UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report April 23, 1998
COMMISSION FILE NO. 0-24812
BRASSIE GOLF CORPORATION
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1781650
- -------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Tampa City Center, Suite 200, Tampa, FL 33602
- ------------------------------------------------------------------------------
(Address of principal executive offices)
(813) 222-0611
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes |X| No |_|
1
<PAGE>
BRASSIE GOLF CORPORATION
FORM 8 - K
TABLE OF CONTENTS
Item 1. Changes in Control of Registrant - None
Item 2. Acquisition or Disposition of Assets.............................Page 3
Item 3. Bankruptcy or Receivership - None
Item 4. Changes in Registrant's Certifying Accountant - None
Item 5. Other Events - None
Item 6. Resignations of Registrant's Directors - None
Item 7. Financial Statements and Exhibits ...............................Page 4
Signatures................................................................Page 5
Exhibits
2.1 Stock Purchase Agreement effective as of January 29, 1998 by and among
Brassie Golf Corporation ("Brassie"), Miller Golf, Inc. ("Acquired Entity") and
Robert Marchetti ("Marchetti"), Louis Katon ("Katon"), and John Carroll
("Carroll")...............................................................Page 6
10.1 Form of Private Placement Purchase Agreement dated April 3, 1998 between
the Company and the signatories thereto, with form of convertible note and
warrants.................................................................Page 43
Page 2 of 4
2
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On April 8, 1998, the Company completed its $4.3 million stock acquisition of
Miller Golf, Inc. ("Miller"), a Massachusetts corporation. The Miller stock was
acquired from its shareholders, Robert Marchetti, Louis Katon, and John Carroll,
for a combination of $3.0 million in cash, $1,000,000 in notes payable to the
sellers and $300,000 of the Company's common stock (800,000 shares valued at the
fair market value of the common stock at the date of closing). The sellers'
notes payable are due on September 30, 1998 and accrue interest at 8% per annum
and are secured by a pledge of the common stock of Miller. The Company had
previously announced in a press release on February 2, 1998 that on January 29,
1998 a definitive agreement had been reached with Miller. The Company made a
refundable deposit of $100,000 toward the purchase price at that time. A form
8-K was filed on February 12, 1998 describing the terms of this transaction.
The Company will account for the transaction under the purchase method of
accounting, in accordance with generally accepted accounting principles.
To obtain the funds necessary to complete this transaction, the Company issued
$3.0 million of convertible notes. These convertible notes are secured by a
subordinated pledge of the common stock of Miller, which mature on December
31,1999 and accrue interest at 7% per annum, payable quarterly beginning on July
1, 1998. The notes are convertible into shares of the Company's common stock at
the lessor of $0.50 per share or 75% of the average closing bid price of the
common stock during the last five trading days prior to conversion. The
convertible note holders also received warrants to purchase 1,472,727 shares of
common stock at $0.50 per share.
All of the convertible notes and warrants were issued to a small group of
accredited investors. Neither the convertible notes nor the warrants are
exercisable until approval by the shareholders to increase the Company's
authorized common stock at the annual meeting to be held May 21, 1998. In the
event that approval is not obtained, the Company will be required to redeem the
convertible notes at a per share redemption price equal to 125% of the sum of
the principal amount of the notes plus accrued interest. There are other
penalties on the Company for the failure to pay the redemption price and for
failure to issue the common stock upon the exercise of the warrants.
The Company shall be obligated also to redeem the warrants at a redemption price
per share equal to the pre-tax profit the warrants would have earned if
exercised and simultaneously sold at the closing NASDAQ sales price on such
date. The redemption price will be payable within five days after demand and
will accrue interest at 11% per annum.
In connection with the sale of the convertible notes, the Company issued
warrants to purchase 2,727,273 shares of common stock of the Company at $0.40
per share. These warrants were issued as consideration for commissions earned on
securing the placement of the convertible notes.
Page 3 of 5
3
<PAGE>
ITEM 7. Financial Statements and Exhibits
Financial statements of Miller are not being included in this Form 8-K but will
be filed by amendment no later than June 22, 1998
The Exhibits listed below are being filed with this Form 8-K.
Exhibit/ Document/Description
Item
2.1 Stock Purchase Agreement effective as of January 29, 1998 by and among
Brassie Golf Corporation ("Brassie"), Miller Golf, Inc. ("Acquired Entity") and
Robert Marchetti ("Marchetti"), Louis Katon ("Katon"), and John Carroll
("Carroll")
10.1 Form of Private Placement Purchase Agreement dated April 3, 1998 between
the Company and the signatories thereto, with form of convertible note and
warrants.
Page 4 of 5
4
<PAGE>
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 herein duly authorized.
BRASSIE GOLF CORPORATION
By: /s/ Clifford F. Bagnall
-----------------------------
Clifford F. Bagnall
Chief Operating Officer
Date: April 23, 1998
Page 5 of 5
5
<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into
effective as of January ____, 1998 by and among (i) BRASSIE GOLF CORPORATION, a
Delaware corporation ("Brassie"); (ii) MILLER GOLF, INC., a Massachusetts
corporation (the "Acquired Entity"); and (iii) ROBERT MARCHETTI ("Marchetti"),
LOUIS KATON ("Katon") and JOHN CARROLL ("Carroll") who are the sole shareholders
of the Acquired Entity (Marchetti, Katon and Carroll collectively, the
"Sellers").
RECITALS
A. Sellers are presently the owners of all the shares of the
voting common capital stock of the Acquired Entity as represented
by stock certificates Nos. ____, _____, and ___.
B. Sellers desire to sell all of their shares of stock of the Acquired
Entity ("Purchased Shares") and Brassie desires to purchase the Purchased Shares
from Sellers as a means of acquiring the Acquired Entity and its businesses,
rights and properties ("Business").
C. Brassie has determined that it is in the best interests of its
respective shareholders for Brassie to acquire all of the stock of the Acquired
Entity from of the Sellers as provided herein in order to effectuate the
acquisition of the businesses of the Acquired Entity. Simultaneously with such
acquisition, the Sellers will then be issued shares of common stock of Brassie
as provided herein, in consideration for the Purchased Shares of the Acquired
Entity to be acquired.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
ACQUISITION; RELATED TRANSACTIONS; CLOSING
1.1 The Closing. Subject to the terms and conditions of this Agreement,
the consummation of the Acquisition (as defined below) and the other
transactions contemplated hereby shall take place as promptly as practicable
(and in any event within five (5) business days after the satisfaction or waiver
of the conditions set forth in Articles VI and VII hereof), at the offices of
Brassie in Tampa, Florida, or such other place and time as the parties may
otherwise agree (the "Closing"), and the date of Closing is referred to herein
as the "Closing Date."
1.2 Acquisition. At Closing on the Closing Date, and upon all of the
terms and subject to all of the conditions of this Agreement, Sellers shall
sell, assign, convey, transfer and
1
6
<PAGE>
deliver to Brassie, and Brassie shall purchase for the consideration set forth
in Section 1.3 below, all of the respective Sellers' right, title and interest,
legal and equitable, in and to the Purchased Shares, free and clear of any and
all claims, liens or encumbrances, except as otherwise provided in this
Agreement (the "Acquisition").
1.3 Purchase Price. For purposes of this Agreement, "Consideration"
means (a) cash in the amount of Four Million and No/100 Dollars ($4,000,000.00)
and (b) the number of shares (rounded to the nearest whole share) of common
stock, par value $.001 per share, of Brassie (the "Brassie Common Stock")
determined by dividing (i) Three Hundred Thousand and No/100 Dollars
($300,000.00) by (ii) the closing price of the Brassie Common Stock as of the
date of execution of this Agreement (the "Share Sale Price"); provided, however,
that, if for any reason the shares of Brassie Common Stock are not available to
meet the Share Sale Price at the Closing, Brassie may pay at Closing the Share
Sale Price in cash or other consideration reasonably acceptable to Sellers.
Upon execution of this Agreement, Brassie shall deliver to Sellers, by
wire transfer or certified check, a refundable deposit in the amount of Four
Hundred Thousand and No/100 Dollars ($400,000.00), which deposit shall be
applied against and reduce accordingly the Purchase Price to be paid hereunder
upon Closing.
1.4 Procedure at the Closing. At the Closing, the parties agree that
the following shall occur:
(a) The Acquired Entity and the Sellers shall have satisfied
each of the conditions set forth in Article VI and shall deliver to Brassie the
documents, certificates, opinions, consents and letters required by Article VI.
(b) Brassie shall have satisfied each of the conditions set
forth in Article VII and shall deliver the documents, certificates, consents and
letters required by Article VII.
(c) Sellers shall transfer to Brassie appropriate stock
assignments separate from certificate, representing the Purchased Shares of the
Acquired Entity being purchased hereunder.
(d) Brassie shall issue and deliver stock certificates
representing the shares of Brassie Common Stock issuable pursuant to Section 1.3
registered in the name of each of the Sellers as allocated in accordance with
Schedule 1.4. The shares of Brassie Common Stock issuable pursuant to Section
1.3 are referred to herein as the Brassie Shares.
(e) Brassie shall deliver to Sellers, by wire transfer or
certified check, cash in the amount of Two Million Six Hundred Thousand and
No/100 Dollars ($2,600,000.00).
(f) Brassie shall cause to be delivered to Sellers a stand by
letter of credit or such other evidence of security as the Seller's deem
satisfactory, to secure Brassie's obligation to pay the deferred purchase price
as provided in Section 1.5 below.
2
7
<PAGE>
(g) Brassie shall cause to be delivered one or more Lease
Letters of Credit as provided in Section 5.12, which letters of credit shall
provide for security as to the Lease.
1.5 Deferred Balance of Purchase Price. Brassie shall deliver to
Sellers, by wire transfer or certified check, within one hundred eighty (180)
days from the Closing Date, cash in the amount of One Million and No/100 Dollars
($1,000,000.00), the remaining outstanding balance of the Purchase Price.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF BRASSIE
As a material inducement to the Acquired Entity and the Sellers to
enter into this Agreement and to consummate the transactions contemplated
hereby, Brassie makes the following representations and warranties to the
Acquired Entity and the Sellers:
2.1 Corporate Status. Brassie is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
authorized to do business in the State of Delaware, is qualified to do business
as a foreign corporation in all jurisdictions where it presently carries on
business, and has the requisite power and authority to own or lease its
properties and to carry on its business as presently conducted. There is no
pending or, to the knowledge of Brassie, threatened proceeding for the
dissolution, liquidation, insolvency or rehabilitation of Brassie.
2.2 Corporate Power and Authority. Brassie has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Brassie has
taken all corporate action necessary to authorize its execution and delivery of
this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby.
2.3 Enforceability. This Agreement has been duly executed and delivered
by Brassie and constitutes its legal, valid and binding obligation enforceable
against Brassie in accordance with its terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
2.4 Brassie Common Stock. Upon consummation of the transactions
contemplated hereby and the issuance and delivery of certificates representing
the Brassie Shares as provided in this Agreement, the Brassie Shares will be
validly issued, fully paid, non-assessable shares, but unregistered and
restricted under the Securities Act, and listed on the National Association of
3
8
<PAGE>
Securities Dealers Automated Quotations ("Nasdaq") and tradeable only in
accordance with Rule 144 as promulgated under the Securities Act.
2.5 Capitalization. As of the date hereof, the authorized capital stock
of Brassie consists of 50,000,000 shares of Brassie Common Stock and 1,000,000
shares of Brassie Preferred Stock, and as of December 28, 1997, 42,632,503
shares of Brassie Common Stock are validly issued and outstanding and no shares
of Brassie Preferred Stock are issued or outstanding.
2.6 No Violation. The execution and delivery of this Agreement by
Brassie, the performance by Brassie of its respective obligations hereunder and
the consummation by Brassie of the transactions contemplated by this Agreement
will not (a) contravene any provision of the Certificates or Articles of
Incorporation or Bylaws of Brassie, (b) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment, ruling
or order of any Governmental Authority or of any arbitration award which is
either applicable to, binding upon, or enforceable against Brassie, (c) conflict
with, result in any breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any Contract which is applicable to, binding upon or enforceable
against Brassie, (d) result in or require the creation or imposition of any Lien
upon or with respect to any of the property or assets of Brassie, (e) give to
any individual or entity a right or claim against Brassie, which would have a
Material Adverse Effect on Brassie, or (f), except as specifically set forth on
Schedule 2.6, require the consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, including, without limitation, (i) pursuant to the
Exchange Act and the Securities Act and applicable inclusion requirements of
Nasdaq, (ii) filings required under the securities or blue sky laws of the
various states, (iii) any filings or consents required to be made or obtained by
Brassie or (iv) any governmental permits or licenses required to operate the
businesses of the Acquired Entity.
2.7 Reports and Financial Statements. From January 1, 1997 to the date
hereof and at all other material times, except where failure to have done so did
not and would not have a Material Adverse Effect on Brassie, Brassie has filed
all reports, registrations and statements, together with any required amendments
thereto, that it was required to file with the SEC, including, but not limited
to Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements (collectively, the
"Brassie Reports"). As of their respective dates (but taking into account any
amendments filed prior to the date of this Agreement), the Brassie Reports
complied in all material respects with all the rules and regulations promulgated
by the SEC and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Brassie included in the Brassie
Reports comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP consistently applied during
the periods presented (except, as noted therein, or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal audit adjustments)
the
4
9
<PAGE>
financial position of Brassie and its consolidated subsidiaries as of the date
thereof and the results of their operations and their cash flows for the periods
then ended.
2.8 No Commissions. Brassie has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
2.9 Accuracy of Information Furnished. No representation, statement or
information contained in this Agreement (including, without limitation, the
various Schedules attached hereto) or any agreement executed in connection
herewith or in any certificate delivered pursuant hereto or thereto or made or
furnished to the Sellers or their representatives by Brassie, contains or shall
contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained therein not
misleading. Brassie has provided the Acquired Entity or the Sellers with true,
accurate and complete copies of all documents listed or described in the various
Schedules attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE ACQUIRED ENTITY AND SELLER
As a material inducement to Brassie to enter into this Agreement and to
consummate the transactions contemplated hereby, the Acquired Entity and the
Sellers, jointly and severally make the following representations and warranties
to Brassie:
3.1 Corporate Status. The Acquired Entity is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Massachusetts and has the requisite power and authority to own or lease its
properties and to carry on its business as now being conducted. The Acquired
Entity is not required to qualify to do business as a foreign corporation in any
jurisdiction. The Acquired Entity has fully complied with all of the
requirements of any statute governing the use and registration of fictitious
names, and has the legal right to use the names under which it operates its
businesses. There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of the Acquired Entity.
