SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Carlyle Golf, Inc.
(Name of Issuer)
Common Stock, Par Value $0.001 per Share
(Title of Class of Securities)
143083103
(Cusip Number)
Kevin G. Levy
201 Main Street, Suite 2500
Fort Worth, Texas 76102
(817) 332-2500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 24, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page. The information required on the
remainder of this cover page shall not be deemed to be "filed" for the purpose
of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall be subject to
all other provisions of the Act (however, see the Notes).
**The total number of shares reported herein is 522,375 which constitutes
approximately 9.7% of the 5,403,899 shares deemed outstanding pursuant to Rule
13d-3(d)(1).
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1. Name of Reporting Person:
Star Point Enterprises, Inc.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / x /
3. SEC Use Only
4. Source of Funds: See Item 3
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: 322,375 (1)
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 322,375 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person: 322,375
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ /
13. Percent of Class Represented by Amount in Row (11): 6.2% (2)
14. Type of Reporting Person: CO
- ----------
(1) Power is exercised through its President, Laurence H. Anton.
(2) Based on the total number of outstanding shares of common stock of the
Issuer as reported in the Issuer's most recent filing on Form 10-KSB
(4,881,524) plus the 322,375 shares issued to Star Point Enterprises,
Inc. by the Issuer as further described in Items 3, 5 and 6.
<PAGE>
1. Name of Reporting Person:
Laurence H. Anton
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / x /
3. SEC Use Only
4. Source of Funds: PF (1)
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Texas
7. Sole Voting Power: 322,375 (2)
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 322,375 (2)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
522,375 (2)(3)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ /
13. Percent of Class Represented by Amount in Row (11): 9.7% (4)
14. Type of Reporting Person: IN
- ----------
(1) Solely with respect to 200,000 shares issuable upon exercise of options
granted to Mr. Anton pursuant to the Stock Option Agreement further
described in Items 3 and 6.
(2) Solely in his capacity as the President of Star Point Enterprises, Inc.
with respect to 322,375 shares.
(3) Includes 200,000 shares issuable upon exercise of options granted to Mr.
Anton pursuant to the Stock Option Agreement further described in Items
3 and 6.
(4) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are
5,403,899 shares of the Stock outstanding.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement relates to shares of Common Stock, par value $0.001 per
share (the "Common Stock"), of Carlyle Golf, Inc. (the "Issuer"). The
principal executive offices of the Issuer are located at 10550 East 54th Ave.
Unit E, Denver, Colorado 80239.
ITEM 2. IDENTITY AND BACKGROUND.
(a) Pursuant to Rules 13d-1(f)(1)-(2) of Regulation 13D-G of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended
(the "Act"), the undersigned hereby file this Schedule 13D Statement on behalf
of Star Point Enterprises, Inc. ("Star Point") and Laurence H. Anton ("L.
Anton"). Star Point and L. Anton are sometimes hereinafter collectively
referred to as the "Reporting Persons."
(b)-(c)
STAR POINT
Star Point is a Texas corporation. Prior to the sale described in Items
3 and 6, the principal business of Star Point had been the manufacture and
distribution of headwear. Following such sale, Star Point will not be
transacting business. The principal business address of Star Point, which
also serves as its principal office, is 8224 White Settlement Road, Fort
Worth, Texas 76108. Pursuant to Instruction C to Schedule 13D of the Act,
the name, residence or business address, and present principal occupation or
employment of each director, executive officer and controlling person of Star
Point are as follows:
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
L. Anton See answer below See answer below
Harriet Anton 8224 White Settlement Road Corporate Secretary
Fort Worth, TX 76108 of Star Point
L. ANTON
L. Anton's principal occupation or employment is serving as the President
of Star Point. L. Anton's business address is 8224 White Settlement Road,
Fort Worth, Texas 76108.
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
(f) All of the natural persons identified in this Item 2 are citizens of
the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Star Point acquired the shares of the Common Stock reported herein from
the Issuer pursuant to the Asset Purchase Agreement by and among the Issuer,
Star Point and L. Anton, dated as of December 31, 1996 (more fully described
in Item 6 hereof, the "Asset Purchase Agreement"). Pursuant to the Asset
Purchase Agreement, Star Point sold substantially all of its assets to the
Issuer.
Pursuant to the Stock Option Agreement between the Issuer and L. Anton,
dated effective as of December 31, 1996 (further described in Item 6 hereof,
the "Stock Option Agreement"), the Issuer granted options to L. Anton for
200,000 shares of the Common Stock, with an exercise price of $2.08 per share
which are exercisable at any time during the five year term of the Stock
Option Agreement. Should L. Anton decide to exercise his options, the total
exercise price to obtain such 200,000 shares would be $416,000.00. Pursuant
to the Stock Option Agreement, the exercise price may be paid in cash or
through a "cashless exercise" by delivery of shares of the Common Stock having
a fair market value equal to the exercise price. Should L. Anton decide to
exercise his options and use cash to pay the exercise price, it is anticipated
that he would use personal funds to do so.
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Persons acquired the shares of the Common Stock reported
herein for investment purposes. Depending on market conditions and other
factors that each of the Reporting Persons may deem material to its investment
decision, such Reporting Person may sell all or a portion of the shares of the
Common Stock that it now owns or hereafter may acquire on the open market or
in private transactions. Depending on these same factors, the Reporting
Persons may purchase additional shares of the Common Stock on the open market
or in private transactions.
Following the closing of the Asset Purchase Agreement, L. Anton was
elected to serve on the Issuer's Board of Directors. See also the description
of the Asset Purchase Agreement and related transaction documents described in
Item 6 hereof.
Except as set forth in this Item 4, the Reporting Persons have no present
plans or proposals that relate to or that would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Act.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)
STAR POINT
The aggregate number of shares of the Common Stock that Star Point owns
beneficially, pursuant to Rule 13d-3 of the Act, is 322,375, which constitutes
approximately 6.2% of the outstanding shares of the Common Stock.
L. ANTON
Because of his position as the President of Star Point and because of his
individual ownership of options to purchase 200,000 shares of Common Stock, L.
Anton may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial
owner of an aggregate of 522,375 shares of the Common Stock, which constitutes
approximately 9.7% of the 5,403,899 shares of the Common Stock deemed
outstanding pursuant to Rule 13d-3(d)(1)(i) under the Act.
To the best of the knowledge of each of the Reporting Persons, none of
the persons named in Item 2 herein is the beneficial owner of any shares of
the Common Stock other than as set forth above.
(b)
STAR POINT
Acting through L. Anton, its President, Star Point has the sole power to
vote or to direct the vote and to dispose or to direct the disposition of
322,375 shares of the Common Stock.
L. ANTON
In his capacity as the President of Star Point, L. Anton has the sole
power to vote or to direct the vote and to dispose or to direct the
disposition of 322,375 shares of the Common Stock.
(c) As further described in Item 6 hereof, on January 24, 1997, Star
Point acquired 322,375 shares of the Common Stock from the Issuer upon the
closing of the Asset Purchase Agreement pursuant to which Star Point sold
substantially all of its assets to the Issuer. In addition, L. Anton entered
into a Stock Option Agreement with the Issuer on January 24, 1997, pursuant to
which L. Anton was granted the right to purchase 200,000 shares of the Common
Stock from the Issuer at an exercise price of $2.08.
Other than as described above and in Item 6 hereof, to the best of the
knowledge of each of the Reporting Persons, none of the persons named in
response to paragraph (a) has effected any transactions in shares of the
Common Stock during the past 60 days.
(d) Each of the Reporting Persons affirms that no person other than such
Reporting Person has the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of, the shares of the Common
Stock owned by such Reporting Person.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
On January 24, 1997 (the "Closing Date"), Star Point, L. Anton and the
Issuer consummated the transactions contemplated by the Asset Purchase
Agreement. In addition, in connection with the transactions contemplated by
the Asset Purchase Agreement, L. Anton and certain persons and entities
associated with him entered into various agreements with the Issuer, including
a Debt Conversion Agreement and Registration Rights Agreement, and in
connection with the Debt Conversion and Registration Rights Agreement, an
Amendment and Waiver of the Terms of the Amended and Restated Articles of
Incorporation of the Issuer with respect to the Preferred Stock (as defined
below), and a Consulting Agreement, and in connection therewith, a Stock
Option Agreement, each as more fully described below.
ASSET PURCHASE AGREEMENT. The description of the Asset Purchase
Agreement that follows is not, and does not purport to be, complete and is
qualified in its entirety by reference to the Asset Purchase Agreement, a copy
of which is attached hereto as Exhibit 10.1.
Pursuant to the Asset Purchase Agreement, the Issuer purchased
substantially all of the assets of Star Point's headwear manufacturing
business located in Fort Worth, Texas. The purchase price for these assets
was approximately $4,784,812, consisting of (i) the assumption of certain
scheduled liabilities of Star Point totalling $3,137,783, (ii) the conversion
of current and long-term debt owed by Star Point to L. Anton and certain
related persons and entities into Convertible Preferred Stock, par value $.001
per share, of the Issuer (the "Preferred Stock") pursuant to the Debt
Conversion and Registration Rights Agreement (as more fully described below)
and (iii) the issuance to Star Point of 322,375 shares of the Common Stock.
In addition, Star Point loaned $1,243,000 to the Issuer pursuant to a
promissory note secured by a mortgage on the building described in the last
sentence of this paragraph. With respect to the repayment os such promissory
note, the Issuer agreed to use its best efforts to obtain additional capital
through the public or private sale of securities within a period of 60 to 120
days following the closing of the Asset Purchase Agreement in an amount
sufficient to permit the Issuer to retain $800,000 and to use remaining
proceeds to pay off the promissory note. Also, pursuant to the Asset Purchase
Agreement, L. Anton, together with Shirley G. Anton, sold a building in which
Star Point conducted its business operations to the Issuer for a purchase
price of $567,364, consisting of a secured promissory note in the original
principal amount of $223,421 and the issuance of 343,943 shares of Preferred
Stock of the Issuer.
DEBT CONVERSION AND REGISTRATION AGREEMENT. The description of the Debt
Conversion and Registration Rights Agreement by and among the Issuer, Star
Point, L. Anton, the Shirley Anton Ten-Year Grit Trust, Shirley G. Anton and
Charles Anton, dated effective as of December 31, 1996 (the "Debt Conversion
Agreement"), that follows is not, and does not purport to be, complete and is
qualified in its entirety by reference to the Debt Conversion Agreement, a
copy of which is attached hereto as Exhibit 10.2.
PREFERRED STOCK. Pursuant to the Debt Conversion Agreement, L.
Anton and certain members of his family and a related family trust agreed
to the conversion of an aggregate amount of $976,489 of indebtedness owed
to them by Star Point, which was assumed by the Issuer, into 976,489
shares of Preferred Stock. The Preferred Stock is governed by the terms
set forth in Attachment A to the Issuer's Amended and Restated Articles
of Incorporation dated as of April 11, 1994 (the "Issuer's Charter"), as
modified by an Amendment and Waiver of the Terms of the Amended and
Restated Articles of Incorporation of the Issuer entered into by each of
the parties to the Debt Conversion Agreement (the "Amendment and
Waiver"). A copy of the Amendment and Waiver is attached hereto as
Exhibit 10.3. Any references herein to the Preferred Stock are
references to the Preferred Stock as modified by the Amendment and
Waiver. The Preferred Stock is convertible at any time after the first
anniversary of the Closing Date into shares of Common Stock at a rate of
$1.00 per share (the "Original Purchase Price") divided by a conversion
rate of $2.50 (as adjusted, the "Conversion Price"). The Conversion
Price is subject to standard anti-dilution adjustments. The Preferred
Stock is automatically converted into shares of Common Stock upon the
closing of a "Minimum Public Offering" which is defined to include an
underwritten public offering pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission
(the "SEC") which results in aggregate proceeds to the Company of at
least $3,000,000 and a price per share equal to five times the Original
Purchase Price or which results in aggregate gross proceeds to the
Company of at least $5,000,000 and a price per share equal to at least
120% of the Conversion Price. The Preferred Stock may be redeemed by the
Issuer upon 30 days prior written notice if at any time the closing price
of the Common Stock equals or exceeds 120% of the Conversion Price for a
period of 20 consecutive days. The description of the Amendment and
Waiver above is not, and does not purport to be, complete and is
qualified in its entirety by reference to the Amendment and Waiver, a
copy of which is attached hereto.
