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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
October 19, 1998
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Date of Report (date of earliest event reported)
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
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Exact name of Registrant as Specified in its Charter
Colorado 0-17436 84-1034868
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State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada 89118
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Address of Principal Executive Offices, Including Zip Code
(702) 798-7777
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Registrant's Telephone Number, Including Area Code
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On October 19, 1998, Las Vegas Discount Golf & Tennis, Inc. (the
"Company") issued 2,303,290 shares of its Common Stock to ASI Group, L.L.C.
("ASI"), for $2,500,000 in cash in a private transaction. As part of this
transaction, ASI also received an option to purchase 347,975 shares of Common
Stock at an exercise price of $1.8392 per share through October 19, 2008 (the
"Option"). As a result of this transaction, ASI is now deemed to beneficially
own approximately 31.3% of the Company's Common Stock.
The Common Stock and Option were issued by the Company pursuant to the
terms of an Investment and Voting Agreement between the Company and ASI (the
"Agreement"). ASI is a Nevada limited liability company whose members are
Andre K. Agassi, a professional tennis player, Perry Craig Rogers, an attorney
and business manager, and Sunbelt Communications Company ("Sunbelt"). Sunbelt
is engaged in the broadcasting business and is owned by James Earl Rogers.
ASI obtained the funds for the purchase of the stock from its members,
including a bank loan taken by Sunbelt. Sunbelt obtained funds for this
transaction from an additional draw (the "Draw") on an existing loan between
AT&T Commercial Finance Corporation and Sunbelt. The Draw is in the amount of
$1.2 million and bears interest at the commercial paper rate at the close of
business on the first business day of every month plus 2.5%. Sunbelt is
required to make monthly payments of principal and interest through June 1,
2008.
Pursuant to the terms of the Agreement, ASI has a right of first refusal
to purchase its pro rata share of all or any part of any shares of capital
stock of the Company (or securities that are convertible into shares of common
or preferred stock of the Company) which the Company may propose to sell or
issue. The number of shares of Common Stock of the Company owned by ASI by
reason of purchase pursuant to the Agreement shall be adjusted in the event
the Company offers to sell any shares of its capital stock to any other person
or entities at a lower price per share than the purchase price paid by ASI or
otherwise on more favorable terms.
ASI has the right to demand that the Company effect a registration under
the Securities Act of 1933 of the Common Stock of the Company purchased
pursuant to the Agreement or upon exercise of the Option or to participate in
any registration of Common Stock undertaken by the Company as long as ASI owns
at least five percent (5%) of the Company's outstanding voting equity
securities.
Pursuant to the terms of the Agreement, ASI entered into a Voting
Agreement with Vaso Boreta, Ronald Boreta and John Boreta and Boreta
Enterprises, Ltd. (collectively "Boreta"). The Voting Agreement provides that
while ASI is an equity owner of the Company and/or the Company's majority-
owned subsidiary Saint Andrews Golf Corporation ("SAGC"), ASI and Boreta will
(a) vote the shares of capital stock of the Company any of them is entitled to
vote as mutually agreed by ASI and Boreta, and (b) Boreta will, if it acquires
additional capital stock of the Company or SAGC, transfer a portion of such
capital stock to ASI so as to maintain their relative proportionate direct and
indirect equity ownership in each of the Company and SAGC.
Pursuant to the terms of a Co-Sale Agreement between ASI and Boreta, ASI
and Boreta agreed that, until the fifth anniversary of such agreement, except
with respect to certain limited transactions, if any of Boreta proposes to
sell any shares of capital stock of the Company, ASI shall have the right to
participate in such sale of capital stock on the same terms and conditions.
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ITEM 5. OTHER EVENTS.
On October 19, 1998, immediately following the transaction between the
Company and ASI described in Item 1 of this Report on Form 8-K, the Company
used the $2,500,000 received from ASI to purchase 250,000 shares of the Series
B Convertible Preferred Stock of its majority-owned subsidiary Saint Andrews
Golf Corporation ("SAGC"). SAGC is using these funds together with the
proceeds of the $13,500,000 loan which SAGC recently obtained from the Nevada
State Bank toward the completion of SAGC's All-American SportPark in Las
Vegas, Nevada, to pay down short-term debt obligations and for working
capital.
The shares of Series B Convertible Preferred Stock purchased by the
Company have a liquidation value of $10.00 per share and may be redeemed by
SAGC under certain circumstances. Each share is convertible into one share of
SAGC's Common Stock, is entitled to one vote per share and votes together with
the Common Stock as a single class. The Series B Convertible Preferred Stock
entitles the holder to receive dividends equal to those paid to the holders of
SAGC's Common Stock, on an as-converted basis.
On October 9, 1998, SAGC opened its All-American SportPark in Las Vegas.
The SportPark has four major attractions: the Pepsi Pavillion, Major League
Baseball Slugger Stadium, NASCAR Speedpark, and Allsport Arena.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) EXHIBITS. The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION LOCATION
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10.1 Investment and Voting Agreement, dated Filed herewith
as of October 19, 1998, by and between electronically
ASI Group, L.L.C. and Las Vegas Discount
Golf & Tennis, Inc.
10.2 Option Agreement, dated as of October Filed herewith
19, 1998, by and between ASI Group, electronically
L.L.C. and Las Vegas Discount Golf &
Tennis, Inc.
10.3 Voting Agreement, dated as of October 19, Filed herewith
1998, by and among ASI Group, L.L.C. and electronically
Messrs. John Boreta, Ronald Boreta and
Vaso Boreta and Boreta Enterprises, Inc.
10.4 Co-Sale Agreement, dated as of October 19, Filed herewith
1998, by and among ASI Group, L.L.C., electronically
Las Vegas Discount Golf & Tennis, Inc.
and Messrs. John Boreta, Ronald Boreta
and Vaso Boreta and Boreta Enterprises,
Inc.
10.5 Investment Agreement, dated as of October Filed herewith
19, 1998, by and between Las Vegas electronically
Discount Golf & Tennis, Inc. and Saint
Andrews Golf Corporation
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
Dated: October 28, 1998 By:/s/ Vaso Boreta
Vaso Boreta, President
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INVESTMENT AND VOTING AGREEMENT
This Investment and Voting Agreement is made as of October 19, 1998,
between LAS VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation (the
"Company"), whose address is 5325 South Valley View Boulevard, Suite 4, Las
Vegas, Nevada 89118, and ASI GROUP, L.L.C., a Nevada limited liability company
(the "Purchaser"), whose address is c/o Agassi Enterprises, Inc., 3960 Howard
Hughes Parkway, Suite 750, Las Vegas, Nevada 89109.
SECTION 1
AUTHORIZATION AND SALE OF COMMON STOCK
1.1 Authorization. The Company will authorize the sale and issuance of
Two Million Three Hundred Three Thousand Two Hundred Ninety (2,303,290) shares
(the "Shares") of its Common Stock ("Common Stock"), no par value.
1.2 Sale of Common Stock. Subject to the terms and conditions hereof,
and in reliance upon the representations, warranties and agreements of the
parties contained herein, the Company will issue and sell to the Purchaser,
and the Purchaser will buy from the Company, Two Million Three Hundred Three
Thousand Two Hundred Ninety (2,303,290) shares of Common Stock at a purchase
price of One Dollar and Eight and One-Half Cents ($1.085) per share, for an
aggregate purchase price of Two Million Five Hundred Thousand Dollars
($2,500,000.00).
1.3 Adjustment of Price and/or Terms.
(a) If at any time and each time within three (3) years after the
Closing (as defined in Section 2.1 below), the Company offers to sell or
grants, sells or issues shares of its capital stock to any persons or entity
other than the Purchaser at a lower price per share than the purchase price
paid by the Purchaser for the Shares and/or on more favorable terms and
conditions than those afforded to the Purchaser in connection with the
purchase of the shares of Common Stock (taking into account any equitable
adjustment in accordance with the Anti-Dilution Provisions), the Company
agrees to retroactively apply such lower price and/or more favorable terms and
conditions to the Shares purchased by the Purchaser. At the Purchaser's
request, the Company shall either (i) issue the Purchaser additional shares of
Common Stock in the amount equal to (A) the amount of any such overpayment by
the Purchaser divided by (B) such lower price charged by the Company to any
person or entities or (ii) deliver to the Purchaser the amount of any such
overpayment in cash.
(b) If at any time after the Closing, while the Purchaser is an
equity holder of the Company or has options, warrants or other rights to
acquire equity of the Company, the Company offers to sell or grants, sells or
issues shares of its capital stock to any of Messrs. Vaso Boreta, Ronald
Boreta and John Boreta or Boreta Enterprises Ltd. or their respective
affiliates (collectively, "Boreta") at any price or for any consideration
(including, but not limited to, provision of services) the Company shall issue
the Purchaser additional shares of Common Stock so as to maintain the relative
proportionate equity ownerships of the Purchaser, on the one hand, and Boreta,
on the other hand, in the Company as they were immediately prior to such
offer, grant, sale or issuance, assuming the consummation of such offer,
grant, sale or issuance.
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SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Common
Stock hereunder shall be held at the offices of the Company sixteen days from
the execution hereof (the "Closing"), or at such other time and place upon
which the Company and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates, registered in the Purchaser's name representing
Two Million Three Hundred Three Thousand Two Hundred Ninety (2,303,290) Shares
against payment of the purchase price therefor, by check payable to the
Company or wire transfer per the Company's instructions. The total purchase
price shall be paid by the Purchaser to the Company in one installment without
interest thereon.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B (which Schedule makes specific reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty to which such exception
shall apply), the Company represents and warrants to the Purchaser as follows:
3.1 Definition of Material. For purposes of this Section 3, material
shall mean anything having a value or effect of more than $50,000.
3.2 Organization and Standing; Articles and By-Laws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Colorado and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction, and the failure to be
qualified will not have a material adverse affect on the Company's business as
now conducted or as now proposed to be conducted. The Company has furnished
the Purchaser with copies of its Articles of Incorporation and By-Laws, as
amended. Said copies are true, correct and complete and contain all
amendments through the Closing Date.
3.3 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, at the Closing will
have all requisite legal and corporate power and authority to sell and issue
the Shares hereunder, to issue the Option (as defined below), to issue the
Option Shares (as defined below) upon exercise of the Option and to carry out
and perform its obligations under the terms of this Agreement.
3.4 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.5 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock, of which 5,831,807 shares are
issued and outstanding, and 5,000,000 shares of Preferred Stock, of which no
shares are issued and outstanding. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. Options
to purchase 432,000 shares of Common Stock are issued and outstanding under
the Company's employee stock option plan. All outstanding securities of the
Company were issued in compliance with applicable federal and state securities
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laws. Except as set forth above, there are no option, warrants or other
rights to purchase any of the Company's capital stock. Except as set forth in
any agreement entered into with the Purchaser, the Company is not a party or
subject to any agreement or understanding, and there is no agreement or
understanding between any persons that affects or related to the voting or
giving of written consents with respect to any security or the voting by a
director of the Company.
3.6 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement and the Option Agreement
(as defined below) by the Company, the authorization, sale, issuance and
delivery of the Shares, the Option, and the Option Shares and the performance
of all of the Company's obligations hereunder and under the Option Agreement
has been taken or will be taken prior to the Closing. This Agreement and the
Option Agreement, when executed and delivered by the Company, shall constitute
valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms. The Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable the Option Shares have been duly and validly reserved and, when
issued in compliance with the provisions of this Agreement, and the Option
Agreement will be validly issued, fully paid and nonassessable; and the Shares
and Option Shares will be free of any liens or encumbrances, other than any
liens or encumbrances created by or imposed upon the holders hereof through no
action of the Company; provided, however, that the Option Shares will be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares are not subject to any preemptive rights or
rights of first refusal.
3.7 Financial Statements. The Company has delivered to the Purchaser
its audited balance sheet and statements of operations and cash flow was of
and for the period ended December 31, 1997, and its combined unaudited balance
sheet and statements of operations and cash flows as of and for the period
ended June 30, 1998 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except that the
unaudited financial statements do not contain footnotes. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the period,
indicated therein. The financial statements for the year ended December 31,
1997, were audited by Arthur Andersen LLP.
3.8 Absence of Changes. Since June 30, 1998: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no materially adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company other
than changes in the ordinary course of business, none of which, individually
or in the aggregate, has been materially adverse, (c) there has been no damage
to, destruction of or loss of physical property (whether or not covered by
insurance) materially and adversely affecting the business or operations of
the Company, (d) the Company has not declared or paid any dividend or made any
distribution on its stock, or redeemed, purchased or otherwise acquired any of
its stock, (e) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there
has been no resignation or termination of employment of any key officer,
consultant or employee of the Company, and the Company does not know of the
impending resignation or termination of employment of any such officer,
consultant or employee that if consummated would have a material adverse
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effect on its business, (g) there has been no labor dispute involving the
Company or its employees and none is pending or, to the best of the Company's
knowledge, threatened, (h) there has not been any change, except in the
ordinary course of business, in the contingent obligations of the Company, by
way of guaranty, endorsement, indemnity, warranty or otherwise, (i) there have
not been any loans made by the Company to any of its employees, officers or
directors other than travel advances and office advances made in the ordinary
course of business and (j) to the best of the Company's knowledge, there has
been no other event or condition of any character pertaining to and materially
and adversely affecting the assets or business of the Company.
3.9 Material Liabilities. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate) except
(a) the liabilities and obligations set forth in the Financial Statements, (b)
liabilities and obligations which have been incurred subsequent to June 30,
1998, in the ordinary course of business which have not been in the aggregate
materially adverse, (c) liabilities and obligations under lease for its
principal offices and for equipment, and (d) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.10 Title to Properties and Assets; Liens, etc. The Company has good
and marketable title to its properties and assets, and has good title to all
of its leasehold interests in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the lien of current taxes not yet due
and payable. Each of the Company's assets is in good repair and good,
marketable and operating condition and is suitable for the purposes for which
it presently is being used and is intended to be used by the Company and is
adequate and suitable to meet all present and reasonably anticipated future
requirements of the Company. The Company's assets conform to all applicable
laws, ordinances, codes, rules and regulations, and the Company has not
received any notice to the contrary. The Company does not own, of record or
beneficially, any real property. Exhibit C sets forth a list and description
of all property leased or subleased to or by the Company.
3.11 Compliance with Other Instruments; None Burdensome, etc. The
Company is not in violation of any term of its Articles or By-Laws, or, in any
material respect, of any term or provision of any mortgage, indebtedness,
indenture, contract, security agreement, agreement, instrument, judgment or
decree, and, to the best of its knowledge, is not in violation of any order,
statute, rule or regulation applicable to the Company where such violation
would materially and adversely affect the Company. The execution, delivery
and performance of and compliance with this Agreement and the Option
Agreement, and the issuance of the Common Stock, the Option and the Option
Shares have not resulted and will not result in any violation of, or conflict
with, or constitute a default (or an event that might, with the passage of
time or the giving of notice or either of them, constitute a default) any of
the terms of, result in the termination of, result in the loss of any right
under, or give to any other person the right to cause such a termination of or
loss under and will be in compliance with, the Company's Articles, By-Laws and
all of its agreements, permits and licenses or any provision of federal,
state, local or foreign statute rule ordinance or regulation applicable to the
Company or result in the creation of, any mortgage, pledge, lien, encumbrance
or charge upon any of the capital stock, properties or assets of the Company
in the creation, maturation or acceleration of any liability or obligation of
the Company or the creation, maturation or acceleration of any liability or
obligation of the Company (or give to any other person the right to cause such
a creation, maturation or acceleration) and there is no such violation or
default which adversely affects the business of the Company or any of its
properties or assets.
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3.12 Intangible Assets.
(a) The Company (i) owns or has the right to use, free and clear of
all liens, claims and restrictions, all Intellectual Property (as hereinafter
defined) used in the conduct of its business as now conducted or as proposed
to be conducted without infringing upon or otherwise acting adversely to the
right or claimed right of any person under or with respect to any of the
foregoing, and (ii) is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner of, license
of, or other claimant to, any patent, trademark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise. "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable) and whether or not reduced
to practice, all improvements thereto, and all patents, patent applications
and patent disclosures, together with all reissuance, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and producing processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software and information systems, programs,
(including data and related documentation), whether owned or leased by the
Company, (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium). The Company has taken all
necessary action to maintain and protect each item of Intellectual Property
that it owns or uses and has never granted any sublicense or similar right to
any third party with respect to such Intellectual Property.
(b) The Company owns and has the unrestricted right to use all
Intellectual Property required for or incidental to the development,
construction and operation of the SportPark segment of its business, free and
clear of any rights, liens or claims of others, including without limitation,
former employers of all current and former employees, consultants, officers,
directors and shareholders of the Company.
(c) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the stockholders and directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company has ever received any charge, complaint, claim, demand
or notice alleging any such interference, infringement, misappropriation or
violation (including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party). No third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of the Company.
(d) Exhibit D identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual Property, each
pending patent application or application for registration which the Company
has made with respect to any of its Intellectual Property, and each license,
agreement or other permission which the Company has granted to any third party
with respect to any of its Intellectual Property. The Company has delivered
to the Purchaser correct and complete copies of all such patents,
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registrations, applications, licenses, agreements and permissions (as amended
to date). Exhibit D also identifies each trade name or unregistered trademark
used by the Company in connection with any of its businesses. With respect to
each item of Intellectual Property required to be identified in Exhibit D:
(i) the Company possesses all right, title and interest in and to the item,
free and clear of any Liens, license or other restriction, (ii) the item is
not subject to any outstanding injunction, judgment, order, decree, ruling or
charge, (iii) no action, suit proceeding hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of each of the
shareholders and the directors and officers (and employees with responsibility
for Intellectual Property matters) of the Company, is threatened which
challenges the legality, validity, enforceability, use or ownership of the
item and (iv) the Company has never agreed to indemnify any person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
3.13 Litigation, etc. There is no suit, action, hearing, investigation,
claim or litigation, or legal, administrative, arbitration or other proceeding
pending or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company, its business or any of its property or
assets, before any court, arbitrator, or federal, state, municipal or other
governmental board, department, agency or instrumentality, and there is no
basis for any such action. There is no judgment, decree, injunction, ruling,
award, charge, order or writ of any court, governmental department,
commission, agency, instrumentality, arbitration or other person outstanding
against, binding upon or involving the Company, its business, any directors or
officers of the Company. None of the matters set forth on Exhibit B could
result in any material adverse effect. The Company owns policies of casualty,
liability or other forms of insurance which provide coverages in amount and
scope sufficient to cover every claim, action, cause of action, suit,
proceeding, litigation, arbitration or investigation arising out of, related
to, or in connection with those matters listed on the schedule of exception.
Neither the Company nor any of its directors, officers or employees is
currently charged with, or is currently under investigation with respect to,
any violation of any provision of any foreign, federal, state or local law or
administrative regulation in respect of the business of the Company. The
Company is not in default with respect to any judgment, decree, injunction,
ruling, award, order or writ of any foreign, federal, state, municipal agency
or other governmental department, board, commission, bureau, agency or
instrumentality.
3.14 Employees. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. There
are no controversies pending nor, to the best knowledge of the Company any
basis of any such controversies, between the Company and any of its employees.
To the knowledge of the Company, and the directors and officers (and employees
with responsibility for employment matters) of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not bound by any collective bargaining agreement, nor
has the Company experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has not
committed any unfair labor practice. None of the shareholders or the
directors or officers (or employees with responsibility for employment
matters) of the Company has any knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
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3.15 Employee Agreements. There are no pension, profit-sharing, bonus,
group insurance, death benefit, vacation pay, severance pay, sick leave,
holiday pay, welfare, or any other employee benefit or "fringe benefit" plans
or arrangements relating to the current or former employees or consultants of
the Company. In addition, there are no employment, deferred compensation,
collective bargaining, retainer, savings, consulting, non-competition,
retirement or incentive agreements, contracts, plans or arrangements relating
to, with or for the benefit of any officers or employees of the Company or
other persons.