3.2 Power and Authority. The Acquired Entity has the corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The Acquired
Entity has taken all corporate action necessary to authorize the execution and
delivery of this Agreement, the performance of its obligations hereunder, and
the consummation of the transactions contemplated hereby. Each of the Sellers
have the requisite competence and authority to execute and deliver this
Agreement, to perform his respective obligations hereunder and to consummate the
transactions contemplated hereby.
5
10
<PAGE>
3.3 Enforceability. This Agreement has been duly executed and delivered
by the Acquired Entity and by each of the Sellers, and constitutes the legal,
valid and binding obligation of each of them, enforceable against each of them
in accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
3.4 Capitalization. Schedule 3.4(a) sets forth, as of the date hereof,
with respect to the Acquired Entity (a) the number of authorized shares of each
class of its capital stock, (b) the number of issued and outstanding shares of
each class of its capital stock and (c) the number of shares of each class of
its capital stock which are held in treasury. All of the issued and outstanding
shares of capital stock of the Acquired Entity (i) have been duly authorized and
validly issued and are fully paid and nonassessable, (ii) were issued in
compliance with all applicable state and federal securities laws and (iii) were
not issued in violation of any preemptive rights or rights of first refusal or
similar rights. Except for those matters provided on Schedule 3.4(b) which the
Sellers agree shall be terminated at or before the Closing, no preemptive rights
or rights of first refusal or similar rights exist with respect to any shares of
capital stock of the Acquired Entity and no such rights arise by virtue of or in
connection with the transactions contemplated hereby; there are no outstanding
or authorized rights, options, warrants, convertible securities, subscription
rights, conversion rights, exchange rights or other agreements or commitments of
any kind that could require the Acquired Entity to issue or sell any shares of
its capital stock (or securities convertible into or exchangeable for shares of
its capital stock); there are no outstanding stock appreciation, phantom stock,
profit participation or other similar rights with respect to the Acquired
Entity; there are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the capital stock of
the Acquired Entity; the Acquired Entity is not obligated to redeem or otherwise
acquire any of its outstanding shares of capital stock.
3.5 Shareholders of the Acquired Entity. Schedule 3.5(a) sets forth,
with respect to the Acquired Entity (i) the name, address and federal taxpayer
identification number of the Sellers, and the number of outstanding shares of
each class of its capital stock owned by the Sellers as of the close of business
on the date of this Agreement; and (ii) the name, address and federal taxpayer
identification number of, and number of shares of each class of its capital
stock beneficially owned by each beneficial owner of outstanding shares of
capital stock (to the extent that record and beneficial ownership of any such
shares or interests are different). The Sellers constitute the record and
beneficial holders of all issued and outstanding shares of capital stock of the
Acquired Entity, and the Sellers own such shares as is set forth on Schedule 3.5
free and clear of all Liens, restrictions and claims of any kind, except for
claims under those shareholder agreements listed on Schedule 3.5(b), which
claims, the Sellers agree, shall be terminated at or before the Closing.
3.6 No Violation. Except for any approvals or consents required with
respect to those Material Contracts (as defined in Section 3.23) expressly
identified on Schedule 3.23 as requiring the consents of third parties, the
execution and delivery of this Agreement by the Acquired Entity
6
11
<PAGE>
and the Sellers, the performance by the Acquired Entity and the Seller of their
obligations hereunder and the consummation by them of the transactions
contemplated by this Agreement will not (a) contravene any provision of the
Articles of Incorporation or Bylaws or other organizational or governing
document of the Acquired Entity, (b) violate or conflict with any law, statute,
ordinance, rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against the Acquired Entity and Sellers, (c)
conflict with, result in any breach of, or constitute a default (or an event
which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right of payment under or the
right to terminate, amend, modify, abandon or accelerate, any Material Contract
which is applicable to, binding upon or enforceable against the Acquired Entity
or the Sellers, (d) result in or require the creation or imposition of any Lien
upon or with respect to any of the properties or assets of the Acquired Entity
of the Sellers, (e) give to any individual or entity a right or claim against
the Acquired Entity or the Sellers or (f) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except any applicable SEC
and other filings required to be made by Brassie.
3.7 Records of the Acquired Entity. The copies of the Articles of
Incorporation, Bylaws and other documents and agreements of the Acquired Entity
which were provided to Brassie are true, accurate, and complete and reflect all
amendments made through the date of this Agreement. The minute books and other
records of corporate actions for the Acquired Entity made available to Brassie
for review were correct and complete as of the date of such review, no further
entries have been made through the date of this Agreement, such minute books and
records contain the true signatures of the persons purporting to have signed
them, and such minute books and records contain an accurate record of all
corporate actions of the shareholder and directors (and any committees thereof)
of the Acquired Entity taken by written consent or at a meeting or otherwise
since incorporation or formation. All corporate actions by the Acquired Entity
have been duly authorized or ratified. All accounts, books, ledgers and official
and other records of the Acquired Entity are accurate and complete, and there
are no inaccuracies or discrepancies of any kind contained therein. The stock
ledger of the Acquired Entity, as previously made available to Brassie, contains
accurate and complete records of all issuances, transfers and cancellations of
shares of the capital stock of the Acquired Entity.
3.8 Financial Statements. The Acquired Entity has delivered to Brassie
the financial statements of the Acquired Entity for the fiscal years ended
December 31, 1995 and December 31, 1996 and for the period ending December 31,
1997, copies of which are attached as Schedule 3.8 (the "Financial Statements").
The individual balance sheet of the Acquired Entity dated as of December 31,
1997, included in the Financial Statements attached as Schedule 3.8, is referred
to herein as the ("Current Balance Sheet"). The Financial Statements fairly
present the financial position of the Acquired Entity at each of the balance
sheet dates and the results of operations for the periods covered thereby, and
have been prepared in accordance with GAAP consistently applied throughout the
periods indicated. The books and records of the Acquired Entity fully and fairly
reflect all of its transactions, properties, assets and liabilities. There are
no material special or non-recurring items of income or expense during the
periods covered by the Financial
7
12
<PAGE>
Statements, and the balance sheets included in the Financial Statements do not
reflect any write-up or revaluation increasing the book value of any assets. The
Financial Statements reflect all adjustments necessary for a fair presentation
of the financial information contained therein, subject, in the case of
unaudited statements, to normal audit adjustments.
3.9 No Changes. Except as set forth on Schedule 3.9, since
December 31, 1997, there has not been any:
(a) transaction by the Acquired Entity or any Seller except in
the ordinary course of business conducted as of that date;
(b) material adverse change in the financial condition,
liabilities, assets or results of operation of the business of the Acquired
Entity;
(c) indebtedness or liability, whether accrued, absolute,
contingent or otherwise incurred by the Acquired Entity;
(d) default under any indebtedness of the Acquired Entity, or
any event which with the lapse of time or the giving of notice, or both, would
constitute such a default;
(e) amendment or termination of any Contract, lease or license
to which the Acquired Entity is a party;
(f) material increase in compensation paid, payable or to
become payable by the Acquired Entity to any of its employees;
(g) extraordinary losses (whether or not covered by insurance)
or waiver by the Acquired Entity of any extraordinary rights of value;
(h) commitment to or liability to any labor organization;
(i) lowering of the prices charged by the Acquired Entity for
goods or services in a manner not consistent with past practices;
(j) notice from any customer as to the customer's intention
not to conduct business with the Acquired Entity, the result of which loss or
losses of business, individually or in the aggregate, has had, or could
reasonably be expected to have, a material adverse effect on the business; or
(k) other event or condition of any character, that has or
might reasonably have an adverse effect on the Acquired Entity's or the
business' Assets, financial condition, or business.
8
13
<PAGE>
3.10 Liabilities. The Acquired Entity has no liabilities or
obligations, whether accrued, absolute, contingent or otherwise, except (a) to
the extent reflected on the Acquired Entity's Current Balance Sheet and not paid
or discharged, (b) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Acquired Entity's Current
Balance Sheet (none of which relates to any breach of contract, breach of
warranty, tort, infringement or violation of law, or which arose out of any
action, suit, claim, governmental investigation or arbitration proceeding), and
(c) liabilities incurred in the ordinary course of business prior to the date of
the Acquired Entity's Current Balance Sheet which, in accordance with GAAP
consistently applied, were not required to be recorded thereon and which, in the
aggregate, are not material (the liabilities and obligations referenced in (a),
(b) and (c) above are referred to as the "Designated Liabilities"). Schedule
3.10 lists, for the Acquired Entity, (8) all indebtedness of the Acquired Entity
for borrowed money and for capitalized equipment leases, and (ii) the account
numbers and names of each bank, broker or other depository institution and the
names of all persons authorized to withdraw funds from each such account.
3.11 Litigation. Except as provided on Schedule 3.11, there is no
action, suit or other legal or administrative proceeding or governmental
investigation pending, or, to the knowledge of the Acquired Entity and the
Sellers, threatened, anticipated or contemplated (i) against, by or affecting
the Acquired Entity or the Sellers (relating to the transactions herein or to
the Acquired Entity), or the Acquired Entity's properties or assets, except for
routine customer claims and complaints arising in the ordinary course consistent
with past practice which involve amounts less than $10,000 individually or
$75,000 in the aggregate, or (ii) which question the validity or enforceability
of this Agreement or the transactions contemplated hereby, and there is no basis
for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which the
Acquired Entity is or was a party which have not been complied with in full or
which continue to impose any material obligations on the Acquired Entity.
3.12 Environmental Matters.
(a) To the best of the Acquired Entity's and the Sellers'
knowledge, the Acquired Entity is and has at all times been in full compliance
with all Environmental Laws governing its business, operations, properties and
assets, including, without limitation: (i) all requirements relating to the
Discharge and Handling of Hazardous Substances; (ii) all requirements relating
to notice, record keeping and reporting; (iii) all requirements relating to
obtaining and maintaining Licenses (as defined herein) for the ownership by the
Acquired Entity of its properties and assets and the operation of its business
as presently conducted and the use by the Acquired Entity of the Company Owned
Properties (as defined in Section 3.13); and (iv) all applicable writs, orders,
judgments, injunctions, governmental communications, decrees, informational
requests or demands issued pursuant to, or arising under, any Environmental
Laws.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation (collectively
"Notices"), claims, suits, actions, judgments, penalties, fines, or
administrative or judicial investigations of any nature or proceedings
(collectively
9
14
<PAGE>
"Proceedings") pending or threatened against or involving the Acquired Entity,
its businesses, operations, properties or assets issued by any Governmental
Authority or third party with respect to any Environmental Laws or Licenses
issued to the Acquired Entity thereunder in connection with, related to or
arising out of the ownership by the Acquired Entity of its properties or assets
or the operation of its businesses, which have not been resolved to the
satisfaction of the issuing Governmental Authority or third party in a manner
that would not impose any obligation, burden or continuing liability on Brassie
in the event that the transactions contemplated by this Agreement are
consummated.
(c) To the best of the Acquired Entity's and the Sellers'
knowledge, the Acquired Entity has not at any time Discharged, nor has it at any
time allowed or arranged for any third party to Discharge, Hazardous Substances
to, at or upon: (i) any location other than a site lawfully permitted to receive
such Hazardous Substances; (ii) any parcel of real property owned or leased at
any time by the Acquired Entity (including, without limitation, the Company
Owned Properties (as defined in Section 3.13), except in compliance with
applicable Environmental Laws; or (iii) any site which, pursuant to CERCLA or
any similar state law has been placed on the National Priorities List or its
state equivalent, or the Environmental Protection Agency or any relevant state
agency has notified the Acquired Entity that it has proposed or is proposing to
place on the National Priorities List or its state equivalent. To the best of
the Acquired Entity's and the Sellers' knowledge, there has not occurred, nor is
there presently occurring, a Discharge, or threatened Discharge of any Hazardous
Substance on, into or directly beneath the surface of any real property owned or
leased at any time by the Acquired Entity.
(d) Schedule 3.12 identifies, for the prior five (5) years,
(i) all environmental audits, assessments or occupational health studies
undertaken by any Governmental Authority, the Acquired Entity or the Sellers or
their agents or representatives, or any third party, relating to or affecting
the Acquired Entity or the Company Owned Properties; (ii) all ground, water,
soil, air or asbestos monitoring undertaken by the Acquired Entity, the Sellers
or their agents or representatives thereof or undertaken by any Governmental
Authority or any third party, relating to or affecting the Company Owned
Properties or any real property owned or leased at any time by the Acquired
Entity; (iii) all material written communications between the Acquired Entity
and any governmental authority arising under or relative to Environmental Laws
including, but not limited to, all Notices issued to the Acquired Entity or the
Sellers and pertaining to the Company Owned Properties; and (iv) all outstanding
citations issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings or decrees, relating to
or affecting the Acquired Entity or any real property owned or leased at any
time by the Acquired Entity.
(e) For purposes of this Section, the following terms shall
have the meanings ascribed to them below:
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, migrating or emitting, as any of such terms may
further be defined in any
10
15
<PAGE>
Environmental Law, into or through any medium including, without
limitation, ground water, surface water, land, soil or air in violation
of law.
"Environmental Laws" means all federal state, regional or
local statutes, laws rules, regulations, codes, ordinances, orders,
plans, injunctions, decrees, rulings, licenses, and changes thereto, or
judicial or administrative interpretations thereof, or similar laws,but
only to the extent currently in existence, any of which govern, purport
to govern, or relate to pollution, protection of the environment,
public health and safety, air emissions, water discharges, waste
disposal, hazardous or toxic substances, solid or hazardous waste,
occupational, health and safety, as any of these terms are or may be
defined in such statutes, laws, rules, regulations, codes, orders,
ordinances, plans, injunctions, decrees, rulings, licenses, and changes
thereto, or judicial or administrative interpretations thereof,
including, without limitation: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.
9601, et. seq., (herein, collectively, "CERCLA"); the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act
of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. ss. 6901 et. seq., (herein, collectively, "RCRA"); the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. ss. 1801, et. seq.,
(the "Hazardous Materials Transportation Act"); the Clean Water Act, as
amended, 33 U.S.C. ss. 1311, et. seq., (the "Clean Water Act"); the
Clean Air Act, as amended, 42 U.S.C. ss. 7401-7642, (the "Clean Air
Act"); the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 2601
et. seq., (the "Toxic Substances Control Act"); the Federal
Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. ss.