REGISTRATION RIGHTS. The Debt Conversion Agreement also provides
Star Point, L. Anton and the other parties to the Debt Conversion
Agreement (collectively, the "Stock Purchasers") with certain rights to
registration of the Common Stock and the Common Stock into which the
Preferred Stock is convertible. Pursuant to the Debt Conversion
Agreement, the Issuer agreed to use its best efforts to include the
shares of Common Stock acquired by Star Point pursuant to the Asset
Purchase Agreement and the shares of Common Stock that may be acquired by
L. Anton pursuant to the Stock Option Agreement (the "Contingent Demand
Registrable Securities") in a registration statement on Form S-3 which
the Issuer intended to file with the SEC within 30 days following the
Closing Date. In the event that such a registration statement is not
filed by the Issuer within 60 days of the Closing Date, Star Point and L.
Anton have the right to make a written demand of the Issuer to file a
shelf registration for the registration of the Contingent Demand
Registrable Securities. The Issuer is required to maintain the
effectiveness of such demand shelf registration until the earliest to
occur of the expiration of the holding period under Rule 144 under the
Act, three years from the Closing Date or the sale of all Contingent
Demand Registrable Securities. Star Point and L. Anton, with respect to
the Contingent Demand Registrable Securities, and the holders of the
Preferred Stock, also have "piggyback" rights, beginning one year after
the Closing Date, with respect to the registration of any of the
Contingent Demand Registrable Securities and any shares of Common Stock
into which the Preferred Stock may be converted. Additionally, at any
time beginning one year after the Closing Date the holders of the
Preferred Stock may make a demand that the Issuer file and use its best
efforts to have declared effective a shelf registration for the
registration of the shares of Common Stock into which the Preferred Stock
may be converted. The Issuer would also be required to maintain the
effectiveness of this shelf registration until the earliest to occur of
the expiration of the holding period under Rule 144 under the Act, three
years from the Closing Date or the sale of all the shares of Common Stock
subject to this demand registration right.
BOARD REPRESENTATION. The Debt Conversion Agreement further
provides that for so long as the Stock Purchasers (or their affiliates or
members of the Anton family) continue to hold, directly or indirectly,
ten percent of the outstanding Common Stock of the Issuer (treating the
Preferred Stock on an as-converted basis), the Stock Purchasers have the
right to designate one person for nomination to the Issuer's Board of
Directors. Pursuant to this right, L. Anton has been elected to the
Issuer's Board of Directors.
CONSULTING AGREEMENT AND STOCK OPTION AGREEMENT.
The Issuer and L. Anton entered into a Consulting Agreement effective as
of January 24, 1997 (the "Consulting Agreement"). The description of the
Consulting Agreement that follows is not, and does not purport to be, complete
and is qualified in its entirety by reference to the Consulting Agreement, a
copy of which is attached hereto as Exhibit 10.4. Pursuant to the Consulting
Agreement, L. Anton agreed to assist, counsel and advise the Issuer with
respect to the Issuer's business, particularly in connection with the
manufacture and sale of headwear previously conducted by Star Point. The
Consulting Agreement is for a term of three years during which L. Anton will
be paid $9,028 per month plus reimbursement of reasonable out-of-pocket
expenses. As additional compensation to L. Anton for his consulting services,
the Issuer granted L. Anton options to purchase up to 200,000 shares of Common
Stock pursuant to the Stock Option Agreement, a copy of which is attached
hereto as Exhibit 10.5. The Stock Option Agreement provides that L. Anton may
elect to exercise the options granted to him at any time during the term of
the Stock Option Agreement, provided, however, that the options, to the extent
not exercised, expire five years after the date of the Stock Option Agreement.
The exercise price (as may be adjusted pursuant to the Stock Option Agreement)
is $2.08 per share, and, upon exercise of the options by L. Anton, the
exercise price may be paid in cash or through a "cashless exercise" by
delivery of shares of the Common Stock having a fair market value equal to the
exercise price.
The description of the Stock Option Agreement above is not, and does not
purport to be, complete and is qualified in its entirety by reference to the
Stock Option Agreement, a copy of which is attached hereto.
Except as set forth herein or in the Exhibits filed or to be filed
herewith, there are no contracts, arrangements, understandings or
relationships with respect to the shares of the Common Stock owned by the
Reporting Persons.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 99.1 -- Agreement pursuant to Rule 13d-1(f)(1)(iii) filed herewith.
Exhibit 10.1 -- Asset Purchase Agreement filed herewith.
Exhibit 10.2 -- Debt Conversion Agreement filed herewith.
Exhibit 10.3 -- Amendment and Waiver filed herewith.
Exhibit 10.4 -- Consulting Agreement filed herewith.
Exhibit 10.5 -- Stock Option Agreement filed herewith.
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 3, 1997
STAR POINT ENTERPRISES, INC.
By: /s/ Laurence H. Anton
Laurence H. Anton, President
/s/ Laurence H. Anton
LAURENCE H. ANTON
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 Agreement pursuant to Rule 13d-1(f)(1)(iii) filed
herewith.
10.1 Asset Purchase Agreement filed herewith.
10.2 Debt Conversion Agreement filed herewith.
10.3 Amendment and Waiver filed herewith.
10.4 Consulting Agreement filed herewith.
10.5 Stock Option Agreement filed herewith.
Exhibit 99.1
Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agrees that the
statement to which this Exhibit 99.1 is attached is filed on behalf of each of
them in the capacities set forth below.
STAR POINT ENTERPRISES, INC.
By: /s/ Laurence H. Anton
Laurence H. Anton, President
/s/ Laurence H. Anton
LAURENCE H. ANTON
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, entered into effective December 31, 1996 is by and among
Laurence H. Anton ("Anton"), Star Point Enterprises, Inc. d/b/a Pro-Line Cap
Company, a Texas corporation ("Seller"), and Carlyle Golf, Inc., a Colorado
corporation ("Buyer").
RECITALS
A. Seller is engaged in the business of manufacturing headwear (the
"Business").
B. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer, certain assets of the Business upon the terms and conditions set forth
below.
AGREEMENTS
In consideration of the aforementioned premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE I
Agreement to Sell and
Purchase Assets
Upon the terms and subject to the conditions herein set forth, Seller
hereby agrees to sell, transfer, convey, assign and deliver to Buyer on
Closing, free and clear of any liens, mortgages or encumbrances whatsoever
(other than (i) liens for current taxes not yet due and payable; (ii)
imperfections of title and encumbrances, if any, none of which, individually
or in the aggregate, (1) are substantial in amount, (2) materially detract
from the value of the property subject thereto, or (3) materially impair or
interfere with the use of the Transferred Assets in the Business, (the
foregoing in clauses (i) and (ii) are hereafter referred to as "Permitted
Liens")), by such bills of sale, assignments and other documents as have been
reasonably requested by counsel for Buyer, and Buyer hereby agrees on the date
hereof to purchase and accept delivery of certain assets relating to the
Business that are owned by Seller according to Seller's December 31, 1996
balance sheet (the "December Balance Sheet"), as shown in Exhibit A attached
hereto, that are necessary for Buyer to operate the Business (collectively,
the "Transferred Assets") including, without limitation:
1.1 all equipment located at Seller's manufacturing, distribution and
administrative facilities, as more fully described on Schedule 1.1(a) attached
hereto, but excluding certain assets separately described on Schedule 1.1(b)
consisting of certain personal effects and furnishings owned by Anton.
1.2 all inventory relating to the Business, including raw materials,
semi-finished product, finished product and stores and spare parts (the
"Inventory") but, excluding that obsolete inventory which secures the Summit
Bank loan for $88,338 (as shown on the December Balance Sheet and separately
described on Schedule 1.2) (the "Excluded Inventory") and any proceeds
therefrom;
1.3 all right, title and interest of Seller in and to all accounts
receivable, notes receivable, and receivables due from employees ("Accounts
Receivable").
1.4 all rights to (a) inventions directly relating to the Business,
including United States patents, their foreign equivalents and pending United
States patent applications (provided that Seller shall retain a royalty free,
non-exclusive license to such patents and patent applications for purposes
other than the Business), (b) trademarks and trade names used in connection
with the Business, (c) all other intellectual property rights, including
unpatented technical information, trade secrets and know-how, owned or
licensed by Seller that directly relate to the operation of the Business (the
"Intellectual Property"). The rights include, without limitation, all those
rights listed on Schedule 1.4 attached hereto;
1.5 all customer lists, prospect lists, supplier lists marketing
documents and promotional materials, proposals and other proprietary marketing
information of Seller;
1.6 all of Seller's rights under agreements (hereinafter "Contract
Rights"), including sales orders and facilities leases directly relating to
the Business, that have not been terminated prior to the Closing except those
relating to the Excluded Inventory, including, without limitation, those
Contract Rights listed on Schedule 1.6 attached hereto; and
1.7 all right, title and interest of Seller in and to all cash and cash
equivalents, including cash held in bank accounts listed, by bank and account
number, on Schedule 1.7 attached hereto;
ARTICLE II
Assets Not Purchased
Anything to the contrary in this Agreement notwithstanding, the following
assets of Seller are not being sold hereby:
(a) certain intangible assets totalling $332,653 reflected on the
December Balance Sheet and more fully described at Schedule 2(a) attached
hereto;
(b) certain merchandise samples totaling $45,000 reflected on the
December Balance Sheet more fully described at Schedule 2(b) attached hereto;
(c) the Excluded Inventory or any proceeds therefrom;
(d) assets which are related only to the proposed activities of Larry
Anton & Associates, Inc. in selling goods and providing services as more fully
described on Schedule 2(d) attached hereto (collectively the "LAA
Activities");
(e) claims for refunds of taxes and other governmental charges for
periods ending on or prior to the Closing Date;
(f) claims or rights against third parties relating solely to
liabilities and obligations that are not assumed by Buyer hereunder;
(g) rights under insurance policies, including rights to any
cancellation value on the Closing, except to the extent that such policies are
reflected as assets on the December Balance Sheet;
(h) security deposits paid by Seller to utility companies or other
parties, except to the extent that such deposits are reflected as assets on
the December Balance Sheet; and
(i) Seller's corporate minute books and other books and records other
than those set forth in Section 1.5 hereof (collectively, the "Excluded
Assets").
ARTICLE III
Closing
The Closing of this transaction shall take place simultaneously with the
execution hereof. If the transaction is not closed by that date, either party
may unilaterally terminate this Agreement without liability or notice to the
other.
ARTICLE IV
Purchase Price for Transferred Assets
4.1(a) The purchase price (the "Purchase Price") to be paid by Buyer to
Seller for the Assets will be approximately $4,784,812, consisting of (1) the
assumption of certain Liabilities totaling $3,137,783 as more fully set forth
at Section 5.1(a) and (b) and supporting schedules (2) the assumption and
simultaneous conversion of all current and long-term debt, including accrued
interest, held by Anton and/or related entities of $976,489 (the "Anton
Debt"), into Preferred Stock as more fully set forth in Section 5.1(c) and
supporting exhibit and (3) the issuance of 322,375 shares of Common Stock to
Seller with an agreed upon value of $670,540, or $2.08 per share (representing
the average of the closing ask price of the Common Stock for the ten (10)
trading days beginning five (5) trading days prior to January 9, 1997). The
assumption of liabilities, including the assumption and conversion of the
Anton Debt together with the issuance of Common Stock as set forth above shall
constitute full payment for the Transferred Assets and Buyer will have no
obligation to make any cash payment in connection with this Transaction except
the payment of transfer, sales and use taxes in accordance with Section 16.1,
as set forth in Section 6.1 and as contemplated by Article VII.
