand and by such Indemnified Party on the other or (ii) if (but
only if) the allocation provided in clause (i) of this sentence is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (i) but also the relative fault of
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the Indemnifying Party and of such Indemnified Party; provided, however, that in
no event shall the aggregate amount contributed by a Holder exceed the profit,
if any, earned by such Holder as a result of the exercise by him of the Purchase
Option and the sale by him of the underlying shares of Common Stock.
5.3.2. Elimination of Registration Rights. Notwithstanding anything to
the contrary in Section 5.2, no holders of Registrable Securities shall be
entitled to have such securities registered under the Securities Act in
accordance with the provisions of Section 5.2 if, in the opinion of counsel to
the Company, they may be sold without restriction pursuant to Rule 144(k)
promulgated under the Securities Act and any restrictive legends under the
Securities Act are removed from the certificates representing such securities
and any stop transfer order for such certificates is removed.
5.3.3. Successors and Assigns. The registration rights granted to the
Holders inure to the benefit of all the Holders' successors, heirs, pledgees,
assignees, transferees and purchasers of the Registrable Securities.
5.3.4. Documents Delivered to Holders. The Company shall furnish to
each Holder participating in any of the foregoing offerings and to each
underwriter of any such offering, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company shall also deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
to the managing underwriter copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc.
5.3.5. Underwriting Agreement. The Company shall enter into an
underwriting agreement with the underwriter representing the Holders whose
Registrable Securities are being registered pursuant to Section 5.1. Such
underwriter must be reasonably acceptable to the Company. Such agreement shall
be reasonably satisfactory in form and substance to the Company, each Holder and
such underwriter, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their Registrable
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriter shall also be made to and for the benefit of such Holders.
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Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriter except as they may relate to
such Holders, their shares and their intended methods of distribution.
5.3.6. Documents to be Delivered by Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company requesting
information customarily sought of selling security holders.
6. Adjustments.
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6.1. Adjustments to Exercise Price and Number of Securities. The Exercise
Price and the number of shares of Common Stock underlying the Purchase Option
shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1. Stock Dividends, Recapitalization, Reclassification, Split-Ups. If
after the date hereof, and subject to the provisions of Section 6.2 below, the
number of outstanding shares of Common Stock is increased by a stock dividend
payable in shares of Common Stock or by a split-up, recapitalization or
reclassification of shares of Common Stock or other similar event, then, on the
effective date thereof, the number of shares of Common Stock issuable on
exercise of this Purchase Option shall be increased in proportion to such
increase in outstanding shares. For example, if the Company declares a
two-for-one stock dividend and at the time of such dividend this Purchase Option
is for the purchase of 1,000 shares at $1.50 per share, upon effectiveness of
the dividend, this Purchase Option will be adjusted to allow for the purchase of
2,000 shares at $.75 per share.
6.1.2. Aggregation of Shares. If after the date hereof, and subject to
the provisions of Section 6.2, the number of outstanding shares of Common Stock
is decreased by a consolidation, combination or reclassification of shares of
Common Stock or other similar event, then, upon the effective date thereof, the
number of shares of Common Stock issuable on exercise of this Purchase Option
shall be decreased in proportion to such decrease in outstanding shares.
6.1.3. Adjustments in Exercise Price. Whenever the number of shares of
Common Stock issuable upon exercise of this Purchase Option is adjusted, as
provided in this Section 6.1, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares purchasable upon the exercise of this Purchase Option immediately prior
to such adjustment, and (y) the denominator of which shall be the number of
shares so purchasable immediately thereafter.
6.1.4. Replacement of Securities upon Reorganization, etc. In case of any
reclassification or reorganization of the outstanding shares of Common Stock
other than a change covered by Section 6.1.1 hereof or that solely affects the
par value of such shares of Common Stock, or in the case of any merger or
consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or reorganization of the
outstanding shares of Common Stock), or in the case of any sale or conveyance to
another corporation or entity of the property of the Company as an entirety or
substantially as an entirety in connection with which the Company is dissolved,
the Holder of this Purchase Option shall have the right thereafter (until the
expiration of the right of exercise of this Purchase Option) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
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immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Purchase Option immediately
prior to such event; and if any reclassification also results in a change in
shares of Common Stock covered by Section 6.1.1, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.3 and this Section 6.1.4. The provisions of
this Section 6.1.4 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
6.1.5. Changes in Form of Purchase Option. This form of Purchase Option
need not be changed because of any change pursuant to this Section, and Purchase
Options issued after such change may state the same Exercise Price and the same
number of shares of Common Stock as are stated in the Purchase Options initially
issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Purchase Options reflecting a required or permissive change shall not be
deemed to waive any rights to a prior adjustment or the computation thereof.