136-136y ("FIFRA"); the Emergency Planning and Community Right-to-Know
Act of 1986 as amended 42 U.S.C. ss. 11001, et. seq., (Title III of
SARA) ("EPCRA"); and the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. ss. 651, et. seq., ("OSHA").
"Handle" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling,
handling, manufacturing or using, as any of such terms may further be
defined in any Environmental Law.
"Hazardous Substances" shall be construed broadly to include
any toxic or hazardous substance, material or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires investigation or remediation
under any Environmental Laws or which are or become regulated, listed
or controlled by, under or pursuant to any Environmental Laws, or which
has been or shall be determined or interpreted at any time by any
Governmental Authority to be a hazardous or toxic substance regulated
under any other statute, law, regulation, order, code, rule, order, or
decree.
11
16
<PAGE>
"Licenses" means, for purposes of this Section 3.12 only, all
licenses, certificates, permits, approvals, decrees and registrations
required under the Environmental Laws.
3.13 Real Estate. Schedule 3.13(a) (i) contains the legal description
of, any real property or any leasehold or other interest therein (including
without limitation any option or other right or obligation to purchase any real
property or any interest therein) owned by the Acquired Entity as of the date
hereof (the "Company Owned Properties"); and (ii) lists all real property (or
any interest therein) owned by the Acquired Entity within the past five years
that is not owned by the Acquired Entity as of the date of this Agreement. With
respect to each such parcel of Company Owned Properties: (i) the Acquired Entity
or Brassie or their assignee has or will have at Closing good and marketable
title, free and clear of any covenants, conditions, easements and exceptions
other than the permitted exceptions and of any Lien other than liens for real
estate taxes not yet due and payable, (ii) there are no pending or, to the
knowledge of the Acquired Entity or the Sellers, threatened condemnation
proceeding, suits or administrative actions relating to the Company Owned
Properties or other matters affecting adversely the current use, occupancy or
value thereof; (iii) the legal descriptions for the Company Owned Properties
contained in the deeds thereof describe such parcels fully and adequately; (iv)
the buildings and improvements, if any, are located within the boundary lines of
the described parcels of land and are not in violation of applicable setback
requirements, local comprehensive plan provisions, zoning laws and ordinances
(and none of the properties or buildings or improvements thereon are subject to
"permitted nonconforming use" or "permitted non-conforming structure"
classifications), applicable building code requirements, permits, licenses or
other forms of approval, regulation or restrictions by any Governmental
Authority, and do not encroach on any easement which may burden the land; the
land does not serve any adjoining property for any purpose inconsistent with the
use of the land; and the Company Owned Properties are not located within any
flood plain or subject to any similar type restriction for which any permits or
licenses necessary to the use thereof have not been obtained; (v) all
facilities, if any, have received all approvals of Governmental Authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, ordinances, rules and regulations; (vi) there are no Contracts
granting to any party or parties the right of use or occupancy of any portion of
the Company Owned Properties, and there are no parties (other than the Acquired
Entity) in possession of any of the Company Owned Properties; (vii) there are no
outstanding options or rights of first refusal or similar rights to purchase any
of the Company Owned Properties or any portion thereof or interest therein;
(viii) all facilities, if any, located on the Company Owned Properties are
supplied with utilities and other services necessary for their operation, all of
which services are adequate in accordance with all applicable laws, ordinances,
rules and regulations, and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefiting the Company Owned Properties; (ix)
the Owned Properties abut on and have adequate direct vehicular access to a
public road and there is no pending or, to the knowledge of the Acquired Entity
or the Sellers, threatened termination of such access; and (x) all improvements,
buildings and systems on the Owned Properties are suitable for their current
use.
12
17
<PAGE>
3.14 Business; Good Title to and Condition of Assets; Inventory.
(a) Upon the consummation of the transactions contemplated
hereby, Brassie will have acquired and own all of the Acquired Entity's Assets
and operations of its Business, and any related rights and interests thereto.
The Acquired Entity has good and marketable title to all of its Assets free and
clear of any Liens, except as provided on Schedule 3.14(a).
(b) The Fixed Assets currently in use or necessary for the
business and operations of the Acquired Entity are in good operating condition,
normal wear and tear excepted, and have been maintained in accordance with all
applicable manufacturer's specifications and warranties. For purposes of this
Agreement, the term "Fixed Assets" means all vehicles, machinery, equipment,
tools, supplies, leasehold improvements, furniture and fixtures, owned, used by
or located on the premises of the Acquired Entity.
3.15 Compliance with Laws. The Acquired Entity and the Sellers and
their Affiliates have been in compliance with all laws, regulations and orders
applicable to them, their business and operations (as conducted by them now and
in the past), the Assets, the Company Owned Properties, and any other properties
and assets (in each case owned or used by them now or in the past). The Acquired
Entity has not been cited, fined or otherwise notified of any asserted past or
present failure to comply with any laws, regulations or orders and no proceeding
with respect to any such violation is pending or threatened. The Acquired Entity
is not subject to any Contract, decree or injunction to which it is a party
which restricts the continued operation of any business or the expansion thereof
to other geographical areas, customers and suppliers or lines of business.
Neither the Acquired Entity, nor any of its employees or agents, has made any
payment of funds in connection with its business which is prohibited by law, and
no funds have been set aside to be used in connection with its business for any
payment prohibited by law. The Acquired Entity is and at all times has been in
full compliance with the terms and provisions of the Immigration Reform and
Control Act of 1986, as amended (the "Immigration Act"). With respect to each
Employee (as defined in 8 C.F.R. 274a.1(f)) of the Acquired Entity for whom
compliance with the Immigration Act is required, the Acquired Entity has on file
a true, accurate and complete copy of (i) each Employee's Form I-9 (Employment
Eligibility Verification Form) and (ii) all other records, documents or other
papers prepared, procured and/or retained pursuant to the Immigration Act. The
Acquired Entity has not been cited, fined, served with a Notice of Intent to
Fine or with a Cease and Desist Order, nor has any action or administrative
proceeding been initiated or threatened against the Acquired Entity, by the
Immigration and Naturalization Service by reason of any actual or alleged
failure to comply with the Immigration Act.
3.16 Labor and Employment Matters. Except as provided in Schedule 3.16,
the Acquired Entity is not a party to or bound by any collective bargaining
agreement or any other agreement with a labor union, and there has been no labor
union prior to the date hereof organizing any employees of the Acquired Entity
into one or more collective bargaining units. There is not now, and there has
not been prior to the date hereof, any actual or threatened labor dispute,
strike or work stoppage which affects or which may affect the business of the
Acquired Entity or which may interfere with its continued operations. Neither
the Acquired Entity, nor any
13
18
<PAGE>
employee, agent or representative thereof, has since the date of incorporation
or formation of the Acquired Entity committed any unfair labor practice as
defined in the National Labor Relations Act, as amended, and there is no pending
or threatened charge or complaint against the Acquired Entity by or with the
National Labor Relations Board or any representative thereof. There has been no
strike, walkout or work stoppage involving any of the employees of the Acquired
Entity prior to the date hereof. To the knowledge of the Sellers and the
Acquired Entity, no executive or key employee (including the Sellers) or group
of employees has any plans to terminate his, her or their employment with the
Acquired Entity as a result of the transactions contemplated hereby or
otherwise. The Acquired Entity has complied with applicable laws, rules and
regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act, and the Americans with Disabilities Act, all as
amended.
3.17 Employee Benefit Plans
(a) Employee Benefit Plans. Schedule 3.17 contains a list
setting forth each employee benefit plan or arrangement of the Acquired Entity,
including but not limited to employee pension benefit plans, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), multiemployer plans, as defined in Section 3(37) of ERISA, employee
welfare benefit plans, as defined in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA, in
which employees, their spouses or dependents, of the Acquired Entity participate
("Employee Benefit Plans") (true and accurate copies of which, together with the
most recent annual reports on Form 5500 and summary plan descriptions with
respect thereto, were furnished to Brassie).
(b) Compliance with Law. With respect to each Employee Benefit
Plan (i) each has been administered in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"); (ii) no actions, suits, claims or
disputes are pending, or threatened; (iii) no audits, inquiries, reviews,
proceedings, claims, or demands are pending with any governmental or regulatory
agency; (iv) there are no facts which could give rise to any liability in the
event of any such investigation, claim, action, suit, audit, review, or other
proceeding; (v) all reports, returns and similar documents required to be filed
with any governmental agency or distributed to any plan participant have been
duly or timely filed or distributed; and (vi) no "prohibited transaction" has
occurred within the meaning of the applicable provisions of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee Benefit
Plan intended to qualify under Code Section 401(a) or 403(a), (i) the Internal
Revenue Service has issued a favorable determination letter, true and correct
copies of which have been furnished to Brassie, that such plans are qualified
and exempt from federal income taxes; (ii) no such determination letter has been
revoked nor has revocation been threatened, nor has any amendment or other
action or omission occurred with respect to any such plan since the date of its
most recent
14
19
<PAGE>
determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its costs; (iii) no
such plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the code; (iv) no reportable
event (within the meaning of Section 4043 of ERISA) has occurred, other than one
for which the 30-day notice requirement has been waived; (v) as of the Closing
Date, the present value of all liabilities that would be "benefit liabilities"
under Section 4001(a)(16) of ERISA if benefits described in Code Section
411(d)(6)(B) were included will not exceed the then current fair market value of
the assets of such plan (determined using the actuarial assumptions used for the
most recent actuarial valuation for such plan); (vi) all contributions to, and
payments from and with respect to such plans, which may have been required to be
made in accordance with such plans and, when applicable, Section 302 of ERISA or
Section 412 of the Code, have been timely made; and (vii) all such contributions
to the plans and all payments under the plans (except those to be made from a
trust qualified under Section 401(a) of the Code) and all payments with respect
to the plans (including without limitation PBGC (as defined below) and insurance
premiums) for any period ending before the Closing Date that are not yet, but
will be, required to be made are properly accrued and reflected on the Current
Balance Sheet.
(d) Multiemployer Plans. The Acquired Entity is not, nor has
it been, obligated with respect to any multiemployer plan as described in
Section 4001(a)(3) of ERISA ("MPPA Plan").
(e) Welfare Plans. (i) The Acquired Entity is not obligated
under any employee welfare benefit plan as described in Section 3(1) of ERISA
("Welfare Plan") to provide medical or death benefits with respect to any
employee or former employee of the Acquired Entity or its predecessors after
termination of employment; (ii) the Acquired Entity has complied with the notice
and continuation coverage requirements of Section 4980B of the Code and the
regulations thereunder with respect to each Welfare Plan that is, or was during
any taxable year for which the statute of limitations on the assessment of
federal income taxes remains open, by consent or otherwise, a group health plan
within the meaning of Section 5000(b)(l) of the Code; and (iii) there are no
reserves, assets, surplus or prepaid premiums under any Welfare Plan which is an
Employee Benefit Plan. The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and, will not
accelerate the time of payment or vesting, or increase the amount of
compensation due to any individual.
(f) Controlled Group Liability. Neither the Acquired Entity,
nor any entity that would be aggregated with the Acquired Entity under Code
Section 414(b), (c), (m) or (o); (i) has ever terminated or withdrawn from an
employee benefit plan under circumstances resulting (or expected to result) in
liability to the Pension Benefit Guaranty Corporation ("PBGC"), the fund by
which the employee benefit plan is funded, or any employee or beneficiary for
whose benefit the plan is or was maintained (other than routine claims for
benefits); (ii) has any assets subject to (or expected to be subject to) a lien
for unpaid contributions to any employee benefit plan; (iii) has failed to pay
premiums to the PBGC when due (iv) is subject to (or expected to be subject) an
excise tax under Code Section 4971; (v) has engaged in any transaction which
15
20
<PAGE>
would give rise to liability under Section 4069 or Section 4212(c) of ERISA; or
(vi) has violated Code Section 4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. (i) None of the Employee Benefit Plans
obligates the Acquired Entity to pay separation, severance, termination or
similar benefits solely as a result of any transaction contemplated by this
Agreement or solely as a result of a "change of control" (as such term is
defined in Section 280G of the Code); (ii) all required or discretionary (in
accordance with historical practices) payments, premiums, contributions,
reimbursements, or accruals for all periods ending prior to or as of the Closing
Date shall have been made or properly accrued on the Current Balance Sheets or
will be properly accrued on the books and records of the Acquired Entity as of
the Closing Date; and (iii) none of the Employee Benefit Plans has any unfunded
liabilities which are not reflected on the Current Balance Sheets or the books
and records of the Acquired Entity.