(b) To assist Buyer in meeting its obligations at Section 4.1(a)(1)
above, Seller agrees to loan or cause to be loaned to the Buyer at Closing the
sum of $1,243,000 (the "New Anton Loan"), to be evidenced by a Secured
Promissory Note in the form attached hereto as Exhibit B, secured by a Deed of
Trust in the form attached hereto as Exhibit C.
(c) Buyer agrees that, immediately upon Closing, (1) it will use
its best efforts to obtain within sixty (60) days from Closing if possible
and, in any event, within 120 days from Closing, additional capital (the "New
Capital"), through the public or private sale of securities, in an amount at
least sufficient to permit the Buyer to retain $800,000 and to pay off the New
Anton Loan and (2) the first $800,000 of net proceeds from the New Capital
will be retained by the Buyer; the remaining net proceeds will be used to pay
off the New Anton Loan.
ARTICLE V
Assumption of Liabilities
5.1 Buyer hereby agrees to assume, to the extent the same remain unpaid
on the date hereof, the following liabilities of Seller;
(a) All accounts payable, accrued commissions and royalties, other
accrued liabilities (excluding accrued interest on the Anton Debt and the
current portion of long-term debt) and (X) the aggregate principal amount of
Seller's line of credit at Summit Bank as of December 31, 1996 (collectively
"Current Liabilities").
(b) all accrued interest, current and long-term debt, excluding
Anton Debt, on the December Balance Sheet as detailed in Schedule 5.1(b)
attached hereto, however, Buyer will not assume the Summit Bank loan related
to the Excluded Inventory;
(c) all Anton Debt, as detailed in Schedule 5.1(c) attached hereto,
which debt shall be simultaneously converted into Series A Convertible
Preferred Stock ("Preferred Stock") of the Buyer in accordance with the Debt
Conversion and Registration Right Agreement provided at Exhibit D attached
hereto;
(d) liabilities or obligations of Seller pertaining to the
Transferred Assets or the operation of the Business which arise under the
terms of a contract, agreement, license, lease or other commitment (i) which
is disclosed in the schedules to this agreement, and (ii) which was entered
into by Seller in the ordinary course of business of Seller; provided that, in
the case of any contract, agreement, license, or other commitment to be
assumed by Buyer hereunder, except as otherwise expressly agreed to herein,
only to the extent such liabilities arise out of and relate solely to the
period after the Closing Date and which by the terms thereof are to be
observed, paid, discharged or performed, as the case may be, at any time on
and after the Closing Date; and
(e) those obligations with respect to employees detailed in Article
XIV hereof.
5.2 Buyer does not assume any long term debt beyond the amount set forth
in the December Balance Sheet.
5.3 Seller hereby agrees and acknowledges that Buyer will assume no
liabilities, obligations or commitments of Seller other than those
specifically assumed in Section 5.1, above.
ARTICLE VI
Real Estate Purchase and Lease
6.1 At Closing, Buyer will also purchase from Shirley G. Anton and
Laurence H. Anton (the "Building Owner") a building located at 8224 White
Settlement Road, Fort Worth, Texas for $567,364 (such amount being hereinafter
referred to as the "Building Purchase Price"), the contract for purchase and
sale being substantially in the form set forth at Exhibit E attached hereto.
The Building Purchase Price shall be payable by Buyer (a) by the issuance on
Closing of a Secured Promissory Note in the principal amount of $223,421 in
the form attached hereto as Exhibit F, secured by a Deed of Trust attached
hereto as Exhibit G, and (b) by the issuance of 343,943 shares of Preferred
Stock.
6.2 At Closing Buyer will enter into leases substantially in the form
set forth at Exhibit H attached hereto on real property located at 512
Jennings and 8314 White Settlement Road with certain Anton family entities.
ARTICLE VII
Consulting Agreement
At Closing Buyer and Anton agree to execute a Consulting Agreement in the
form set forth at Exhibit I attached hereto under which Anton will render
certain consulting services to the Buyer for a period of three (3) years from
Closing.
ARTICLE VIII
Exchange of Documents
8.1 On closing, Buyer will receive from Seller and/or Anton:
(a) such bills of sale, deeds, assignments and other instruments as
may be necessary (or, in the opinion of Buyer's counsel, advisable) to
transfer, assign and convey the Transferred Assets from Seller to Buyer;
(b) the New Anton Loan;
(c) opinion dated the date hereof, of legal counsel for Seller in
substantially the form of Exhibit J attached hereto;
(d) certified copies of resolutions adopted by (i) the Board of
Directors of Seller and (ii) all of the stockholders of Seller authorizing the
execution, delivery and performance of this Agreement by Seller;
(e) such other documents or instruments as Buyer has reasonably
requested to effect the transactions contemplated hereby.
8.2 On closing, Seller, Anton, the Building Owner and/or the holders of
the Anton Debt, as the case may be will receive from Buyer:
(a) such assumption instruments as have been necessary (or, in the
opinion of Seller's counsel, advisable) to cause Buyer to assume the Assumed
Liabilities together with releases from all existing lenders to Seller of all
collateral securing indebtedness of Seller (other than the Transferred Assets)
and all guaranties respecting such indebtedness;
(b) an opinion, dated the date hereof, of legal counsel for Buyer
in substantially the form of Exhibit K attached hereto;
(c) certified copies of resolutions adopted by the Board of
Directors of Buyer authorizing the execution, delivery and performance of this
Agreement by Buyer; and
(d) the Real Estate Purchase, Lease, Debt Conversion and
Registration Rights and Consulting Agreements as executed by Buyer;
(e) the Common Stock referenced at Section 4.1(a) and Series A
Convertible Preferred Stock referenced at Sections 5.1(c) and 6.1;
(f) the Secured Promissory Notes and Deeds of Trust referenced at
Sections 4.1(b) and 6.1; and
(g) such other documents or instruments as Seller has reasonably
requested to effect the transactions contemplated hereby.
ARTICLE IX
Representations and Warranties of Seller and Anton
Seller and Anton hereby represent and warrant to Buyer as follows:
9.1 Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Texas, and is duly qualified to
do business and in good standing as a foreign corporation in all other
jurisdictions where the nature of its business or the ownership of its
property requires such qualification except where the failure to be so
qualified would not have a material adverse effect on Seller's results of
operations, properties, assets or condition (financial or otherwise)
("Material Adverse Effect"). Seller has all requisite power and authority to
own, lease and operate its properties, and to carry on the Business as it is
now being conducted.
9.2 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action (including unanimous consent of stockholders)
on the part of Seller, and this Agreement has been duly executed and delivered
by Seller and constitutes the valid and legally binding and enforceable
obligation of Seller, except (a) as rights to indemnity, if any, thereunder
may be limited by federal or state securities laws or the public policies
embodied therein, (b) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, and (c) as the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
discretion of the court before which any proceeding therefor may be brought.
Except as provided on Schedule 9.2 attached hereto neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby nor compliance by Seller with any of the provisions hereof
will contravene, violate, constitute a default or the creation of a lien (i)
under Seller's certificate of incorporation or bylaws, (ii) to the best of
Seller's knowledge, any law judgment, order, injunction, decree, regulation or
ruling of any court of governmental authority domestic or foreign, to which
Seller or any of its properties or assets is subject, or (iii) any material
agreement, lease, commitment or contract to which Seller is a party, or by
which it or any of its properties or assets may be bound.
9.3 To the best of Seller's knowledge, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby nor compliance by Seller with any of the provisions hereof
will conflict with, or result in a breach or contravention of any of the terms
or provisions of any agreement or other instrument or obligation to which any
officer or director of Seller is a party, the violation of which could
reasonably be expected to have a Material Adverse Effect.
9.4 Except for the Excluded Assets, the Transferred Assets include all
of the rights and properties (tangible and intangible) used in the Business as
heretofore conducted, and constitute all of the material assets, properties,
rights and interests necessary to conduct the Business as now conducted.
9.5 Except as provided on Schedule 9.5 attached hereto, Seller owns all
of the Transferred Assets, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever except Permitted Liens. All
of the contracts and other agreements acquired hereunder are in good standing
and are valid and effective in accordance with their respective terms and no
material breach or default by Seller exists or has been asserted and remains
uncured with respect to any thereof.
9.6 Seller has delivered to Buyer (a) its unaudited financial statements
for the calendar year ended December 31, 1996, (b) its audited financial
statements for the calendar years ended December 31, 1994 and December 31,
1995 and (c) the unaudited September 30, 1996 Balance Sheet (collectively the
"Financial Statements"). The Financial Statements (i) fairly and accurately
present the financial position of the Seller as of the balance sheet dates and
the results of the Seller's operations for the periods then ended and (ii)
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP") except as otherwise expressly stated
therein and except that the December and September Balance Sheets do not
contain footnotes as required by GAAP.
9.7 All tax returns and related information required to be filed by or
on behalf of Seller with respect to the Business have been prepared and filed
in accordance with applicable law, and all taxes, interest, penalties,
assessments or deficiencies that have become due pursuant to such returns or
any assessments or otherwise have been paid in full. All such returns are
true and correct in all material respects. Seller has in all material
respects paid all taxes owed by it or which it is obligated to withhold from
amounts owing to any employee, creditor or third party. With respect to the
Business, Seller has not waived any statute of limitations with respect to
taxes or agreed to any extension of time with respect to a material tax
assessment or deficiency relating to Seller or the Business and there are no
existing extensions with respect to the filing by Seller of any tax return.
The amounts reflected as taxes (other than income taxes, any liabilities for
which is retained by Seller hereunder) payable on the December Balance Sheet
are sufficient for the payment of all accrued, unpaid or deferred taxes,
assessments and charges with respect to the Business for all periods up to and
through the date thereof.
9.8 Seller owns or has the right to use in the conduct of the Business,
without payment of any license fee, royalty or similar charge, the
Intellectual Property. There is no claim or demand of any person pertaining
to, or any proceeding pending or, to the best knowledge of Seller, threatened,
which challenges the rights of Seller in respect of the Intellectual Property.
None of the Intellectual Property owned by Seller is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any
court, arbitrator or administrative agency or infringes on the patent rights
or copyrights of other or, to the best knowledge of Seller, is being infringed
by others or, to the best knowledge of Seller, is used by others (whether or
not such use constitutes infringement). To the best knowledge of Seller, none
of the Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court arbitrator or
administrative agency or infringes on the United States patent rights or
copyrights of others.
9.9 Attached hereto as Schedule 9.9 is a true and complete list of all
persons employed by Seller, including a description of all compensation
arrangements (including commission arrangements) affecting such persons and a
description of the basis for their compensation. Seller has heretofore
delivered to Buyer a copy of all employment agreements, non-competition
agreements and non-disclosure agreements covering any of its employees.
Schedule 9.9 hereto also describes all employee benefit plans or arrangements
for Seller's employees including, without limitation, incentive plans for
salesmen, bonus arrangements, pension or profit-sharing plans, employer
contributions to hospitalization and other insurance programs, and vacation
and sick leave policies. Seller has no contracts, agreements or
understandings, written or oral, with any labor union or other labor
organization or employee bargaining group relating to its employees. Seller
has no knowledge of any efforts being made on the part of any labor union or
other labor organization or employee bargaining group with respect to
representation or organization of any of Seller's employees.
9.10 Except as set forth on Schedule 9.10 attached hereto, there are no
actions, suits, proceedings, orders, investigations or claims pending or
threatened against or affecting Seller at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality, or any arbitration proceedings pending under collective
bargaining agreements or otherwise, which, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect or which seek to
prohibit, restrict or delay the consummation of transactions contemplated
hereby.
9.11 Seller is in compliance in all material respects with applicable
statutes and regulations of the United States of America, or of any state or
municipality or agency of any thereof having jurisdiction over it. Seller is
not in default with respect to any judgment, order, injunction or decree of
any court, administrative agency or other governmental authority in any
respect material to this transaction.
9.12 Seller has no knowledge, or reason to know, of any effective or
threatened termination, cancellation, or significant limitation, modification
or change in its business relationship with any customer or any group of
affiliated or interrelated customers, whose purchases individually or in the
aggregate constituted more than three percent (3%) of Seller's sales for the
year ended December 31, 1996.