3.16 Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever; none of said
officers, directors or shareholders, or any members of their immediate
families, are indebted to the Company or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or
with which the Company has a business relationship, or any firm or corporation
which competes with the Company, except that officers, directors and/or
shareholders of the Company may own less than 1% of the stock of
publicly-traded companies which may compete with the Company. No officer,
director or shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any contract with the Company. The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.17 Material Contracts and Obligations. Attached hereto as Exhibit E
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by the Company; or which involve transactions or
proposed transactions between the Company and its officers, directors,
affiliates or any affiliate thereof. Copies of certain of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by the Purchaser and its counsel. All
of such agreements and contracts are valid, binding and in full force and
effect in all respects, assuming due execution by the other parties to such
agreements and contracts. To the best knowledge of the Company, the Company
and each other party to each such agreement and contract has performed all
obligations required to be performed by it thereunder and is not in breach or
default, and is not alleged to be in breach or default, in any respect
thereunder, and no event has occurred and no condition or state of facts
exists (or would exist upon the giving of notice or the lapse of time or any
of them) that would become or cause a breach, default or event of default
thereunder, would give to any person the right to cause such a termination or
would cause an acceleration of any obligation thereunder.
3.18 Registration Rights. Except as set forth in this Agreement, the
Company is not under any contractual obligation to register (as defined in
Section 8.1 below) any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.19 Governmental Consent, etc. No consent, approval, order or
authorization of (of designation, declaration or filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Common Stock, or the consummation of any other transaction contemplated
hereby, except qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) or the offer and sale of
the Common Stock under applicable estate securities laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
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3.20 Offering. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Common Stock and the Option Shares (as defined in Section 7.6 below) to be
issued in conformity with the terms of this Agreement, and the issuance of the
Option Shares upon exercise of the Option, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "Securities Act").
3.21 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.22 Tax Matters. The Company (a) has timely filed all tax returns that
are required to have been filed by it with all appropriate federal, state,
county and local governmental agencies (and all such returns fairly reflect
the Company's operations for tax purposes), (b) has timely paid all taxes owed
by it for which it is obligated to withhold from amounts owing to any employee
(including without limitation social security taxes), creditor or third party
(other than taxes the validity of which are being contested in good faith by
appropriate proceedings), and (c) has not waived any statute of limitations
with respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency. The assessment of any additional taxes for a period
for which returns have been filed is not expected to exceed the recorded
liability therefor, and there are no material unresolved questions or claims
concerning the Company's tax liability. The Company's tax returns have not
been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to
any of said returns which, if determined adversely to the Company, would
result in the assertion by any taxing authority of any valid deficiency in any
material amount for taxes.
3.23 Insurance. With respect to each insurance policy maintained by the
Company: (a) the policy is legal, valid, binding, enforceable and in full
force and effect, (b) the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
consummation of the transactions contemplated hereby, (c) neither the Company
nor any other party to the policy is in breach of default (including with
respect to the payment of premiums or the giving of notices) and (d) no party
to the policy has repudiated any provision thereof. The Company has been
covered since its formation by insurance in type, scope and amount that (x)
meet the minimum requirements of any contract, lease or agreement to which the
Company is a party and (y) is customary and reasonable for the business in
which it has engaged during such period including, without limitation, fire,
casualty, liability and key-man life (on the lives of Ron and Vaso Boreta)
insurance polices. The Company has not failed to give any notice or present
any claim under any insurance policy in a due and timely fashion.
3.24 Environmental and Safety Regulations. The Company is not in
violation of any environmental laws or regulations, including without
limitation any and all applicable federal, state and local laws, regulations
and ordinances relating to air and water pollution and handling and disposal
of chemical and hazardous materials (hereinafter the "Environmental Laws").
The Company possesses all of the authorizations, permits and approvals
required to be obtained by applicable Environmental Laws; neither the Company
nor any stockholder has received any notice from any governmental authority or
has knowledge of any governmental inquiry or investigation or any other claim,
suit or proceeding against or involving the Company with respect to any actual
or alleged violation of any applicable Environmental Law and all hazardous
waste and chemical waste materials have been disposed of in accordance with
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all applicable Environmental Laws. There have been no spills, dumping,
discharge or clean-up of hazardous waste or chemical materials in violation of
any Environmental Laws on or at any premises owned or any premises occupied by
the Company.
3.25 Employee Benefit Plans.
(a) The Company has never maintained or contributed to, and does
not maintain or contribute to any Employee Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974, as amended. The Company has
not incurred any liability under ERISA (including any withdrawal liability) or
under the Internal Revenue Code of 1986, as amended Code (the "Code"), with
respect to any Employee Benefit Plan.
(b) The Company does not contribute to, nor has ever had
contributed to and has never been required to contribute to any multi-employer
plan or has any liability (including withdrawal liability) under any
multi-employer plan.
(c) The Company does not maintain or contribute to, nor has it ever
maintained or contributed to, nor has it ever been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
3.26 Minute Books. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately.
3.27 Legal Compliance. The Company has complied with all applicable
laws, statutes, and ordinances (including without limitation all rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings
and charges thereunder) of federal, state, local and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against it alleging any failure to so comply. The Company has all
permits, certificates, licenses, approvals and other authorizations required
in connection with the operation of its business, all of which are valid and
effective. No notice has been issued and no investigation or review is
pending or threatened by any governmental entity with respect to (a) any
alleged violation by the Company of any law, statute or ordinance, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge,
policy or guideline of any federal, state, local or foreign governmental
entity(or agency thereof), or (b) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Company.
3.28 LVDGT Agreement. The Investment Agreement (the "LVDGT Agreement")
entered into as of the date hereof between LVDGT and SAGC and attached as
Annex 3.28 hereto is valid, binding and in full force and effect.
3.29 SAGC. The Company's most significant asset is the Company's equity
holding in Saint Andrews Golf Corporation, a Nevada corporation ("SAGC"). The
Company owns 2 million shares of the Common Stock of SAGC (collectively, the
"SAGC Shares"). Each of the SAGC Shares has been duly authorized, validly
issued, fully paid and nonassessable. The Company has good, valid and
marketable title to the SAGC Shares, free and clear of any lien, charge,
encumbrance, security interest, claim or fight of others of whatever nature.
No person or entity has any power or right, whether or not shared with any
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other person or entity, to dispose of or direct the disposition of any SAGC
Shares or vote or direct the voting of any SAGC Shares. The Company hereby
makes the same representations and warranties as contained in Section 3 of the
LVDGT Agreement with respect to SAGC for the benefit of the Purchaser, which
representations and warranties are incorporated herein by reference in their
entirety.
3.30 Disclosure. This Agreement with the Exhibits hereto and all
information provided by the Company to the Purchaser do not contain any untrue
statement of a fact or omit to state a fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 Experience. It has experience in evaluating and investing in
private placement transactions of securities in companies so that it is
capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests.
4.2 Investment. It is acquiring the Shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Shares
have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature
of the investment intent and the accuracy of the Purchaser's representations
as expressed herein.
4.3 Rule 144. It acknowledges that the Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. It is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market
for the shares, the availability of certain current public information about
the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected
through a "brokers transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three month period not
exceeding specified limitations.
4.4 Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and
has had the opportunity to review the Company's facilities. It has also had
an opportunity to ask questions of officers of the Company, which questions
were answered to its satisfaction. It understands that such discussions, as
well as any written information issued by the Company, were intended to
describe certain aspects of the Company's business and prospects but were not
a thorough or exhaustive description. However, no investigation by, or
furnishing of information to, the Purchaser shall affect or modify the
representations, warranties and agreements of the Company set forth herein or
the right of the Purchaser to rely exclusively thereon and to seek and obtain
all damages and other remedies available to the Purchaser in connection with
the breach of any of the representations, warranties and covenants contained
herein.
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4.5 Authorization. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms subject to (a) the laws of
bankruptcy and the laws affecting creditor's rights generally and (b) the
availability of equitable remedies.
4.6 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the
Purchaser, any liability for brokerage or finder's fees or agents' commissions
or any similar charges in connection with this Agreement.
4.7 Required SEC Filings. The Purchaser acknowledges that within 10
days after the Closing, it will be required to file a Schedule 13D or Schedule
13G, as appropriate, or Schedule 13G, as appropriate, and a Form 3 with the
Securities and Exchange Commission.
SECTION 5
THE PURCHASER'S CONDITIONS TO CLOSING
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the below-listed conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto. If at the Closing Date any of the conditions specified in this
Agreement shall not have been fulfilled, the Purchaser shall, at the
Purchaser's election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights Investor may have by
reason of such nonfulfillment.
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true, complete and
correct when made, and shall be true, complete and correct on the Closing
Date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 Good Standing Certificate. The Company shall have delivered to the
Purchaser a certificate of good standing of the Company under the laws of the
State of Colorado.
5.5 Legal Matters. All matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been reasonably
approved by counsel to the Purchaser.
5.6 Co-Sale Agreement. The Purchaser and John Boreta, the Company, Ron
Boreta and Vaso Boreta shall each have entered into a Co-Sale Agreement which
shall have a term of two years in the form attached hereto as Exhibit F.
5.7 LVDGT Agreement. The transactions contemplated by the LVDGT
Agreement have been consummated or are being consummated simultaneously
herewith.
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5.8 Merger. The terms of the proposed merger between the Company and
SAGC shall be entirely satisfactory, in both form and substance, to the
Purchaser in its sole discretion. Without limiting the foregoing, the terms
of such merger shall provide that the Purchaser's economic interest in the
Company shall not be diluted by the consummation of such merger.
5.9 Voting Agreement. The voting agreement by and among the Purchaser
and the individuals listed therein (the "Voting Agreement"), in the form
attached hereto as Exhibit A, has been executed and is valid, binding and in
full force and effect.
5.10 Opinion of the Company's Counsel. The Purchaser shall have
received from Krys, Boyle, Freedman & Sawyer, P.C., counsel to the Company, an
opinion dated the Closing Date, in form and substance satisfactory to the
Purchaser, to the effect that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado, and the Company
has the requisite corporate power and authority to own it properties and to
conduct its business.
(b) The Company is not presently required to be qualified to do
business as a foreign corporation in any state or jurisdiction of the United
States.
(c) The Company has the requisite corporate power and authority to
execute, deliver and perform this Agreement and the Option Agreement. The
Agreement and the Option Agreement have been duly and validly authorized by
the Company, duly executed and delivered by an authorized officer of the
Company and constitutes legal, valid and binding obligations of the Company,
subject to bankruptcy and other laws of general application affecting the
rights and remedies of creditors and except insofar as the enforceability of
the indemnification provisions of Section 8.11 of the Agreement may be limited
by applicable laws and except that no opinion need be given as to the
availability of equitable remedies.
(d) The capitalization of the Company is as follows:
(i) The authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, of which 5,831,807 shares are issued and
outstanding, and 5,000,000 shares of Preferred Stock, of which no shares are
issued and outstanding. The outstanding shares have been duly authorized and
validly issued, and are fully paid and nonassessable. Options to purchase
432,000 shares of Common Stock are issued and outstanding under the Company's
employee stock option plan. All outstanding securities of the Company were
issued in compliance with applicable federal and state securities laws.
Except as set forth above, there are no option, warrants or other rights to
purchase any of the Company's capital stock.
(ii) Preferred Stock. 5,000,000 shares of Stock, of which no
shares are issued and outstanding.
(iii) Common Stock. 15,000,000 shares of Common Stock, of
which (A) 5,831,807 shares are issued and outstanding and (B) 2,303,290 shares
are being purchased pursuant to this Agreement. All such shares of Common
Stock have been duly authorized, issued and delivered and are validly
outstanding, fully paid and nonassessable and were issued in compliance with
all applicable federal and state securities laws and approved by all requisite
shareholder action.
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(iv) Except for (A) the rights of first refusal contained in
Section 9 hereof; (B) 347,975 shares of Common Stock reserved for issuance
upon the exercise of the stock option granted herein, (C) 432,000 shares of
Common Stock reserved for issuance to employees and consultants upon exercise
of outstanding stock options, there are no preemptive rights or, to the best
of counsel's knowledge, options, warrants, conversion privileges or other
rights (or agreements of any such rights) outstanding to purchase or otherwise
obtain any of the Company's securities.
(e) The certificates representing shares of Common Stock are in due
and proper form and have been duly and validly executed by the officers of the
Company named thereon.
(f) The execution, delivery, performance and compliance with the
terms of this Agreement and the Option Agreement do not violate any provision
of any federal, state or local law, rule or regulation or of any judgment,
writ, decree or order binding upon the Company or any provision of the
Company's amended Articles of Incorporation ("Articles") or By-Laws.
(g) All consents, approvals, orders or authorizations of, and all
qualifications, registrations, designations, declarations or filings with, any
federal or state governmental authority on the part of the Company required in
connection with the consummation of the transactions contemplated by this
Agreement and the Option Agreement have been obtained and are effective as of
the Closing, and such counsel is not aware of any proceedings, or threat
thereof, which question the validity thereof.
(h) Based in part upon the representations of the Purchaser in this
Agreement, the offer and sale of the Common Stock pursuant to the terms of
this Agreement are exempt from the registration requirements of Section 5 of
the Securities Act by virtue of Section 4(2) thereof, and from the
qualification requirements of the securities laws of the State of Nevada, or
all requisite permits, qualifications and orders have been obtained.
(i) Except as set forth on the Schedule of Exceptions attached to
the Agreement as Exhibit B, such counsel is not aware of any action,
proceeding or investigation pending against the Company or any of its
officers, directors or employees, or that any of the foregoing has received
any threat thereof, which questions the validity of the Agreement or the right
of the Company or its officers, directors and employees to enter into such
agreement or which might result, either individually or in the aggregate, in
any adverse change in the assets, condition, affairs or prospects of the
Company, nor is such counsel aware of any litigation pending, against the
Company or any of its officers, directors or employees' or that any of the
foregoing has received any threat thereof, by reason of the proposed
activities of the Company, the past employment relationships of its officers,
directors or employees, or negotiations by the Company or any of its officers
or directors with possible investors in the Company.
(j) The Company is not in violation of any provisions of its
Articles or Bylaws, and neither of such documents is in violation of any
provision of the Corporation Law of the State of Colorado.
5.11 No Material Adverse Change. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the business or any of the assets, results of
operations, liabilities, prospects or conditions, financial or otherwise, of
the Company.
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SECTION 6
THE COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares at the Closing is,
at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 Representations. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Legal Matters. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any of the shares
of Common Stock and the Option Shares:
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of operations and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form similar information of the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in
any event within 45 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations and consolidated statements
of cash flows of the Company and its subsidiaries, if any, for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail and signed, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of the Company.
(c) Within 15 days after the end of each fiscal month, unaudited
consolidated balance sheets of the Company as of the end of such month,
unaudited consolidated statements of operations including income statements,
and unaudited consolidated rolling cash flow projections for each month and
for the current fiscal year to date. Such financial statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied (other than accompanying notes), all in reasonable detail
subject to year-end audit adjustments.
(d) Promptly after each meeting or the execution of an action by
written consent, copies of the minutes of proceedings or actions by written
consent of the Company's Board of Directors and shareholders.
(e) With reasonable promptness, such other information and data
with respect to the Company and its subsidiaries, if any, as the Purchaser may
from time to time reasonably request.
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(f) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to visit
and inspect any of the properties of the Company or any of its subsidiaries,
to examine its books of account and records, and to discuss their affairs,
finances and accounts with their officers, all at such reasonable times as
often as may be reasonably requested, provided, however, that the Company
shall not be obligated to provide any information, other than to the
representatives of the Purchaser on the Board of Directors, that it reasonably
considers to be a trade secret or to contain confidential information.
7.2 Assignment of Rights to Financial Information. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by the
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that the Purchaser may
assign such rights to a parent, subsidiary or affiliate of the Purchaser upon
notice to the Company thereof.
7.3 Use of Proceeds. The Company shall completely segregate the
proceeds from the sale of the Shares from all other funds of the Company.
These funds shall be strictly and exclusively used for the purchase of equity
securities of SAGC and shall not be used for any other purposes. All such
purchases shall be on terms and conditions satisfactory to the Purchaser. The
Company shall maintain a separate accounting for the use of these proceeds and
provide a copy of such accounting to the Purchaser upon request.
7.4 Rule 144 Reporting. With a view to making available to the
Purchaser the benefits of certain rules and regulations of the Securities and
Exchange Commission which may permit the sale the Option Shares to the public
without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) Use its best efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) So long as the Purchaser owns any Restricted Securities (as
defined in Section 8.1 hereof) furnish to the Purchaser forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company filed with
the Securities and Exchange Commission, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtained by the Company as the Purchaser may reasonably request in availing
itself of any due or regulation of the Securities and Exchange Commission
allowing the Purchaser to sell any such securities without registration.
7.5 Protective Provisions. For so long as the Purchaser or its
assignees is a holder of any shares of the Common Stock or Option Shares, the
Company shall not without the Purchaser's prior written consent:
(a) change any of the terms of Common Stock or any amendment,
addition, change, modification or deletion of any portion of the By-Laws or
Articles of the Company;
(b) authorize or issue (i) any class or series of Preferred Stock
or other securities having rights senior to the Common Stock, or (ii) any
rights to purchase or any securities or instruments convertible or
exchangeable into any such Preferred Stock and other securities of the
Company;
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(c) sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or effect any merger, consolidation,
reorganization or amalgamation of the Company, with another corporation;
(d) adopt a statutory plan of share exchange;
(e) redeem or repurchase (or enter into any agreement to become so
obligated) any shares of Common Stock or Common Stock (other than pursuant to
employee stock vesting or repurchase employee stock agreements;
(f) enter into any transaction with or increase the compensation
paid or issue any securities of the Company or SAGC, rights or options to
purchase any securities of the Company or SAGC or any instrument convertible
or exchangeable into or payable or satisfied with any securities of the
Company or SAGC or any other compensation derived from or based on the profits
or securities of the Company or SAGC to any of Boreta or SAGC or any of their
respective affiliates or approve, allow or agree to any of the foregoing;
(g) take or fail to take any action with respect to any shares of
capital stock of SAGC or rights to purchase any such capital stock owned or
under the control of the Company (including, but not limited to, the sale,
transfer, assignment, disposition, exchange, conversion, pledge or voting of
such shares, the granting of any proxies with respect to such shares, or
entering into any agreement or arrangement with respect to any of the
foregoing);
(h) dissolve or liquidate the Company and/or its assets or close
the business of the Company; or
(i) file a petition to appoint a receiver for the Company or file a
voluntary petition for bankruptcy, insolvency or to make any assignment for
the benefit of creditors of the Company
7.6 Grant of Stock Options. Simultaneously with the execution hereof,
the Company and the Purchaser are entering into an option agreement (the
"Option Agreement") attached as annex A hereto pursuant to which the Company
is granting the Purchaser an option (the "Option") to purchase from the
Company Three Hundred Forty Seven Thousand Nine Hundred Seventy Five (347,975)
shares of Common Stock of the Company (the "Option Shares"), as such number
may be adjusted pursuant to the terms of the Option Agreement. The Option may
be exercised from time to time in full or in part by the Purchaser at any time
prior to the tenth year anniversary of the Closing. The Option shall be
exercisable at a purchase price of $1.8392 per share, subject to adjustment as
described therein. The Company agrees that the Option Shares issued upon the
exercise by Purchaser of the Option shall carry the same registration rights
as set forth in Section 8 of this Agreement and be considered "Registrable
Securities" under the terms of such Section 8.
7.7 Principal Business. The Company shall ensure that all its principal
shareholders, officers and directors (a) direct or refer all opportunities
relating to, similar to or of the same nature as SAGC's Sports Park business
exclusively to SAGC, (b) not realize any profit or gain with respect to such
opportunities to the detriment or in lieu of the Company or SAGC and (c) not
otherwise misappropriate any corporate opportunity.