3.18 Tax Matters. All Tax Returns required to be filed prior to the
date hereof with respect to the Acquired Entity or any of its income,
properties, franchises or operations have been timely filed, each such Tax
Return has been prepared in compliance with all applicable laws and regulations,
and all such Tax Returns are true and accurate in all respects. All Taxes due
and payable by or with respect to the Acquired Entity have been paid or are
accrued on the applicable Current Balance Sheet or will be accrued on the
Acquired Entity's books and records as of the Closing. Except as provided in
Schedule 3.18, (i) with respect to each taxable period of the Acquired Entity,
either such taxable period has been audited by the relevant taxing authority or
the time for assessing or collecting Taxes with respect to each such taxable
period has closed and each taxable period is not subject to review by any
relevant taxing authority; (ii) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for any amount of Taxes has been asserted
or assessed by any taxing authority against the Acquired Entity; (iii) the
Acquired Entity has not consented to extend the time in which any Taxes may be
assessed or collected by any taxing authority; (iv) the Acquired Entity has not
requested or been granted an extension of the time for filing any Tax Return to
a date later than the Closing; (v) there is no action, suit, taxing authority
proceeding, or audit or clam for refund now in progress, pending or threatened
against or with respect to the Acquired Entity regarding Taxes; (vi) the
Acquired Entity has not made an election or filed a consent under Section 341(f)
of the Code (or any corresponding provision of state, local or foreign law) on
or prior to the Closing Date; (vii) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Acquired Entity;
(viii) the Acquired Entity will not be required (A) as a result of a change in
method of accounting for a taxable period ending on or prior to the Closing
Date, to include any adjustment under Section 481(c) of the Code (or any
corresponding provision of state, local or foreign law) in taxable income for
any taxable period (or portion thereof) beginning after the Closing Date or (B)
as a result of any "closing agreement," as described in Section 7121 of the Code
(or any corresponding provision of state, local or foreign law), to include any
item of income or exclude any item of deduction from any taxable period (or
portion thereof) beginning after the Closing Date; (ix) the Acquired Entity has
not been a member of an affiliated group (as defined in Section 1504 of the
Code) or filed or been included in a combined, consolidated or unitary income
Tax Return; (x) the Acquired Entity is not a party to or bound by any tax
16
21
<PAGE>
allocation or tax sharing agreement and has no current or potential contractual
obligation to indemnify any other Person with respect to Taxes; (xi) no taxing
authority will claim or assess any additional Taxes against the Acquired Entity
for any period for which Tax Returns have been filed; (xii) the Acquired Entity
has not made any payments and is not and will not become obligated (under any
contract entered into on or before the Closing) to make any payments, that will
be non-deductible under Section 280G of the Code (or any corresponding provision
of state, local or foreign law); and (xiii) the Acquired Entity has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code (or any corresponding provision of state, local or foreign
law) during the applicable period specified in Section 897(c)(1)(a)(ii) of the
Code (or any corresponding provision of state, local or foreign law); (xiv) no
claim has ever been made by a taxing authority in a jurisdiction where the
Acquired Entity does not file Tax Returns that the Acquired Entity is or may be
subject to Taxes assessed by such jurisdiction; (xv) the Acquired Entity does
not have any permanent establishment in any foreign country, as defined in the
relevant tax treaty between the United States of America and such foreign
country; (xvi) true, correct and complete copies of all income and sales Tax
Returns filed by or with respect to the Acquired Entity for the past three years
have been furnished or made available to Brassie; (xvii) the Acquired Entity
will not be subject to any Taxes, for the period ending at the Closing for any
period for which a Tax Return has not been filed, imposed pursuant to Section
1374 or Section 1375 of the Code (or any corresponding provision of state, local
or foreign law); and (xviii) no sales or use tax will be payable by the Acquired
Entity or Brassie or transferee as a result of this transaction, and there will
be no non-recurring intangible tax, documentary stamp tax other than on the
Brassie Shares, or other excise tax (or comparable tax imposed by any
governmental entity) as a result of this transaction. The Acquired Entity has
timely and properly filed an S corporation election under the Code and under
applicable state and local Tax law for its first taxable year, and no such S
election has been revoked or terminated, and neither the Acquired Entity nor the
Sellers have taken any action that would cause a termination of such S election.
3.19 Insurance. Schedule 3.19 lists all valid, outstanding enforceable
policies of insurance issued to the Acquired Entity by reputable insurers
covering its properties, assets and business insuring against such risks and in
such coverage amounts (the "Insurance Policies"). The Insurance Policies are in
full force and effect, and all premiums due thereon have been paid through the
date of this Agreement and will be paid through the Closing. The Acquired Entity
has complied with the provisions of such Insurance Policies applicable to it,
and has provided Brassie copies of all Insurance Policies and all amendments and
riders thereto. There are no pending claims under any of the Insurance Policies
for an amount in excess of $25,000 individually or $100,000 in the aggregate,
including any claim for loss or damage to the properties, assets or business of
the Acquired Entity. The Acquired Entity has not failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve its
rights thereunder.
3.20 Licenses and Permits. The Acquired Entity possesses all licenses,
approvals, permits or authorizations from Governmental Authorities
(collectively, the "Permits") for its business and operations, including with
respect to the operations of each of the Company Owned
17
22
<PAGE>
Properties. Schedule 3.20 sets forth a true, complete and accurate list of all
such Permits or applications for such Permits, itemized for the Acquired Entity.
All such Permits are valid and in full force and effect, the Acquired Entity is
in compliance with the respective requirements thereof, and no proceeding is
pending or threatened to revoke or amend any of them. None of such Permits is or
will be impaired or in any way affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.21 Adequacy of the Assets; Affiliated Transactions. The Assets, Owned
Properties, Leased Premises and other equipment leased by the Acquired Entity
constitute, in the aggregate, all of the assets and properties necessary for the
conduct of the business of the Acquired Entity in the manner in which and to the
extent to which such business is currently being conducted. Except as provided
in Schedule 3.21, no officer, director or shareholder of the Acquired Entity,
nor any person related by blood or marriage to any such person, nor any entity
in which any such person owns any beneficial interest, is a party to any
Contract or transaction with the Acquired Entity or has any interest in any
property used by the Acquired Entity.
3.22 Intellectual Property. The Acquired Entity has full legal right,
title and interest in and to all trademarks, service marks, trade names,
copyrights, know-how, patents, trade secrets, licenses (including licenses for
the use of computer software programs), and other intellectual property used in
the conduct of its business as specifically listed on Schedule 3.22 hereof (the
"Intellectual Property"). The conduct of the business of the Acquired Entity as
presently conducted, and the unrestricted conduct and the unrestricted use and
exploitation of the Intellectual Property, does not infringe or misappropriate
any rights held or asserted by any Person and, to the knowledge of the Acquired
Entity and the Sellers, no Person is infringing on any Intellectual Property. No
payments are required for the continued use of the Intellectual Property. None
of the Intellectual Property has ever been declared invalid or unenforceable, or
is the subject of any pending or threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding.
3.23 Contracts. Schedule 3.23 sets forth a list of each Material
Contract (as defined below), true, correct and complete copies of which have
been provided to Brassie, Schedule 3.23 identifies certain Material Contracts
that require the Consents of third parties to the transactions contemplated
hereby. The Acquired Entity has not violated any of the material terms or
conditions of any Material Contract or any term or condition which would permit
termination or material modification of any Material Contract, all of the
covenants to be performed by any other party thereto have been fully performed,
and there are no claims for breach or indemnification or notice of default or
termination under any Material Contract. To the knowledge of the Acquired Entity
and the Sellers, no event has occurred which constitutes, or after notice or the
passage of time, or both, would constitute, a default by the Acquired Entity
under any Material Contract, and no such event has occurred which constitutes or
would constitute a default by any other party. As used in this Section 3.23
"Material Contracts" shall mean formal or informal, written or oral, (a) loan
agreements, indentures, mortgages, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements, security agreements, equipment
financing
18
23
<PAGE>
obligations or guaranties, or other sources of contingent liability in respect
of any indebtedness or obligations to any other Person, or letters of intent or
commitment letters with respect to same (other than those which individually
provide for annual payments of less than $25,000); (b) contracts obligating the
Acquired Entity to provide or obtain products or services for a period of one
year or more, (c) leases of real property; (d) leases of personal property
(other than those which individually provide for annual payments of less than
$25,000); (e) distribution, sales agency or franchise or similar agreements, or
agreements providing for an independent contractor's services, or letters of
intent with respect to same (other than those which individually provide for
annual payments of less than $15,000); (f) employment agreements, management
service agreements, consulting agreements, confidentiality agreements,
non-competition agreements, employee handbooks, policy statements and any other
agreements relating to any employee, officer or director of the Acquired Entity;
(g) licenses, assignments or transfers of trademarks, trade names, service
marks, patents, copyrights, trade secrets or know how, or other agreements
regarding proprietary rights or intellectual property; (h) contracts relating to
pending capital expenditures by the Acquired Entity; (i) contracts obligating
the Acquired Entity to purchase parts, accessories, supplies, equipment,
advertising, media and media related services of any kind (other than those
which individually provide for annual payments of less than $15,000); (j)
non-competition agreements restricting the Acquired Entity in any manner, (k)
any contracts obligating the Acquired Entity to make payments in excess of
$25,000, in the aggregate, over the remaining term of such contract; and (1) all
other Contracts or understandings which are material to the Acquired Entity or
its Business, assets or properties, irrespective of subject matter and whether
or not in writing, and not otherwise disclosed on the Schedules.
3.24 Accuracy of Information Furnished. No representation, statement or
information contained in this Agreement (including, without limitation, the
various Schedules attached hereto) or any agreement executed in connection
herewith or in any certificate delivered pursuant hereto or thereto or made or
furnished to Brassie or its representatives by the Acquired Entity or the
Sellers, contains or shall contain any untrue statement of a material fact or
omits or shall omit any material fact necessary to make the information
contained therein not misleading. The Acquired Entity has provided Brassie with
true, accurate and complete copies of all documents listed or described in the
various Schedules attached hereto.
3.25 Securities Law Matters. Sellers represent and warrant that the
Securities to be acquired by the upon consummation of the transactions described
in Article 1(i) will be acquired by each of them for their own account, not as a
nominee or agent, and without a view to resale or other distribution within the
meaning of the Securities Act and the rules and regulations thereunder; and (ii)
none of the Sellers will distribute any of the Securities in violation of the
Securities Act. The Sellers have had the opportunity to discuss the transactions
contemplated hereby with Brassie and have had the opportunity to obtain such
information pertaining to Brassie as has been requested, including but not
limited to filings made by Brassie with the SEC under the Exchange Act. The
Sellers represent that each of them has such knowledge and experience in
business or financial matters that he is capable of evaluating the merits and
risks of an investment in the Brassie Shares.
19
24
<PAGE>
3.26 No Commissions. Neither the Acquired Entity nor the Sellers has
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 Conduct of Business by the Acquired Entity Pending the Closing. The
Acquired Entity and the Sellers, jointly and severally, covenant and agree that,
except as otherwise expressly required or permitted by the terms of this
Agreement, between the date of this Agreement and the Closing, the business of
the Acquired Entity shall be conducted only in, and the Acquired Entity shall
not take any action except in, the ordinary course of business consistent with
past practice. The Acquired Entity and the Sellers shall use its or their
reasonable best efforts to preserve intact the Acquired Entity's business
organizations, to keep available the services of their current officers,
employees and consultants, and to preserve their present relationships with
Persons with which they have business relations. By way of amplification and not
limitation, the Acquired Entity shall not, except as expressly required or
permitted by the terms of this Agreement, between the date of this Agreement and
the Closing, directly or indirectly, do or propose or agree to do any of the
following (except to the extent such is contemplated to be done herein) without
the prior written consent of Brassie:
(a) amend or otherwise change its Articles of
Incorporation, Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of any of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice; or any shares of its capital stock of any class,
or any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest, of
it;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or other securities;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock or other
securities; or acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation or acquisition of stock or assets) any interest
in any corporation, partnership or other business organization or division
thereof or any assets;
(e) except in the ordinary course of business consistent with
past practice, (i) sell, lease or transfer any of its properties or assets, (ii)
make any investment either by purchase of stock or securities, contributions of
capital or property transfer, or purchase any property or
20
25
<PAGE>
assets of any other Person; (iii) make or obligate itself to make capital
expenditures; (iv) incur any obligations or liabilities including, without
limitation, any indebtedness for borrowed money, issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become responsible
for, the obligations of any Person, or make any loans or advances; (v) modify,
terminate, amend or enter into any Contract other than as expressly required or
permitted herein; or (vi) impose any security interest or other Lien on any of
its Assets;
(f) other than in the ordinary course of business consistent
with past practice, pay any bonus to its officers or employees, or increase the
compensation payable or to become payable to its officers or employees or,
except as presently bound to do, grant any severance or termination pay to, or
enter into any employment or severance agreement with, any of its directors,
officers or employees, or establish, adopt, enter into or amend or take any
action to accelerate any rights or benefits under any collective bargaining,
bonus, profit sharing trust, compensation, stock option, restricted stock
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employees;
(g) take any action with respect to accounting policies or
procedures other than in the ordinary course of business consistent with past
practice;
(h) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
liabilities reflected or reserved against in its financial statements, as
appropriate, or liabilities incurred after the date thereof in the ordinary
course of business consistent with past practice, or delay paying any amount
payable beyond forty-five (45) days following the date on which it is due,
except to the extent being contested in good faith;
(i) enter into any transaction with any of the Sellers or
an Affiliate thereof;
(j) make or pledge any charitable contributions in excess
of $5,000 in the aggregate; or
(k) agree, in writing or otherwise, to take or authorize any
of the foregoing actions or any action which would make any representation or
warranty in Article III untrue or incorrect in any respect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or
21
26
<PAGE>
appropriate to effectuate, carry out and comply with all of the terms of this
Agreement and the transactions contemplated hereby.
5.2 Compliance with Covenants. The Sellers shall cause the Acquired
Entity to comply with all of the covenants of the Acquired Entity under this
Agreement.
5.3 Cooperation. Each of the parties agrees to cooperate with the
others in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by this
Agreement, and to use his or its best efforts to agree jointly on a method to
overcome any objections by any Governmental Authority to any such transactions.
5.4 Access to Information. From the date hereof to Closing, each party
shall afford to each other party and its officers, employees, auditors, counsel
and agents reasonable access at all reasonable times to its properties, offices
and other facilities, to its officers and employees and to all books and
records, and shall furnish such persons with all financial, operating and other
data and information as may be requested.
5.5 Notification of Certain Matters. Each of the parties to this
Agreement shall give prompt notice to the other parties of the occurrence or
non-occurrence of any event which would likely cause any representation or
warranty made by such party herein to be untrue or inaccurate or any covenant,
condition or agreement contained herein not to be complied with or satisfied
(provided, however, that, any such disclosure shall not in any way be deemed to
amend, modify or in any way affect the representations, warranties and covenants
made by any party in or pursuant to this Agreement).
5.6 Confidentiality; Publicity. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement, the subject matter or terms hereof or any
confidential information or other proprietary knowledge concerning the business
or affairs of any other party which it may have acquired from such party in the
course of pursuing the transactions contemplated by this Agreement without the
prior consent of the other parties hereto; provided, that any information that
is otherwise publicly available, without breach of this provision, or has been
obtained from a third party without a breach of such third party's duties, shall
not be deemed confidential information. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto, except that Brassie may make such public
disclosure as it deems appropriate and Sellers may announce the transaction to
its employees prior to any public announcement by Brassie (in which case,
Brassie will consult with the Acquired Entity prior to making such disclosure).
5.7 No Other Discussions. The Acquired Entity, the Sellers, and their
Affiliates, employees, agents and representatives will not (a) initiate,
encourage the initiation by others of discussions or negotiations with third
parties, or respond to solicitations by third persons relating
22
27
<PAGE>
to any merger, sale or other disposition of any substantial part of the assets,
capital stock (or derivatives thereof), business or properties of the Acquired
Entity (whether by merger, consolidation, sale of stock, sale of assets, or
otherwise), or (b) enter into any agreement or commitment (whether or not
binding) with respect to any of the foregoing transactions. The Acquired Entity
and the Sellers will immediately notify Brassie if any third party attempts to
initiate any solicitation, discussion, or negotiation with respect to any of the
foregoing transactions, and shall provide Brassie with the name of such third
parties and the terms of any offers.