6.2. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares upon the exercise or
transfer of this Purchase Option, nor shall it be required to issue scrip or pay
cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up or
down to the nearest whole number of shares of Common Stock or other securities,
properties or rights.
6.3. Notice of Adjustment. Upon the happening of any event requiring an
adjustment of the Exercise Price hereunder, the Company shall forthwith give
written notice thereof to the Holders stating the adjusted Exercise Price and
the adjusted number of shares of Common Stock resulting from such event and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of the Purchase Options, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Purchase Options and payment of the Exercise Price therefor, all shares of
Common Stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable and not subject to preemptive
rights of any stockholder. As long as the Purchase Options shall be outstanding,
the Company shall use its best efforts to cause all shares of Common Stock
issuable upon exercise of the Purchase Options to be listed (subject to official
notice of issuance) on all securities exchanges (or, if applicable, on Nasdaq)
on which the Common Stock is then listed and/or quoted.
8. Notices of Record Date. In case:
----------------------
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this
Purchase Option) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of any class or any other securities, or to receive any
other right, or
(b) of any capital reorganization of the Company, any reclassification of
the capital stock of the Company, any consolidation or merger of the Company
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with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then, and in each such case, the Company will deliver or cause
to be delivered to the Holders a notice specifying, as the case may be, (i) the
date on which a 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, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, 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 (or such other stock or securities at the
time deliverable upon the exercise of this Purchase Option) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least fifteen (15) days prior to the
record date or effective date for the event specified in such notice, provided
that the failure to mail such notice shall not affect the legality or validity
of any such action.
8.1. Transmittal of Notices. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made on the date of delivery if delivered personally or
sent by overnight courier, with acknowledgment of receipt to the party to whom
notice is given, or on the fifth day after mailing if mailed to the party to
whom notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of the Purchase Option, to the address of such Holder as shown
on the books of the Company, or (ii) if to the Company, to its principal
executive office.
9. Miscellaneous.
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9.1. Amendments. The Company and M.H. Meyerson & Co., Inc. ("Meyerson") may
from time to time supplement or amend this Purchase Option without the approval
of any of the Holders in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder that the Company and Meyerson may deem necessary or
desirable and that the Company and Meyerson deem shall not adversely affect the
interest of the Holders. All other modifications or amendments shall require the
written consent of the party against whom enforcement of the modification or
amendment is sought.
9.2. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Purchase Option.
9.3. Entire Agreement. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with this
Purchase Option) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
9.4. Binding Effect. This Purchase Option shall inure solely to the benefit
of and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Purchase Option or any provisions herein
contained.
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9.5. Governing Law; Submission to Jurisdiction. This Purchase Option shall
be governed by and construed and enforced in accordance with the laws of the
State of New York, without giving effect to conflict of laws. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Purchase Option shall be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at its principal business offices.
Such mailing shall be deemed personal service and shall be legal and binding
upon the Company in any action, proceeding or claim. The prevailing party(ies)
in any such action shall be entitled to recover from the other party(ies) all of
its reasonable attorneys' fees and expenses relating to such action or
proceeding and/or incurred in connection with the preparation therefor.
9.6. Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Purchase Option shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of the provisions of this Purchase Option shall be effective unless set
forth in a written instrument executed by the party or parties against whom or
which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.
9.7. Exchange Agreement. As a condition of the Holder's receipt and
acceptance of this Purchase Option, Holder agrees that, at any time prior to the
complete exercise of this Purchase Option by Holder, if the Company and Meyerson
enter into an agreement ("Exchange Agreement") pursuant to which they agree that
all outstanding Purchase Options will be exchanged for securities or cash or a
combination of both, then Holder shall agree to such exchange and become a party
to the Exchange Agreement.
IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the 16th day of March, 2000.
GOLFROUNDS.COM, INC.
By:______________________________
Name: Robert H. Donehew
Title: Vice President and Treasurer
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Form to be used to exercise Purchase Option:
GolfRounds.com, Inc.