7.8 Merger. The Company shall amend the merger agreement (the "Merger
Agreement") dated as of January 20, 1998 with SAGC such that upon consummation
of the merger, the Purchaser will receive equity interests in the surviving
company having terms, conditions, rights, designations, preferences and values
at least as favorable as those of the Shares. Notwithstanding the foregoing,
no amendment of or modification to the Merger Agreement shall be made without
the prior approval of the Purchaser.
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SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS; INDEMNIFICATION
8.1 Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934 as amended
or any similar federal statute and the rules and regulations of the
Commissions thereunder all as the same shall be in effect at the time.
"Holder" shall mean the Purchaser and any person holding Registrable
Securities or shares to whom the rights under this Section 8 have been
transferred in accordance with Section 8.2 hereof.
"Registrable Securities" means (i) the Option Shares; and (ii) any Common
Stock of the Company issued or issuable in respect of the Option Shares or
other securities issued or issuable pursuant to the conversion of the shares
upon any Recapitalization or any Common Stock otherwise issued or issuable
with respect to the Shares provided however that shares of Common Stock or
other securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or (B)
sold or are available for sale in the opinion of counsel to the Company in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are or may be removed upon the
consummation of such sale.
The term "register," "registered" and "registration" refer to a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses
as defined below, incurred by the Company in complying with Sections 8.5, 8.6
and 8.7, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the notes and regulations of the Commission
thereunder all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered
by the holders.
8.2 Restriction on Transferability. The Shares shall not be sold,
assigned, transferred or pledged except upon satisfaction of the conditions
specified in this Section 8, which conditions are intended to ensure
compliance with the provisions of the Securities Act.
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8.3 Restrictive Legend. Each certificate representing (i) the Shares,
and (ii) any other securities issued in respect of the Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
events, shall (unless otherwise permitted by the provisions of Section 8.4
below) be stamped or otherwise imprinted with a legend in the following form
(in addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
The Purchaser consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Shares in order to
implement the restrictions on transfer established in this Section 8.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution of Restricted Securities by the
Purchaser to a parent, subsidiary or affiliate of the Purchaser), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall
be accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (ii) a "no action" letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder
to the Company. Each certificate evidencing the Restricted Securities
Transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
8.3 above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for such holder and the Company such legend is
not required in order to establish compliance with any provision of the
Securities Act.
8.5 Request for Registration.
(a) Request for Registration. If the Company shall receive from
the Purchaser at any time a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
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(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws, and appropriate compliance with the Securities Act) and
as would permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or holders
joining in such request as are specified in a written request received by the
Company within twenty (20) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this Section 8.5:
(A) After the Company has initiated one such registration
pursuant to this Section 8.5(a);
(B) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred twenty (120) days after the effective date of, a
Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(b) Subject to the foregoing clauses (A) and (B), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Purchaser.
The registration statement filed pursuant to the request of the
Purchaser may include other securities of the Company, with respect to which
registration rights have been granted, and may include securities of the
Company being sold for the account of the Company.
(c) Underwriting. The right of any Holder to registration pursuant
to Section 8.5 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of
the Purchaser and such holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he or she holds.
8.6 The Company Registration.
(a) Notice of Registration. If at any time or from time to time
the Company shall determine to register of its securities, either for its own
account or the account of a Holder or Holders, other than a registration
relating solely to employee benefit plans or a post effective amendment to the
registration statement for the Company's initial public offering, the Company
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under the sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made within 20 days after receipt of such written notice
from the Company, by any Holder.
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(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and any other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 8.6, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities to be included in such registration. The Company
shall so advise all Holders and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such holders at the time of filing
the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of
shares allocated to any Holder or other shareholder to the nearest 100 shares.
If any Holder or other shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall
not be transferred in a public distribution prior to 90 days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require. The Company may
include shares of Common Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 8.6, so long as the amount of
Registrable Securities otherwise includable in such registration statement
would not thereby be diminished.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 8.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
8.7 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders).
(b) If a request complying with the requirements of Section 8.7(a)
hereof is delivered to the Company, the provisions of Section 8.5(a)(i) and
(ii) and Section 8.5(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Section 8.5(c)
hereof shall apply to such registration.
8.8 Expenses of Registration. All Registration Expenses incurred in
connection with the registration pursuant to Section 8.5, 8.6 and 8.7 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating
to securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the
basis of the number of shares registered.
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8.9 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section
8, the Company will keep each Holder advised in writing as to the initiation
of each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days, and prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement effective for
at least one hundred twenty (120) days, provided that no such registration
shall constitute a shelf registration under Rule 415 promulgated by the
Commission under the Securities Act;
(b) Enter into a written underwriting agreement in customary form
and substance reasonably satisfactory to the Company, the Holders and the
managing underwriting or underwriters of the public offering of such
securities, if the offering is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number
of copies of the registration statement, preliminary prospectus' final
prospects and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders may reasonably
request within ten (10) days prior to the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business a
foreign corporation in any jurisdiction where it is not so qualified;
(e) Notify the Holders (of if they have appointed an
attorney-in-fact, such attorney-in-fact) participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) Prepare and file with the Commission promptly upon the request
of such registration statement or prospectus which, in the reasonable opinion
of counsel for such Holders, is required under the Securities Act or the rules
and regulations thereunder in connection with the distribution of the
Registration Securities by such Holders;
(h) Prepare and promptly file with the Commission, and promptly
notify such Holders or their attorney-in-fact of the filing of, such amendment
or supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances in which they
were made;
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(i) In case any of such Holders or any underwriter for any such
Holders is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly
upon request such amendment or amendments to such registration statement and
such prospectus as may be necessary to permit compliance with the requirements
of the Securities Act;
(j) Advise such Holders or their attorney-in-fact, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(k) At the request of any such holder, furnish on the effective
date of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the underwriting
agreement, (i) an opinion, dated each such date, of the counsel representing
the Company for the purpose of such registration, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
covering such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto, proceedings under state
and federal securities laws other matters relating to the Company, the
securities being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and (ii) to the extent the
Company's accounting firm, is willing to do so, a letter dated each such date,
from the independent public accountants of the Company, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
stating that they are independent public accountants within the meaning of the
Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the
registration statement or the prospectus or any amendment or supplement
thereto comply in all material respects with the applicable accounting
requirements of the Securities Act, and additionally covering such other
financial matter, including information as to the period ending not more than
five (5) business days prior to the data of such letter with respect to the
registration statement and prospectus, as the underwriters or such requesting
Holder or Holders may reasonably request.
8.10 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 8.
8.11 Indemnification.
(a) The Company will defend, indemnify and hold the Purchaser, each
Holder, each of its officers, directors and partners, and each person
controlling the Purchaser and each such Holder within the meaning of Section
15 of the Securities Act, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities (or actions
in respect thereof), including without limitation, any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on (i) any breaches of the representations, warrants or covenants
contained herein, or (ii) any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement, prospectus,
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offering circular or other document or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, and each such holder, each of its officers and directors, and each
person controlling such holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to
be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company each to its directors and
officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement prospectus' offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein. Notwithstanding
the foregoing, the liability of each Holder under this subsection (b) shall be
limited to an amount equal to the initial public offering price of the shares
sold by such Holder, unless such liability arises out of or is based on
willful conduct by such Holder.
(c) Each party entitled to indemnification under this Section 8.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall, when applicable, permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 8
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
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the Indemnifying Party shall not assume the defense for matter as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.12 Transfer of Registration Rights. The rights to cause the Company
to register securities granted the Purchasers under Sections 8.5, 8.6 and 8.7
may be assigned to a transferee or assignee in connection with any transferor
assignment of Registrable Securities by the Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws and (ii) such assignee or transferee acquires at least 10,000 of the
Shares (appropriately adjusted for Recapitalization). Notwithstanding the
foregoing, the rights to cause the Company to register securities may be
assigned to any parent, subsidiary or affiliate of the Purchaser, without
compliance with item (ii) above, provided, written notice thereof is promptly
given to the Company.
8.13 Standoff Agreement. Each Holder agrees, so long as such Holder
holds at least five percent (5%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, it will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, a the case may be, for such period of time (not to exceed one
hundred and twenty (120) days) from the effective date of such registration as
may be requested by the underwriters; provided that the officers and directors
of the Company who own stock of the Company also agree to such restrictions.
SECTION 9
THE PURCHASER'S RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. The Company hereby grants to the Purchaser
the right of first refusal to purchase its pro rata share of all or any part
of any New Securities (as defined in this Section 9.1) which the Company may,
from time to time, propose to sell and issue. The Purchaser's pro rata share,
for purposes of this right of first refusal, is the ratio that the sum of the
number of shares of Common Stock then held by the Purchaser bears to the sum
of the total number of shares of Common Stock then outstanding and the number
of shares of Common Stock issuable upon conversion of the then outstanding
Preferred Stock convertible into Common Stock.
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred
Stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into said shares of
Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) the Shares and the Option Shares, (ii)
securities offered to the public generally pursuant to a registration
statement or pursuant to Regulation A under the Securities Act, (iii)
securities issued in the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company or its shareholders own not less than fifty-one percent
(51%) of the voting power of the surviving or successor corporation, (iv)
shares of the Company's Common Stock or related options exercisable for such
Common Stock issued to employees, officers and directors of the Company
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pursuant to any arrangement approved by the Board of Directors of the Company,
(v) stock issued pursuant to any rights or agreements, including without
limitation convertible securities, options, warrants, provided that the rights
of first refusal established by this Section 9.1 apply with respect to the
initial sale or grant by the Company of such rights or agreements, and (vi)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give the Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Purchaser shall have fifteen (15)
days from the date of receipt of any such notice to agree to purchase up to
the Purchaser's respective pro rata share of such New Securities for the price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Purchaser fails to exercise such right of
first refusal within said fifteen (15) day period, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by the Purchaser at the price and upon
the terms no more favorable to the purchasers of such securities than
specified in the Company's notice. In the event the Company has not sold the
New Securities or entered into an agreement to sell the New Securities within
said ninety (90) day period (or sold and issued New Securities in accordance
with the foregoing within sixty (60) days from the date of said agreement),
the Company shall not thereafter issue or sell any of such New Securities,
without first offering such securities in the manner provided above.
(d) The right of first refusal hereunder is not assignable except
to a parent, subsidiary or affiliate of the Purchaser, without the prior
written consent of the Company, which consent will not be unreasonably
withheld.
SECTION 10
INDEMNIFICATION
10.1 Survival of Representations. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall
survive the Closing, but all claims for damages made by virtue of such
representations, warranties and agreements shall be made under this Section
10. The representations and warranties set forth herein are cumulative, and
any limitation or qualification set forth in any one representation and
warranty therein shall not limit or qualify any other representation and
warranty therein.
10.2 Indemnification by the Company. Notwithstanding any term in this
Agreement to the contrary, the Company, shall indemnify, defend, save and hold
the Purchaser and its officers, directors, employees, agents and Affiliates
(excluding Ron Boreta, Vaso Boreta, John Boreta and the Company; collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious (collectively, "Purchaser Damages") asserted against, imposed
upon, resulting to, required to be paid by or incurred by any Purchaser
Indemnitees, directly or indirectly, in connection with, arising out of, which
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could result in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Company in this Agreement, in any
certificate or document furnished pursuant hereto by the Company or any other
agreement to which the Company is or is to become a party, or (b) a breach or
nonfulfillment of any covenant or agreement made by the Company in or pursuant
to this Agreement or in any other agreement to which the Company is or is to
become a party.
10.3 Indemnification by Purchaser. The Purchaser shall indemnify,
defend, save and hold the Company and its officers, directors, employees,
agents and Affiliates (excluding Ron Boreta, Vaso Boreta, John Boreta and the
Purchaser; (collectively, "Company Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious (collectively, "Company Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Company Indemnitees,
directly or indirectly, in connection with, arising out of, which would result
in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Purchaser in this Agreement or in any
certificate or document furnished pursuant hereto by buyer or any other
agreement to which the Purchaser is a party and (b) a breach of nonfulfillment
of any covenant of agreement made by the Purchaser in or pursuant to this
Agreement and in any other agreement to which the Purchaser is a party.
10.4 Notice of Claims. If any Purchaser Indemnitee or Company
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Company Damages, as the case
may be ("Damages"), for which it is entitled to indemnification under this
Section 10, such Indemnified Party shall so notify the party or parties from
whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The failure of an
Indemnified Party to give any notice required by this Section shall not affect
any of such party's rights under this Section 10 or otherwise except and to
the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
10.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or
settle the same, provided that the Indemnified Party shall give the
Indemnifying Party advance notice of any proposed compromise or settlement.
The Indemnified Party shall permit the Indemnifying Party to participate in
the defense of any such action or suit through counsel chosen by the
Indemnifying Party, provided that the fees and expense of such counsel shall
be borne by the Indemnifying Party. If the Indemnified Party permits the
Indemnifying Party to undertake, conduct and control the conduct and
settlement of such action or suit, (a) the Indemnifying Party shall not
thereby permit to exist any encumbrance upon any asset of the Indemnified
Party; (b) the Indemnifying Party shall not consent to any settlement that
does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; (c) the Indemnifying Party shall permit the Indemnified Party to
participate in such conduct or settlement through counsel chosen by the
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Indemnified Party; and (d) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving
the foregoing notice to the Indemnifying Party and prior to the assumption of
the conduct and control of such action or suit by the Indemnifying Party.
10.6 Good Faith Efforts to Settle Disputes. The Purchaser and the
Company agree that, prior to commencing any litigation against the other
concerning any matter with respect to which such party intends to claim a
right of indemnification in such proceeding, the respective chief executive
officers (or officers holding such authority) of such parties shall meet in a
timely manner and attempt in good faith to negotiate a settlement of such
dispute during which time such officers shall disclose to the others all
relevant information relating to such dispute. In the event that the parties
are unable to amicably resolve the matter or matters in dispute, the parties
shall submit all matters still in dispute to arbitration in accordance with
the arbitration rules of the American Arbitration Association. The Purchaser
shall select an arbitrator and the Company shall select an arbitrator and the
two arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators shall be final and binding on the parties. Such matter shall
be submitted to arbitration within thirty (30) days from the date that either
the Company or the Purchaser declares that any matter in dispute cannot be
amicable resolved. All costs and expenses of arbitration shall be paid
equally by the Purchaser on one hand and the Company on the other. Any cash
or other monetary award shall be paid within thirty (30) days of the
arbitrators final decision. Arbitration shall be held in Las Vegas, Nevada.
SECTION 11
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of Colorado.
11.2 Events of Default and Remedies.
(a) For purpose of this Agreement, the term "Event of Default"
shall mean the occurrence or happening of any breach or violation of or
default in the observation or performance of any term, agreement, covenant,
representation, warranty, condition or stipulation contained or referred to in
this Agreement by any party to this Agreement.
(b) (i) Upon the occurrence of an Event of Default, the
non-defaulting party shall have all rights and remedies afforded by law or
equity, including the remedy of specific performance, it being recognized that
the Common Stock and Option Shares and the rights and benefits to be derived
therefrom are unique and special. Any party awarded a money judgment against
the other shall be entitled to recover in addition thereto interest thereon at
the rate of twelve percent (12%) per annum.
(ii) Each right, power and remedy provided for in this
Agreement, or now or hereafter existing at law or in equity shall be
cumulative and may be exercised successively or concurrently and shall be in
addition to every other such right, power or remedy. The exercise or
beginning of the exercise by either party of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise of
all such other rights, powers or remedies. No failure or delay on the party
of any party to exercise any such right, power or remedy shall operate as a
waiver thereof. No waiver by a party will be effective unless and until it is
in writing and signed by an authorized representative of such party.
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(c) Each party will pay to the other, in addition to all other sums
due all costs and expenses (including, without limitation, attorneys' fees,
brokerage fees and accountants' fees) reasonably incurred by or on behalf of a
party in exercising and protecting their rights and remedies hereunder,
enforcing the obligations of the other party hereunder and defending any
unsuccessful counterclaim, cross-claim or other claim asserted by the other
party.
11.3 Set Off. In addition to, and not in lieu of, any and all other
remedies which the Purchaser otherwise may have at law or in equity, or
pursuant to this Agreement, the Purchaser shall have the right to set off,
counterclaim and recoup any loss against any amounts to be paid to the Company
under this Agreement.
11.4 Nonexclusivity. The foregoing set off right and the
indemnification provision set forth in Section 8 are in addition to, and not
in lieu or derogation of, any statutory, equitable or common law remedy the
Purchaser may have arising out of or as a result of this Agreement or for
breach of representations, warranties or covenants herein. Neither the
exercise of nor the failure to exercise the set off right set forth in Section
10.3 shall constitute an election of remedies.
11.5 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby.
11.6 Anti-Dilution Provisions. The "Anti-Dilution Provisions" shall
provide that in the event that any of the securities referenced herein as
presently constituted, shall be changed into or exchanged for a different
number or kind of securities or interests of the Company or of another entity
(whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares, sale of assets or
otherwise), or if the number of such securities shall be increased through the
payment of a dividend, or if the Company makes any other distribution of
securities or other property including cash in respect of such securities,
then there shall be substituted for and added to such securities, as the case
may be, theretofore subject or which may become subject to the terms of this
Agreement, the number and kind of securities, interests or property into which
each outstanding security shall be so changed, or for which each such security
shall be exchanged, or to which each such security shall be entitled, as the
case may be, and the purchase price per security appropriately adjusted.
11.7 Assignment; Successors and Assigns. The rights and obligations of
the Company and the rights of the Purchaser to purchase the Shares shall not
be assignable without the written consent of the other; provided, however, the
Purchaser may assign its rights and obligations under this Agreement to a
parent, subsidiary or affiliate of the Purchaser upon notice to the Company
thereof. Except as otherwise provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
11.8 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom endorsement of any such amendment, waiver, discharge or
termination is sought.
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11.9 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to the Purchaser, at its address set forth on the
cover page of this Agreement, or at such other address as the Purchaser shall
have furnished to the Company in writing, or (b) if to any other holder of any
Shares or Option Shares, at such address as such holder shall have furnished
the Company in writing, or, until any such holder so furnishes an address to
the Company, then to and at the address of the last holder of such Shares or
Option Shares who has so furnished an address to the Company, or (c) if to the
Company, one copy shall be sent to its address set forth on the cover page of
this Agreement and addressed to the attention of the Corporate Secretary, or
at such other address as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given or received, as the
case may be, when delivered if delivered personally, when sent by confirmed
facsimile to the correct facsimile number, or, if sent by mail, at the earlier
of its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
11.10 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares or Option Shares, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Except as provided in Section 10.8 hereof, any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach of default under this Agreement or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to
any holder, shall be cumulative and not alternative.
11.11 Expenses. Except as otherwise provided herein, the Company and
the Purchaser shall each bear their own expenses incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.13 Confidentiality. Neither party shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party. This
provision shall not apply, however, to any announcement or written statement
which in the opinion of counsel to such party is required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange.
11.14 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
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11.15 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
11.16 Third Party Beneficiary. It is understood that the Purchaser is a
specific intended third party beneficiary of the LVDGT Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
"PURCHASER"
ASI GROUP, L.L.C.,
a Nevada limited liability company
By: Sunbelt Communications Company, a Member
By: /s/ James Earl Rogers
Name: James Earl Rogers
Title: President
"COMPANY"
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.,
a Colorado corporation
By: /s/ Vaso Boreta
Name: Vaso Boreta
Title: President
The undersigned, Saint Andrews Golf Corporation, a Nevada corporation,
acknowledges that, by virtue of entering into this Agreement, the Purchaser is
a specific intended third party beneficiary of the LVDGT Agreement.