5.8 Restrictive Covenants. The Acquired Entity and Sellers,
individually (a "Restricted Party") and collectively, agree as follows:
(a) Competitive Business. Each Restricted Party hereby agrees
that for a period of two (2) years following the Closing, each Restricted Party
will not engage in the business of or perform any services whatsoever pertaining
or relating in any way to the Business or services of the Acquired Entity or
Brassie, or become financially interested in any such business or services,
whether directly or indirectly as an owner, partner, trustee, beneficiary,
stockholder, officer, director, employee or agent; provided, however, that
performing services for or owning an interest in the Acquired Entity, Brassie,
or an Affiliate of Brassie, shall not be in violation of this covenant;
provided, further, however, this Section 5.8(a) shall not be applicable to Louis
Katon.
(b) Hiring. Each Restricted Party hereby agrees that for a
period of two (2) years following the Closing, the Restricted Party will not
attempt to hire any employee of Brassie or any Affiliate or otherwise encourage
or attempt to encourage any such employee to leave the Acquired Entity's,
Brassie's, or such Affiliates' employ.
(c) Solicitation. Each Restricted Party hereby further agrees
that for a period of two (2) years following the Closing, the Restricted Party
will not, in any manner or at any time, solicit or encourage any person, firm,
corporation, or other business entity that do business with Brassie, the
Acquired Entity, or any Affiliates of either Brassie or Acquired Entity, to
cease doing such business.
(d) Covenants Independent. Each restrictive covenant on the
part of a Restricted Party set forth in this Section 5.8 shall be construed as a
covenant independent of any other covenant or provisions of this Agreement or
any other agreement which the Restricted Party may have, fully performed and not
executory, and the existence of any claim or cause of action by any Restricted
Party against the Acquired Entity, Brassie, or any Affiliate, whether predicated
upon another covenant of this Agreement or otherwise, shall not constitute a
defense to the enforcement by the other Sellers of any other covenant.
(e) Divisibility of Covenant Areas and Periods. If any portion
of the restrictive covenants contained herein is held to be unreasonable,
arbitrary or against public policy, each covenant shall be considered divisible
both as to time and geographical area; and each one (1)
23
28
<PAGE>
month of the specified period shall be deemed a separate period of time and each
county of the geographical area, so that the maximum lesser time period and
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary, or against public policy.
(f) Injunctive and Equitable Relief. Each Restricted Party
recognizes and hereby expressly agrees that the extent of damages to Brassie or
any Affiliate in the event of a breach by a Restricted Party of any restrictive
covenant set forth herein would be impossible to ascertain, that the irreparable
harm arising out of any breach shall be irrebuttably presumed, and that the
remedy at law for any breach will be inadequate to compensate Brassie or any
Affiliate. Consequently, each Restricted Party hereby agrees that in the event
of a breach of any such covenant, in addition to any other relief to which
Brassie or any Affiliate may be entitled, the Brassie and any Affiliate shall be
entitled to enforce the covenant by injunctive or other equitable relief ordered
by a court of competent jurisdiction.
5.9 Trading in Brassie Common Stock. Except as otherwise expressly
consented to in writing by Brassie, from the date of this Agreement until the
Closing Date, neither the Acquired Entity, the Sellers, nor any of their
Affiliates will directly or indirectly purchase or sell (including short sales)
any shares of Brassie Common Stock in any transactions effected on Nasdaq or
otherwise. The Sellers agree that for a period of two years after the Closing
Date, the Sellers will not directly or indirectly sell or purchase or enter into
any agreement, contract or arrangement to sell or purchase any put or call
options or other derivative securities (including shorts sales) with respect to
Brassie Common Stock or enter into any other agreements, contracts or
arrangements providing for the alteration of the shareholders' investment risk
with respect to any shares of Brassie Common Stock; provided, however, that the
foregoing shall not prohibit the Sellers from making outright, unhedged sales or
purchases of Brassie Common Stock after the Closing.
5.10 Employment Agreements. At the Closing, Brassie, the Acquired
Entity, or its assignee, shall enter into an employment agreement in the forms
attached hereto as Schedule 5.10 with each of the Sellers.
5.11 Real Property Lease. At the Closing, the Acquired Entity, or its
assignee, shall enter into a lease agreement for the real property and any
improvements thereon where the Acquired Entity presently conducts its Business
in the form attached hereto as Schedule 5.11 with the Sellers. The Lease shall
be for an eight (8) year term and shall provide for a renewal option for an
additional five (5) year period.
5.12 Lease Letter of Credit. On the execution date of the Lease set
forth in Section 5.11 above, Brassie shall cause to be delivered to Sellers a
Letter of Credit (the "Lease Letter of Credit"), which Lease Letter of Credit
shall secure the amounts owed under the Lease. The Lease Letter of Credit shall
be in the aggregate amount of four times the total annual rental under the Lease
(the "Initial Letter of Credit Amount") during the first year of the term of the
Lease and shall be reduced on each anniversary thereof in the amount of 25% of
the Initial Letter of Credit
24
29
<PAGE>
Amount. On the fourth annual anniversary date of the Lease, Brassie shall be
entitled to the full release of the Lease Letter of Credit, and Sellers shall
promptly return the same to Brassie.
5.13 Shareholder and Director Vote. The Sellers, in executing this
Agreement, consent as directors and shareholders (as applicable) of the Acquired
Entity, to the Acquisition and other transactions contemplated hereby, waive
notice of any meeting in connection therewith, and hereby release and waive all
rights with respect to the transactions contemplated hereby under any agreements
relating to the sale or purchase of the Purchased Shares of the Acquired Entity.
5.14 Working Capital. The Acquired Entity and the Sellers covenant and
agree that, on the Closing Date, the Working Capital of the Acquired Entity
shall be equal to or exceed Dollars ($ ). Should the Working Capital on the
Closing Date be less than Dollars ($ ), Brassie shall be entitled to the
shortfall as Indemnifiable Damages (as defined in Section 8.1) without regard to
the Indemnification Threshold. "Working Capital" shall mean the amount, if any,
by which the aggregate of the Current Assets of the Acquired Entity exceeds the
aggregate of the Current Liabilities of the Acquired Entity being acquired
hereunder. "Current Assets" shall mean all current assets of the Acquired Entity
determined in accordance with GAAP; "Current Liabilities" shall mean the current
liabilities of the Acquired Entity determined in accordance with GAAP (excluding
any reserve for LIFO inventories).
5.15 Due Diligence Review. Brassie shall be entitled to conduct prior
to Closing a due diligence review of the assets, properties, books and records
of the Acquired Entity and an environmental assessment of the Owned Properties
and Leased Premises, if applicable (hereinafter referred to as "Environmental
Assessment"). The Environmental Assessment may include, but not be limited to, a
physical examination of the Owned Properties and Leased Premises and any
structures, facilities, or equipment located thereon, soil samples, ground and
surface water samples, storage tank testing, review of pertinent records
(including but not limited to, off-site disposal records and manifests),
documents, and Licenses of the Acquired Entity. The Sellers and the Acquired
Entity shall provide Brassie or its designated agents or consultants with
reasonable access to such property as Brassie, its agents or consultants require
to conduct the Environmental Assessment. Brassie's failure or decision not to
conduct any such Environmental Assessment shall not affect any representation or
warranty of the Acquired Entity or the Sellers under this Agreement.
5.16 Certain Tax Matters. The Sellers shall duly prepare or cause to be
prepared, and file or cause to be filed, on a timely basis, all Tax Returns for
the Acquired Entity for any period ending on or before Closing. The Sellers
shall provide such Tax Returns to Brassie for review at least thirty (30)
business days prior to their due date (including extensions where applicable).
The Sellers shall not file any amended Tax Returns with respect to the Acquired
Entity without the prior written consent of Brassie, which consent shall not be
unreasonably withheld. After Closing, each party shall provide the other parties
with such information and records and access to such of its officers, directors,
employees and agents as may be reasonably requested by the
25
30
<PAGE>
other parties in connection with the preparation of any tax return or any audit
or other proceeding relating to the Acquired Entity.
5.17 Agreements of Affiliates. The Sellers hereby agree to comply with
the restrictions imposed upon affiliates of the Acquired Entity pursuant to Rule
144 under the Securities Act.
5.18 Section 338(h)(10) Election. The Sellers agree, if requested by
Brassie, to join with Brassie in making an election under Section 338(h)(10) of
the Internal Revenue Code and the Treasury Regulations thereunder (and any
corresponding election elections under state or local tax law) (collectively, a
"Section 338(h)(10) Election") with respect the Acquisition of the Purchased
Shares. Brassie will pay any liability of Sellers or the Acquired Entity for tax
resulting solely from the application to it of Treasury Regulation
ss.1.338(h)(10)-1(e)(5), attributable to the making of the Section 338(h)(10)
Election.
5.19 Securities Laws Matters. Brassie covenants to remain current in
its reporting obligations under the Exchange Act for two (2) years following the
Closing Date.
5.20 Distributions to Sellers. Prior to or at the Closing, the Acquired
Entity shall have transferred, conveyed, and assigned unto the Sellers all
right, title, and interest in and to The Ridge Club bond and all key man life
insurance as specified on Schedule 5.20 and allocated in accordance therewith.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF BRASSIE
The obligations of Brassie to effect the Acquisition and the other
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part by Brassie:
6.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Acquired Entity and the
Sellers in this Agreement shall be true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of that time except that those representations and warranties which address
matters only as of particular date shall remain true and correct as of such
date. The Acquired Entity and the Sellers shall have performed or complied with
all of their obligations required by this Agreement to be performed or complied
with at or prior to the Closing Date. The Acquired Entity and the Sellers shall
have delivered to Brassie a certificate, dated as of the Closing Date, (which in
case of the Acquired Entity shall be duly signed by its President and Secretary)
certifying that such representations and warranties are true and correct and
that all such obligations have been performed and complied with.
26
31
<PAGE>
6.2 No Material Adverse Change or Destruction of Property. Between the
date hereof and the Closing Date; (a) there shall have been no Material Adverse
Change to the Acquired Entity, (b) there shall have been no adverse federal,
state or local legislative or regulatory change having a Material Adverse Effect
on the services, products or business of the Acquired Entity, and (c) none of
the Assets of the Acquired Entity shall have been damaged by fire, flood,
casualty, act of God or the public enemy or other cause (regardless of insurance
coverage for such damage) which damages may have a Material Adverse Effect on
the Acquired Entity, and the Acquired Entity and the Sellers shall have
delivered to Brassie a certificate, dated as of the Closing Date, to that
effect.
6.3 Corporate Certificate. The Acquired Entity and the Sellers shall
have delivered to Brassie (i) copies of the Articles of Incorporation of the
Acquired Entity certified by the Massachusetts Secretary of State no longer than
fifteen (15) days prior to the Closing Date and copies of the Bylaws of the
Acquired Entity as in effect immediately prior to the Closing Date, (ii) copies
of resolutions adopted by the Board of Directors and the shareholders of the
Acquired Entity authorizing the transactions contemplated by this Agreement, and
(iii) a certificate of good standing of the Acquired Entity issued by the State
of Massachusetts and each other state in which it is qualified to do business as
of a date not more than five (5) days prior to the Closing Date, and all of such
documents as to the Acquired Entity shall be certified as of the Closing Date by
the Secretary of the Acquired Entity as being true, correct and complete.
6.4 Consents. The Acquired Entity, the Sellers, and Brassie shall have
received consents to the Acquisition and other transactions contemplated hereby
and waivers of rights to terminate or modify any material rights or obligations
of the Acquired Entity or the Sellers, from any Person from whom such consent or
waiver is required, including without limitation, under any Material Contract
listed or required to be listed in Schedule 3.23 or any other law or regulation
as of a date not more than five (5) days prior to the Closing, or who as a
result of the transactions contemplated hereby, would have such rights to
terminate or modify such Contracts or instruments, either by the terms thereof
or as a matter of law. Brassie shall have obtained other approvals required
under state laws and all other Governmental Authorities with respect to the
transactions contemplated hereby.
6.5 Securities Laws. Brassie shall have received all necessary consents
and otherwise complied with any state Blue Sky or securities laws applicable to
the issuance of the Brassie Shares in connection with the transactions
contemplated hereby.
6.6 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Acquisition or other transactions hereunder, or which, in the reasonable
judgment of Brassie, makes it inadvisable to proceed with the transactions
contemplated hereby.
6.7 Board Approval. The Board of Directors of Brassie shall have
authorized and approved this Agreement and the transactions contemplated hereby.
27
32
<PAGE>
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE ACQUIRED ENTITY AND THE SELLERS
The obligations of the Acquired Entity and the Sellers to effect the
Acquisition and the other transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions, any
or all of which may be waived in whole or in part by the Acquired Entity and the
Sellers.
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Brassie contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except (i) for changes specifically permitted by this Agreement, and (ii)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Brassie shall
have performed and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date.
Brassie shall have delivered to the Sellers a certificate, dated as of the
Closing Date, and signed by an executive officer, certifying that such
representations and warranties are true and correct and that all such
obligations have been performed and complied with.
7.2 Brassie Shares. On the Closing Date, Brassie shall have issued all
of the Brassie Shares and shall have delivered to the Sellers certificates for
the Brassie Shares as described in Section 2.4, issued to him hereunder.
7.3 No Order or Injunction. There shall not be issued and in effect by
or before any court or other governmental body an order or injunction
restraining or prohibiting the transactions contemplated hereby.
ARTICLE VIII
INDEMNIFICATION
8.1 Agreement by the Sellers for Indemnification. The Sellers, jointly
and severally, agree to indemnify and hold Brassie and its stockholders,
directors, officers, employees, attorneys, agents and Affiliates harmless from
and against the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including, without limitation, related counsel and
paralegal fees and expenses) incurred or suffered by Brassie arising out of,
relating to, or resulting, from (i) any breach of a representation or warranty
made by the Acquired Entity or the Sellers in or pursuant to this Agreement,
(ii) any breach of the covenants or agreements made by the Acquired
28
33
<PAGE>
Entity or the Sellers in or pursuant to this Agreement, (iii) any inaccuracy in
any certificate, instrument or other document delivered by the Acquired Entity
or the Sellers as required by this Agreement; or (iv) any Excluded Liabilities
(collectively, "Indemnifiable Damages"). Without limiting the generality of the
foregoing, with respect to the measurement of Indemnifiable Damages, Brassie,
its stockholders, directors, officers, employees, attorneys, agents, and
Affiliates shall have the right to be put in the same pre-tax consolidated
financial position as they would have been in if the breach or inaccuracy
referenced in the foregoing clauses (i), (ii), (iii) and (iv) that caused such
Indemnifiable Damages had not occurred, taking into consideration insurance
proceeds actually received by Brassie or agree to be paid to Brassie.