9.13 Seller's operations, properties and assets are (a) in compliance in
all material respects with the requirements of all applicable federal, state,
and local environmental, health, and safety statutes, regulations and rules of
common law (the "Environmental Laws"), (b) not the subject of any "Superfund"
evaluation or investigation or subject to any state superlien environmental
law, and (c) not the subject of any federal, state, or local investigation
evaluating whether any remedial action is needed to respond to a release or
threatened release of any hazardous substance, pollutant, hazardous waste, or
contaminant ("Hazardous Substances") into the environment. None of the
properties or assets of Seller are contaminated with Hazardous Substances.
9.14 Since September 30, 1996, except as set forth in Schedule 9.14
hereof, there has not been any:
(a) transaction by Seller except in the ordinary course of business
as conducted on that date;
(b) material adverse change in the financial condition,
liabilities, assets, business, or prospects of Seller;
(c) destruction, damage to, or loss of any Transferred Asset that
has or could reasonably be expected to result in a Material Adverse Effect;
(d) labor trouble or other event or condition of any character that
has or could reasonably be expected to result in a Material Adverse Effect;
(e) declaration, setting aside, or payment of a dividend or other
distribution in respect of the capital stock of Seller, or any direct or
indirect redemption, purchase, or other acquisition by Seller of any of its
shares of capital stock;
(f) increase in the salary or other compensation or benefit payable
or to become payable by Seller to any of its officers, directors, or
management and key employees, or the declaration, payment, or commitment or
obligation of any kind for the payment by Seller of a bonus or other
additional salary or compensation to any such person, except for normal
increases to non-officers and non-directors in accordance with Seller's
personnel policies;
(g) sale or transfer of any Transferred Assets, except in the
ordinary course of business;
(h) amendment or termination of any material contract, agreement,
or license to which Seller is a party and which is included in the definition
of Transferred Assets, or extension or renewal of any lease under which Seller
is a lessee;
(i) loan or salary advance by Seller to any person or entity, or
guaranty by Seller of any loan or repayment of any loan from any shareholder;
(j) mortgage, pledge, or other encumbrance of any asset of Seller
except which has arise by reason of purchase money liens on assets acquired in
the ordinary course of business;
(k) waiver or release of any right or claim of Seller, except in
the ordinary course of business;
(l) violation by Seller of any applicable laws, rules or
regulations which violations has resulted or could reasonably be expected to
result in a Material Adverse Effect;
(m) other event or condition of any character that has resulted or
could reasonably be expected to result in a Material Adverse Effect;
(n) issuance or sale by Seller of any shares of its capital stock
of any class, or of any other of its securities; or
(o) agreement by Seller to do any of the things described in the
preceding clauses (a) through (n) of this section.
9.15 From and after Closing, Seller and Anton will use their best efforts
to assist Buyer in obtaining all third party consents which may be required or
desired in connection with existing contracts.
9.16 As of December 31, 1996 Seller did not have, and as of the date
hereof Seller does not have, any debt, liability, or obligation of any nature,
including, but not limited to, claims by or liability to past or present
employees for wages and employee benefits, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, that may or could
be asserted against Buyer except such liabilities as are being expressly
assumed by Buyer.
9.17 No representation or warranty by Seller or Anton set forth herein or
in any schedule hereto or certificate furnished in connection with the
transactions contemplated hereby contains as of the date hereof any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements contained herein not misleading.
ARTICLE X
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as follows:
10.1 Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Colorado, and has the corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder.
10.2 The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and this Agreement has
been duly executed and delivered by Buyer and constitutes the valid and
legally binding and enforceable obligation of Buyer, except (a) as rights to
indemnify, if any, thereunder may be limited by federal or state securities
laws or the public policies embodied therein, (b) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, and (c) as the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to discretion of the court before which any proceeding therefor
may be brought. Neither the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby nor compliance by Buyer
with any of the provisions hereof will contravene, violate, constitute a
default or the creation of a lien (i) under Buyer's certificate of
incorporation or bylaws, (ii) to the best of Buyer's knowledge, any law
judgment, order, injunction, decree, regulation or ruling of any court of
governmental authority domestic or foreign, to which Buyer or any of its
properties or assets is subject, or (iii) any material agreement, lease,
commitment or contract to which Buyer is a party, or by which it or any of its
properties or assets may be bound.
10.3 To the best of Buyer's knowledge, except as provided on Schedule
10.3, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by Buyer
with any of the provisions hereof will conflict with, or result in a breach or
contravention of any of the terms or provisions of any agreement or other
instrument or obligation to which any officer or director of Buyer is a party,
the violation of which could reasonably be expected to have a Material Adverse
Effect.
10.4 The loan agreement between the Buyer and Norwest Bank which will be
used by the Buyer to assist it in meeting its obligations at Section 4.1(a)(1)
(the "Norwest Loan") will permit payment of the principal amount of the New
Anton Loan in the manner set forth at Section 4.1(c) and will permit payments
of interest on the New Anton Loan in the manner set forth in the promissory
note evidencing the New Anton Loan. The provisions of the Norwest Loan
referenced above will not be changed without the prior written approval of the
Seller.
ARTICLE XI
Brokerage
Each of Seller and Buyer represents and warrants to the other that,
except for fees payable by the Buyer to the Wallach Company, it has not taken
any action on account of which a claim by any person could arise for any
brokerage fee or commission with respect to the negotiation, execution and
performance of this Agreement, and each of Seller and Buyer agrees to
indemnify, defend and hold harmless the other from and against any loss, claim
or expense arising from a breach of its foregoing representation and warranty.
ARTICLE XII
Conditions to Transaction
12.1 The respective obligations of the Buyer and Seller to effect the
transaction described herein shall be subject to the satisfaction, prior to
Closing, of the following conditions:
(a) all consents (except those referenced at Schedule 9.2),
approvals, orders or authorizations of, the failure of which to occur, file or
be obtained would be reasonably likely to have a material adverse affect on
Buyer's ability to conduct the Business shall have occurred;
(b) no order, ruling or injunction issued by any court of competent
jurisdiction restraining and enjoining or otherwise prohibiting the
consummation of the transaction, or limiting or restricting Buyer's conduct or
operation of the Seller's Business after the transaction shall have been
issued and then be in effect.
12.2 The obligations of Buyer to effect the transaction are subject to
the satisfaction of each of the following conditions, any of which may be
waived in writing by Buyer:
(a) the representations and warranties of Seller as set forth in
this Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing as though made on and as of the
Closing, except for changes contemplated by this Agreement; and Buyer shall
have received a certificate signed on behalf of Seller by the President and
Treasurer of the Seller to such effect;
(b) Seller and Anton shall have performed in all material respects
all obligations required to be performed by each of them under this Agreement
at or prior to Closing; and Buyer shall have received a certificate signed on
behalf of the Seller by the President and the Treasurer of the gage, pledge,
or other encumbrance of any asset of Seller except which has arise by reason
of purchase money liens on assets acquired in the ordinary course of business;
(c) waiver or release of any right or claim of Seller, except in
the ordinary course of business;
(d) violation by Seller of any applicable laws, rules or
regulations which violations has resulted or could reasonably be expected to
result in a Material Adverse Effect;
(e) other event or condition of any character that has resulted or
could reasonably be expected to result in a Material Adverse Effect;
(f) issuance or sale by Seller of any shares of its capital stock
of any class, or of any other of its securities; or
(g) agreement by Seller to do any of the things described in the
preceding clauses (a) through (n) of this section.
12.3 From and after Closing, Seller and Anton will use their best efforts
to assist Buyer in obtaining all third party consents which may be required or
desired in connection with existing contracts.
12.4 As of December 31, 1996 Seller did not have, and as of the date
hereof Seller does not have, any debt, liability, or obligation of any nature,
including, but not limited to, claims by or liability to past or present
employees for wages and employee benefits, whether accrued, absolute,
contingent, or otherwise and whether due or to become due, that may or could
be asserted against Buyer except such liabilities as are being expressly
assumed by Buyer.
12.5 No representation or warranty by Seller or Anton set forth herein or
in any schedule hereto or certificate furnished in connection with the
transactions c on behalf of the Buyer by the President and Treasurer of the
Buyer to such effect; and
(a) Buyer shall have executed and delivered the Consulting
Agreement, the Debt Conversion and Registration Rights Agreement, the
Promissory Note and Deed of Trust evidencing the New Anton Loan, the contract
for the purchase and sale of the building, attached as Exhibit E, and the
related Promissory Note and Deed of Trust attached as Exhibit F and G, the
leases attached as Exhibit H and the documents regarding the LAA Activities;
ARTICLE XIII
Survival and Indemnification
13.1 The respective representations and warranties of the Seller and
Larry Anton, on the one hand, and Buyer, on the other hand, contained in
Articles IX and X respectively shall survive the Closing and shall remain in
full force and effect thereafter until the date one (1) year after the Closing
Date; provided, (a) the representations and warranties of Seller and Anton
contained in Section 9.2 and 9.5 shall survive the Closing and shall remain in
full force and effect thereafter; and (b) the representations and warranties
of the Seller and Larry Anton contained in Sections 9.7 and 9.13 shall survive
the Closing and shall remain in full force and effect thereafter until the
expiration of the applicable statute of limitations, as extended. No party
may assert a claim or bring an action for indemnification in respect to
breaches or inaccuracies of representations and warranties by another party
set forth in this Agreement unless written notice of such claim is received by
the party from whom indemnification is sought within the time periods set
forth above.
13.2 Upon the terms and subject to the conditions set forth in Section
13.5, from and after the Closing Date, Seller and Anton jointly and severally
agree to indemnify and defend Buyer and hold Buyer harmless from, against, and
in respect of any and all claims (including, without limitation, product
liability claims), demands, losses, costs, expenses, damages, and
deficiencies, including, without limitation, interest, penalties, and
attorneys' fees (collectively "Damages"), that Buyer shall suffer or incur,
which arise or result from or relate to (a) the ownership, management,
operation, or use of the Transferred Assets by Seller prior to the date
hereof, (b) the conduct of the Business prior to the date hereof, (c) any and
all liabilities, obligations, or commitments of Seller of any nature, whether
absolute, accrued, contingent, or otherwise, except those expressly assumed by
Buyer pursuant to Section 5.1 above, (d) any breach by Seller of any of the
agreements, warranties, or covenants of Seller set forth in this Agreement,
and (e) any inaccuracy in any of the representations of Seller set forth in
this Agreement.
13.3 Upon the terms and subject to the conditions set forth in Section
13.5, from and after the Closing Date, Buyer agrees to indemnify and defend
Seller and hold Seller harmless from, against, and in respect of any and all
Damages that Seller shall suffer or incur, which arise or result from or
relate to (a) the ownership, management, operation or use of the Transferred
Assets by Buyer subsequent to the date hereof, (b) the conduct of the Business
after the date hereof, (c) any and all liabilities or obligations of Seller of
any nature, whether absolute, accrued, contingent, or otherwise, expressly
assumed by Buyer pursuant to Section 5.1 above, (d) any breach of any of the
agreements, warranties, or covenants of Buyer set forth in this Agreement, and
(e) any inaccuracy in any of the representations of Buyer set forth in this
Agreement.