SAINT ANDREWS GOLF CORPORATION
By: /s/ Ronald S. Boreta
Name: Ronald S. Boreta
Title: President
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OPTION AGREEMENT
OPTION AGREEMENT, effective as of October 19, 1998, by and between LAS
VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation with offices at
5325 South Valley View Boulevard, Suite 10, Las Vegas, Nevada 89118 ("LVDGT"),
and ASI GROUP, L.L.C., a Nevada limited liability company, c/o Agassi
Enterprises, Inc., 3960 Howard Hughes Parkway, Suite 750, Las Vegas, Nevada
89109 ("ASIG"):
W I T N E S S E T H :
WHEREAS, ASIG and LVDGT are entering into an investment agreement (the
"Investment Agreement") simultaneously herewith which Investment Agreement
provides for the purchase by ASIG of certain capital stock of LVDGT. All
terms used but not defined herein shall have the meanings ascribed to them in
the Investment Agreement.
WHEREAS, to induce ASIG to enter into the Investment Agreement, ASIG is
hereby granted options to purchase Shares (as defined herein) on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, ASIG and LVDGT hereby agree
as follows:
SECTION 1. Definitions.
For purposes of this Agreement, the following capitalized terms shall
have the respective meanings indicated below.
"Act" shall mean the Securities Act of 1933, as it may be amended.
"Additional Shares" shall mean all Shares (including treasury Shares)
issued or sold (or, deemed to be issued) by LVDGT after the date hereof,
whether or not subsequently reacquired or retired by LVDGT.
"Affiliate" shall mean any Person which, directly or indirectly,
controls, is controlled by or is under common control with the relevant Person
and, if such Person is an individual, any member of the immediate family
(including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual, or one or more members of such
immediate family or any Person who is controlled by any such member or trust.
For the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean a member of the board of directors, a
partner or an officer of such Person, or any other Person having, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such Person, through the ownership (of record, as trustee, by
voting agreement or by proxy) of voting securities or similar equity
interests, by contract or otherwise. Any Person owning or controlling
directly or indirectly 10% or more of the voting securities or similar equity
interests of another Person shall be deemed to be an Affiliate of such person.
"Business Day" shall mean any other than a Saturday or a Sunday or a day
on which commercial banking institutions in the City of New York are
authorized by law or other governmental action to be closed. Any reference to
"days" (unless Business Days are specified) shall mean calendar days.
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"Convertible Securities" shall mean any evidence of indebtedness, shares
of stock (other than Shares) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares.
"Current Market Price" shall mean on any date specified herein, the
average daily Market Price during the period of the most recent 20 days,
ending on such date, on which the national securities exchanges were open for
trading, except that if no Shares are then listed or admitted to trading on
any national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
"Employee Options" shall mean options (other than the Option) to
subscribe for, purchase or otherwise acquire Additional Shares at an exercise
price equal to no less than the Current Market Price on the date of issuance
of such options, which options are issued to bona-fide employees of or
consultants to LVDGT (other than members of the Boreta family) pursuant to a
stock option plan adopted by the Board of Directors of LVDGT.
"Employee Shares" shall mean Additional Shares issued upon exercise of an
Employee Option.
"Market Price" shall mean on any date specified herein, the amount per
share of the Shares, equal to (a) the last sale price of such Shares, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which
such Shares is then listed or admitted to trading, or (b) if such Shares are
not then listed or admitted to trading on any national securities exchange but
it designated as a national market system security by the NASD, the last
trading price of the Shares on such date, or (c) if there shall have been not
trading on such date or if the Shares are not so designated, the average of
the closing bid and asked prices of the Shares on such date as shown by the
NASD automated quotation system, or (d) if such Shares are not then listed or
admitted to trading on any national exchange or quoted in the over-the-counter
market, the higher of (x) the book value thereof as determined by any firm of
independent public accountants of recognized standing selected by the Board of
Directors of LVDGT as of the last day of any month ending with 60 days
preceding the date as of which the determination is to be made or (y) the fair
value thereof determined in good faith by the Board of Directors of LVDGT as
of a date which is within 180 days of the date as of which the determination
is to be made.
"NASD" shall mean The National Association of Securities Dealers, Inc.
"Option" shall mean the right of ASIG to purchase, at ASIG's election, in
accordance with the terms of this Agreement, a number of Shares up to the
Option Number, upon payment of the aggregate Option Price for the number of
Shares so purchased, subject to adjustment as provided herein.
"Option Number" shall mean 347,975 Shares, as such number may be adjusted
as provided herein.
"Option Price" shall be, on a per Share basis, $1.8392. The Option Price
shall be adjusted and readjusted from time to time as provided herein and, as
so adjusted or readjusted, shall remain in effect until a further adjustment
or readjustment thereof is required hereby. In the event of a Shares
dividend, Shares split, or combination of Shares which results in a
proportionate increase or decrease in the number of Shares, the Option Price
then in effect shall be decreased (in the case of a proportionate increase in
Shares outstanding) or increased (in the case of a proportionate decrease in
Shares outstanding) in the same proportion. In the event of a
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recapitalization, reorganization, consolidation, merger or similar transaction
where Shares are changed into or exchanged for a different number of Shares or
different capital stock or other securities, the Option Price then in effect
shall apply to so much of the different shares of capital stock or other
securities as are received with respect to each Share so changed or exchanged.
ASIG shall be given prompt written notice of any such event, which notice
shall include in reasonable detail the calculation of any adjustments to the
Option Price.
"Other Options" shall mean rights or options (other than the Option) to
subscribe for, purchase or otherwise acquire either Additional Shares or
Convertible Securities.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Shares" shall mean the shares of the common stock of LVDGT, no par
value, outstanding at any time.
SECTION 2. Options.
2.1 Grant of Option. LVDGT hereby grants to ASIG the Option, which is
immediately exercisable. The Option may be exercised in full or in any number
of partial exercises at any time or times at or prior to the tenth anniversary
hereof.
2.2 Exercise of Option. An Option may be exercised in whole or in part
by ASIG by serving written notice (the "Option Notice") upon LVDGT specifying
the number of Shares then to be purchased. An Option shall be exercisable at
a purchase price equal to the product of the number of Shares to be purchased
multiplied by the Option Price then in effect. The closing for each such
purchase shall be held at the offices of LVDGT on a day not later than 30
Business Days after the date of the Option Notice. At the closing, LVDGT
shall deliver to ASIG, against payment of the purchase price specified in this
Section 2.2, certificates for the Shares purchased, free and clear of all
pledges, options, claims, liens, security interests and encumbrances of any
kind, other than the requirements of federal and state securities laws
respecting limitations on the subsequent transfer thereof, which certificates
shall be duly endorsed in blank or with appropriate duly executed blank stock
transfer powers attached, with signatures guaranteed by a commercial bank or
trust company or a member firm of a national securities exchange and with all
requisite stock transfer tax stamps attached or provided for.
SECTION 3. Adjustment of Shares Issuable Upon Exercise.
3.1 General; Option Price. The number of Shares which ASIG shall be
entitled to receive upon each exercise of the Option shall be determined by
multiplying the number of Shares which would otherwise (but for the provisions
of this Section) be issuable upon such exercise, as designated by ASIG, by the
fraction of which (a) the numerator is the Option Price in effect on the date
hereof and (b) the denominator is the Option Price in effect on the date of
such exercise.
3.2 Adjustment of Option Price.
3.2.1 Issuance of Additional Shares. In case LVDGT at any time or
from time to time after the date hereof shall issue or sell Additional Shares
(including Additional Shares deemed to be issued pursuant hereto) without
consideration or for a consideration per Share less than the greater of the
Current Market Price and the Option Price in effect immediately prior to such
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issue or sale, then, and in each such case, subject to Section 3.7, such
Option Price shall be reduced, concurrently with such issue or sale, to a
price (calculated to the nearest .001 of a cent) determined by multiplying
such Option Price by a fraction
(a) the numerator of which shall be (i) the number of Shares
outstanding immediately prior to such issue or sale plus (ii) the number of
Shares which the aggregate consideration received by LVDGT for the total
number of such Additional Shares so issued or sold would purchase at the
greater of such Current Market Price and such Option Price, and
(b) the denominator of which shall be the number of Shares
outstanding immediately after such issue or sale,
provided that, for the purposes of this subsection, (x) immediately after any
Additional Shares are deemed to have been issued pursuant to Section 3.3 or
3.4, such Additional Shares shall be deemed to be outstanding and (y) treasury
shares shall not be deemed to be outstanding.
3.2.2 Extraordinary Dividends and Distributions. In case LVDGT at
any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Other Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Shares, other than
(a) a dividend payable in Additional Shares or (b) a regular periodic cash
dividend at a rate not in excess of 110% of the rate of the last regular
periodic cash dividend theretofore paid, then, and in each such case, subject
to Section 3.7, the Option Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any
class of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Option Price by a fraction
(x) the numerator of which shall be the Current Market Price
in effect on such record date or, in the Shares trade on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the amount
of such dividend or distribution (as determined in good faith by the Board of
Directors of LVDGT) applicable to one Share, and
(y) the denominator of which shall be such Current Market
Price,
provided that, in the event that the amount of such dividend as so determined
is equal to or greater than 50% of such Current Market Price or in the event
that such fraction is less than 1/2, in lieu of the foregoing adjustment,
adequate provision shall be made so that ASIG shall receive a pro rata share
of such dividend based upon the maximum number of shares at the time issuable
to ASIG (determined without regard to whether the Option is exercisable at
such time).
3.3 Treatment of Other Options and Convertible Securities. In case
LVDGT at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to received, any Other Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares (as set forth in the instrument relating thereto, without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Other Options or, in the case of
Convertible Securities and Other Options therefor, the conversion or exchange
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of such Convertible Securities, shall be deemed to be Additional Shares issued
as of the time of such issue, sale, grant or assumption or, in case such a
record date shall have been fixed, as of the close of business on such record
date (or, if the Shares trade on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading), provided that such Additional Shares
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 3.5) of such Shares would be less than the
greater of the Current Market Price and the Option Price in effect on the date
of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date (or, in the
Shares trade on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be, and provided, further, that in any
such case in which Additional Shares are deemed to be issued
(a) no further adjustment of the Option Price shall be made
upon the subsequent issue or sale of Convertible Securities or Shares upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, except in the case of any such Other Options or Convertible
Securities which contain provisions requiring an adjustment, subsequent to the
date of the issue or sale thereof, of the number of Additional Shares issuable
upon the exercise of such Other Options or the conversion or exchange of such
Convertible Securities by reason of (x) a change of control of LVDGT, (y) the
acquisition by any Person or group of Persons of any specified number of
percentage of the voting securities of LVDGT or (z) any similar event or
occurrence, each such case to be deemed hereunder to involve a separate
issuance of Additional Shares, Other Options or Convertible Securities, as the
case may be;
(b) if such Other Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to LVDGT, or decrease in the number of Additional Shares
issuable, upon the exercise, conversion or exchange thereof (by change of rate
or otherwise), the Option Price computed upon the original issue, sale, grant
or assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options, or the rights of
conversion or exchange under such Convertible Securities, which are
outstanding at such time;
(c) upon the expiration (or purchase by LVDGT and cancellation
or retirement) of any such Other Options which shall not have been exercised
or the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by LVDGT and cancellation or
retirement of any such Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised, the Option Price computed
upon the original issue, sale, grant or assumption thereof (or upon the
occurrence of the records date, or date prior to the commencement of ex-
dividend trading, as the case may be, with respect thereto), and any sub
sequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Other Options for Shares or
Convertible Securities, the only Additional Shares issued or sold were the
Additional Shares, if any, actually issued or sold upon the exercise of such
Other Options or the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration actually received by
LVDGT for the issue, sale, grant or assumption of all such Other Options,
whether or not exercised, plus the consideration actually received by LVDGT
upon such exercise, or the issue or sale of all such Convertible Securities
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which were actually converted or exchanged, plus the additional consideration,
if any, actually received by LVDGT upon such conversion or exchange (less the
consideration, if any, actually paid by LVDGT to purchase all such Other
Options), and
(ii) in the case of Other Options for Convertible
Securities, only the Convertible Securities, if any, actually issued or sold
upon the exercise of such Other Options were issued at the time of the issue,
sale, grant or assumption of such Other Options, and the consideration
received by LVDGT for the Additional Shares deemed to have then been issued
was the consideration actually received by LVDGT for the issue, sale, grant or
assumption of all such Other Options, whether or not exercised, plus the
consideration deemed to have been received by LVDGT (pursuant to Section 3.5)
upon the issue or sale of such Convertible Securities with respect to which
such Other Options were actually exercised (less the consideration, if any,
actually paid by LVDGT to purchase all such Other Options);
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Option Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the issue,
sale, grant or assumption of such Other Options or Convertible Securities; and
(e) in the case of any such Other Options which expire by
their terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Option Price shall be made until the
expiration or exercise of all such Other Options, whereupon such adjustment
shall be made in the manner provided in subdivision (c) above.
3.4 Treatment of Share Dividends, Share Splits, Etc. In case LVDGT at
any time or from time to time after the date hereof shall declare or pay any
dividend on the Shares payable in Shares, or shall effect a subdivision of the
outstanding Shares into a greater number of Shares (by reclassification or
otherwise than by payment of a dividend in Shares), then, and in each such
case, Additional Shares shall be deemed to have been issued (a) in the case of
any such dividend, immediately after the close of business on the record date
for the determination of holders of any class of securities entitled to
receive such dividend, or (b) in the case of any such subdivision, at the
close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
3.5 Computation of Consideration. For the purposes of this Section,
(a) the consideration for the issue or sale of any Additional
Shares shall, irrespective of the accounting treatment of such consideration,
(i) insofar as it consists of cash, be computed at the
net amount of cash received by LVDGT, without deducting any expenses paid or
incurred by LVDGT or any commissions or compensations paid or concessions or
discounts allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value thereof at the time
of such issue or sale, as determined in good faith by the Board of Directors
of LVDGT, and
(iii) in case Additional Shares are issued or sold
together with other stock or securities or other assets of LVDGT for a
consideration which covers both, be the portion of such consideration so
received, computed as provided in clauses (i) and (ii) above, allocable to
such Additional Shares, all as determined in good faith by the Board of
Directors of LVDGT;
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(b) Additional Shares deemed to have been issued pursuant to
Section 3.3, relating to Other Options and Convertible Securities, shall be
deemed to have been issued for a consideration per share determined by
dividing
(i) the total amount, if any, received and receivable by
LVDGT as consideration for the issue, sale, grant or assumption of the Other
Options or Convertible Securities in question, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration to protect against dilution) payable to LVDGT
upon the exercise in full of such Other Options or the conversion or exchange
of such Convertible Securities or, in the case of Other Options for
Convertible Securities, the exercise of such Other Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, in
each case computing such consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of Shares (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to protect against
dilution) issuable upon the exercise of such Other Options or the conversion
or exchange of such Convertible Securities; and
(c) Additional Shares deemed to have been issued pursuant to
Section 3.4, relating to stock dividends, stock splits, etc., shall be deemed
to have been issue for no consideration.
3.6 Adjustments for Combinations, Etc. In case the outstanding Shares
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of Shares, the Option Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
3.7 Minimum Adjustment of Option Price. If the amount of any adjustment
of the Option Price required pursuant to this Section would be less than one
percent (1%) of the Option Price in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one percent (1%) of such
Option Price.
3.8 Employee Options; Employee Shares. Notwithstanding anything to the
contrary contained herein, no adjustment to the Option Price shall be required
to be made hereunder with respect to the grant or exercise of Employee Options
or the issuance of Employee Shares.
4. Consolidation, Merger, Etc.
4.1 Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In case LVDGT after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation of such consolidation or merger, or (b)
shall permit any other Person to consolidate with or merge into LVDGT and
LVDGT shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Shares shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property,
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or (c) shall transfer all or substantially all of its properties or assets to
any other Person, or (d) shall effect a capital reorganization or
reclassification of the Shares (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares for which
adjustment in the Option Price is provided herein), then, and in the case of
each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Option, ASIG, upon the
exercise hereof at any time after the consummation of such transaction, shall
be entitled to receive (at the aggregate Option Price in effect at the time of
such consummation for all Shares issuable upon such exercise immediately prior
to such consummation), in lieu of the Shares issuable upon such exercise prior
to such consummation, the highest amount of securities, cash or other property
to which such holder would actually have been entitled as a shareholder upon
such consummation if such holder had exercised the rights represented by this
Option immediately prior thereto (determined without regard to whether the
Option is exercisable at such time).
4.2 Assumption of Obligations. Notwithstanding anything contained
in this Option to the contrary, LVDGT will not effect any of the transactions
described in subdivision (a) through (d) of Section 4.1 unless, prior to the
consummation thereof, each Person (other than LVDGT) which may be required to
deliver any stock, securities, cash or property upon the exercise of this
Option as provided herein shall assume, by written instrument delivered to,
and reasonably satisfactory to, the holder of this Option, (a) the obligations
of LVDGT under this Option (and if LVDGT shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not
release LVDGT from, any continuing obligations of LVDGT under this Option),
and (b) the obligation to deliver to such holder such shares of stock,
securities, cash or property as, in accordance with the foregoing provisions
of this Section 4, such holder may be entitled to receive, and such Person
shall have similarly delivered to such holder an opinion of counsel for such
Person, which counsel shall be reasonably satisfactory to such holder, stating
that this Option shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this
Section 4) shall be applicable to the stock, securities, cash or property
which such Person may be required to deliver upon any exercise of this Option
or the exercise of any rights pursuant hereto.
SECTION 5. Representations, Warranties and Covenants of LVDGT.
LVDGT jointly and severally represents, warrants and covenants to ASIG as
follows:
(a) Organization and Qualification. LVDGT is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado.
(b) Authority Relative to this Agreement. LVDGT has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated thereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
actions and no other proceedings on the part of LVDGT or its respective
stockholders are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by LVDGT, and (assuming this Agreement is the valid and binding
obligation of ASIG) constitutes a valid and binding agreement of LVDGT,
enforceable against LVDGT in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
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creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(c) No Violation. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
and thereby will not (i) constitute a breach or violation of or default under
the Certificate of Incorporation or the By-laws of LVDGT or (ii) violate,
conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination or
acceleration under, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets
of LVDGT under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which LVDGT is a party or to which LVDGT or any of
its properties or assets may be subject, other than, in the case of clause
(ii), such events that would not, either individually or in the aggregate,
prevent or delay the consummation of the transactions contemplated hereby.
The (i) execution, delivery and performance of this Agreement by LVDGT will
not require the consent or approval of any other party, and (ii) the
execution, delivery and performance by LVDGT of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach or violation of or default under any law, rule or regulation or any
judgment, decree, order, governmental permit or license to which LVDGT is
subject. To the knowledge of LVDGT, no challenges to the validity or
effectiveness of this Agreement, or any other agreement or instrument
necessary to consummate the transactions contemplated hereby, have been made
by any governmental authority or other person.
(d) Ownership of Shares. Upon payment of the Option Price,
ASIG will acquire, good and valid title to the Shares received, free and clear
of any lien, charge, encumbrance, security interest, claim or right of others
of whatever nature other than the requirements of the federal and state
securities laws respecting limitations on the subsequent transfer thereof, and
shall be free or preemptive rights.
SECTION 6. Representations, Warranties and Covenants of ASIG.
ASIG hereby represents, warrants and covenants:
(a) That ASIG, either individually or together with ASIG's
advisers, has knowledge and experience in financial and business matters; is
familiar with all of the financial and other features of LVDGT; is capable of
evaluating the merits and risks of an investment in LVDGT; and is able to bear
the economic risk of an investment in the Option and, upon exercise of the
Option, the Shares.
(b) That AEI's acquisition of the Option and in the event of
the exercise thereof, the Shares is based upon and will be based upon ASIG's
independent evaluation of the long-term prospects of LVDGT, and that ASIG has
been furnished with such financial and other information as it has requested
concerning LVDGT.