Notwithstanding the foregoing provisions, no claim for Indemnifiable Damages
(except for claims under clauses (ii) and (iv) of this Section 8.1 and claims
under Section 3.18, which may be asserted without regard to the Indemnification
Threshold) shall be asserted by Brassie or any other Person, until the aggregate
of all Indemnifiable Damages exceeds the sum of Twenty-five Thousand and No/100
Dollars ($25,000.00) (the "Indemnification Threshold"), in which case Brassie
shall be entitled to Indemnifiable Damages in excess of Fifteen Thousand and
No/100 Dollars ($15,000.00).
8.2 Survival of Representations and Warranties. Each of the
representations and warranties made by the Acquired Entity and the Sellers in
this Agreement or pursuant hereto shall survive for two (2) years following the
Closing Date, except that the representations and warranties in Section 3.12,
Section 3.17, and Section 3.18 shall survive for the respective statute of
limitations. No claim for the recovery of Indemnifiable Damages may be asserted
by Brassie after such representations and warranties shall thus have expired;
provided, however, that claims for Indemnifiable Damages first asserted within
the applicable period shall not thereafter be barred. Notwithstanding any
knowledge of facts determined or determinable by any party by investigation,
each party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any other documents or papers delivered in connection herewith.
Each representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement. Each of the representations and warranties of Brassie
shall expire on the Closing Date.
8.3 Remedies Cumulative; Waiver. The remedies provided herein shall be
the sole remedies for breach of contract, but shall not preclude Brassie from
asserting any other right, or seeking any other remedies against the Sellers,
including remedies for fraud and injunctive relief. The Sellers hereby waive and
right to contribution or any other similar right they may have against the
Acquired Entity as a result of their Agreement to Indemnify in this Article
VIII.
8.4 Defense of Third Party Claims. With respect to each third party
claim for which Brassie seeks indemnification under this Article VIII (a "Third
Party Claim"), Brassie shall give prompt notice to the Sellers of the Third
Party Claim, provided that failure to give such notice promptly shall not
relieve or limit the obligations of the Sellers unless the Sellers has been
materially prejudiced thereby (and such failure to notify the Sellers will not
relieve them from any other liability they may have to Brassie). If the remedy
sought in the Third Party Claim is solely money damages, or if Brassie otherwise
permits, then the Sellers at their sole cost and
29
34
<PAGE>
expense, may, upon notice to Brassie within fifteen (15) days after the Sellers
receives notice of the Third Party Claim, assume the defense of the Third Party
Claim. If the Sellers assumes the defense of a Third Party Claim, then the
Sellers shall select counsel reasonably satisfactory to Brassie to conduct the
defense. The Sellers shall not consent to a settlement of, or the entry of any
judgment arising from, any Third Party Claim, unless (i) the settlement or
judgment is solely for money damages and the Sellers admit in writing their
liability to hold Brassie harmless from and against any losses, damages,
expenses and liabilities arising out of such settlement or judgment or (ii)
Brassie consents thereto, which consent shall not be unreasonably withheld. The
Sellers shall provide Brassie with fifteen (15) days prior notice before they
consent to a settlement of, or the entry of a judgment arising from, any Third
Party Claim. Brassie shall be entitled to participate, at its own expense, in
the defense of any Third Party Claim, the defense of which is assumed by the
Sellers with their own counsel and at their own expense. With respect to Third
Party Claims in which the remedy sought is not solely money damages and Brassie
does not permit the Sellers to assume the defense, the Sellers shall, upon
notice to Brassie within fifteen (15) days after the Sellers receive notice of
the Third Party Claim, be entitled to participate in the defense with his own
counsel at his own expense. If the Sellers do not assume or participate in the
defense of any Third Party Claim in accordance with the terms of this Section,
then the Sellers shall be bound by the results obtained by Brassie with respect
to the Third Party Claim. The parties shall cooperate in the defense of any
Third Party Claim.
ARTICLE IX
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after the Closing Date of the Brassie Shares:
9.1 Disposition of Shares. The Sellers represent and warrant that the
shares of Brassie Common Stock being acquired hereunder will not be sold or
otherwise disposed of, except (a) pursuant to an exemption from the registration
requirements under the Securities Act, (b) in accordance with Rule 144 under the
Securities Act, or (c) pursuant to an effective registration statement filed by
Brassie with the SEC under the Securities Act. To the extent the Sellers comply
with the provisions of Rule 144 under the Securities Act in effecting sales of
the Brassie Shares, Brassie agrees to provide its transfer agent with
appropriate instructions and/or opinions of counsel in order for the Sellers to
sell, transfer and/or dispose of the Brassie Shares in accordance with Rule 144.
9.2 Legend. The certificates representing the Brassie Shares shall bear
the following or similar legend as used by Brassie at the time:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
30
35
<PAGE>
"ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF BY THE HOLDER EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT AND IN COMPLIANCE
WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT
THERETO, (B) IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR (C)
IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Brassie may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
ARTICLE X
DEFINITIONS
10.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, contract, lease, note,
mortgage, indenture, loan agreement, franchise agreement, covenant,
employment agreement, license, instrument, purchase and sales order,
commitment, undertaking, obligation, whether written or oral, express
or implied.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Environmental Costs" shall mean any and all expenses, costs,
damages, liabilities, or obligations (including, without limitation,
fees and expenses of counsel) incurred by, under or pursuant to any
Environmental Laws or related to the Discharge, Handling, presence or
clean up of Hazardous Substances arising as a result of events
occurring or facts or circumstances arising or existing on or prior to
the Closing Date (whether or not in the ordinary course of business),
including and related to those matters set forth in Schedule 3.12.
31
36
<PAGE>
"Excluded Liabilities" shall mean (i) any obligations and
liabilities of the Acquired Entity, absolute or contingent, known or
unknown, other than Designated Liabilities; (ii) any liability or
obligation of the Acquired Entity arising under this Agreement; (iii)
any liability or obligation of the Acquired Entity relating to any
default under any Designated Liability to the extent such default
existed and was not cured prior to the Closing; (iv) any liability or
obligation of the Acquired Entity with respect to, or arising out of,
any employee benefit plan, executive deferred compensation plan, or any
other plans or arrangements for the benefit of any employees or
officers of the Acquired Entity (except for those listed on Schedule
3.17); (v) any liability or obligation of the Acquired Entity to the
Sellers or any Affiliate of the Acquired Entity or the Sellers or to
any party claiming to have a right to acquire any shares of capital
stock or other securities convertible into or exchangeable for any
shares of capital stock of the Acquired Entity, and (vi) any
Environmental Costs or Litigation Costs.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited to,
any conditional sale or other title retention agreement any lease in
the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable law
or any jurisdiction in connection with such mortgage, pledge, security
interest, encumbrance, lien or charge).
"Litigation Costs" shall mean any and all expenses, costs,
damages, liabilities, or obligations (including, without limitation,
fees and expenses of counsel) incurred in connection with any action,
suit, or other legal or administrative proceeding or governmental
investigation arising as a result of events occurring or facts or
circumstances arising or existing on or prior to the Closing Date
(whether or not in the ordinary course of business), including those
matters set forth on Schedule 3.11.
"Material Adverse Change (or Effect)"means a change (or
effect), in the condition (financial or otherwise), properties, assets,
liabilities, rights, obligations, operations, business or prospects
which change (or effect) individually or in the aggregate, is
materially adverse to such condition, properties, assets, liabilities,
rights, obligations, operations, business or prospects.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, estate,
trust, unincorporated association, joint venture, Governmental
Authority or other entity, of whatever nature.
32
37
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Tax.
"Taxes" means all taxes, fees or other assessments, including,
but not limited to, income, excise, property, sales, use, franchise,
intangible, payroll, withholding, social security and unemployment
taxes imposed by any federal, state, local or foreign government
agency, and any interest or penalties related thereto.
10.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) by mutual written consent of all of the parties
hereto at any time prior to the Closing; or
(b) by Brassie upon delivery of written notice to the Acquired
Entity and the Sellers in accordance with Section 12.1 of this Agreement in the
event of a material breach by the Acquired Entity or the Sellers of any
provisions of this Agreement, including covenants, warranties or
representations; or
33
38
<PAGE>
(c) by the Acquired Entity and the Sellers upon delivery of
written notice to Brassie in accordance with Section 12.1 of this Agreement in
the event of a material breach by Brassie of any provision of this Agreement,
including covenants, warranties or representations; or
(d) by (i) Brassie or (ii) the Acquired Entity and the Sellers
upon delivery of written notice in accordance with Section 12.1 of this
Agreement, if the Closing shall not have occurred by March 9, 1998.
11.2 Effect of Termination. Except for the provisions of Article VIII,
in the event of termination of this Agreement pursuant to Section 11.1, this
Agreement shall forthwith become void and of no further force and effect, and
the parties shall be released from any and all obligations hereunder; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage prepaid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage
prepaid) or guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which any party
shall designate in writing to the other parties):
(a) if to Brassie to:
One Tampa City Center
201 N. Franklin Street, Suite 200
Tampa, Florida 33602
Attn: Jeremiah Daley, President
Telecopy: (813) 222-3434
34
39
<PAGE>
with a copy to:
Annis, Mitchell, Cockey, Edwards & Roehn
One Tampa City Center, Suite 2100
P.O. Box 3433
Tampa, FL 33601
Attn: Fred S. Ridley, Esquire
Telecopy: (813) 223-9067
(b) If to the Sellers to:
===============================
===============================
Telecopy: (___) _______________
with a copy to:
===============================
===============================
Telecopy: (___) _______________
12.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto) and other documents delivered at Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matters and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
Schedules and Exhibits constitute a part hereof as though set forth in full
above.
12.3 Expenses. Except as otherwise provided herein, the Sellers shall
pay their own and the Acquired Entity's fees and expenses, including counsel
fees incurred in connection with this Agreement or any transaction contemplated
hereby. Brassie shall pay its own fees and expenses, including its own counsel
fees.
12.4 Amendment: Waiver. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or
35
40
<PAGE>
under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts.
12.5 Binding Effect: Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned or delegated by the Acquired Entity or the Sellers
without the prior written consent of Brassie. Brassie may assign all or any
portion of its rights hereunder to one or more of its wholly owned subsidiaries.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
12.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever, the words "include," "includes," or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
12.8 Governing Law: Interpretation. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of Florida applicable to contracts executed and to be wholly performed
within such State.
12.9 Jurisdiction.
(a) The parties to this Agreement agree that any suit, action
or proceeding arising out of, or with respect to, this Agreement or any judgment
entered by any court in respect thereof shall be brought in the courts of
Hillsborough County, Florida or in the U.S. District Courts for the Middle
District of Florida and the Acquired Entity and the Shareholder hereby
irrevocably accept the exclusive personal jurisdiction of those courts for the
purpose of any suit, action or proceeding.
(b) In addition, Brassie, the Acquired Entity and the Sellers
each hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it or he may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or any
judgment entered by any court in respect thereof brought in Hillsborough County,
Florida or the U.S. District Courts for the Middle District of Florida, and
hereby further irrevocably waives any claim that any suit, action or proceedings
brought in any such court has been brought in an inconvenient forum.
36
41
<PAGE>
12.10 Arm's Length Negotiations. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions, and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advise of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
The parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first above written.
BRASSIE GOLF CORPORATION,
a Delaware corporation
By:
Name:
Title:
MILLER GOLF, INC., a Massachusetts corporation
By:
Name: Robert Marchetti
Title: President
Robert Marchetti, Individually
Louis Katon, Individually
John Carroll, Individually
37
42
<PAGE>
EXHIBIT 10.1
PRIVATE PLACEMENT PURCHASE AGREEMENT
Brassie Golf Corporation (the "Company")
One Tampa City Center
201 North Franklin Street, Suite 200
Tampa, Florida 33602
re: Purchase of Units
Gentlemen:
1) Certain Representations.
a) The undersigned ("Subscriber") has reviewed the filings which the Company has
made with the Securities Exchange Commission during the past 12 months.
Subscriber has had the opportunity to discuss the Company's affairs with the
Company's officers.
b) The Company represents and warrants to the Subscriber that all such filings
are correct and accurate in all material respects and in all material respects
state all facts necessary to make such filings not misleading. The Company
further represents and warrants that:
i) there has been no material adverse change in the business, assets or
financial condition of the Company since the most recent such filing, except for
adverse changes in the Company's financial condition and results of operations
since September 30, 1997;
ii) the Company has the full power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby, all proceedings required
to be taken by it or its stockholders to authorize the execution, delivery and
performance of this Agreement and the agreements relating hereto have been
properly taken and this Agreement constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms; and
iii) neither the execution, delivery nor performance of this Agreement by the
Company will, with or without the giving of notice or the passage of time, or
both, conflict with, result in a default, right to accelerate or loss of rights
under, or result in the creation of any lien, charge or encumbrance pursuant to,
any provision of the Company's certificate of incorporation or by-laws or any
franchise, lien, deed of trust, lease, license, agreement, understanding, law,
rule or regulation or any order, judgment or decree to which the Company is a
party or by which it may be bound or affected.
2) Use of Proceeds. The net proceeds of this offering will be used exclusively
as set forth in a certificate with respect thereto which has been signed by
Jerry Daly and Joseph Cellura which confirms the foregoing.
3) The Units.
a) Each Unit consists of one secured note in the principal amount of $55,000 and
in the form of Exhibit A (a "Note"), and warrants in the form of Exhibit B to
purchase 27,000 shares of common stock of the Company ("common stock"). Such
warrants, together with the Mueller Warrants referred to below, are referred to
herein as the "Warrants."