13.4 Each party agrees to notify the party or parties from whom
indemnification is to be sought ("Indemnitor") promptly after learning of the
assertion of any claim, demand, examination, audit, or action in consequence
of which Indemnitor might become liable under the provisions of this Article;
provided, however, that the failure to give any such notice shall not
adversely affect any rights to indemnification hereunder unless Indemnitor
shall have been materially prejudiced by such failure. Such notice shall
include a description of, and furnish reasonable details with regard to, any
such claim, demand, examination, audit, or action. If the claim involves a
third party claim, then the Indemnitor shall have the right, at its sole cost,
expense and ultimate liability regardless of the outcome, and through counsel
of its choice, to litigate, defend, settle or otherwise attempt to resolve
such claim, except that the party claiming indemnification (the "Indemnitee")
may elect, at any time and at the Indemnitee's sole cost, expense and ultimate
liability, regardless of the outcome, and through counsel of its choice, to
litigate, defend, settle or otherwise attempt to resolve such Claim. If the
Indemnitee so elects (for reasons other than the Indemnitor's failure or
refusal to provide a defense to such claim), then the Indemnitor shall have no
obligation to indemnify the Indemnitee with respect to such claim. In the
event of any litigation with a third party to which the foregoing provisions
of this Article relate, Indemnitee agrees to cooperate with Indemnitor in
connection therewith and to make all books, records, and documents in its
possession and in existence available to Indemnitor, or its duly authorized
representatives, upon request, for inspection and copying at Indemnitor's
expense. Nothing contained in this Section shall be construed to limit the
rights of the parties to discovery under the procedural rules relevant to any
proceeding. Indemnitor shall reimburse Indemnitee on demand for any payment
made or cost incurred by Indemnitee at any time in respect of any claims to
which the foregoing indemnity relates.
13.5 Notwithstanding anything to the contrary contained herein (but not
including the separate indemnification provided at Section 13.6) no
indemnification shall be required to be made by any party hereto until the
aggregate amount of losses incurred or suffered by the Indemnitee exceeds
$25,000 (and then only to the extent of such excess).
13.6 Separately, Buyer hereby indemnifies and holds harmless the Seller
against any costs, losses or expenses incurred by the Seller as the result of
Buyer's use of Summit National Bank's Irrevocable Standby Letter of Credit No.
1046 in the face amount of $70,000 issued on behalf of the Seller for the
benefit of Forstmann & Company, Inc.
ARTICLE XIV
Employment Matters
14.1 Those employees of Seller who accept an offer of employment from
Buyer and who become employed by Buyer (the "Transferred Employees') will be
entitled after Closing to participate in Buyer's employee benefit programs in
accordance with the terms thereof as of the Closing Date (including any and
all amendments to those programs made thereafter).
14.2 Buyer agrees to pay severance benefits, to the extent that the
nature and the amount of such benefits are set forth on Schedule 14.2, to
those employees employed by Seller immediately prior to the Closing Date which
Buyer does not employ as of the Closing Date.
14.3 Buyer will assume liability arising from workers' compensation
claims which are based on injuries occurring prior to Closing for which an
award or judgment has not yet been made or rendered and which are fully
disclosed on Schedule 14.3.
14.4 Buyer will assume responsibility for the satisfaction of all claims
for medical, dental, life insurance, health, accident, disability or other
benefits brought by or in respect of Transferred Employees under any of
Seller's welfare benefit plans where the claims were incurred prior to the
Closing to the extent that the nature and amount of such claims are fully
disclosed on Schedule 14.4 hereto.
14.5 The Transferred Employees shall be credited by Buyer with all
accrued but unused vacation time to which they are entitled under Seller's
vacation policy as described in Schedule 14.5 hereto.
14.6 Effective as of the Closing Date, Buyer will cover the Transferred
Employees and their dependents under Buyer's health insurance plan in
accordance with the terms thereof or will otherwise provide medical benefits
comparable to those currently provided by Buyer to its Employees. In
addition, Buyer will offer health insurance coverage or comparable medical
benefits to former employees of Seller (together with their eligible
dependents) who had been employed by Seller immediately prior to termination
of employment and who, as of the Closing Date, either (i) already had elected
continued coverage under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") or (ii) are in an election period status under COBRA as of the
Closing Date (for purposes of this subsection), (iii) only, Seller's employees
on the Closing Date who are not Transferred Employees will be considered to be
in an election period as of the Closing Date) provided that such coverage
shall not extend beyond the period that Seller would have had to provide
continuation coverage under COBRA.
14.7 Should Buyer's action result in a plant closing or mass layoff
pursuant to the provisions of the Worker Adjustment Retraining Notification
Act ("WARN"), Buyer agrees that Buyer shall be responsible for providing
notice to said employees of Seller who are not employed by Buyer on the
Closing Date in accordance with the provisions of WARN and further agrees to
indemnify and hold Seller harmless against and to reimburse Sellers for any
and all liabilities and/or losses incurred by Seller as a result of Buyer's
breach of this Section 14.7.
ARTICLE XV
Termination
15.1 This Agreement may be terminated before the Closing (i) by mutual
written consent of Seller and Buyer; (ii) by written notice from Seller to
Buyer if Seller is not in default or breach in a material respect of their
representations, warranties, covenants or agreements under this Agreement, if
all the conditions in Section 12.3 have not been satisfied by the date
scheduled for Closing; (iii) by written notice from Buyer to Seller, if Buyer
is not in default or breach in any material respect of its representations,
warranties, covenants or agreements under this Agreement, if all the
conditions set forth in Section 12.2 have not been satisfied by the date
scheduled for Closing; or (iv) by either party to the other if the Closing has
not taken place on or before January 31, 1997.
ARTICLE XVI
Miscellaneous
16.1 Buyer will pay all transfer, sales and use taxes with respect to the
transfer of the Transferred Assets. To the extent that such taxes are
required to be and are paid to Seller, Seller agrees to remit all such amounts
paid on behalf of Buyer to the appropriate tax authorities.
16.2 On and after Closing each party, at the request of the other party
and without additional consideration, shall execute and deliver or cause to be
executed and delivered from time to time such further instruments of
conveyance and transfer and shall take such other action as the other may
require to convey and deliver the Transferred Assets to Buyer, to perfect
Buyer's title thereto and to accomplish the orderly transfer of the
Transferred Assets and the Business to Buyer in the manner contemplated by
this Agreement.
16.3 Except as otherwise specifically set forth in this Agreement, Seller
and Buyer shall each bear their own expenses which they incur in connection
with the execution and performance of this Agreement.
16.4 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither party may assign this Agreement without the prior written consent
of the other party.
16.5 Except to the extent required by law, no public announcements
regarding the existence of this Agreement or the transactions contemplated
hereunder will be made without first receiving the prior written consent and
approval of the other party, which consent shall not be unreasonably withheld.
Seller agrees to give such consent to Buyer at the time a bank commitment for
the transaction is received by Buyer.
16.6 This Agreement is for the sole benefit of the parties hereto, and
for the benefit of no other person. Nothing contained herein is intended or
shall be construed to give any person other than Buyer and Seller any legal or
equitable right, duty, power, privilege, remedy or claim under or in respect
to this Agreement or any provision contained herein.
16.7 Any notice or other communication required or permitted to be given
by either party hereto to the other party hereto shall be in writing and
delivered in person, delivered by commercial overnight delivery service or
mailed by prepaid registered or certified mail, addressed:
If to Seller, to:
Star Point Enterprises, Inc.
8224 White Settlement Road
Fort Worth, Texas 76108
Attn: Laurence H. Anton
With a copy to:
Kevin G. Levy, Esq.
Kelly, Hart & Hallman, P.C.
201 Main Street, Suite 2500
Forth Worth, Texas 76102
If to Buyer, to:
Carlyle Golf, Inc.
10550 E. 54th Avenue
Denver, Colorado 80239
Attn: Jerome M. Hause
With a copy to:
S. Lee Terry, Jr., Esq.
Gorsuch, Kirgis L.L.C.
1401 17th Street, Suite 1100
Denver, Colorado 80202
or to such other address for such party as may be designated by it by notice
pursuant hereto. A notice shall be deemed delivered when delivered personally
or by commercial overnight delivery service or, if given by mail as aforesaid,
at the time and date the same is postmarked.
16.8 This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and, except as herein set
forth, there are no warranties, express or implied, by either party hereto to
the other.
16.9 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Colorado.
16.10 This Agreement may not be amended or modified in any respect
except by a writing executed by the parties hereto. Any failure by either
party to comply with any of its obligations, agreements, covenants or
indemnities contained in this Agreement may be waived in writing, but not in
any other manner, by the party against which enforcement of the waiver is
sought.
16.11 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
instrument.
16.12 In the event any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any
reason, be held to be invalid, illegal or unenforceable, such illegality,
invalidity or unenforceability shall not affect any other provisions of this
Agreement.
16.13 From and after the Closing, Buyer will reasonably cooperate with
Seller in connection with the audit by the Internal Revenue Service for the
year ended December 31, 1994, along with any other audits, and will make
available to Seller such books and records with respect to the Business as
Seller may reasonably request.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
BUYER:
CARLYLE GOLF, INC.
By: /s/ Jerome M. Hause
Jerome M. Hause
President and Chief Operating Officer
SELLER:
STAR POINT ENTERPRISES, INC. d/b/a
PRO-LINE CAP COMPANY
By: /s/ Laurence H. Anton
Laurence H. Anton
President and Chief Executive Officer
LAURENCE H. ANTON
/s/ Laurence H. Anton
<PAGE>
SCHEDULES
1.1(a) Equipment to be Acquired and Certain Permitted Liens
1.1(b) Excluded Assets Including Personal Affects and Furnishing Owned by
Larry Anton
1.2 Inventory and Excluded Inventory
1.4 Intellectual Property Rights
1.6 Contract Rights
1.7 Bank Accounts
2(a) Certain Excluded Intangible Assets
2(b) Excluded Merchandise Samples
2(d) Certain Assets Related to the Proposed Activities of Larry Anton &
Associates, Inc.
5.1(b) Debt and Accrued Interest Assumed
5.1(c) Anton Debt
9.2 No Conflicts (Seller)
9.5 Liens and Encumbrances
9.9 Employees and Employee Benefits
9.10 Claims and Litigation
9.14 Material Events since September 30, 1996
10.3 No Conflicts (Buyer)
14.2 Severance Benefits
14.3 Workers' Compensation Claims
14.4 Benefits Claims
14.5 Vacation Policy
<PAGE>
EXHIBITS
A Seller's December 31, 1996 Balance Sheet
B Secured Promissory Note for the New Anton Loan
C Deed of Trust
D Debt Conversion and Registration Rights Agreement
E Contract for Purchase and Sale of Building
F Secured Promissory Note for the Building
G Deed of Trust
H Building Leases
I Consulting Agreement
J Opinion of Seller's Counsel
K Opinion of Buyer's Counsel
[EXHIBITS AND SCHEDULES INTENTIONALLY OMITTED]
DEBT CONVERSION AND
REGISTRATION RIGHTS AGREEMENT
DEBT CONVERSION AND REGISTRATION RIGHTS AGREEMENT (this "Agreement")
dated as of December 31, 1996, by and among CARLYLE GOLF, INC., a Colorado
corporation (the "Company"), Star Point Enterprises, Inc. d/b/a Pro-Line Cap
Company, a Texas corporation ("Seller"), the individuals listed on Schedule A
hereto (the "Debtholders"), Laurence H. Anton in his individual capacity
("Anton") and Shirley G. Anton and Laurence H. Anton (the "Building Owner").
WHEREAS, the Company is purchasing (the "Transaction") from Seller,
certain assets relating to Seller's headwear manufacturing business pursuant
to that certain Asset Purchase Agreement entered into effective December 31,
1996 among the Company, Seller and Laurence H. Anton (the "Asset Purchase
Agreement"); and
WHEREAS, (a) in connection with the Asset Purchase Agreement, the
Debtholders have agreed to convert certain debt obligations of Seller (the
"Anton Debt" as defined in the Asset Purchase Agreement) into shares of the
Company's $.001 par value Convertible Preferred Stock (the "Preferred Shares")
pursuant to this Agreement; (b) in connection with the sale of the building
commonly known as 8224 White Settlement Road in Fort Worth, Texas to the
Company pursuant to an agreement of even date herewith (the "Building Purchase
Agreement"), the Building Owner has agreed to accept, as part payment for the
building, Preferred Shares; (c) Seller will be receiving shares of the
Company's $.001 par value Common Stock (the "Common Shares") under the Asset
Purchase Agreement and (d) Anton may also purchase Common Shares pursuant to
his Stock Option Agreement with the Company;
WHEREAS, because all of the Debtholders, Seller, Anton and the Building
Owner (the "Stock Purchasers") qualify as "accredited investors" as defined by
Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the
"Act"), the transaction will be exempt from registration under Section 4(2)
and 4(6) of the Act and Rules 505 and 506 promulgated thereunder; and
WHEREAS, the Company and the Debtholders have agreed to the terms and
conditions set forth herein regarding the conversion of the Anton Debt into
the Preferred Shares.