(c) That ASIG is acquiring the Option and will acquire the
Shares which may be transferred to ASIG upon the exercise of the Option for
ASIG's own account, for investment purposes only, and not with a view to the
resale, transfer or other disposition thereof.
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(d) That ASIG will not offer, sell, hypothecate, transfer or
otherwise dispose of the Option or any of the Shares, as the case may be,
unless:
(i) A registration statement covering such of the Shares
which are to be so transferred has been filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
such sale, transfer or other disposition is accompanied by a prospectus
relating to a registration statement which is in effect under the Act covering
such of the Shares which are to be sold, transferred or otherwise disposed of
and meeting the requirements of Section 10 of the Act; or
(ii) Counsel satisfactory to LVDGT renders an opinion in
writing and addressed to LVDGT, reasonably satisfactory in form and substance
to LVDGT, that in the opinion of such counsel, registration under the Act or
the Exchange Act is not required in order to effect such proposed transaction
SECTION 7. Reservation of Shares, Etc.
LVDGT will at all times reserve and keep available, solely for issuance
and delivery upon exercise of the Option the number of Shares from time to
time issuable upon full exercise of the Option. All Shares issuable upon
exercise of the Option at any time shall be duly authorized and, when issued
upon such exercise, shall be validly issued and fully paid and nonassessable
with no liability on the part of ASIG.
SECTION 8. No Dilution or Impairment.
LVDGT will not by amendment of its organizational documents or through
any consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Option, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the holder of this Option against dilution or
other impairment. Without limiting the generality of the foregoing, LVDGT (a)
will not permit the par value of any Shares receivable upon the exercise of
this Option to exceed the amount payable therefor upon such exercise, (b) will
take all such action as may be necessary or appropriate in order that LVDGT
may validly and legally issue fully paid and non-assessable Shares on the
exercise of the Option from time to time, (c) will not take any action which
results in any adjustment of the Option Price if the total number of Shares
issuable after the action upon full exercise of the Option would exceed the
total number of Shares then authorized by LVDGT's certificate of incorporation
and available for the purpose of issue upon such exercise, and (d) will not
issue any capital stock of any class which is preferred as to dividends or as
to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage of par value or a sum determined by
reference to a formula based on a published index of interest rates, an
interest rate publicly announced by a financial institution or a similar
indicator of interest rates in respect of participation in dividends and to a
fixed sum or percentage of par value in any such distribution of assets. In
case any event shall occur as to which any of the provisions of this Option
are not strictly applicable but the failure to make any adjustment would not
fairly protect the purchase rights represented by this Option in accordance
with the essential intent and principles contained herein, then, in each such
case, LVDGT shall, at its sole cost and expense, appoint a firm of independent
certified public accountants of recognized national standing (which may be the
regular auditors of LVDGT), which shall give their opinion upon the
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adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve, without dilution, the
purchase rights represented by this Option. Upon receipt of such opinion,
LVDGT will promptly mail a copy thereof to the holder of this Option and shall
make the adjustments described therein.
SECTION 9. Registration.
9.1 Issuance of Shares. If any Shares required to be reserved for
purposes of exercise of this Option require registration with or approval of
any governmental authority under any federal or state law (other than the Act)
before such Shares may be issued upon exercise, LVDGT will, at its expense and
as expeditiously as possible, cause such Shares to be duly registered or
approved, as the case may be. At any such time as Shares are listed on any
national securities exchange, LVDGT will, at its expense, obtain promptly and
maintain the approval for listing on each such exchange, upon official notice
of issuance, the Shares issuable upon exercise of the then outstanding portion
of the Option and maintain the listing of such Shares after their issuance;
and LVDGT will also list on such national securities exchange, will register
under the Securities Exchange Act of 1934 and will maintain such listing of,
any other securities that at any time are issuable upon exercise of the
Option, if and at the time that any securities of the same class shall be
listed on such national securities exchange by LVDGT.
9.2 Registrable Securities. The Shares issued upon exercise of the
Option shall be considered "Registrable Securities" pursuant to and under the
Investment Agreement and the holders of such Shares shall have all the rights
and privileges of holders of Registrable Securities as set forth in the
Investment Agreement, which is incorporated herein by reference.
SECTION 10. Specific Performance; Remedies.
The parties acknowledge and agree that irreparable damage will result to
ASIG in the event that this Agreement is not specifically enforced.
Therefore, the rights to, or obligations of, purchase and sale of the Shares
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies
and all other remedies provided for in this Agreement or available at law or
in equity shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which either party may have under this
Agreement or otherwise.
SECTION 11. Severability.
If any provisions of this Agreement shall, for any reason, be adjudged by
any court of competent jurisdiction to be invalid or unenforceable, such
judgment shall not affect, impair or invalidate the remainder of this
Agreement but shall be confined in its operation to the provision of this
Agreement directly involved in the controversy in which such judgment shall
have been rendered.
SECTION 12. Notices.
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if mailed by first
class, registered mail, return receipt required, postage and registry fees
prepaid, and addressed as follows:
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If to LVDGT: 5325 South Valley View Boulevard
Suite 10
Las Vegas, Nevada 89118
If to ASIG: c/o Agassi Enterprises, Inc.
3960 Howard Hughes Parkway, Suite 750
Las Vegas, Nevada 89109
with a copy to: International Merchandising Corporation
IMG Center, Suite 100
1360 East 9th Street
Cleveland, Ohio 44114
Attention: Tony Decello
Either party by notice in writing mailed to the other party may change the
name and address to which notices, requests, demands and other communications
shall be mailed.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to any conflict of law principles
that might require the application of the laws of another jurisdiction.
SECTION 14. Arbitration.
The parties agree to submit to arbitration any dispute related to this
Agreement and agree that the arbitration process shall be the exclusive means
for resolving disputes which the parties cannot resolve. Any arbitration
hereunder shall be conducted under the Dispute Resolution Rules of the
American Arbitration Association ("AAA") as modified herein. Arbitration
proceedings shall take place in Las Vegas, Nevada, before a single arbitrator
who shall be a lawyer. All arbitration proceedings shall be confidential.
Neither party shall disclose any information about the evidence produced by
the other party in the arbitration proceedings, except in the course of
judicial, regulatory, or arbitration proceeding, or as may be demanded by
government authority. Before making any disclosure permitted by the preceding
sentence, a party shall give the other party reasonable advance written notice
of the intended disclosure and an opportunity to prevent disclosure. Each
party shall have the right to take the deposition of one individual and any
expert witness designated by the other party. Additional discovery may be had
only where the arbitrator so orders, upon a showing of substantial need. Only
evidence that is directly relevant to the issues may be obtained in discovery.
Each party bears the burden of persuasion of any claim or counterclaim raised
by that party. The arbitration provisions of this Agreement shall not prevent
any party from obtaining injunctive relief from a court of competent
jurisdiction to enforce the obligations for which such party may obtain
provisional relief pending a decision on the merits by the arbitrator. Each
of the parties hereby consents to the jurisdiction of Nevada courts for such
purpose. The arbitrator shall have authority to award any remedy or relief
that a court of the State of Nevada could grant in conformity to applicable
law, except that the arbitrator shall have no authority to award attorneys'
fees or punitive damages. Any arbitration award shall be accompanied by a
written statement containing a summary of the issues in controversy, a
description of the award, and an explanation of the reasons for the award.
The arbitrator's award shall be final and judgment may be entered upon such
award by any court.
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SECTION 15. Amendments, Etc.
This Agreement may not be modified or amended, and no provision hereof
may be waived, except by an instrument in writing signed by the parties
hereto.
SECTION 16. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, and permitted
assigns and transferees. No party hereto may assign their rights and
obligations hereunder without the prior written consent of the other party
hereto; except that ASIG may, after providing LVDGT with written notice,
transfer and assign its rights under this Agreement to any member of ASIG, any
other entity wholly owned by any such member or to one or more trusts for such
member's estate planning purposes.
SECTION 17. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LAS VEGAS DISCOUNT GOLF & TENNIS, INC. ASI GROUP, L.L.C.
By: Sunbelt Communications Company,
a Member
By: /s/ Vaso Boreta By: /s/ James Earl Rogers
Name: Vaso Boreta Name: James Earl Rogers
Title: President Title: President
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VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 19, 1998 by and among ASI Group,
L.L.C., a Nevada limited liability company ("ASI"), c/o Agassi Enterprises,
Inc., 3960 Howard Hughes Parkway, Suite 750, Las Vegas, Nevada 89109, and the
individuals and entities listed on the signature page hereto (collectively
"Boreta").
WITNESSETH:
WHEREAS, ASI and Las Vegas Discount Golf & Tennis, Inc., a Colorado
corporation ("LVDGT"), are entering into an investment and voting agreement
(the "ASI Agreement") pursuant to which, among other things, ASI is buying
shares of common stock of LVDGT; and
WHEREAS, LVDGT and Saint Andrews Golf Corporation, a Nevada corporation
("SAGC"), are entering into an investment agreement (the "LVDGT Agreement")
pursuant to which, among other things, LVDGT is buying shares of preferred
stock of SAGC; and
WHEREAS, in order to induce each other to enter into the ASI Agreement,
ASI and Boreta desire to enter into this Voting Agreement with respect to all
the capital stock of LVDGT and SAGC now owned or controlled by and/or
hereafter acquired or coming under the control of any of them respectively
(collectively, the "Shares"). Exhibit A lists all Shares currently owned or
controlled by Boreta or ASI;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
Section 1. Restrictions on and Voting of Shares.
(a) During the term of this Agreement, Boreta agrees that it will
not sell, assign, pledge or otherwise dispose of, or grant any proxies with
respect to, the Shares, or enter into any contract, option or other
arrangement or understanding with respect to the sale, assignment, pledge or
other disposition, directly or indirectly, of the Shares except as expressly
contemplated by the LVDGT Agreement or the ASI Agreement.
(b) Boreta and ASI agree that, during the term of this Agreement,
they will vote the Shares either of them is entitled to vote, in person or by
proxy, at any annual, special or other meeting of the holders of capital stock
of LVDGT or SAGC, as the case may be, and at any adjournments thereof or
pursuant to any consent in lieu of a meeting, or otherwise, as mutually agreed
by ASI and Boreta (provided that no party will be so required to vote its
shares if the subject action implemented in accordance with such mutual
agreement, would in any manner adversely effect the interests of Boreta in
LVDGT or SAGC or the interests of ASI in LVDGT and indirectly in SAGC, as the
case may be, or adversely affect the value of the Shares (or any securities
into which such shares might be exchanged)).
Section 2. Subsequent Acquisitions. If at any time after the first to
occur of the closing of the transactions contemplated by the LVDGT Agreement
or the ASI Agreement, while ASI is an equity holder of LVDGT or SAGC or has
options, warrants or other rights to acquire equity of either or both of LVDGT
and/or SAGC, either of LVDGT or SAGC offers to sell or grants, sells or issues
shares of its capital stock to any of Boreta or their respective affiliates at
any price or for any consideration (including, but not limited to, provision
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of services), Boreta shall transfer or cause to be transferred to ASI Shares
so as to maintain the relative proportionate direct and indirect (by virtue of
ownership of LVDGT capital stock) equity ownerships of ASI, on the one hand,
and Boreta, on the other hand, in each of LVDGT and SAGC as they were
immediately prior to such offer, grant, sale or issuance, assuming the
consummation of such offer, grant, sale or issuance.
Section 3. Term of Agreement. Except as otherwise specifically provided
herein, this Agreement will be effective as of the closing of the transactions
contemplated by the ASI Agreement (the "Effective Date"). The obligations of
ASI and Boreta under this Agreement will terminate as of the date ASI no
longer holds any equity interest, options, warrants or rights to purchase any
equity interest in or instruments convertible or exchangeable into equity
interests of SAGC or LVDGT or their respective successors.
Section 4. Representations and Warranties of Boreta. Boreta represents
and warrants to ASI as of the date and as of the Effective Date hereof that:
(a) Boreta is the record owner of the Shares and the Shares
represent all of the capital stock of SAGC or LVDGT owned of record by Boreta,
directly or indirectly;
(b) Boreta has full legal power and authority to execute and
deliver this Agreement;
(c) the Shares are free and clear of all proxies; and
(d) Boreta has duly executed and delivered this Agreement.
Section 5. Representations and Warranties of ASI. ASI represents and
warrants to Boreta as of the date and as of the Effective Date hereof that:
(a) ASI is the record owner of the Shares and the Shares represent
all of the capital stock of SAGC or LVDGT owned of record by ASI, directly or
indirectly;
(b) ASI has full legal power and authority to execute and deliver
this Agreement;
(c) the Shares are free and clear of all proxies; and
(d) ASI has duly executed and delivered this Agreement.
Section 6. Stock Options Owned by Boreta or ASI. It is agreed that any
Shares obtained by Boreta or ASI after the date hereof upon exercise of any
option to purchase Shares or which otherwise become held of record by Boreta
shall in all events be deemed to be "Shares" or subject to this Agreement.
Section 7. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms of were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
the United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity
without the necessity of posting bond or other security or showing actual
damages.
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Section 8. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by confirmed facsimile to the correct
facsimile number or otherwise delivered by hand or by messenger, addressed (a)
if to ASI, at its address set forth on the cover page of this Agreement, or at
such other address as ASI shall have furnished to the Company in writing, or
(b) if to any of Boreta, at such address as listed on the signature page
hereto.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or if sent by confirmed facsimile to the correct
facsimile number, upon the sending of such facsimile, or, if sent by mail, at
the earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
Section 9. Binding Effect. Upon execution and delivery of this
Agreement by ASI, this Agreement shall become effective as to Boreta at the
time Boreta executes and delivers this Agreement. This Agreement shall inure
to the benefit of and, subject to applicable law, be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
Section 10. Assignment. This Agreement will be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns provided that neither this Agreement nor any rights hereunder may be
assigned by either party without first obtaining the prior written consent of
the other party.
Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without giving
effect to the principles of conflict of laws thereof.
Section 12. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
Section 13. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
Section 14. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 15. Amendment; Waiver. No amendment or waiver of any provision
of this Agreement or consent to departure therefrom shall be effective unless
in writing and signed by ASI and Boreta, in the case of an amendment, or by
the party which is the beneficiary of any such provision, in the case of a
waiver or a consent to departure therefrom.
Section 16. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, covenants, arrangements, communications,
representations and warranties, whether oral or written, by either party with
respect thereto.
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Section 17. Obligations. The obligations of Boreta hereunder are joint
and several.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto all as of the day and year first above written.
ASI GROUP, L.L.C. BORETA:
By: Sunbelt Communications
Company, a Member
By: /s/ James Earl Rogers
Name: James Earl Rogers
Title: President /s/ Vaso Boreta
Vaso Boreta
/s/ Ronald Boreta
Ronald Boreta
/s/ John Boreta
John Boreta
BORETA ENTERPRISES LTD
By: /s/ Ronald Boreta
Name: Ronald Boreta
Title: General Partner
4
CO-SALE AGREEMENT
This Co-Sale Agreement is made as of the 19th day of October, 1998 by and
among LAS VEGAS DISCOUNT GOLF & TENNIS INC. (the "Company"), a Colorado
corporation, RON BORETA, VASO BORETA and JOHN BORETA (collectively the
"Boretas") and BORETA ENTERPRISES LTD. (the "Family Company"; the Family
Company and the Boretas are each a "Significant Shareholder," and collectively
are the "Significant Shareholders") and ASI GROUP, L.L.C., a Nevada limited
liability company ("ASI").
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
1. Definitions.
(a) "Stock" shall mean shares of the Company's Common and Preferred
Stock now owned beneficially or of record or subsequently acquired
beneficially or of record directly or indirectly by the Significant
Shareholders.
(b) "Preferred Stock" shall mean the Company's or LVDG&T's outstanding
Preferred Stock of any series or designation.
(c) "Common Stock" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's Preferred
Stock.
2. Sale by Significant Shareholders.
(a) On each occasion that any Significant Shareholder proposes to sell
or transfer to any person any shares of Stock in one or more related
transactions, such Significant Shareholder shall promptly give written notice
(the "Notice") to ASI at least twenty (20) days prior to the closing of such
sale or transfer. The Notice shall describe in reasonable detail the proposed
sale or transfer including, without limitation, the number of shares of Stock
to be sold or transferred, the nature of such sale or transfer, the considera
tion to be paid, and the name and address of each prospective purchaser or
transferee. In the event that the sale or transfer is being made pursuant to
the provisions of Section 3(a) or 3(b) hereof, the Notice shall state under
which Section the sale or transfer is being made.
(b) ASI shall have the right, exercisable upon written notice to such
Significant Shareholder within fifteen (15) days after receipt of the Notice,
to participate in such sale of Stock on the same terms and conditions. To the
extent ASI exercises such right of participation in accordance with the terms
and conditions set forth below, the number of shares of Stock that the
Significant Shareholder may sell in the transaction shall be correspondingly
reduced.
(c) ASI may sell all or any part of that number of shares of Common
Stock equal to the product obtained by multiplying (i) the aggregate number of
shares of Stock covered by the Notice by (ii) a fraction the a numerator of
which is the number of shares of Common Stock owned by ASI at the time of the
sale or transfer and the denominator of which is the total number of shares of
Common Stock owned by the Significant Shareholders and ASI at the time of the
sale or transfer.
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(d) ASI shall effect its participation in the sale by promptly
delivering to the Significant Shareholders for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of Common Stock which ASI elects
to sell; or
(ii) that number of shares of Series B Convertible Preferred Stock
which is at such time convertible into the number of shares of Common Stock
which ASI elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Series B Convertible Preferred Stock in lieu of
Common Stock, ASI shall convert such Preferred Stock into Common Stock and
deliver Common Stock as provided in Section 2(d)(i) above. The Company agrees
to make any such conversion concurrent with the actual transfer of such shares
to the purchaser.
(e) The Stock certificate or certificates that ASI delivers to the
Significant Shareholders pursuant to Section 2(d) shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Notice, and the Significant
Shareholders shall concurrently therewith remit to ASI that portion of the
sale proceeds to which ASI is entitled by reason of its participation in such
sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities
from ASI, the Significant Shareholders shall not sell to such prospective
purchaser or purchasers any Stock unless and until, simultaneously with such
sale, the Significant Shareholders shall purchase such shares or other
securities from ASI.
(f) The exercise or non-exercise of the rights of ASI hereunder to
participate in one or more sales of Stock made by the Significant Shareholders
shall to adversely affect its rights to participate in subsequent sales of
Stock subject to Section 2(a).
3. Exempt Transfers.
Notwithstanding the foregoing, the co-sale rights of ASI shall not apply to
(a) any pledge of Stock made pursuant to a bona fide third party loan
transaction with a party not affiliated with or a stockholder of any
significant shareholder that creates a mere security interest; (b) any
transfer to the ancestors, descendants or spouse or to trusts for the benefit
of such persons or a Significant Shareholder; (c) any bona fide gift; or (d)
any sale or sales of not more than 25,000 shares of Common Stock individually
or in the aggregate during the term hereof (as adjusted for stock splits,
reverse stock splits and the like effected after the date of this Agreement);
provided that (i) the transferring Shareholder shall inform ASI of such
pledge, transfer or gift prior to effecting it and (ii) the pledgee,
transferee or donee shall furnish ASI with a written agreement to be bound by
and comply with all provisions of Section 2. Such transferred Stock shall
remain "Stock: hereunder, and such pledge, transferee or donee shall be
treated as a "Shareholder" for purposes of this Agreement.
4. Prohibited Transfers.
(a) In the event a Significant Shareholder should sell any Stock in
contravention of the co-sale rights of ASI under this Agreement (a "Prohibited
Transfer"), ASI, in addition to such other remedies as may be available at
law, in equity or hereunder, shall have the put option provided below, and the
Significant Shareholders shall be bound by the applicable provisions of such
option.