43
<PAGE>
b) The term "Purchasers" as used herein means Subscriber and other subscribers
who in the aggregate are purchasing or prior to June 30, 1998 will purchase a
minimum aggregate of 50 Units and a maximum of 100 Units under agreements of the
same tenor as this Agreement. The term "Notes" means the Notes purchased by all
Purchasers.
c) The Company hereby sells to Subscriber, and Subscriber hereby purchases from
the Company, the number of Units set forth opposite Subscriber's name below.
d) The purchase price of each Unit is $55,000, and is payable in cash at the
Closing.
e) The Company covenants that should it complete the acquisition of all of the
outstanding shares (the "Miller Shares") of Miller Golf, Inc., a Massachusetts
corporation, the Notes to be issued to the Purchasers will thereupon become
secured by a subordinate pledge of the Miller Shares under an agreement
substantially in the form of Exhibit C (the "Lien"). The Lien will be held of
record by Mark Mueller (the "Agent") as agent for the Purchasers. The interest
and voting rights of each Purchaser in and with respect to the Lien will be pro
rata with the outstanding principal amount outstanding under such Purchaser's
Note.
f) Concurrently with the Closing and as a condition to the obligations of
Subscriber hereunder, the Company shall cause Annis, Mitchell, Cockey, Edwards &
Roehn to deliver to the Subscriber an opinion of such counsel (which opinion
shall be satisfactory to counsel to Subscriber) to the effect that the Note, the
Warrants, this Agreement and the Lien are valid, binding and enforceable in
accordance with their respective terms, that (except for a lien in favor of the
seller of the Miller Shares to the Company) the Lien is superior to and are not
subordinate to or on a parity with any other liens or claims then in effect or
which may arise thereafter, that the Lien has been perfected by possession and
by any requisite UCC or other filings, and that the shares issuable on exercise
of the Warrants will when issued be duly and validly issued, fully paid and
non-assessable.
4) The Agent.
a) The Agent is acting as agent solely for the convenience of Purchasers. He
makes no representation or endorsement regarding the Lien or the value thereof,
or the potential of making any recovery in respect of the Lien, or regarding the
Units or the value thereof. The Agent is not a participant in this offering.
b) The Company will in advance pay all of Agent's fees (at Agent's regular time
charges) and expenses incurred in the performance of his duties hereunder, and
will pay reasonable advances which Agent requires in respect of such fees and
expenses. Purchasers will be jointly and severally responsible for the payment
of such fees of expenses if not promptly paid by the Company. Agent will not
undertake any actions hereunder unless and until such advances and fees has
expenses have been paid in full. The Company and Purchasers will jointly and
severally indemnify the Agent for all costs and expenses, losses and damages.
c) The Agent will be entitled to rely on documents he believes to be genuine.
The Agent shall not be required to take any action unless so directed in writing
by the holders of a majority in interest of the Notes. He may interplead the
Purchasers in courts in the City of New York, for which purpose process may be
served and shall be effective when given by
44
<PAGE>
certified mail. He may resign at any time by notice to one or more
Purchasers.
d) Agent shall have no liability for any action or omission, however wrongful,
unless taken in knowing bad faith.
5) Registration.
a) The Company will on or before July 1, 1998 file a registration statement on
Form S-1 or S-3 (the "Registration Statement") for the public sale of the shares
which are issuable on conversion of the Notes and on exercise of the Warrants.
The Registration Statement shall also cover such indeterminate number of shares
as may be permitted under Rules 416 and 457 under the Securities Act of 1933.
The registration shall be accompanied by blue sky clearances in such states as
Subscriber may reasonably request. The shares to be covered by the Registration
Statement are collectively referred to as the "registered shares."
b) In addition to, and without limiting Subscriber's other remedies, for each
month (pro rated for any part of a month) by which the Company is late in filing
the Registration Statement, the Company will pay to Subscriber promptly upon
demand an amount equal to 1% of the principal amount of the Note.
c) The Company shall use its diligent efforts to cause the Registration
Statement to become effective not later than 120 days after the date of this
Agreement, and to remain effective for two years and thereafter so long as any
Warrants remain exercisable. The registration shall be accompanied by blue sky
clearances in such states as Subscriber may reasonably request. The Company will
file an acceleration request with the SEC no later than three business days
after SEC clearance to do so.
d) The Company shall pay all expenses of the registration hereunder, other than
Subscriber's underwriting discounts.
e) The Company shall supply to Subscriber a reasonable number of copies of all
registration materials and prospectuses. The Company and Subscriber shall
execute and deliver to each other indemnity agreements which are conventional in
registered offerings of this type. The Subscriber shall reasonably cooperate
with the Company in the preparation and filing of the Registration Statement and
appropriate amendments thereto.
f) Subscriber may transfer a proportionate part of its registration rights to a
limited number of permitted transferees of the Units or portions thereof.
g) Once the registration statement is effective, the Company will issue
UNLEGENDED shares of common stock (in form which can be transmitted
electronically if desired by Subscriber):
i) on conversion of the Notes, whether or not such shares are sold
simultaneously with such conversion or exercise; or
ii) in exchange for any legended shares of common stock which were issued on
prior conversion of the Notes.
h) Subscriber covenants that in connection with all sales pursuant to the
Registration Statement it will deliver to the buyer or its agent a copy of the
prospectus which shall constitute a part of the Registration Statement.
45
<PAGE>
i) Should Subscriber from time to time or times give to the Company notice that
it has assigned the Warrants or any portion thereof, the Company shall, within
ten business days after receipt of such notice as provided below, file a
supplement to the registration statement to reflect the name(s) of the
transferee(s) as a selling shareholder.
6) Until the 270th day after the date of the effectiveness of the Registration
Statement, the Company shall not issue any securities pursuant to Regulation D
or Section 4(2) under the Securities Act of 1933, as amended (the "Securities
Act"). So long as any shares of Preferred are outstanding, the Company shall not
issue any securities under Regulation S under the Securities Act.
7) The Company represents that neither the issuance of the Notes and Warrants,
nor the conversion or exercise thereof, will trigger any rights or obligations
under any outstanding securities of the Company.
8) The Company's obligations under this Agreement and under the securities
issuable hereunder shall not be subject to defense, offset or counterclaim for
any matter or thing. All claims by the Company against any Subscriber of such
securities shall be brought by the Company in separate actions for monetary
damages only, and injunctive relief shall not be available.
9) Securities Representations.
a) Subscriber represents and warrants that it is purchasing the Units solely for
investment solely for its own account and not with a view to or for the resale
or distribution thereof except as permitted under the Registration Statement or
as otherwise permitted by law.
b) Subscriber understands that it may sell or otherwise transfer the Units or
the shares issuable thereunder only if such transaction is duly registered under
the Securities Act of 1933, as amended, under the Registration Statement or
otherwise, or if Subscriber shall have received the favorable opinion of counsel
to the Subscriber, which opinion shall be reasonably satisfactory to counsel to
the Company, to the effect that such sale or other transfer may be made in the
absence of registration under the Securities Act of 1933, as amended, and
registration or qualification in every applicable state. The certificates
representing the Units and the shares will be legended to reflect these
restrictions, and stop transfer instructions will apply. Subscriber realizes
that the Units are not a liquid investment.
c) Subscriber has not relied upon the advice of a "Purchaser Representative" (as
defined in Regulation D of the Securities Act) in evaluating the risks and
merits of this investment. Subscriber has the knowledge and experience to
evaluate the Company and the risks and merits relating thereto.
d) Subscriber represents and warrants that Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated
pursuant to the Securities Act of 1933, as amended, and shall be such on the
date any shares are issued to the Subscriber; Subscriber acknowledges that
Subscriber is able to bear the economic risk of losing Subscriber's entire
investment in the Units and understands that an investment in the Company
involves substantial risks; Subscriber has the power and authority to enter into
this agreement, and the execution and delivery of, and performance under this
agreement shall not conflict with any rule, regulation, judgment or agreement
applicable to the Subscriber; and Subscriber has invested in previous
transactions involving restricted securities.
46
<PAGE>
10) Commissions and Fees.
a) The Company will at the Closing pay to _____________ a cash commission equal
to 10% of the gross proceeds to the Company from the sale of the Units, and a
commission to Mueller & Company, Inc. ("Mueller") warrants in the form of
Exhibit D (the "Mueller Warrants") to purchase 5,000,000 shares of common stock
if all Units are sold, and a pro rata portion thereof if less than all Units are
sold.
b) Legal Fee. At the Closing of the sale of the initial Units to the first
Purchaser, the Company will pay the fees of Oscar D. Folger in connection with
the negotiation and execution of this Agreement.
11) Miscellaneous.
a) This Agreement may not be changed or terminated except by written agreement.
It shall be binding on the parties and on their personal representatives and
permitted assigns. It sets forth all agreements of the parties. It shall be
enforceable by decrees of specific performance (without posting bond or other
security) as well as by other available remedies. This Agreement shall be
governed by, and construed in accordance with, the laws of Florida. The federal
and state courts sitting in the City of Tampa shall have exclusive jurisdiction
over all matters relating to this Agreement. Trial by jury is expressly waived.
b) A
c) ll notices, requests, service of process, consents, and
d) other communications under this Agreement shall be in writing and shall be
deemed to have been delivered (i) on the date personally delivered or (ii) one
day after properly sent by Federal Express, addressed to the respective parties
at their address set forth in this Agreement or (iii) on the day transmitted by
facsimile so long as a confirmation copy is simultaneously forwarded by Federal
Express, in each case addressed to the respective parties at their address set
forth in this Agreement. Either party hereto may designate a different address
by providing written notice of such new address to the other party hereto as
provided above.
e) Except as otherwise expressly set forth herein, each party hereto shall be
responsible for its own expenses with regard to the negotiation and execution of
this Agreement.
Dated: ________________________
SUBSCRIBER:
signature: _________________________
type or print name: ________________
Address: ___________________________
Fax No.
Social Security No: _______________
Number of Units: _________________
47
<PAGE>
AGREED:
BRASSIE GOLF CORPORATION
BY_______________________
48
<PAGE>
Exhibit A
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED, DISPOSED OF OR OFFERED FOR SALE, IN
WHOLE OR IN PART, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THAT ACT COVERING THIS NOTE AND/OR THE COMMON STOCK ISSUABLE UPON CONVERSION
THEREOF, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BRASSIE GOLF
CORPORATION, THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
$----------
CONVERTIBLE SECURED NOTE
(the "Note")
BRASSIE GOLF CORPORATION
BRASSIE GOLF CORPORATION, a _______ corporation (hereinafter called the
"Corporation"), hereby promises to pay to the order of
____________________________ (hereinafter the "Holder") the principal sum of
$____ on December 31, 1999. This Note shall accrue interest at the rate of 7%
per annum, payable on the first day of each calendar quarter commencing July 1,
1998 and on maturity.
This Note is being issued under an Agreement between the Company and
the Holder (the "Subscription Agreement"). The term "Registration Statement"
shall have the meaning attributed thereto in the Subscription Agreement, and the
term "Effective Date" means the date on which the Registration Statement shall
be declared to be effective.
The indebtedness evidenced by this Note is secured by collateral
referred to in the Subscription agreement.
1. Conversion Rights.
(a) The principal and accrued interest on this Note is convertible by Holder
from time to time commencing immediately, in whole or in part, into shares of
common stock of the Company ("Common Stock") at the lesser (the "Conversion
Price") of $.50 per share (the "Cap") or 75% of the average closing bid price
(the "Average Price") of the Common Stock during the last five trading days
prior to conversion.
(b) In the event that the Holder elects to exercise its conversion rights
hereunder, such conversion shall be effective when Holder shall give to the
Company written notice of such election (which may be effected by facsimile).
Holder shall thereafter promptly surrender this Note to the Company for
cancellation against payment of interest accrued through the date of conversion.
The Company shall within three business days after conversion DWAC to Holder the
shares the Common Stock acquired by Holder upon such conversion.
(c) If the Effective Date has not occurred by the 121st day after the date
hereof, then, in addition to the Holder's other remedies:
(i) the interest rate under the Note shall be increased to 18% per annum (or, if
less, the highest rate permitted by law) until the Effective Date, and
49
<PAGE>
(ii) at Holder's option, the Note shall not be repaid by the Company and shall
remain convertible and accrue interest, until such date as is designated by
Holder but not later than 180 days after the Effective Date.
(a) If the Effective Date has not occurred by the 180th day after the date
hereof, then, in addition to the Holder's other remedies, the interest rate
under the Note shall be further increased to 24% per annum (or, if less, the
highest rate permitted by law) until the Effective Date.
(b) The Company covenants to call a special or annual meeting of shareholders
which will be held on or before June 30, 1998 and at which the Company's
shareholders will be asked to approve an increase in the authorized shares of
the Company. The Board of Directors of the Company will recommend that the
shareholders of the Company vote in favor of such approval. This Note shall not
be convertible until such approval is obtained. Should such approval not be
obtained by the close of business on June 30, 1998, then until such approval is
obtained, the Company shall on demand by Holder made at any time or times redeem
any portion of the Notes designated by Holder for redemption (the "Redeemed
Portion") at a redemption price per share equal to 125% of the sum of the
principal amount of this Note and accrued interest. The redemption price shall
be payable within five business days after demand for redemption is made, and
shall accrue interest payable on demand at 11% per annum.
(c) The Company covenants to call a second special meeting of shareholders which
will be held on or before August 31, 1998 and at which the Company's
shareholders will be asked to ratify the issuance of shares on conversion of the
Notes and on exercise of the Warrants issued to the Purchasers and others (each
as defined in the Subscription Agreement). The Board of Directors of the Company
will recommend that the shareholders of the Company vote in favor of such
approval. Until such approval is obtained, the maximum number of shares which
will be issued on conversion of the Notes (as defined in the Subscription
Agreement) and on exercise of the Warrants, for all Purchasers is 9,668,705,
issuable on a first converted-first exercised basis. Should such approval not be
obtained by the close of business on August 31, 1998, then until such approval
is obtained, the Company shall on demand by Holder made at any time or times
redeem any portion of the Notes designated by Holder for redemption (the
"Redeemed Portion") at a redemption price per share equal to 125% of the sum of
the principal amount of this Note and accrued interest. The redemption price
shall be payable within five business days after demand for redemption is made,
and shall accrue interest payable on demand at 11% per annum.
(d) Subject to the approval by shareholders referred to above, the Company shall
reserve for issuance on conversion and exercise of this Note and the Warrant
sufficient shares of Common Stock. The Company shall use its best efforts
promptly to list on NASDAQ all shares of Common Stock which are issued upon
conversion of this Note.
(e) The Note shall be convertible at any time only to the extent that
Holder would not as a result of such exercise beneficially own more
that 4.99% of the then outstanding Common Stock. Beneficial
50
<PAGE>
ownership shall be defined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934. The opinion of counsel to Holder shall prevail in the
event of any dispute on the calculation of Holder's beneficial ownership.