NOW, THEREFORE, in consideration of the aforesaid and the mutual promises
hereinafter made, the parties hereto agree as follows (it being agreed that
all capitalized words not otherwise defined herein shall have the meanings set
forth in the Asset Purchase Agreement):
1. Conversion of Debt.
1.01 Preferred Shares. The Company agrees to issue in exchange for
cancellation of the Anton Debt and each of the Debtholders agree to accept in
exchange for cancellation of the Anton Debt owing to each such Debtholder that
number of Preferred Shares as shall be calculated by dividing the principal
and accrued interest on the Anton Debt owing to such Debtholder at Closing as
set forth in Schedule A hereto, by $1.00; such $1.00 per share exchange price
representing the Original Purchase Price for purposes of the terms of the
Preferred Shares described in the Company's Amended and Restated Articles of
Incorporation, dated April 11, 1994 (the "Articles"), a copy of which is
attached hereto as Exhibit 1.02(a), as such Articles are to be amended
pursuant to this Agreement. Attached hereto as Exhibit 1.02(b) is an
Amendment and Waiver (the "Amendment"), authorized by Paragraph 4(c) of
Attachment A to the Articles, to be executed by the Building Owner and to each
Debtholder entitled to receive Preferred Shares pursuant to this Agreement.
The Amendment when executed by all the Debtholders receiving Preferred Shares
hereunder and the Building Owner shall have the effect of amending the terms
of the Preferred Shares and waiving certain rights which would otherwise apply
to holders of Preferred Shares. The Articles as set forth in the attached
Exhibit 1.02(a), as they will be amended by the Amendment attached as Exhibit
1.02(b), contain the terms applicable to the Preferred Shares. Execution and
delivery of the Amendment by all Debtholders entitled to receive Preferred
Shares and the Building Owner is a condition precedent to the Company's
obligations to deliver any Preferred Shares under this Agreement and the Asset
Purchase Agreement.
1.02 Closing Date; Delivery. The closing of the conversion of the Anton
Debt and the issuance of the Preferred Shares hereunder will be held at the
offices of Gorsuch, Kirgis L.L.C. in Denver, Colorado on the closing date of
the Asset Purchase Agreement or at such other time and place as to which the
Company, the Debtholders and the Building Owner may agree (the "Closing
Date"). At the Closing the Company will deliver a stock certificate for
343,943 Preferred Shares to the Building Owner and to each Debtholder stock
certificates registered in such Debtholder's name as set forth in Schedule A
representing the Preferred Shares to be received by such Debtholder, against
receipt by the Company for cancellation of the notes representing the Anton
Debt held by each such Debtholder and a copy of the Amendment executed by each
Debtholder and the Building Owner. The Company will not deliver any
certificates representing the Preferred Shares unless and until it shall have
received a copy or copies of the Amendment executed by the Building Owner and
each Debtholder entitled to receive Preferred Shares hereunder. The Preferred
Shares and the shares of the Company's $.001 par value Common Stock (the
"Common Stock") into which the Preferred Shares are convertible together with
the shares of Common Stock to be acquired as set forth above are collectively
referred to herein as the "Shares."
1.03 Investment Representations of the Stock Purchasers.
Each of the Stock Purchasers hereby represent and warrant as follows:
a. The Shares are being or will be acquired for investment only
and not with a view to or for resale or distribution of any part thereof, and
with no present intention of selling, granting participation in, or otherwise
distributing the same except pursuant to the registration rights granted by
Section 3 hereof;
b. Each of the Stock Purchasers has such knowledge and experience
in business and financial matters as to be capable of evaluating the merits
and risks of an investment in the Shares and has sufficient financial
resources to bear the economic risks thereof (including possible complete loss
of such investment) for an indefinite period of time. Each of the Stock
Purchasers has had full and free access to the Company's books, financial
statements, records, contracts, documents and other information concerning the
Company and has been afforded an opportunity to ask questions of the Company's
officers, employees, agents, accountants and representatives concerning the
Company's business, operations, financial condition, assets, liabilities and
other relevant matters, and has been given all such information as has been
requested, in order to evaluate the merits and risks of the investment in the
Shares;
c. Each of the Stock Purchasers qualifies as an "accredited
investor" as defined by Rule 501(a) of Regulation D under the Act; and
d. (i) The Shares are "restricted securities" within the meaning
of Rule 144 under the Act; (ii) the Shares are not being registered at this
time and therefore must be held until they are subsequently registered under
the Act and any applicable state or foreign securities laws (pursuant to
Section 2 hereof or otherwise) unless an exemption from registration is
available; and (iii) the exemption from registration under Rule 144 will not
be available for two years from the date of acquisition of the Shares, and
even then may not be available unless (A) a public trading market still exists
for the shares at that time, (B) adequate information concerning the Company
is then publicly available, and (C) the sale complies with the other terms and
conditions of Rule 144.
1.04 Restrictive Legends. Each certificate evidencing the Shares which
is issued pursuant to this Agreement shall bear the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT OR AN
EXEMPTION THEREFROM.
1.05 Representations of the Company.
a. Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, par value .001 per share, of
which 4,881,524 shares were issued and outstanding as of December 31, 1996,
and 2,500,001 shares of Preferred Stock, par value .001 per share of which no
shares are issued and outstanding as of the date hereof. All of the
outstanding shares of the Company's Common Stock have been validly issued and
are fully paid and nonassessable. Except as described in the Company SEC
Documents, there are no other outstanding securities of the Company
convertible into or exchangeable or exercisable for any shares of capital
stock, nor are there any other outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments, or other contracts, agreements
or understandings of any character obligating the Company to issue additional
shares of capital stock or any other securities convertible into or evidencing
the right to subscribe for any shares of capital stock.
b. Compliance with Laws. The Company holds all licenses, permits
and other authorizations from government authorities necessary for the lawful
conduct of its business except where the failure to hold the foregoing would
not have, individually or in the aggregate, a material adverse effect on the
results of operations, properties, assets, liabilities or financial condition
of the Company. The business and operations of the Company are being
conducted in compliance with all applicable laws, rules, and regulations of
any governmental authority having jurisdiction over such businesses and
operations, except for such noncompliance as would not have, individually or
in the aggregate, a material adverse effect on the results of operations,
properties, assets, liabilities or financial condition of the Company.
c. Company SEC Documents. Each annual and quarterly report to the
Securities and Exchange Commission ("SEC"), each definitive proxy statement
and each current report filed with the SEC since January 1, 1994 (as such
documents have since the time of their filing been amended, the "Company SEC
Documents"), as of their respective dates, complied in all material respects
with the requirements of the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable, and the rules and regulations of
the SEC thereunder applicable to such Company SEC Documents and none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted 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 the Company included
in the Company SEC Documents filed with the SEC by the Company comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the financial position of the Company
as at the date thereof and the results of its operations and cash flows for
the periods then ended. There has not been any change, occurrence or
circumstance, which, individually or in the aggregate, will have a material
adverse effect on the results of operations, properties, assets, liabilities
or financial condition of the Company which is not set forth in the Company
SEC Documents.
d. Company Common Stock and Preferred Stock. The Shares to be
issued pursuant to this Agreement, the Asset Purchase Agreement and the
Building Purchase Agreement are duly authorized and, when issued in accordance
with the provisions hereof and thereof, will be validly issued, fully paid and
non-assessable.
e. Registration Statements. Each registration statement to be
filed by the Company hereunder will not, at the time such registration
statement is filed with the SEC and at the time it becomes effective under the
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, the Company makes no representations or
warranties as to information provided in writing by the Seller, Debtholders or
the Building Owner for inclusion in the registration statement. Each
registration statement will comply as to form in all material respects with
the provisions of the Act and the rules and regulations thereunder.
f. Amendment. The Amendment, when duly executed and delivered by
the Building Owner and all Debtholders receiving Preferred Shares hereunder,
will be legally binding and enforceable against the Company in accordance with
its terms without the approval of the stockholders of the Company.
2. Registration Rights
2.01 Demand Registration Rights.
a. Rights to Demand Registration. The Stock Purchasers shall be
entitled to Demand Registration Rights as follows:
(i) If the piggyback registration referenced at Section 2.02(a)
below is not filed within sixty (60) days from the Closing Date, or is not
declared effective within one hundred twenty (120) days from the Closing Date,
or, if all of the Contingent Demand Registrable Securities are not included in
and the subject of an effective registration statement within one hundred
twenty (120) days from the Closing Date Seller, as the recipient of shares
pursuant to the Asset Purchase Agreement, and Anton, as the holder of the
option granted pursuant to that certain Consulting Agreement dated December
31, 1996 between Laurence H. Anton and the Company (the Shares held by Seller
or Anton are referred to hereafter as the "Contingent Demand Registrable
Securities") may make a written request (a "Demand Notice") to the Company for
registration under the Act of all or part of the Contingent Demand Registrable
Securities then owned by them (a "Contingent Demand Registration") and the
Company shall thereupon file, as expeditiously as possible, a registration
statement with the SEC and shall use its best efforts to have such
registration statement declared effective promptly by the SEC. Such
Contingent Demand Registration shall be a "shelf registration" so that the
securities may be offered on a delayed or continuous basis pursuant to Rule
415 under the Act and the Company shall keep such registration effective until
the earliest to occur of (A) the expiration of the holding period required by
SEC Rule 144 (to the extent applicable), including any amendments thereto,
(B), a period of three years from the Closing Date or (C) all of the
Contingent Demand Registrable Securities shall be sold;
(ii) At any time beginning one (1) year after the Closing
Date, those Stock Purchasers representing a majority in interest receiving
Preferred Shares under Section 6.1 of the Asset Purchase Agreement may give a
Demand Notice to the Company for registration under the Act of all or part of
the shares of Common Stock issuable upon conversion of the Preferred Shares,
including any additional shares of Common Stock issued as a stock dividend or
stock split or other distribution recapitalization or reclassification with
respect to the Preferred Shares or the Common Stock issued upon conversion
thereof (such shares being referred to hereafter as "Preferred Demand
Registrable Securities"). Upon receipt of such a Demand Notice covering the
Preferred Demand Registrable Securities, the Company shall thereupon, as
expeditiously as possible, file a registration statement with the SEC and use
its best efforts to have the registration statement declared effective
promptly by the SEC (a "Preferred Demand Registration"). Such Preferred
Demand Registration shall be a "shelf registration" so that the securities may
be offered on a delayed or continuous basis pursuant to Rule 415 under the Act
and the Company shall keep registration effective until the earliest to occur
of (A) the expiration of the holding period required by SEC Rule 144 (to the
extent applicable), including any amendments thereto, (B) a period of three
(3) years, or (C) all of the Preferred Demand Registrable Securities in
question shall be sold;
(iii) If at the time of either Demand Notice (a) the Company
is engaged in a registered public offering or in a merger, consolidation,
recapitalization or acquisition, or any other similar activity outside of the
ordinary course of business which, in the good faith judgment of the Board of
Directors of the Company, would be materially and adversely affected by the
requested registration, or (b) the Board of Directors of the Company makes a
good faith determination that the public disclosures required to be made in
the requested registration statement would have a material and adverse impact
on the business, financial condition or prospects of the Company, the Company
may, at its option, direct that such request be delayed for a period of not
more than sixty (60) days (provided that the total aggregate delay shall not
exceed 180 days).
b. Effective Registration Statement. A registration requested
pursuant to this Section 2.01 will not be deemed to have been effected unless
it has become effective; provided, that if, within 135 days after it has
become effective, the offering of Contingent Demand or Preferred Demand
Registrable Securities pursuant to such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or
other governmental agency or court, such registration will be deemed not to
have been effected. Nevertheless, if any such stop order is rescinded, the
effective period shall continue upon such rescission and be extended by the
number of days by which such stop order reduced the effective period.