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(b) In the event of a Prohibited Transfer, ASI shall have the right to
sell to the Significant Shareholders the type and number of shares of Common
Stock equal to the number of shares ASI would have been entitled to transfer
to the purchaser had the Prohibited Transfer under Section 2(c) hereof been
effected pursuant to and in compliance with the terms hereof. Such sale shall
be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to the
Significant Shareholders shall be equal to the price per share paid by the
purchaser to Significant Shareholders in this Prohibited Transfer.
Significant Shareholders shall also reimburse ASI for any and all fees and
expenses, including legal fees and expenses, incurred pursuant to the exercise
or the attempted exercise of ASI's rights under Section 2.
(ii) Within ninety (90) days after the later of the dates on which
ASI (A) received notice of the Prohibited Transfer or (B) otherwise became
aware of the Prohibited Transfer, ASI shall, if exercising the option created
hereby, deliver to Significant Shareholders the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(iii) Significant Shareholders shall, upon receipt of the
certificate or certificates for the shares to be sold by ASI, pursuant to this
Section 4(b), pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in Section 5(b)(i), in cash or by
other means acceptable to ASI.
(iv) Notwithstanding the foregoing, any attempt by a Significant
Shareholder to transfer Stock in violation of Section 2 hereof shall be void
and the Company agrees it will not effect such a transfer nor will it treat
any alleged transferee as the holder of such shares without the written
consent of ASI.
5. Legend.
(a) Each certificate representing shares of Stock now or hereafter owned
by the Significant Shareholder or issue to any person in connection with a
transfer pursuant to Sections(a) and 3(b) hereof shall be endorsed with the
following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN CO-SALE AGREEMENT AMONG THE INITIAL HOLDER OF THE SECURITIES, THE
COMPANY AND CERTAIN STOCKHOLDER(S) OF THE COMPANY. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
(b) Each Significant Shareholder agrees that the Company may instruct
its transfer agent to impose transfer restrictions on the shares represented
by certificates bearing the legend referred to in Section 5(a) above to
enforce the provisions of this Agreement and the Company agrees to promptly do
so. The legend shall be removed upon termination of this Agreement.
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Nevada.
6.2 Amendment. Any provision may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of the party or
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parties affected thereby. Any amendment or waiver effected in accordance with
clauses (a), (b) and (c) of this Section shall be binding upon ASI, its
successors and assigns, the Company and Significant Shareholders in question.
6.3 Assignment of Rights. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
6.4 Term. This Agreement shall terminate on the fifth anniversary
hereof.
6.5 Ownership. Each Significant Shareholder represents and warrants
that it/he is the sole legal and beneficial owner of the shares of stock
subject to this Agreement and that no other person has any interest (other
than a community property interest) in such shares.
6.6 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five (5) days after deposit in the United States mail,
by registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth on the signature page hereof or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto.
6.7 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.8 Attorney Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
The foregoing agreement is hereby executed as of the date first above written.
SAINT ANDREWS GOLF CORPORATION, ASI GROUP, L.L.C., a Nevada limited
a Nevada corporation liability company
By: /s/ Vaso Boreta By: /s/ James Earl Rogers
Name: Vaso Boreta Name: James Earl Rogers
Title: President Title: President
LAS VEGAS DISCOUNT GOLF &
TENNIS INC., a Nevada
corporation
By: /s/ Ron Boreta
Name: Ron Boreta
Title: President
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/s/ Vaso Boreta
Vaso Boreta
/s/ Ron Boreta
Ron Boreta
/s/ John Boreta
John Boreta
BORETA ENTERPRISES LTD.
By: /s/ Ron Boreta
Name: Ron Boreta
Title: General Partner
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CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know
its contents. I am aware that by its provisions if I and/or my spouse agree
to sell all or part of the shares of the company held of record by either or
both of us, including my community property interest in such shares, if any,
co-sale rights (as described in the Agreement) must be granted to ASI by the
seller. I hereby agree that those shares and my interest in them, if any, are
subject to the provisions of the Agreement and that I will take no action at
any time to hinder operations of, or violate, the Agreement.
/s/ Keri Boreta
(Signature)
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CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Agreement and that I know
its contents. I am aware that by its provisions if I and/or my spouse agree
to sell all or part of the shares of the company held of record by either or
both of us, including my community property interest in such shares, if any,
co-sale rights (as described in the Agreement) must be granted to ASI by the
seller. I hereby agree that those shares and my interest in them, if any, are
subject to the provisions of the Agreement and that I will take no action at
any time to hinder operations of, or violate, the Agreement.
/s/ Stacey Boreta
(Signature)
7
INVESTMENT AGREEMENT
This Investment Agreement is made as of October 19, 1998, between SAINT
ANDREWS GOLF CORPORATION, a Nevada corporation (the "Company"), whose address
is 5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada 89118, and LAS
VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation (the "Purchaser"),
whose address is 5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada
89118.
SECTION 1
AUTHORIZATION AND SALE OF SERIES B PREFERRED
1.1 Authorization. The Company will authorize the sale and issuance of
Two Hundred Fifty Thousand (250,000) shares (the "Shares") of its Series B
Convertible Preferred Stock ("Series B Preferred"), having the rights,
privileges and preferences as set forth in the Certificate of Designation (the
"Certificate") in the form attached to this Agreement as Exhibit A. The
Shares of Common Stock into which the Shares will be convertible are referred
to herein as the "Conversion Stock."
1.2 Sale of Series B Preferred. Subject to the terms and conditions
hereof, and in reliance upon the representations, warranties and agreements of
the parties contained herein, the Company will issue and sell to the
Purchaser, and the Purchaser will buy from the Company, Two Hundred Fifty
Thousand (250,000) shares of Series B Preferred at a purchase price of Ten
Dollars ($10.00) per share, for an aggregate purchase price of Two Million
Five Hundred Thousand Dollars ($2,500,000.00). The parties hereto understand
that the number of shares of Series B Preferred to be purchased hereunder may
be reduced, and the aggregate purchase price reduced accordingly, to the
extent Three Oceans, Inc. ("Three Oceans") exercises its rights of first
refusal pursuant to that certain Investment Agreement between Three Oceans and
the Company (the "Sanyo Agreement").
1.3 Summary of Terms of Series B Preferred. The following summary of
the Series B Preferred is provided for information purposes only and is
subject to the description set forth in Exhibit A:
Each share of Series B Preferred is convertible, at the option of the
Purchaser, into one share of the Company's Common Stock, subject to the
Anti-Dilution Provisions set forth herein. In the event of liquidation or
dissolution of the Company, each share of Series B Preferred will have a
$10.00 liquidation preference to be paid pari passu on a prorata basis with
liquidation preference of the Series A Convertible Preferred Stock of the
Company (the "Series A Preferred") and over all other shareholders. After the
distribution described above has been paid, the remaining assets of the
Company available for distribution to shareholders shall be distributed among
the holders of Series B Preferred, the Series A Preferred (together with the
Series B Preferred and any other series of preferred stock of the Company
which may hereafter be issued, the "Preferred") and Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming
conversion of all such Series B Preferred and Series A Preferred). In
addition, holders of Series B Preferred shall be entitled to receive dividends
at a rate equal to the rate per share payable to Common Stock or Series A
Preferred holders, assuming conversion of Series B Preferred and Series A
Preferred, payable out of funds legally available therefor. Such dividends
shall be payable only when, as, and if declared payable to holders of Common
Stock or Series A Preferred by the board of directors of the Company and
shall be non-cumulative. In the event the Company shall declare a
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distribution payable in securities of other persons, evidences of indebtedness
issued by the Company or other persons, assets (excluding cash dividends) or
options or rights to purchase any such securities or evidences of
indebtedness, then, in each such case the holders of the Series B Preferred
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series B Preferred were the holders of the number of shares
of Common Stock of the Company into which their respective shares of Series B
Preferred are convertible as of the record date fixed for the determination of
the holders of Common Stock of the Company entitled to receive such
distribution. Each share of Series B Preferred will have one vote and will
vote along with the holders of the Common Stock and the Series A Preferred
except as otherwise specified herein. The Series B Preferred can be redeemed
by the Company if there is an effective registration statement filed with the
Securities and Exchange Commission covering the issuance of the Common Stock
upon conversion of the Series B Preferred and the following two conditions are
satisfied: (a) the Company earns $1,000,000 of pre-tax income for a fiscal
year according to the year-end audited financial statements; and (b) the
closing bid price of the Company's Common Stock is a least $15.00 for 20
consecutive trading days. If the Company notifies the Purchaser of its intent
to redeem the Series B Preferred, the Purchaser will have at least 30 days to
elect to convert its Series B Preferred or accept the redemption price of
$12.50 per Share. The Series B Preferred shall be pari passu with the Series
A Preferred and the Company shall not authorize or issue any class or series
of securities having rights or preferences senior to or pari passu with those
of Series B Preferred without a vote of the holders of a majority of the
Series B Preferred outstanding, voting separately as a class.
1.4 Adjustment of Price and/or Terms. If at any time and each time
within three (3) years after the Closing (as defined in Section 2.1 below),
the Company offers to sell or grants, sells or issues shares of its capital
stock to any persons or entity other than the Purchaser at a lower price per
share than the purchase price paid by the Purchaser for the Shares and/or on
more favorable terms and conditions than those afforded to the Purchaser in
connection with the purchase of the shares of Series B Preferred (taking into
account any equitable adjustment in accordance with the Anti-Dilution
Provisions), the Company agrees to retroactively apply such lower price and/or
more favorable terms and conditions to the Shares purchased by the Purchaser
or to the Conversion Stock acquired by the Purchaser. At the Purchaser's
request, the Company shall either (a) issue the Purchaser additional shares of
Series B Preferred in the amount equal to (i) the amount of any such
overpayment by the Purchaser divided by (ii) such lower price charged by the
Company to any person or entities or (b) deliver to the Purchaser the amount
of any such overpayment in cash.
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Series B
Preferred hereunder shall be held at the offices of the Company sixteen days
from the execution hereof (the "Closing"), or at such other time and place
upon which the Company and the Purchaser shall agree (the date of the Closing
is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates, registered in the Purchaser's name representing
Two Hundred Fifty Thousand (250,000) Shares against payment of the purchase
price therefor, by check payable to the Company or wire transfer per the
Company's instructions. The total purchase price shall be paid by the
Purchaser to the Company in one installment without interest thereon.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B (which Schedule makes specific reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty to which such exception
shall apply), the Company represents and warrants to the Purchaser as follows:
3.1 Definition of Material. For purposes of this Section 3, material
shall mean anything having a value or effect of more than $50,000.
3.2 Organization and Standing; Articles and By-Laws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Nevada and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction, and the failure to be
qualified will not have a material adverse affect on the Company's business as
now conducted or as now proposed to be conducted. The Company has furnished
the Purchaser with copies of its Articles of Incorporation (the "Articles")
and By-Laws, as amended. Said copies are true, correct and complete and
contain all amendments through the Closing Date.
3.3 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, at the Closing will
have all requisite legal and corporate power and authority to sell and issue
the Shares hereunder, to issue the Conversion Stock upon conversion of the
Shares, and to carry out and perform its obligations under the terms of this
Agreement.
3.4 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.5 Capitalization. The authorized capital stock of the Company
consists, or upon the filing of the Certificate will consist, of 10,000,000
shares of Common Stock, of which 3,000,000 shares are issued and outstanding,
and 5,000,000 shares of Preferred Stock, of which (a) 500,000 shares have been
designated "Series A Preferred" and are issued and outstanding and (b) 250,000
shares have been designated "Series B Preferred," of which none is issued and
outstanding prior to the Closing. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved shares of Series B Preferred for issuance hereunder,
250,000 shares of Common Stock upon conversion of the Series B Preferred,
500,000 shares of Common Stock upon conversion of Series A Preferred, 500,000
shares for issuance upon exercise of outstanding Class A Warrants (exercise
price of $6.50), 100,000 shares of Common Stock for issuance upon exercise of
outstanding Underwriter's Warrants (exercise price of $5.40), 250,000 shares
of Common Stock for issuance upon exercise of the option under the Sanyo
Agreement and 50,000 shares of Common Stock for issuance upon exercise of the
Underwriter's Class A Warrants (exercise price of $7.80). Options to purchase
657,000 shares of Common Stock are issued and outstanding under the Company's
employee stock option plan. All outstanding securities of the Company were
issued in compliance with applicable federal and state securities laws. The
Series B Preferred shall have the rights, preferences, privileges and
restrictions set forth in the Certificate. Except as set forth above, there
are no options, warrants or other rights to purchase any of the Company's
capital stock. Except as set forth in any agreement entered into with the
Purchaser, the Company is not a party or subject to any agreement or
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understanding, and there is no agreement or understanding between any persons
that affects or related to the voting or giving of written consents with
respect to any security or the voting by a director of the Company.
3.6 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares and the Conversion
Stock and the performance of all of the Company's obligations hereunder has
been taken or will be taken prior to the Closing. This Agreement, when
executed and delivered by the Company, shall constitute a valid and legally
binding obligation of the Company, enforceable in accordance with its
respective terms. The Shares, when issued in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable and
will have the rights, preferences and privileges described in the Certificate;
the Conversion Stock has been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement and the Certificate, will be
validly issued, fully paid and nonassessable; and the Shares and Conversion
Stock will be free of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon the holders hereof through no action
of the Company; provided, however, that the shares of the Conversion Stock
will be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein. Except as set forth in the Sanyo
Agreement, the Shares are not subject to any preemptive rights or rights of
first refusal.
3.7 Financial Statements. The Company has delivered to the Purchaser
its audited balance sheet and statements of operations and cash flow was of
and for the period ended December 31, 1997, and its combined unaudited balance
sheet and statements of operations and cash flows as of and for the period
ended June 30, 1998 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except that the
unaudited financial statements do not contain footnotes. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the period,
indicated therein. The financial statements for the year ended December 31,
1997, were audited by Arthur Andersen LLP.
3.8 Absence of Changes. Since June 30, 1998: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no materially adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company other
than changes in the ordinary course of business, none of which, individually
or in the aggregate, has been materially adverse, (c) there has been no damage
to, destruction of or loss of physical property (whether or not covered by
insurance) materially and adversely affecting the business or operations of
the Company, (d) the Company has not declared or paid any dividend or made any
distribution on its stock, or redeemed, purchased or otherwise acquired any of
its stock, (e) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there
has been no resignation or termination of employment of any key officer,
consultant or employee of the Company, and the Company does not know of the
impending resignation or termination of employment of any such officer,
consultant or employee that if consummated would have a material adverse
effect on its business, (g) there has been no labor dispute involving the
Company or its employees and none is pending or, to the best of the Company's
knowledge, threatened, (h) there has not been any change, except in the
ordinary course of business, in the contingent obligations of the Company, by
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way of guaranty, endorsement, indemnity, warranty or otherwise, (i) there have
not been any loans made by the Company to any of its employees, officers or
directors other than travel advances and office advances made in the ordinary
course of business and (j) to the best of the Company's knowledge, there has
been no other event or condition of any character pertaining to and materially
and adversely affecting the assets or business of the Company.
3.9 Material Liabilities. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate) except
(a) the liabilities and obligations set forth in the Financial Statements, (b)
liabilities and obligations which have been incurred subsequent to June 30,
1998, in the ordinary course of business which have not been in the aggregate
materially adverse, (c) liabilities and obligations under lease for its
principal offices and for equipment, and (d) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.10 Title to Properties and Assets; Liens, etc. The Company has good
and marketable title to its properties and assets, and has good title to all
of its leasehold interests in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the lien of current taxes not yet due
and payable. Each of the Company's assets is in good repair and good,
marketable and operating condition and is suitable for the purposes for which
it presently is being used and is intended to be used by the Company and is
adequate and suitable to meet all present and reasonably anticipated future
requirements of the Company. The Company's assets conform to all applicable
laws, ordinances, codes, rules and regulations, and the Company has not
received any notice to the contrary. The Company does not own, of record or
beneficially, any real property. Exhibit C sets forth a list and description
of all property leased or subleased to or by the Company.
3.11 Compliance with Other Instruments; None Burdensome, etc. The
Company is not in violation of any term of its Articles or By-Laws, or, in any
material respect, of any term or provision of any mortgage, indebtedness,
indenture, contract, security agreement, agreement, instrument, judgment or
decree, and, to the best of its knowledge, is not in violation of any order,
statute, rule or regulation applicable to the Company where such violation
would materially and adversely affect the Company. The execution, delivery
and performance of and compliance with this Agreement, and the issuance of the
Series B Preferred and the Conversion Stock has not resulted and will not
result in any violation of, or conflict with, or constitute a default (or an
event that might, with the passage of time or the giving of notice or either
of them, constitute a default) under any of the terms of, result in the
termination of, result in the loss of any right under, or give to any other
person the right to cause such a termination of or loss under, and will be in
compliance with, the Company's Articles, By-Laws and all of its agreements,
permits and licenses or any provision of federal, state, local or foreign
statute rule ordinance or regulation applicable to the Company or result in
the creation of, any mortgage, pledge, lien, encumbrance or charge upon any of
the capital stock, properties or assets of the Company or the creation,
maturation or acceleration of any liability or obligation of the Company (or
give to any other person the right to cause such a creation, maturation or
acceleration); and there is no such violation or default which adversely
affects the business of the Company or any of its properties or assets.
3.12 Intangible Assets.
(a) The Company (i) owns or has the right to use, free and clear of
all liens, claims and restrictions, all Intellectual Property (as hereinafter
defined) used in the conduct of its business as now conducted or as proposed
to be conducted without infringing upon or otherwise acting adversely to the
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right or claimed right of any person under or with respect to any of the
foregoing, and (ii) is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner of, license
of, or other claimant to, any patent, trademark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise. "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable) and whether or not reduced
to practice, all improvements thereto, and all patents, patent applications
and patent disclosures, together with all reissuance, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and producing processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software and information systems, programs,
(including data and related documentation), whether owned or leased by the
Company, (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium). The Company has taken all
necessary action to maintain and protect each item of Intellectual Property
that it owns or uses and has never granted any sublicense or similar right to
any third party with respect to such Intellectual Property.
(b) The Company owns and has the unrestricted right to use all
Intellectual Property required for or incidental to the development,
construction and operation of the SportPark segment of its business, free and
clear of any rights, liens or claims of others, including without limitation,
former employers of all current and former employees, consultants, officers,
directors and shareholders of the Company.
(c) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the stockholders and directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company has ever received any charge, complaint, claim, demand
or notice alleging any such interference, infringement, misappropriation or
violation (including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party). No third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of the Company.
(d) Exhibit D identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual Property, each
pending patent application or application for registration which the Company
has made with respect to any of its Intellectual Property, and each license,
agreement or other permission which the Company has granted to any third party
with respect to any of its Intellectual Property. The Company has delivered
to the Purchaser correct and complete copies of all such patents,
registrations, applications, licenses, agreements and permissions (as amended
to date). Exhibit D also identifies each trade name or unregistered trademark
used by the Company in connection with any of its businesses. With respect to
each item of Intellectual Property required to be identified in Exhibit D:
(i) the Company possesses all right, title and interest in and to the item,
free and clear of any Liens, license or other restriction, (ii) the item is
not subject to any outstanding injunction, judgment, order, decree, ruling or
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charge, (iii) no action, suit proceeding hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of each of the
shareholders and the directors and officers (and employees with responsibility
for Intellectual Property matters) of the Company, is threatened which
challenges the legality, validity, enforceability, use or ownership of the
item and (iv) the Company has never agreed to indemnify any person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
3.13 Litigation, etc. There is no suit, action, hearing, investigation,
claim or litigation, or legal, administrative, arbitration or other proceeding
pending or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company, its business or any of its property or
assets, before any court, arbitrator, or federal, state, municipal or other
governmental board, department, agency or instrumentality, and there is no
basis for any such action. There is no judgment, decree, injunction, ruling,
award, charge, order or writ of any court, governmental department,
commission, agency, instrumentality, arbitration or other person outstanding
against, binding upon or involving the Company, its business, any directors or
officers of the Company. None of the matters set forth on Exhibit B could
result in any material adverse effect. The Company owns policies of casualty,
liability or other forms of insurance which provide coverages in amount and
scope sufficient to cover every claim, action, cause of action, suit,
proceeding, litigation, arbitration or investigation arising out of, related
to, or in connection with those matters listed on the schedule of exception.