(f) If any capital reorganization or reclassification of the common stock, or
consolidation, or merger of the Company with or into another corporation, or the
sale or conveyance of all or substantially all of its assets to another
corporation shall be effected, then, as a condition precedent of such
reorganization or sale, the Cap shall be appropriately adjusted and the
following provision shall be made: The Holder of the Note shall from and after
the date of such reorganization or sale have the right to receive (in lieu of
the shares of common stock of the Company immediately theretofore receivable
with respect to the Note, upon the exercise of conversion rights), such shares
of stock, securities or assets as would have been issued or payable with respect
to or in exchange for the number of outstanding shares of such common stock
immediately theretofore receivable with respect to the Note (assuming the Note
were then convertible). In any such case, appropriate provision shall be made
with respect to the rights and interests of the Holders to the end that such
conversion rights (including, without limitation, provisions for appropriate
adjustments) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise thereof.
1. The Company covenants and agrees that all shares of Common Stock which may be
issued upon conversion of this Note will, upon issuance, be duly and validly
issued, fully paid and non-assessable and no personal liability will attach to
the holder thereof.
2. Purchase for Investment. The Holder, by acceptance hereof, acknowledges that
the Note (and the Common Stock into which the Note is convertible) has not been
registered under the Act, covenants and agrees with the Company that such Holder
is taking and holding this Note (and the Common Stock into which the Note is
convertible) for investment purposes and not with a view to, or for sale in
connection with, a distribution thereof and that this Note (and the Common Stock
into which the Note is convertible) may not be assigned, hypothecated or
otherwise disposed of in the absence of an effective registration statement
under the Act or an opinion of counsel for the Holder, which counsel shall be
reasonably satisfactory to the Company, to the effect that such disposition is
in compliance with the Act, and represents and warrants that such Holder is an
"accredited investor" that such Holder has, or with its representative has, such
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks in respect of this Note (and the Common Stock
into which the Note is convertible) and is able to bear the economic risk of
such investment.
3. Certain Payments. In the event the Company breaches its obligation to DWAC
shares of Common Stock under this Note upon conversion, or if the Company
breaches its obligation to pay redemption amounts when due, then, without
limiting Holder's other rights and remedies (including, without limitation,
rights and remedies available to Holder upon an event of default), the Company
shall forthwith pay to the Holder an amount accruing at the rate of $1,000 per
day for each day of such breach for each $100,000 principal amount of this Note,
with pro rata payments for principal amounts of less than $100,000.
4. Events of Default and Acceleration of the Note.
(a) An "event of default" with respect to this Note shall exist if any
51
<PAGE>
of the following shall occur, if:
(i) The Company shall breach or fail to comply with any provision of this Note
and such breach or failure shall continue for 15 days after written notice by
any Holder of any Note to the Company.
(ii) A receiver, liquidator or trustee of the Company or of a substantial part
of its properties shall be appointed by court order and such order shall remain
in effect for more than 15 days; or the Company shall be adjudicated bankrupt or
insolvent; or a substantial part of the property of the Company shall be
sequestered by court order and such order shall remain in effect for more than
15 days; or a petition to reorganize the Company under any bankruptcy,
reorganization or insolvency law shall be filed against the Company and shall
not be dismissed within 45 days after such filing.
(iii) The Company shall file a petition in voluntary bankruptcy or request
reorganization under any provision of any bankruptcy, reorganization or
insolvency law, or shall consent to the filing of any petition against it under
any such law.
(iv) The Company shall make an assignment for the benefit of its creditors, or
admit in writing its inability to pay its debts generally as they become due, or
consent to the appointment of a receiver, trustee or liquidator of the Company,
or of all or any substantial part of its properties.
(b) If an event of default referred to in clause (i) shall occur, the Holder
may, in addition to such Holder's other remedies, by written notice to the
Company, declare the principal amount of this Note, together with all interest
accrued thereon, to be due and payable immediately. Upon any such declaration,
such amount shall become immediately due and payable and the Holder shall have
all such rights and remedies provided for under the terms of this Note and the
Subscription Agreement. If an event of default referred to in clauses (ii),
(iii) or (iv) shall occur, the principal amount of this Note, together with all
interest accrued thereon, shall become immediately due and payable and the
Holder shall have all such rights and remedies provided for under the terms of
this Note and the Subscription Agreement.
5. Miscellaneous.
(a) All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telegram, by facsimile,
recognized overnight mail carrier, telex or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows: (a) if to the Holder, to such address
as such Holder shall furnish to the Company in accordance with this Section, or
(b) if to the Company, to it at its headquarters office, or to such other
address as the Company shall furnish to the Holder in accordance with this
Section.
52
<PAGE>
(b) This Note shall be governed and construed in accordance with the laws of the
State of Florida applicable to agreements made and to be performed entirely
within such state.
(c) The Company waives protest, notice of protest, presentment, dishonor, notice
of dishonor and demand.
(d) If any provision of this Note shall for any reason be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this Note shall be construed as if such invalid or
unenforceable provision had never been contained herein.
(e) The waiver of any event of default or the failure of the Holder to exercise
any right or remedy to which it may be entitled shall not be deemed a waiver of
any subsequent event of default or of the Holder's right to exercise that or any
other right or remedy to which the Holder is entitled.
(f) The Holder of this Note shall be entitled to recover its legal and other
costs of collecting on this Note, and such costs shall be deemed added to the
principal amount of this Note.
In addition to all other remedies to which the Holder may be entitled hereunder,
Holder shall also be entitled to decrees of specific performance without posting
bond or other security.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on the
date set forth below
Dated: _____________________
BRASSIE GOLF CORPORATION
By:____________________________________
53
<PAGE>
Exhibit B
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
WARRANT
To Purchase Shares of Common Stock of
Brassie Golf Corporation
DATED: March __, 1998
Number of Shares:
Holder:
Address:
THIS CERTIFIES that, for value received the holder of this Warrant
("Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, to purchase from Brassie Golf Corporation, a Delaware
corporation (the "Company" or "Brassie"), the number of fully paid and
nonassessable shares of the Company's Common Stock (the "Common Stock") set
forth above at the purchase price per share as set forth in Section 1 below
("Exercise Price"). The number of shares and Exercise Price are subject to
adjustment as provided below.
1. Number of Shares; Exercise Price.
(a) Subject to adjustments as provided herein, this Warrant shall be exercisable
for the number of shares of common stock set forth above, at an Exercise Price
per share of $.50.
(b) This Warrant shall be exercisable during the period commencing on the date
hereof and ending on the fourth anniversary of the date of this warrant.
2. Exercise of Warrant. The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time,
or from time to time, during the term hereof as described in Section l above, by
faxed or other written notice thereof, so long as such notice is followed within
three business days by the surrender of this Warrant and a standard form of
Notice of Exercise duly completed and executed on behalf of the holder hereof,
at the office of the Company in Florida (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company), and
payment of the purchase price of the shares thereby purchased in cash or check
reasonably acceptable to the Company. The holder of this Warrant shall be
entitled within five business days after exercise to receive a DWAC for the
number of shares so purchased and, if this Warrant is exercised in part, a
receipt acknowledging tender of the Warrant, with a new Warrant for the
unexercised portion of this Warrant to be issued as soon as reasonably
practicable. The Company agrees that, upon exercise of this Warrant in
accordance with the terms hereof, the shares so purchased shall be deemed to be
issued to such holder as the record owner of such shares as of
54
<PAGE>
the close of business on the date on which this Warrant shall have been
exercised. In the event the Company fails to DWAC shares of Common Stock upon
exercise of this Warrant within such time, then without limiting Holder's other
rights and remedies, the Company shall forthwith pay to the Holder an amount
accruing at the rate of $250 per day for each 10,000 such shares of common stock
subject to this Warrant, with pro rata payments for shares in an amount less
than 10,000. In the event that upon exercise no registration statement is in
effect with respect to this Warrants, the shares issued upon such exercise shall
be appropriately restricted and legended.
3. The Company covenants that all shares which may be issued upon the exercise
of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein).
4. Notwithstanding anything to the contrary contained herein, the holder hereof
shall not have the right to exercise this Warrant so long as and to the extent
that at the time of such exercise, such exercise would cause such holder then to
be the "beneficial owner" of five percent (5%) or more of the Company's then
outstanding Common Stock. For purposes hereof, the term "beneficial owner" shall
have the meaning ascribed to it in Section 13(d) of the Securities Exchange Act
of 1934, as amended. The opinion of legal counsel to the holder of this Warrant
shall prevail in all matters relating to the amount of such holder's beneficial
ownership.
5. Shareholders Meetings.
(a) The First Meeting.
(i) The Company covenants to call a special or annual meeting of shareholders
which will be held on or before June 30, 1998 and at which the Company's
shareholders will be asked to approve an increase in the authorized shares of
the Company. The Board of Directors of the Company will recommend that the
shareholders of the Company vote in favor of such approval. This Warrant shall
not be exercisable until such approval is obtained.
(ii) Should such approval not be obtained by the close of business on June 30,
1998, then until such approval is obtained, the Company shall on demand by
Holder made at any time or times redeem any portion of this Warrant designated
by Holder for redemption (the "Redeemed Portion") at a redemption price per
share equal to the pre-tax profit Holder would have earned had Holder, at the
close of business on the date of its demand for redemption, exercised the
Redeemed Portion and simultaneously sold the shares received on such exercise at
the closing NASDAQ sales price on such date. The redemption price shall be
payable within five business days after demand for redemption is made, and shall
accrue interest payable on demand at 11% per annum.
(iii) The redemption price shall be payable within five business days after
demand for redemption is made, and shall accrue interest payable on demand at
11% per annum.
(b) The Second Meeting.
55
<PAGE>
(i) The Company covenants to call a second special meeting of shareholders which
will be held on or before August 31, 1998 and at which the Company's
shareholders will be asked to ratify the issuance of shares on conversion of the
Notes and on exercise of the Warrants issued to the Purchasers and others (each
as defined in the Subscription Agreement). The Board of Directors of the Company
will recommend that the shareholders of the Company vote in favor of such
approval. Until such approval is obtained, the maximum number of shares which
will be issued on conversion of the Notes (as defined in the Subscription
Agreement) and on exercise of the Warrants, for all Purchasers is 9,668,705,
issuable on a first converted-first exercised basis.
(ii) Should such approval not be obtained by the close of business on August 31,
1998, then until such approval is obtained, the Company shall on demand by
Holder made at any time or times redeem any portion of this Warrant designated
by Holder for redemption (the "Redeemed Portion") at a redemption price per
share equal to the pre-tax profit Holder would have earned had Holder, at the
close of business on the date of its demand for redemption, exercised the
Redeemed Portion and simultaneously sold the shares received on such exercise at
the closing NASDAQ sales price on such date. The redemption price shall be
payable within five business days after demand for redemption is made, and shall
accrue interest payable on demand at 11% per annum.
(iii) The redemption price shall be payable within five business days after
demand for redemption is made, and shall accrue interest payable on demand at
11% per annum.
6. No fractional shares shall be issued upon the exercise of this Warrant. In
lieu of any fractional share to which such holder would otherwise be entitled,
such holder shall be entitled, at its option, to receive either (i) a cash
payment equal to the excess of fair market value for such fractional share above
the Exercise Price for such fractional share (as mutually determined by the
Company and the holder) or (ii) a whole share if the holder tenders the Exercise
Price for one whole share.
7. This Warrant and the Common Stock issuable on exercise of this Warrant (the
"Underlying Shares") may be transferred, sold, assigned or hypothecated, only if
registered by the Company under the Securities Act of 1933 (the "Act") or if the
Company has received from counsel to the Company a written opinion to the effect
that registration of the Warrant or the Underlying Shares is not necessary in
connection with such transfer, sale, assignment or hypothecation. The Warrant
and the Underlying Shares shall be appropriately legended to reflect this
restriction and stop transfer instructions shall apply. The Holder shall through
its counsel provide such information as is reasonably necessary in connection
with such opinion.
8. The holder of this warrant is entitled to certain registration rights under
an Agreement dated of even date herewith (the "Subscription Agreement").
9. Any permitted assignment of this Warrant shall be effected by the Holder by
(i) executing the form of assignment at the end hereof, (ii) surrendering the
Warrant for cancellation at the office of the Company, accompanied by the
opinion of counsel to the Company referred to above; and (iii) unless in
connection with an effective registration statement which covers the sale of
this Warrant and or the shares underlying the Warrant, delivery to the Company
of a statement by the
56
<PAGE>
transferee (in a form acceptable to the Company and its counsel) that such
Warrant is being acquired by the Holder for investment and not with a view to
its distribution or resale; whereupon the Company shall issue, in the name or
names specified by the Holder (including the Holder) new Warrants representing
in the aggregate rights to purchase the same number of Shares as are purchasable
under the Warrant surrendered. Such Warrants shall be exercisable immediately
upon any such assignment of the number of Warrants assigned. The transferor will
pay all relevant transfer taxes. Replacement warrants shall bear the same legend
as is borne by this Warrant.
10. The term "Holder" should be deemed to include any permitted record
transferee of this Warrant.
11. The Company covenants and agrees that all shares of Common Stock which may
be issued upon exercise hereof will, upon issuance, be duly and validly issued,
fully paid and non-assessable and no personal liability will attach to the
holder thereof. The Company further covenants and agrees that, during the
periods within which this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
for issuance upon exercise of this Warrant and all other Warrants.
12. This Warrant shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
13. In the event that as a result of reorganization, merger, consolidation,
liquidation, recapitalization, stock split, combination of shares or stock
dividends payable with respect to such Common Stock, the outstanding shares of
Common Stock of the Company are at any time increased or decreased or changed
into or exchanged for a different number or kind of share or other security of
the Company or of another corporation, then appropriate adjustments in the
number and kind of such securities then subject to this Warrant shall be made
effective as of the date of such occurrence so that the position of the Holder
upon exercise will be the same as it would have been had it owned immediately
prior to the occurrence of such events the Common Stock subject to this Warrant.
Such adjustment shall be made successively whenever any event listed above shall
occur and the Company will notify the Holder of the Warrant of each such
adjustment. Any fraction of a share resulting from any adjustment shall be
eliminated and the price per share of the remaining shares subject to this
Warrant adjusted accordingly.
14. This Warrant shall be governed by and construed in accordance with the laws
of the State of Florida. The federal and state courts in Tampa, Florida shall
have exclusive jurisdiction over this instrument and the enforcement thereof.
Service of process shall be effective if by certified mail, return receipt
requested. All notices shall be in writing and shall be deemed given upon
receipt by the party to whom addressed. This instrument shall be enforceable by
decrees of specific performances well as other remedies.
IN WITNESS WHEREOF, Brassie Golf Corporation has caused this Warrant to
be executed by its officer thereunto duly authorized.
Dated: March __, 1998
BRASSIE GOLF CORPORATION
By:
Title:
57
<PAGE>