2.02 Piggyback Registration.
a. Immediate Piggyback Rights. The Company agrees that it will
make its best efforts to include the Contingent Demand Registrable Securities
in a registration statement on Form S-3 presently intended to be filed by the
Company with the SEC within thirty (30) days from the Closing Date.
b. Right to Piggyback on Registration of Common Stock. Subject to
Section 2.02(c), if at any time, beginning one year after the Closing Date,
the Company proposes to register any Common Stock under the Act in connection
with the offering of such Common Stock (except for registration on Form S-4 or
S-8 or a registration in connection with an exchange offer solely to existing
securityholders) (a "Piggyback Registration"), the Company shall promptly give
to each Stock Purchaser prior written notice of such determination no later
than 45 days prior to the proposed filing date of such registration statement.
Any Stock Purchaser wishing to register all or any portion of the Purchaser's
Contingent Demand or Preferred Demand Registrable Securities (hereafter
"Piggyback Registrable Securities") must give written notice to the Company of
intent to participate no less than 15 days after the receipt of such notice.
Upon receipt of a request for Piggyback Registration, the Company will use its
best efforts to effect the prompt registration under the Act of such Piggyback
Registrable Securities. Any Stock Purchaser holding Piggyback Registrable
Securities initially requesting to be included in such registration may elect,
in writing, prior to the effective date of the registration statement filed in
connection with such registration, not to register such Piggyback Registrable
Securities in connection with such registration.
c. Selection of Underwriter(s). If the Company proposes to
register Common Stock under the Act in a transaction to which Piggyback
Registration would attach and in its sole discretion decides such registration
shall be underwritten, the Company shall have sole discretion in the selection
of any underwriter(s) to manage such registration.
d. Priority on Piggyback Registrations. If the underwriter(s) of
an underwritten Piggyback Registration (or if a Piggyback Registration is not
underwritten, holders of a majority of the securities being registered) advise
the Company in writing that in its or their opinion the number of securities
proposed to be sold in such Piggyback Registration exceeds the number which
can be sold without adversely affecting the price at which the securities are
to be sold in such offering, the Company will include in such registration
only the number of securities which, in the opinion of such underwriter(s) (or
the securityholders, as the case may be) can be sold in such offering without
so affecting such price. The Piggyback Registrable Securities so included in
such Piggyback Registration shall be apportioned (i) first, to any Common
Stock that the Company proposes to sell, and (ii) second, pro rata among any
shares of Common Stock outstanding with registration rights (including but not
limited to holders of Piggyback Registrable Securities) that were granted
prior to the date hereof) that such rightholders propose to sell in each case
according to the total number of shares of Common Stock requested for
inclusion by said selling securityholders, or in such other proportions as
shall mutually be agreed to among such selling securityholders.
e. The amount of shares which may be sold by Stock Purchasers
under any Registration Statement contemplated by Section 2 hereof, will not
exceed the amounts which would be permitted if such sales were being made in
accordance with Rule 144(e)(1) under the Act.
2.03 Registration Procedures. It shall be a condition precedent to the
obligations of the Company and any underwriter(s) to take any action pursuant
to this Article II that the Stock Purchasers requesting inclusion in any
Piggyback Registration, Contingent Demand Registration or Preferred Demand
Registration (a "Registration") shall furnish to the Company such information
regarding them, the Piggyback Contingent Demand or Preferred Demand
Registrable Securities (collectively, "Registrable Securities") held by them,
the intended method of disposition of such Registrable Securities, and such
agreements regarding indemnification, disposition of such securities and the
other matters referred to in this Article II as the Company shall reasonably
request. With respect to any Registration which includes Registrable
Securities held by a Stock Purchaser, the Company will, subject to Sections
2.01 and 2.02, as expeditiously as practicable:
(a) Prepare and file a Form S-3 registration statement, or, if is
not able to use a Form S-3, then another appropriate form prescribed by the
Commission and file with the Commission any necessary amendments to the
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective;
(b) Prepare and file with the Commission such amendments and post-
effective amendments to such registration statement and any documents required
to be incorporated by reference therein as may be necessary to keep the
registration statement effective for a period of time as necessary to complete
the offering which later period shall be not more than 180 days following the
effective date of such registration statement and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Act (or any successor rule);
(c) Furnish to such Stock Purchaser and the underwriter(s) if any,
without charge, such number of conformed copies of the registration statement
and any post-effective amendment thereto, upon request, and a such number of
copies of the final prospectus and any preliminary prospectus(es) and any
amendments or supplements thereto, and any exhibits or documents incorporated
therein by reference as such Stock Purchaser or underwriters may reasonably
request;
(d) Immediately notify such Stock Purchaser, at any time when a
prospectus relating thereto is required to be delivered under the Act, when
the Company becomes aware of any event which causes the prospectus to contain
any untrue statement of material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made not misleading and, as promptly as practicable
thereafter, prepare and file and furnish a supplement or amendment to such
prospectus correcting same;
(e) Use its best efforts to cause all securities included in such
registration statement to be listed, by the date of the first sale of
securities pursuant to such registration statement, on the NASDAQ Small Cap
Market or such market or exchange on which the Company's Common Stock shall
then be traded;
(f) Make generally available to its security holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later than
90 days after the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date of
the registration statement, which statement shall cover said 12-month period;
(g) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
(h) As promptly as practicable after filing with the Commission of
any subsequently filed document which is incorporated by reference into a
registration statement (such as a Form 10-QSB), deliver a reasonable number of
copies of such document to such Stock Purchaser;
(i) Prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify the securities
covered by the registration statement for offer and sale under the securities
or blue sky laws of each state of the United States as such Stock Purchaser or
underwriter(s), may reasonably request and to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Securities
covered by the applicable registration statement;
(j) Enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions customarily taken by
registrants as sellers of a majority of such Registrable Securities or the
underwriter(s), if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(k) Obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form as may reasonably be
requested;
(l) Make available for inspection by any Stock Purchaser holding
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such Stock Purchaser or any such underwriter, all pertinent financial
and other records, pertinent corporate documents and properties of the
Company, and supply all information reasonably requested by any such Stock
Purchaser, underwriter, attorney, accountant or agent in connection with such
registration statement;
(m) Cooperate with such Stock Purchaser and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing the Shares to be sold under the
registration statement, and enable such securities to be in such denominations
and registered in such names as the Stock Purchaser or the underwriter(s), if
any, may request; and
(n) Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc., as
may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Registrable
Securities.
The Stock Purchasers, upon receipt of any notice from the Company of any
event of the kind described in paragraph (d) of this Section 2.03, will
forthwith discontinue disposition of the securities until the Stock
Purchasers' receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (d) of this Section 2.03 or until they are advised
in writing (the "Advice") by the Company that the use of the prospectus may be
resumed, and have received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus. In the event the
Company shall give any such notice, the time periods mentioned in paragraph
(b) of this Section 2.03 shall be extended by the number of days during the
period from and including any date of the giving of such notice to and
including the date when each seller of securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by paragraph (d) of this Section 2.03 hereof or the
Advice.
2.04 Registration Expenses. In the case of any Registration, the Company
shall bear all of the costs and expenses of such Registration (including,
without limitation, the expenses of preparing any registration statement, SEC,
NASD and state "blue sky" filing registration and qualification fees, the cost
of providing any legal opinion or "cold comfort" letters reasonably requested
by the Stock Purchasers, and printing costs, provided, however, that the
Company shall not be responsible for legal fees or expense of counsel for any
of the Stock Purchasers, or for any underwriter's discounts or commissions
that are attributable to the Registrable Securities of a Stock Purchaser.
2.05 Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless to the full extent permitted by law each Stock
Purchaser, its officers, directors, employees and agents and each person who
controls (within the meaning of the Act and the Exchange Act such Stock
Purchaser, including, without limitation, any general partner or manager of
any thereof, against all losses,claims, damages, liabilities and expenses
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or
preliminary prospectus in which such Stock Purchaser is participating or any
amendment thereof or supplement thereto or in any document incorporated by
reference therein or any omission or alleged omission to state therein a
material fact necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading, except insofar as
the same are caused by, based upon or contained in any information with
respect to such Stock Purchaser furnished in writing to the Company by such
Stock Purchaser expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Stock Purchaser from whom the person asserting
such loss, claim, damage or liability purchased the securities if it is
determined that it was the responsibility of such Stock Purchaser to provide
such person with a current copy of the prospectus and such current copy of the
prospectus would have cured such loss, claim, damage or liability. The
Company will also indemnify underwriters (as such term is defined in the Act),
their officers, directors, employees and agents and each person who controls
such persons (within the meaning of the Act) to the same extent as provided
above with respect to the indemnification of the Stock Purchasers.
(b) Indemnification by the Stock Purchasers. In connection with
any Registration in which a Stock Purchaser is participating, such Stock
Purchaser will furnish to the Company in writing such information and
affidavits with respect to such Stock Purchaser as the Company reasonably
requests for use in connection with any registration statement or prospectus
and agrees to indemnify and hold harmless the Company, its directors, officers
and agents and each person who controls (within the meaning of the Act and the
Exchange Act) the Company against any losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue statement of a material fact
or any omission to state a material fact necessary to make the statements in
the registration statement or prospectus or preliminary ,prospectus in light
of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information or affidavit such Stock Purchaser furnished in
writing to the Company by such Stock Purchaser expressly for use therein;
provided, however, that the amount recoverable by the Company from any Stock
Purchaser under this indemnification provision shall not exceed the amount of
net proceeds received by the Stock Purchaser from the sale of Registrable
Securities hereunder; and provided, further, that the indemnity agreement
contained in this Section 2.05(b) shall not apply to amounts paid in
settlement of any loss, claim, damage, liability or action arising pursuant to
a registration under Article II if such settlement is effected without the
consent of the Stock Purchaser (which consent shall not be unreasonably
withheld). The indemnification provided in subparagraphs (a) and (b) hereof
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Company or any of the prospective sellers, or any of their
respective affiliates, directors, officers or controlling persons and shall
survive the transfer of such securities by such seller.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying party, permit the
indemnifying party to assume the defense of such claim, jointly with any other
indemnifying party similarly notified to the extent it may elect, with counsel
reasonably satisfactory to the indemnified party. The failure to so notify
the indemnifying party shall relieve the indemnifying party from any liability
hereunder with respect to the action to the extent that such failure
materially prejudices the indemnifying party; provided, however, that any such
failure shall not relieve the indemnifying party from any other liability
which it may have to any other party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated to pay
the reasonable fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification provided
for in the preceding paragraphs (a) and (b) of this Section 2.05 is
unavailable to an indemnified party as contemplated by the preceding
paragraphs (a) and (b) of this Section 2.05 for any reason, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations.
(e) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.05 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Act.
2.06 Exchange Act Reports. The Company agrees that at all times after it
has filed a registration statement pursuant to the requirements of the Act
relating to any class of equity securities of the Company, it will use its
best efforts to file in a timely manner all reports required to be filed by it
pursuant to the Exchange Act to the extent the Company is required to file
such reports. Upon request of a Stock Purchaser, the Company will furnish the
requesting Stock Purchaser with such information as may be necessary to enable
such Stock Purchaser to effect sales pursuant to Rule 144A.
2.07 Participation in Registrations. No Stock Purchaser may participate
in any Registration hereunder unless such Stock Purchaser (a) agrees to sell
the Stock Purchaser's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements as set forth herein, and (b) completes and executes all
questionnaires, powers of attorney, underwriting agreements and other
documents customarily required under the terms of such underwriting
arrangements.