Neither the Company nor any of its directors, officers or employees is
currently charged with, or is currently under investigation with respect to,
any violation of any provision of any foreign, federal, state or local law or
administrative regulation in respect of the business of the Company. The
Company is not in default with respect to any judgment, decree, injunction,
ruling, award, order or writ of any foreign, federal, state, municipal agency
or other governmental department, board, commission, bureau, agency or
instrumentality.
3.14 Employees. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. There
are no controversies pending nor, to the best knowledge of the Company any
basis of any such controversies, between the Company and any of its employees.
To the knowledge of the Company, and the directors and officers (and employees
with responsibility for employment matters) of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not bound by any collective bargaining agreement, nor
has the Company experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has not
committed any unfair labor practice. None of the shareholders or the
directors or officers (or employees with responsibility for employment
matters) of the Company has any knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
3.15 Employee Agreements. There are no pension, profit-sharing, bonus,
group insurance, death benefit, vacation pay, severance pay, sick leave,
holiday pay, welfare, or any other employee benefit or "fringe benefit" plans
or arrangements relating to the current or former employees or consultants of
the Company. In addition, there are no employment, deferred compensation,
collective bargaining, retainer, savings, consulting, non-competition,
retirement or incentive agreements, contracts, plans or arrangements relating
to, with or for the benefit of any officers or employees of the Company or
other persons.
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3.16 Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever; none of said
officers, directors or shareholders, or any members of their immediate
families, are indebted to the Company or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or
with which the Company has a business relationship, or any firm or corporation
which competes with the Company, except that officers, directors and/or
shareholders of the Company may own less than 1% of the stock of
publicly-traded companies which may compete with the Company. No officer,
director or shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any contract with the Company. The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.17 Material Contracts and Obligations. Attached hereto as Exhibit E
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by the Company; or which involve transactions or
proposed transactions between the Company and its officers, directors,
affiliates or any affiliate thereof. Copies of certain of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by the Purchaser and its counsel. All
of such agreements and contracts are valid, binding and in full force and
effect in all respects, assuming due execution by the other parties to such
agreements and contracts. To the best knowledge of the Company, the Company
and each other party to each such agreement and contract has performed all
obligations required to be performed by it thereunder and is not in breach or
default, and is not alleged to be in breach or default, in any respect
thereunder, and no event has occurred and no condition or state of facts
exists (or would exist upon the giving of notice or the lapse of time or any
of them) that would become or cause a breach, default or event of default
thereunder, would give to any person the right to cause such a termination or
would cause an acceleration of any obligation thereunder.
3.18 Registration Rights. Except as set forth in this Agreement or as
set forth in the Sanyo Agreement, the Company is not under any contractual
obligation to register (as defined in Section 8.1 below) any of its presently
outstanding securities or any of its securities which may hereafter be issued.
3.19 Governmental Consent, etc. No consent, approval, order or
authorization of (of designation, declaration or filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Series B Preferred and the Conversion Stock, or the consummation of any
other transaction contemplated hereby, except (a) filing of the Certificate in
the office of the Secretary of the State of Nevada, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) or the offer and sale of the Series B Preferred
and the Conversion Stock under applicable estate securities laws, which
filings and qualifications, if required, will be accomplished in a timely
manner.
3.20 Offering. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Series B Preferred to be issued in conformity with the terms of this
Agreement, and the issuance of the Conversion Stock upon conversion of the
Series B Preferred, constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
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3.21 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.22 Tax Matters. The Company (a) has timely filed all tax returns that
are required to have been filed by it with all appropriate federal, state,
county and local governmental agencies (and all such returns fairly reflect
the Company's operations for tax purposes), (b) has timely paid all taxes owed
by it for which it is obligated to withhold from amounts owing to any employee
(including without limitation social security taxes), creditor or third party
(other than taxes the validity of which are being contested in good faith by
appropriate proceedings), and (c) has not waived any statute of limitations
with respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency. The assessment of any additional taxes for a period
for which returns have been filed is not expected to exceed the recorded
liability therefor, and there are no material unresolved questions or claims
concerning the Company's tax liability. The Company's tax returns have not
been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to
any of said returns which, if determined adversely to the Company, would
result in the assertion by any taxing authority of any valid deficiency in any
material amount for taxes.
3.23 Insurance. With respect to each insurance policy maintained by the
Company: (a) the policy is legal, valid, binding, enforceable and in full
force and effect, (b) the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
consummation of the transactions contemplated hereby, (c) neither the Company
nor any other party to the policy is in breach of default (including with
respect to the payment of premiums or the giving of notices) and (d) no party
to the policy has repudiated any provision thereof. The Company has been
covered since its formation by insurance in type, scope and amount that (x)
meet the minimum requirements of any contract, lease or agreement to which the
Company is a party and (y) is customary and reasonable for the business in
which it has engaged during such period including, without limitation, fire,
casualty, liability and key-man life (on the lives of Ron and Vaso Boreta)
insurance polices. The Company has not failed to give any notice or present
any claim under any insurance policy in a due and timely fashion.
3.24 Environmental and Safety Regulations. The Company is not in
violation of any environmental laws or regulations, including without
limitation any and all applicable federal, state and local laws, regulations
and ordinances relating to air and water pollution and handling and disposal
of chemical and hazardous materials (hereinafter the "Environmental Laws").
The Company possesses all of the authorizations, permits and approvals
required to be obtained by applicable Environmental Laws; neither the Company
nor any stockholder has received any notice from any governmental authority or
has knowledge of any governmental inquiry or investigation or any other claim,
suit or proceeding against or involving the Company with respect to any actual
or alleged violation of any applicable Environmental Law and all hazardous
waste and chemical waste materials have been disposed of in accordance with
all applicable Environmental Laws. There have been no spills, dumping,
discharge or clean-up of hazardous waste or chemical materials in violation of
any Environmental Laws on or at any premises owned or any premises occupied by
the Company.
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3.25 Employee Benefit Plans.
(a) The Company has never maintained or contributed to, and does
not maintain or contribute to any Employee Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974, as amended. The Company has
not incurred any liability under ERISA (including any withdrawal liability) or
under the Internal Revenue Code of 1986, as amended Code (the "Code"), with
respect to any Employee Benefit Plan.
(b) The Company does not contribute to, nor has ever had
contributed to and has never been required to contribute to any multi-employer
plan or has any liability (including withdrawal liability) under any
multi-employer plan.
(c) The Company does not maintain or contribute to, nor has it ever
maintained or contributed to, nor has it ever been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
3.26 Minute Books. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately.
3.27 Legal Compliance. The Company has complied with all applicable
laws, statutes, and ordinances (including without limitation all rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings
and charges thereunder) of federal, state, local and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against it alleging any failure to so comply. The Company has all
permits, certificates, licenses, approvals and other authorizations required
in connection with the operation of its business, all of which are valid and
effective. No notice has been issued and no investigation or review is
pending or threatened by any governmental entity with respect to (a) any
alleged violation by the Company of any law, statute or ordinance, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge,
policy or guideline of any federal, state, local or foreign governmental
entity(or agency thereof), or (b) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Company.
3.28 Disclosure. This Agreement with the Exhibits hereto and all
information provided by the Company to the Purchaser do not contain any untrue
statement of a fact or omit to state a fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 Experience. It has experience in evaluating and investing in
private placement transactions of securities in companies so that it is
capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests.
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4.2 Investment. It is acquiring the Shares and the Conversion Stock for
investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. It
understands that the Shares and the Conversion Stock have not been registered
under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed
herein.
4.3 Rule 144. It acknowledges that the Shares and the Conversion Stock
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. It is aware
of the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less
than one year after a party has purchased and paid for the security to be
sold, the sale being effected through a "brokers transaction" or in
transactions directly with a "market maker" and the number of shares being
sold during any three month period not exceeding specified limitations.
4.4 Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and
has had the opportunity to review the Company's facilities. It has also had
an opportunity to ask questions of officers of the Company, which questions
were answered to its satisfaction. It understands that such discussions, as
well as any written information issued by the Company, were intended to
describe certain aspects of the Company's business and prospects but were not
a thorough or exhaustive description. However, no investigation by, or
furnishing of information to, the Purchaser shall affect or modify the
representations, warranties and agreements of the Company set forth herein or
the right of the Purchaser to rely exclusively thereon and to seek and obtain
all damages and other remedies available to the Purchaser in connection with
the breach of any of the representations, warranties and covenants contained
herein.
4.5 Authorization. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms subject to (a) the laws of
bankruptcy and the laws affecting creditor's rights generally and (b) the
availability of equitable remedies.
4.6 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the
Purchaser, any liability for brokerage or finder's fees or agents' commissions
or any similar charges in connection with this Agreement.
4.7 Required SEC Filings. The Purchaser acknowledges that within 10
days after the Closing, it will be required to file an amended Schedule 13D or
Schedule 13G, as appropriate, and a Form 4 with the Securities and Exchange
Commission.
SECTION 5
THE PURCHASER'S CONDITIONS TO CLOSING
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the below-listed conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto. If at the Closing Date any of the conditions specified in this
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Agreement shall not have been fulfilled, the Purchaser shall, at the
Purchaser's election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights Investor may have by
reason of such nonfulfillment.
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true, complete and
correct when made, and shall be true, complete and correct on the Closing
Date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 Good Standing Certificate. The Company shall have delivered to the
Purchaser a certificate of good standing of the Company under the laws of the
State of Nevada.
5.5 Certificate of Amendment. The Certificate shall have been filed
with the Secretary of State of the State of Nevada.
5.6 Legal Matters. All matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been reasonably
approved by counsel to the Purchaser.
5.7 Co-Sale Agreement. The Purchaser and each of Messrs. John Boreta,
Ron Boreta or Vaso Boreta or Boreta Enterprises Ltd. or any of their
respective affiliates shall each have entered into a Co-Sale Agreement which
shall have a term of two years in the form attached hereto as Exhibit F.
5.8 Right of First Refusal. The Company shall have complied with all
provisions of the Sanyo Agreement as such provisions relate to, or are applied
to, this Agreement or consummation of the transactions contemplated hereby.
5.9 Opinion of the Company's Counsel. The Purchaser shall have received
from Krys, Boyle, Freedman & Sawyer, P.C., counsel to the Company, an opinion
dated the Closing Date, in form and substance satisfactory to the Purchaser,
to the effect that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, and the Company
has the requisite corporate power and authority to own it properties and to
conduct its business.
(b) The Company is not presently required to be qualified to do
business as a foreign corporation in any state or jurisdiction of the United
States.
(c) The Company has the requisite corporate power and authority to
execute, deliver and perform this Agreement. The Agreement has been duly and
validly authorized by the Company, duly executed and delivered by an
authorized officer of the Company and constitutes legal, valid and binding
obligations of the Company, subject to bankruptcy and other laws of general
application affecting the rights and remedies of creditors and except insofar
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as the enforceability of the indemnification provisions of Section 8.11 of the
Agreement may be limited by applicable laws and except that no opinion need be
given as to the availability of equitable remedies.
(d) The capitalization of the Company is as follows:
(i) Preferred Stock. 5,000,000 shares of Stock, of which (A)
500,000 shares have been designated Series A Preferred Stock and are issued
and outstanding and (B) 250,000 shares have been designated as Series B
Preferred and purchased pursuant to this Agreement. Such shares of Series B
Preferred Stock have been duly authorized, issued and delivered, are validly
outstanding, fully paid and nonassessable, and have been approved by all
requisite shareholder action. The respective rights, privileges and
preferences of the Preferred Series B are as stated in the Certificate
attached as Exhibit A to the Agreement. The Conversion Stock has been duly
and validly reserved for issuance and, when issued in accordance with the
Certificate, will be validly issued, fully paid and nonassessable.
(ii) Common Stock. 10,000,000 shares of Common Stock, of
which 3,000,000 shares have been duly authorized, issued and delivered and are
validly outstanding, fully paid and nonassessable and were issued in
compliance with all applicable federal and state securities laws.
(iii) Except for (A) the conversion privileges of the Series A
Preferred Stock, (B) the conversion privileges of the Series B Preferred, (C)
the rights of first refusal contained in Section 9 hereof, (D) the rights of
first refusal contained in the Sanyo Agreement, (E) 250,000 shares of Common
Stock reserved for issuance upon the exercise of the stock option granted in
the Sanyo Agreement, (F) 500,000 shares of Common Stock reserved for issuance
upon exercise of outstanding Class A Warrants, (G) 150,000 shares of Common
Stock reserved for issuance upon exercise of outstanding Underwriter's
Warrants and (H) 657,000 shares of Common Stock reserved for issuance to
employees and consultants upon exercise of outstanding stock options, there
are no preemptive rights or, to the best of counsel's knowledge, options,
warrants, conversion privileges or other rights (or agreements of any such
rights) outstanding to purchase or otherwise obtain any of the Company's
securities.
(e) The certificates representing shares of the Preferred Stock and
shares of Common Stock are in due and proper form and have been duly and
validly executed by the officers of the Company named thereon.
(f) The execution, delivery, performance and compliance with the
terms of this Agreement do not violate any provision of any federal, state or
local law, rule or regulation or of any judgment, writ, decree or order
binding upon the Company or any provision of the Company's amended Articles or
By-Laws.
(g) All consents, approvals, orders or authorizations of, and all
qualifications, registrations, designations, declarations or filings with, any
federal or state governmental authority on the part of the Company required in
connection with the consummation of the transactions contemplated by this
Agreement have been obtained and are effective as of the Closing, and such
counsel is not aware of any proceedings, or threat thereof, which question the
validity thereof.
(h) Based in part upon the representations of the Purchaser in this
Agreement, the offer and sale of the Series B Preferred pursuant to the terms
of this Agreement are exempt from the registration requirements of Section 5
of the Securities Act by virtue of Section 4(2) thereof, and from the
qualification requirements of the securities laws of the State of Nevada, or
all requisite permits, qualifications and orders have been obtained.
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(i) Except as set forth on the Schedule of Exceptions attached to
the Agreement as Exhibit B, such counsel is not aware of any action,
proceeding or investigation pending against the Company or any of its
officers, directors or employees, or that any of the foregoing has received
any threat thereof, which questions the validity of the Agreement or the right
of the Company or its officers, directors and employees to enter into such
agreement or which might result, either individually or in the aggregate, in
any adverse change in the assets, condition, affairs or prospects of the
Company, nor is such counsel aware of any litigation pending, against the
Company or any of its officers, directors or employees' or that any of the
foregoing has received any threat thereof, by reason of the proposed
activities of the Company, the past employment relationships of its officers,
directors or employees, or negotiations by the Company or any of its officers
or directors with possible investors in the Company.
(j) The Company is not in violation of any provisions of its
Articles or Bylaws, and neither of such documents is in violation of any
provision of the Corporation Law of the State of Nevada.
5.10 No Material Adverse Change. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the business or any of the assets, results of
operations, liabilities, prospects or conditions, financial or otherwise, of
the Company.
SECTION 6
THE COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares at the Closing is,
at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 Representations. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Legal Matters. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any of the shares
of Series B Preferred or shares of Conversion Stock:
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of operations and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form similar information of the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
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(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in
any event within 45 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations and consolidated statements
of cash flows of the Company and its subsidiaries, if any, for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail and signed, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of the Company.
(c) Within 15 days after the end of each fiscal month, unaudited
consolidated balance sheets of the Company as of the end of such month,
unaudited consolidated statements of operations including income statements,
and unaudited consolidated rolling cash flow projections for each month and
for the current fiscal year to date. Such financial statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied (other than accompanying notes), all in reasonable detail
subject to year-end audit adjustments.
(d) Promptly after each meeting or the execution of an action by
written consent, copies of the minutes of proceedings or actions by written
consent of the Company's Board of Directors and shareholders.
(e) With reasonable promptness, such other information and data
with respect to the Company and its subsidiaries, if any, as the Purchaser may
from time to time reasonably request.
(f) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to visit
and inspect any of the properties of the Company or any of its subsidiaries,
to examine its books of account and records, and to discuss their affairs,
finances and accounts with their officers, all at such reasonable times as
often as may be reasonably requested, provided, however, that the Company
shall not be obligated to provide any information, other than to the
representatives of the Purchaser on the Board of Directors, that it reasonably
considers to be a trade secret or to contain confidential information.
7.2 Assignment of Rights to Financial Information. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by the
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that the Purchaser may
assign such rights to a parent, subsidiary or affiliate of the Purchaser upon
notice to the Company thereof.
7.3 Use of Proceeds. The Company shall completely segregate the
proceeds from the sale of the Shares from all other funds of the Company.
These funds shall be strictly and exclusively used for activities directly
related to the SportPark segment of the Company's business and shall not be
used for the Company's franchise business or for any other purposes. The
Company shall maintain a separate accounting for the use of these proceeds and
provide a copy of such accounting to the Purchaser upon request.
7.4 Rule 144 Reporting. With a view to making available to the
Purchaser the benefits of certain rules and regulations of the Securities and
Exchange Commission which may permit the sale of the Conversion Stock to the
public without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
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(b) Use its best efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) So long as the Purchaser owns any Restricted Securities (as
defined in Section 8.1 hereof) furnish to the Purchaser forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company filed with
the Securities and Exchange Commission, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtained by the Company as the Purchaser may reasonably request in availing
itself of any due or regulation of the Securities and Exchange Commission
allowing the Purchaser to sell any such securities without registration.
7.5 Protective Provisions. For so long as the Purchaser or its
assignees is a holder of any shares of the Series B Preferred or Conversion
Stock, the Company shall not without the Purchaser's prior written consent:
(a) change any of the terms of Series B Preferred as stated in the
Certificate or any amendment, addition, change, modification or deletion of
any portion of the By-Laws or Articles of the Company;
(b) authorize or issue (i) any class or series of securities having
rights senior to or pari passu with those of the Series B Preferred or (ii)
any rights to purchase or any securities or instruments convertible or
exchangeable into any such securities;
(c) sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or effect any merger, consolidation,
reorganization or amalgamation of the Company, with another corporation;
(d) adopt a statutory plan of share exchange;
(e) redeem or repurchase (or enter into any agreement to become so
obligated) any shares of Common Stock or Series B Preferred (other than
pursuant to employee stock vesting or employee stock repurchase agreements or
pursuant to the Certificate);
(f) enter into any transaction with or increase the compensation
paid or issue any securities of the Company, rights or options to purchase any
securities of the Company or any instrument convertible or exchangeable or
payable or satisfied with any securities of the Company or any other
compensation derived from or based on the profits or securities of the Company
to any of Messrs. John Boreta, Ron Boreta or Vaso Boreta or Boreta Enterprises
Ltd. or any of their respective affiliates;
(g) subject to the Sanyo Agreement and to the Agreement, dated as
of July 29, 1996, by and between Three Oceans and the Company regarding the
granting of certain rights to Three Oceans by the Company, including the right
to participate in the ownership, development, management, and/or operation of
a SportPark in Asia, Anaheim, California or Las Vegas, Nevada, the right to
invest in or finance certain transactions, the right to supply certain
products to the Company and certain signage rights, purchase, sell or lease
any material parcel of real property for any SportPark, any single sport
interactive entertainment or training complex ("Single Sport Complex") or
similar facility or enter into any single transaction or series of related
transactions in excess of $100,000 with respect to or relating to or in
connection with any Single Sport Complex or similar facility without first
providing the Purchaser an opportunity to approve the transactions(s) and to
review and provide comments on the relevant documents prior to closing the
transaction;
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(h) dissolve or liquidate the Company and/or its assets or close
the business of the Company; or
(i) file a petition to appoint a receiver for the Company or file a
voluntary petition for bankruptcy, insolvency or to make any assignment for
the benefit of creditors of the Company.