376 Main Street
Bedminster, New Jersey 07921
Date:_________________, ____
The undersigned hereby elects irrevocably to exercise the within Purchase
Option and to purchase ____________ shares of Common Stock of GolfRounds.com,
Inc. and hereby makes payment of $____________ (at the rate of $ per share) in
payment of the Exercise Price pursuant thereto. Please issue the Common Stock as
to which this Purchase Option is exercised in accordance with the instructions
given below.
or
The undersigned hereby elects irrevocably to exercise the within Purchase Option
and to purchase shares of Common Stock of GolfRounds.com, Inc. by surrender of
the unexercised portion of the within Purchase Option (with a "Value" of $ based
on a "Market Price" of $ ). Please issue the Common Stock in accordance with the
instructions given below.
______________________________
Signature
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as written
upon the face of the within Purchase Option in every particular without
alteration or enlargement or any change whatsoever.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name _______________________________________
(Print in Block Letters)
Address ________________________________________
12
<PAGE>
Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within
Purchase Option):
FOR VALUE RECEIVED,____________________________________ does hereby sell,
assign and transfer unto _______________________________ the right to purchase
_______________________ shares of Common Stock of GolfRounds.com, Inc.
("Company") evidenced by the within Purchase Option and does hereby authorize
the Company to transfer such right on the books of the Company.
Dated:___________________, ____
______________________________
Signature
NOTICE: The signature to this form must correspond with the name as written
upon the face of the within Purchase Option in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
13
GolfRounds.com, Inc.
375 Main Street
Bedminister, New Jersey 07921
March 16, 2000
To each of the Stockholders of
GolfRounds.com, Inc.
listed on Schedule A hereto
Re: Registration Rights and Lock-up
Dear Stockholder:
In consideration for M.H. Meyerson & Co., Inc. acting as the placement
agent for an offering of 1,333,005 shares of common stock, par value $.01 per
share ("Common Stock"), of GolfRounds.com, Inc. pursuant to a Confidential Term
Sheet dated March 3, 2000 ("Private Offering"), we hereby agree that you shall
have the same rights to have the Company register your shares for resale, and
you shall be subject to the same restrictions on resale of your shares, as are
set forth in Section 7 of the Subscription Agreement between the Company and
each of the investors in the Private Offering.
If you agree with the foregoing, please sign this letter in the space
provided below and return it to us at the above address.
Very truly yours,
GolfRounds.com, Inc.
By: __________________________________
Robert H. Donehew, Vice President and
Treasurer
ACCEPTED AND AGREED:
- ------------------------
(Print name of Stockholder)
By:_________________________
Name:
Title:
<PAGE>
Schedule A
to
Letter Agreement dated March 16, 2000
Name and Address of Stockholder Number of Shares Owned
- ------------------------------- ----------------------
The Rachel Beth Heller 1997 Trust dated 70,000
7/9/97
Lawrence Kupferberg, Trustee
74 Farview Road
Tenafly, New Jersey 07670
SS #: ###-##-####
The Evan Todd Heller 1997 Trust dated 70,000
6/17/97
Lawrence Kupferberg, Trustee
74 Farview Road
Tenafly, New Jersey 07670
SS #: ###-##-####
Martan & Co. 70,000
525 Washington Blvd., 34th Floor
Jersey City, New Jersey 07310
Eugene Whitehouse, Vice President
Tax ID#: 13-1924455
Donehew Fund Limited Partnership 70,000
Donehew Capital LLC General Partner
111 Village Parkway, Building #2
Marietta, Georgia 30067
Attn: Robert H. Donehew
Tax ID #: 83-0316971
Jonathan & Nancy Glaser Family Trust dated 40,000
12/16/98
Jonathan & Nancy Ellen Glaser, Trustee
1999 Avenue of the Stars, Suite 2530
Los Angeles, California 90067
Tax ID #: ###-##-####
17392.2
<PAGE>
W. Robert Ramsdell 40,000
474 Paseo Miramar
Pacific Palisades, California 90272
SS #: ###-##-####
Nagelberg Family Trust dated 9/24/97 140,000
David S. Nagelberg &
Bette Nagelberg, Trustees
P.O. Box 2142
Rancho Santa Fe, California 92067
Tax ID #: 12-2442177
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-1-1999
<PERIOD-END> FEB-29-2000
<CASH> 1,881,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,892,000
<PP&E> 6,000
<DEPRECIATION> 2,000
<TOTAL-ASSETS> 1,931,000
<CURRENT-LIABILITIES> 51,000
<BONDS> 0
<COMMON> 21,000
0
0
<OTHER-SE> 3,200,000
<TOTAL-LIABILITY-AND-EQUITY> 1,931,000
<SALES> 0
<TOTAL-REVENUES> 51,000
<CGS> 0
<TOTAL-COSTS> 343,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (292,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (292,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (292,000)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