7.6 Principal Business. The Company shall ensure that all its principal
shareholders officers and directors (a) direct or refer all opportunities
relating to, similar to or of the same nature as the Company's Sports Park
business exclusively to the Company, (b) not realize any profit or gain with
respect to such opportunities to the detriment or in lieu of the Company and
(c) not otherwise misappropriate any corporate opportunity.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS; INDEMNIFICATION
8.1 Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Stock issued or issuable pursuant to
conversion of the Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934 as amended
or any similar federal statute and the rules and regulations of the
Commissions thereunder all as the same shall be in effect at the time.
"Holder" shall mean the Purchaser and any person holding Registrable
Securities or shares to whom the rights under this Section 8 have been
transferred in accordance with Section 8.2 hereof.
"Registrable Securities" means (i) the Conversion Stock, and (ii) any
Common Stock of the Company issued or issuable in respect of the Conversion
Stock or other securities issued or issuable pursuant to the conversion of the
shares upon any Recapitalization or any Common Stock otherwise issued or
issuable with respect to the Shares provided however that shares of Common
Stock or other securities shall only be treated as Registrable Securities if
and so long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or (B)
sold or are available for sale in the opinion of counsel to the Company in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are or may be removed upon the
consummation of such sale.
The term "register," "registered" and "registration" refer to a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses
as defined below, incurred by the Company in complying with Sections 8.5, 8.6
and 8.7, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the
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compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the notes and regulations of the Commission
thereunder all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered
by the holders.
8.2 Restriction on Transferability. The Shares and the Conversion Stock
shall not be sold, assigned, transferred or pledged except upon satisfaction
of the conditions specified in this Section 8, which conditions are intended
to ensure compliance with the provisions of the Securities Act. The Purchaser
will cause any proposed assignee, transferee, or pledge of the shares of
Conversion Stock held by the Purchaser to agree to take and hold such
securities subject to the provisions and conditions of this Section 8.
8.3 Restrictive Legend. Each certificate representing (i) the Shares,
(ii) the Conversion Stock and (iii) any other securities issued in respect of
the Shares or the Conversion Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar events, shall (unless
otherwise permitted by the provisions of Section 8.4 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
The Purchaser consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Shares or the Conversion
Stock in order to implement the restrictions on transfer established in this
Section 8.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution of Restricted Securities by the
Purchaser to a parent, subsidiary or affiliate of the Purchaser), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall
be accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected
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without registration under the Securities Act, or (ii) a "no action" letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder
to the Company. Each certificate evidencing the Restricted Securities
Transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
8.3 above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for such holder and the Company such legend is
not required in order to establish compliance with any provision of the
Securities Act.
8.5 Request for Registration.
(a) Request for Registration. If the Company shall receive from
the Purchaser at any time a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws, and appropriate compliance with the Securities Act) and
as would permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or holders
joining in such request as are specified in a written request received by the
Company within twenty (20) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 8.5:
(A) After the Company has initiated one such registration
pursuant to this Section 8.5(a);
(B) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred twenty (120) days after the effective date of, a
Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(b) Subject to the foregoing clauses (A) and (B), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Purchaser.
The registration statement filed pursuant to the request of the Purchaser may
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(c) Underwriting. The right of any Holder to registration pursuant
to Section 8.5 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in the
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underwriting (unless otherwise mutually agreed by a majority in interest of
the Purchaser and such holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he or she holds.
8.6 The Company Registration.
(a) Notice of Registration. If at any time or from time to time
the Company shall determine to register of its securities, either for its own
account or the account of a Holder or Holders, other than a registration
relating solely to employee benefit plans or a post effective amendment to the
registration statement for the Company's initial public offering, the Company
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under the sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made within 20 days after receipt of such written notice
from the Company, by any Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and any other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 8.6, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities to be included in such registration. The Company
shall so advise all Holders and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such holders at the time of filing
the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of
shares allocated to any Holder or other shareholder to the nearest 100 shares.
If any Holder or other shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall
not be transferred in a public distribution prior to 90 days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require. The Company may
include shares of Common Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 8.6, so long as the amount of
Registrable Securities otherwise includable in such registration statement
would not thereby be diminished.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 8.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
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8.7 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders).
(b) If a request complying with the requirements of Section 8.7(a)
hereof is delivered to the Company, the provisions of Section 8.5(a)(i) and
(ii) and Section 8.5(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Section 8.5(c)
hereof shall apply to such registration.
8.8 Expenses of Registration. All Registration Expenses incurred in
connection with the registration pursuant to Section 8.5, 8.6 and 8.7 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating
to securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the
basis of the number of shares registered.
8.9 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section
8, the Company will keep each Holder advised in writing as to the initiation
of each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days, and prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement effective for
at least one hundred twenty (120) days, provided that no such registration
shall constitute a shelf registration under Rule 415 promulgated by the
Commission under the Securities Act;
(b) Enter into a written underwriting agreement in customary form
and substance reasonably satisfactory to the Company, the Holders and the
managing underwriting or underwriters of the public offering of such
securities, if the offering is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number
of copies of the registration statement, preliminary prospectus' final
prospects and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders may reasonably
request within ten (10) days prior to the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business a
foreign corporation in any jurisdiction where it is not so qualified;
(e) Notify the Holders (of if they have appointed an
attorney-in-fact, such attorney-in-fact) participating in such registration,
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promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) Prepare and file with the Commission promptly upon the request
of such registration statement or prospectus which, in the reasonable opinion
of counsel for such Holders, is required under the Securities Act or the rules
and regulations thereunder in connection with the distribution of the
Registration Securities by such Holders;
(h) Prepare and promptly file with the Commission, and promptly
notify such Holders or their attorney-in-fact of the filing of, such amendment
or supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances in which they
were made;
(i) In case any of such Holders or any underwriter for any such
Holders is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly
upon request such amendment or amendments to such registration statement and
such prospectus as may be necessary to permit compliance with the requirements
of the Securities Act;
(j) Advise such Holders or their attorney-in-fact, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(k) At the request of any such holder, furnish on the effective
date of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the underwriting
agreement, (i) an opinion, dated each such date, of the counsel representing
the Company for the purpose of such registration, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
covering such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto, proceedings under state
and federal securities laws other matters relating to the Company, the
securities being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and (ii) to the extent the
Company's accounting firm, is willing to do so, a letter dated each such date,
from the independent public accountants of the Company, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
stating that they are independent public accountants within the meaning of the
Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the
registration statement or the prospectus or any amendment or supplement
thereto comply in all material respects with the applicable accounting
requirements of the Securities Act, and additionally covering such other
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financial matter, including information as to the period ending not more than
five (5) business days prior to the data of such letter with respect to the
registration statement and prospectus, as the underwriters or such requesting
Holder or Holders may reasonably request.
8.10 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 8.
8.11 Indemnification.
(a) The Company will defend, indemnify and hold the Purchaser, each
Holder, each of its officers, directors and partners, and each person
controlling the Purchaser and each such Holder within the meaning of Section
15 of the Securities Act, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities (or actions
in respect thereof), including without limitation, any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on (i) any breaches of the representations, warrants or covenants
contained herein, or (ii) any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement, prospectus,
offering circular or other document or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, and each such holder, each of its officers and directors, and each
person controlling such holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to
be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company each to its directors and
officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement prospectus' offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
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incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein. Notwithstanding
the foregoing, the liability of each Holder under this subsection (b) shall be
limited to an amount equal to the initial public offering price of the shares
sold by such Holder, unless such liability arises out of or is based on
willful conduct by such Holder.
(c) Each party entitled to indemnification under this Section 8.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall, when applicable, permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 8
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
the Indemnifying Party shall not assume the defense for matter as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.12 Transfer of Registration Rights. The rights to cause the Company
to register securities granted the Purchasers under Sections 8.5, 8.6 and 8.7
may be assigned to a transferee or assignee in connection with any transferor
assignment of Registrable Securities by the Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws and (ii) such assignee or transferee acquires at least 10,000 of the
Shares and /or Conversion Stock (appropriately adjusted for Recapitalization).
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to any parent, subsidiary or affiliate of the
Purchaser, without compliance with item (ii) above, provided, written notice
thereof is promptly given to the Company.
8.13 Standoff Agreement. Each Holder agrees, so long as such Holder
holds at least five percent (5%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, it will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, a the case may be, for such period of time (not to exceed one
hundred and twenty (120) days) from the effective date of such registration as
may be requested by the underwriters; provided that the officers and directors
of the Company who own stock of the Company also agree to such restrictions.
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SECTION 9
THE PURCHASER'S RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. The Company hereby grants to the Purchaser
the right of first refusal to purchase its pro rata share of all or any part
of any New Securities (as defined in this Section 9.1) which the Company may,
from time to time, propose to sell and issue. The Purchaser's pro rata share,
for purposes of this right of first refusal, is the ratio that the sum of the
number of shares of Common Stock issuable upon conversion of the shares held
by the Purchaser and the number of shares of Conversion Stock then held by the
Purchaser bears to the sum of the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon conversion
of the then outstanding Preferred Stock convertible into Common Stock.
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred
Stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into said shares of
Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) the Shares and the Conversion Stock, (ii)
securities offered to the public generally pursuant to a registration
statement or pursuant to Regulation A under the Securities Act, (iii)
securities issued in the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company or its shareholders own not less than fifty-one percent
(51%) of the voting power of the surviving or successor corporation, (iv)
shares of the Company's Common Stock or related options exercisable for such
Common Stock issued to employees, officers and directors of the Company
pursuant to any arrangement approved by the Board of Directors of the Company,
(v) stock issued pursuant to any rights or agreements, including without
limitation convertible securities, options, warrants, provided that the rights
of first refusal established by this Section 9.1 apply with respect to the
initial sale or grant by the Company of such rights or agreements, and (vi)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give the Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Purchaser shall have fifteen (15)
days from the date of receipt of any such notice to agree to purchase up to
the Purchaser's respective pro rata share of such New Securities for the price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Purchaser fails to exercise such right of
first refusal within said fifteen (15) day period, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by the Purchaser at the price and upon
the terms no more favorable to the purchasers of such securities than
specified in the Company's notice. In the event the Company has not sold the
New Securities or entered into an agreement to sell the New Securities within
said ninety (90) day period (or sold and issued New Securities in accordance
with the foregoing within sixty (60) days from the date of said agreement),
the Company shall not thereafter issue or sell any of such New Securities,
without first offering such securities in the manner provided above.
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(d) The right of first refusal hereunder is not assignable except
to a parent, subsidiary or affiliate of the Purchaser, without the prior
written consent of the Company, which consent will not be unreasonably
withheld.
SECTION 10
INDEMNIFICATION
10.1 Survival of Representations. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall
survive the Closing, but all claims for damages made by virtue of such
representations, warranties and agreements shall be made under this Section
10. The representations and warranties set forth herein are cumulative, and
any limitation or qualification set forth in any one representation and
warranty therein shall not limit or qualify any other representation and
warranty therein.
10.2 Indemnification by the Company. Notwithstanding any term in this
Agreement to the contrary, the Company, shall indemnify, defend, save and hold
the Purchaser and its officers, directors, employees, agents and Affiliates
(excluding Ron Boreta, Vaso Boreta, John Boreta and the Company; collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Purchaser Damages") asserted against, imposed
upon, resulting to, required to be paid by or incurred by any Purchaser
Indemnitees, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Company in this Agreement, in any
certificate or document furnished pursuant hereto by the Company or any other
agreement to which the Company is or is to become a party, or (b) a breach or
nonfulfillment of any covenant or agreement made by the Company in or pursuant
to this Agreement or in any other agreement to which the Company is or is to
become a party.
10.3 Indemnification by the Purchaser. The Purchaser shall indemnify,
defend, save and hold the Company and its officers, directors, employees,
agents and Affiliates (excluding Ron Boreta, Vaso Boreta, John Boreta and the
Purchaser; collectively, "Company Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious (collectively, "Company Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Company Indemnitees,
directly or indirectly, in connection with, arising out of, which would result
in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Purchaser in this Agreement or in any
certificate or document furnished pursuant hereto by buyer or any other
agreement to which the Purchaser is a party and (b) a breach of nonfulfillment
of any covenant of agreement made by the Purchaser in or pursuant to this
Agreement and in any other agreement to which the Purchaser is a party.
10.4 Notice of Claims. If any Purchaser Indemnitee or Company
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Company Damages, as the case
may be ("Damages"), for which it is entitled to indemnification under this
Section 10, such Indemnified Party shall so notify the party or parties from
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whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The failure of an
Indemnified Party to give any notice required by this Section shall not affect
any of such party's rights under this Section 10 or otherwise except and to
the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
10.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or
settle the same, provided that the Indemnified Party shall give the
Indemnifying Party advance notice of any proposed compromise or settlement.
The Indemnified Party shall permit the Indemnifying Party to participate in
the defense of any such action or suit through counsel chosen by the
Indemnifying Party, provided that the fees and expense of such counsel shall
be borne by the Indemnifying Party. If the Indemnified Party permits the
Indemnifying Party to undertake, conduct and control the conduct and
settlement of such action or suit, (a) the Indemnifying Party shall not
thereby permit to exist any encumbrance upon any asset of the Indemnified
Party; (b) the Indemnifying Party shall not consent to any settlement that
does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; (c) the Indemnifying Party shall permit the Indemnified Party to
participate in such conduct or settlement through counsel chosen by the
Indemnified Party; and (d) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving
the foregoing notice to the Indemnifying Party and prior to the assumption of
the conduct and control of such action or suit by the Indemnifying Party.
10.6 Good Faith Efforts to Settle Disputes. The Purchaser and the
Company agree that, prior to commencing any litigation against the other
concerning any matter with respect to which such party intends to claim a
right of indemnification in such proceeding, the respective chief executive
officers (or officers holding such authority) of such parties shall meet in a
timely manner and attempt in good faith to negotiate a settlement of such
dispute during which time such officers shall disclose to the others all
relevant information relating to such dispute. In the event that the parties
are unable to amicably resolve the matter or matters in dispute, the parties
shall submit all matters still in dispute to arbitration in accordance with
the arbitration rules of the American Arbitration Association. The Purchaser
shall select an arbitrator and the Company shall select an arbitrator and the
two arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators shall be final and binding on the parties. Such matter shall
be submitted to arbitration within thirty (30) days from the date that either
the Company or the Purchaser declares that any matter in dispute cannot be
amicable resolved. All costs and expenses of arbitration shall be paid
equally by the Purchaser on one hand and the Company on the other. Any cash
or other monetary award shall be paid within thirty (30) days of the
arbitrators final decision. Arbitration shall be held in Las Vegas, Nevada.
SECTION 11
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of Nevada.
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11.2 Events of Default and Remedies.
(a) For purpose of this Agreement, the term "Event of Default"
shall mean the occurrence or happening of any breach or violation of or
default in the observation or performance of any term, agreement, covenant,
representation, warranty, condition or stipulation contained or referred to in
this Agreement by any party to this Agreement.
(b) (i) Upon the occurrence of an Event of Default, the
non-defaulting party shall have all rights and remedies afforded by law or
equity, including the remedy of specific performance, it being recognized that
the Series B Preferred and Conversion Stock and the rights and benefits to be
derived therefrom are unique and special. Any party awarded a money judgment
against the other shall be entitled to recover in addition thereto interest
thereon at the rate of twelve percent (12%) per annum.
(ii) Each right, power and remedy provided for in this
Agreement, or now or hereafter existing at law or in equity shall be
cumulative and may be exercised successively or concurrently and shall be in
addition to every other such right, power or remedy. The exercise or
beginning of the exercise by either party of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise of
all such other rights, powers or remedies. No failure or delay on the party
of any party to exercise any such right, power or remedy shall operate as a
waiver thereof. No waiver by a party will be effective unless and until it is
in writing and signed by an authorized representative of such party.
(c) Each party will pay to the other, in addition to all other sums
due all costs and expenses (including, without limitation, attorneys' fees,
brokerage fees and accountants' fees) reasonably incurred by or on behalf of a
party in exercising and protecting their rights and remedies hereunder,
enforcing the obligations of the other party hereunder and defending any
unsuccessful counterclaim, cross-claim or other claim asserted by the other
party.
11.3 Set Off. In addition to, and not in lieu of, any and all other
remedies which the Purchaser otherwise may have at law or in equity, or
pursuant to this Agreement, the Purchaser shall have the right to set off,
counterclaim and recoup any loss against any amounts to be paid to the Company
under this Agreement.
11.4 Nonexclusivity. The foregoing set off right and the
indemnification provision set forth in Section 8 are in addition to, and not
in lieu or derogation of, any statutory, equitable or common law remedy the
Purchaser may have arising out of or as a result of this Agreement or for
breach of representations, warranties or covenants herein. Neither the
exercise of nor the failure to exercise the set off right set forth in Section
10.3 shall constitute an election of remedies.
11.5 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby.
11.6 Anti-Dilution Provisions. The "Anti-Dilution Provisions" shall
provide that in the event that any of the securities referenced herein as
presently constituted, shall be changed into or exchanged for a different
number or kind of securities or interests of the Company or of another entity
(whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares, sale of assets or
otherwise), or if the number of such securities shall be increased through the
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payment of a dividend, or if the Company makes any other distribution of
securities or other property including cash in respect of such securities,
then there shall be substituted for and added to such securities, as the case
may be, theretofore subject or which may become subject to the terms of this
Agreement, the number and kind of securities, interests or property into which
each outstanding security shall be so changed, or for which each such security
shall be exchanged, or to which each such security shall be entitled, as the
case may be, and the purchase price per security appropriately adjusted.
11.7 Assignment; Successors and Assigns. The rights and obligations of
the Company and the rights of the Purchaser to purchase the Shares shall not
be assignable without the written consent of the other; provided, however, the
Purchaser may assign its rights and obligations under this Agreement to a
parent, subsidiary or affiliate of the Purchaser upon notice to the Company
thereof. Except as otherwise provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
11.8 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom endorsement of any such amendment, waiver, discharge or
termination is sought.
11.9 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by confirmed facsimile to the correct
facsimile number or otherwise delivered by hand or by messenger, addressed (a)
if to the Purchaser, at its address set forth on the cover page of this
Agreement, or at such other address as the Purchaser shall have furnished to
the Company in writing, or (b) if to any other holder of any Shares or
Conversion Stock, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares or
Conversion Stock who has so furnished an address to the Company, or (c) if to
the Company, one copy shall be sent to its address set forth on the cover page
of this Agreement and addressed to the attention of the Corporate Secretary,
or at such other address as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid.
11.10 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares or Conversion Shares upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Except as provided in Section 11.8 hereof, any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
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breach of default under this Agreement or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to
any holder, shall be cumulative and not alternative.
11.11 Expenses. Except as otherwise provided herein, the Company and
the Purchaser shall each bear their own expenses incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.13 Confidentiality. Neither party shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party. This
provision shall not apply, however, to any announcement or written statement
which in the opinion of counsel to such party is required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange.
11.14 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11.15 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
"PURCHASER"
LAS VEGAS DISCOUNT GOLF & TENNIS,
INC., a Colorado corporation
By: /s/ Vaso Boreta
Name: Vaso Boreta
Title: President
"COMPANY"
SAINT ANDREWS GOLF CORPORATION, a
Nevada corporation
By: /s/ Ronald S. Boreta
Name: Ronald S. Boreta
Title: President
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