3. Miscellaneous
3.01 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telex, facsimile or similar
writing) and shall be given to such party at its address or telex or facsimile
number set forth on the signature pages hereof or such other address or telex
or facsimile number as such party may hereafter specify in writing to the
Secretary of the Company for the purpose by notice to the party sending such
communication. Each such notice, request or other communication shall be
effective (i) if given by telex or facsimile, when such message is transmitted
to the number set forth on such signature pages or such other number as a
party may specify in writing to the Secretary of the Company or (ii) if given
by any other means, the earlier of (x) when delivered by hand to the address
set forth on such signature pages or such other address as a party may specify
in writing to the Secretary of the Company or (y) five business days after the
mailing of such notice by certified mail. If more than one Stock Purchaser
specified the same address for such notices, then a single notice to such
address shall be deemed to be notice to all Stock Purchasers at that address.
3.02 Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or assigns any legal
or equitable right, remedy or claim under or in respect of any agreement or
any provision contained herein. This Agreement constitutes the entire
agreement and understanding, and supersedes and terminates all prior
agreements and understandings, both oral and written, between the parties
hereto relating to the subject matter hereof.
3.03 Waiver. Any party hereto may, without binding any other party, by
written notice to another party (a) extend the time for the performance of any
of the obligations or other actions of such other party under this Agreement;
(b) waive compliance with any of the conditions or covenants of such other
party contained in this Agreement; and (c) waive or modify performance of any
of the obligations of such other party under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein. Neither the waiver by any party hereto of a
breach of any provision hereof or any preceding or succeeding breach nor the
failure by any party to exercise any right or privilege hereunder shall be
deemed a waiver of such party's rights or privileges hereunder nor shall it be
deemed a waiver of such party's rights to exercise the same at any subsequent
time or times hereunder.
3.04 Amendment. This Agreement may be amended, modified or supplemented
only by a written instrument executed by all of the parties hereto (including
Transferees of Stock Purchasers).
3.05 Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by any Stock Purchaser except (a) as otherwise contemplated
hereunder or (b) with the written consent of the Company which shall not be
unreasonably withheld.
3.06 Termination. The right of any Stock Purchaser to Demand
Registration or Piggyback Registration hereunder will terminate at such time
as there are no longer Registerable Securities held by that Stock Purchaser or
assignee thereof.
3.07 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF COLORADO WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
3.08 Pronouns. Whenever the context may require any pronoun used herein
shall include the corresponding masculine, feminine or neuter forms.
3.09 Attorneys Fees. In the event of a dispute concerning the provisions
of this Agreement which results in litigation, arbitration or other dispute
resolution proceedings, the parties agree that the legal fees and other
expenses of the prevailing party shall be borne by the other, non-prevailing
parties to the dispute.
3.010 Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
3.011 Counterparts. This Agreement may be executed in any number of
counterparts or separate number of counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to be one and the
same instrument.
3.012 Defined Terms. All defined terms used but not otherwise
defined herein shall have the respective meanings given them in the Asset
Purchase Agreement.
3.013 Board Representation. So long as the Stock Purchasers or their
affiliates, or members of the Anton family, directly or indirectly, continue
to hold either (a) ten percent (10%) or more of the outstanding Common Stock
of the Company or (b) Preferred Stock, or Common Stock and Preferred Stock
which, if the Preferred Stock was converted into Common Stock, would together
represent at least ten percent (10%) of the then outstanding Common Stock of
the Company (including the shares that would be so converted), the Stock
Purchasers shall have the right to designate one person for nomination to the
Company's Board of Directors. The Company agrees to nominate such designee at
each annual or special meeting of stockholders at which directors are to be
elected. Such designee will be compensated at a level commensurate with the
compensation received by the Company's outside directors. If a person
designated by the Stock Purchasers ceases to serve on the Company's Board of
Directors for any reason the Stock Purchasers shall have the authority to
designate another person to fill the vacancy on the Company's Board.
IN WITNESS WHEREOF, the Company, Anton, the Building Owner and each Stock
Purchaser have executed this Agreement effective as of the day and year first
above written.
The Company:
CARLYLE GOLF, INC.
By:/s/ Jerome M. Hause
Jerome M. Hause
President and Chief Operating Officer
Notices: 10550 E. 54th Avenue
Unit E
Denver, CO 80239
Facsimile: 303/371-3189
The Stock Purchasers:
STAR POINT ENTERPRISES, INC.
D/B/A PRO-LINE CAP COMPANY
By: /s/ Laurence H. Anton
Title: President
/s/ Shirley G. Anton
Shirley G. Anton as Life Tenant
/s/ Laurence H. Anton
Laurence H. Anton as Remainderman
Shirley Anton Ten-Year Grit Trust
By: /s/ Laurence H. Anton
Trustee
/s/ Charles Anton
Charles Anton, Individually
The Building Owner:
By: /s/ Shirley G. Anton
Shirley G. Anton
By: /s/ Laurence H. Anton
Laurence H. Anton
/s/ Laurence H. Anton
Laurence H. Anton in his individual
capacity
Notices to the Stock Purchasers, the
Building Owner and Anton:
c/o Kevin G. Levy, Esq.
Kelly, Hart & Hallman
201 Main Street, #2500
Fort Worth, TX 76102
Facsimile 817/878-9280
<PAGE>
Schedule A
Stock Purchasers
Name and Address Principal Amount of Note Plus Accrued
Interest to be Converted
Shirley G. Anton as life tenant 427,991
and Laurence H. Anton as
Remainderman
3912 Ann Arbor Ct.
Fort Worth, Texas 76107
Shirley Anton Ten-Year Grit Trust 345,959
3912 Ann Arbor Ct.
Fort Worth, Texas 76107
Charles Anton 202,539
3912 Ann Arbor Ct.
Fort Worth, Texas 76107
AMENDMENT AND WAIVER
OF THE TERMS OF THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
CARLYLE GOLF, INC.
WHEREAS, Carlyle Golf, Inc., a Colorado corporation (the"Corporation") is
purchasing from Star Point Enterprises Inc, d/b/a Pro-Line Cap Company, a
Texas corporation ("Seller"), certain assets relating to Seller's headwear
manufacturing business pursuant to that certain Asset Purchase Agreement
entered into effective December 31, 1996 among the Corporation, Seller and
Laurence H. Anton (the "Asset Purchase Agreement"); and
WHEREAS, in connection with the Asset Purchase Agreement (a) certain
debtholders of Seller (the "Debtholders") have agreed to convert certain debt
obligations of Seller into shares of the Corporation's Convertible Preferred
Stock pursuant to that certain Debt Conversion and Registration Rights
Agreement dated as of December 31, 1996 (the "Debt Conversion Agreement"), and
(b) Shirley G. Anton and Laurence H. Anton (the "Building Owner") have agreed
to sell a building to the Corporation (the "Building Purchase Agreement") and
to accept shares of the Corporation's Convertible Preferred Stock in partial
consideration for the building; and
WHEREAS, the terms negotiated between the parties to the Asset Purchase
Agreement, the Debt Conversion Agreement and the Building Purchase Agreement
regarding the Convertible Preferred Stock differ from the terms of the
Convertible Preferred Stock set forth in Attachment A to the Corporation's
Amended and Restated Articles of Incorporation, dated April 11, 1994 (the
"Articles"), in ways which may be amended or waived by the holders of the
Convertible Preferred Stock pursuant to Paragraph 4(c) of Attachment A to the
Articles; and
WHEREAS, the undersigned represent all of the persons entitled to receive
Convertible Preferred Stock of the Corporation pursuant to the Asset Purchase
Agreement, Debt Conversion Agreement, and the Building Purchase Agreement, and
the undersigned have executed this Amendment and Waiver as a condition to
conversion of the debt obligations and delivery of the Convertible Preferred
Stock issuable pursuant to the Debt Conversion Agreement.
NOW THEREFORE, the undersigned, being, for purposes of this Amendment and
Waiver, all of the holders of the Convertible Preferred Stock, par value $.001
per share, of the Corporation, in accordance with paragraph 4(c) of the Terms
of Convertible Preferred Stock (the "Terms") included as Attachment A to the
Corporation's Articles, do hereby amend the terms of the Convertible Preferred
Stock and waive any right the undersigned would otherwise have pursuant to the
Articles that is inconsistent with terms set forth herein, including without
limitation any rights included in any text deleted hereby, as follows:
1. Paragraph 3(a) of the Terms is hereby amended by deleting the first
sentence thereof and substituting the following:
The holder of any share or shares of Convertible Preferred Stock shall
have the right, at his, or its option, to convert all or any portion of such
shares into fully paid and nonassessable shares of Common Stock of the
Corporation at any time and from time to time after the first anniversary of
the date of issuance. The number of shares of Common Stock into which the
Convertible Preferred Stock is convertible shall be determined by dividing the
Original Purchase Price of $1.00 per share by $2.50, subject to the making of
any adjustment specified in subparagraph (d) hereof (the number of shares of
Common Stock issuable at any time, giving effect to the latest prior
adjustment pursuant to subparagraph (d) hereof, if any, in exchange for one
share of Convertible Preferred Stock being hereinafter called the "Conversion
Rate").
2. Paragraph 3(d) of the Terms is hereby amended by deleting
subparagraphs (iii) through (ix).
3. The first phrase of the first sentence of Paragraph 4(a) of the
Terms is hereby amended to read as follows:
Except as provided herein or as required by the
corporation law of the State of Colorado,
4. Subparagraph (ii) of Paragraph 4(b) of the Terms is hereby amended
and restated as follows:
(ii) Amend the Articles of Incorporation of the Corporation if the
amendment would:
a) Increase or decrease the aggregate number of authorized
shares of Convertible Preferred Stock;
b) Effect an exchange or reclassification of all or part of
the shares of Convertible Preferred Stock into shares of
another class;
c) Effect an exchange or reclassification, or create the
right of exchange, of all or part of the shares of another
class into shares of Convertible Preferred Stock;
d) Change the designation, preferences, limitations, or
relative rights of all or part of the shares of
Convertible Preferred Stock;
e) Change the shares of all or part of Convertible Preferred
Stock into a different number of shares of the same class;
f) Create a new class of shares having rights or preferences
with respect to distributions or dissolution that are
prior, superior, or substantially equal to the shares of
Convertible Preferred Stock;
g) Increase the rights, preferences, or number of authorized
shares of any class that, after giving effect to the
amendment, have rights or preferences with respect to
distribution or to dissolution that are prior, superior,
or substantially equal to the shares of Convertible
Preferred Stock;
h) Limit or deny an existing preemptive right of all or part
of the shares of Convertible Preferred Stock; or
i) Cancel or otherwise affect rights to distributions or
dividends that have accumulated but have not yet been
declared on all or part of the shares of Convertible
Preferred Stock.
5. Paragraph 5(f) of the Terms is hereby amended by adding to the end
thereof the following language:
or which results in aggregate gross proceeds to the Company of at
least $5,000,000 and a price per share equal to at least 120% of the
Conversion Price then in effect.
6. The Terms are hereby further amended by adding a new Paragraph 6 as
follows:
6. Redemption.
The Convertible Preferred Stock may be redeemed, in whole but
not in part, by the Corporation, in its sole discretion, upon thirty
(30) days prior written notice to the holders thereof, if any time
the closing price of the Corporation's Common Stock is 120% of the
Conversion Price then in effect or higher, for a period of twenty
(20) consecutive trading days.
IN WITNESS WHEREOF the undersigned have caused this Amendment and Waiver
to be signed this 24th day of January, 1997, effective as of December 31,
1996.
The Debtholders:
By: /s/ Shirley G. Anton
Shirley G. Anton as Life Tenant
By: /s/ Laurence H. Anton
Laurence H. Anton as Remainderman
Shirley Anton Ten-Year Grit Trust
By: /s/ Laurence H. Anton
Trustee
/s/ Charles Anton
Charles Anton, as an Individual
The Building Owner:
/s/ Shirley G. Anton
Shirley G. Anton
/s/ Laurence H. Anton
Laurence H. Anton
ACKNOWLEDGED AND AGREED TO this 24th day of January, 1997.
CARLYLE GOLF, INC.
By: /s/ Jerome M. Hause
Its: President
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, made this 24th day of January, 1997 by and
between Carlyle Golf, Inc., a Colorado corporation (the "Company"), and
Laurence H. Anton (the "Consultant"), (both of whom may be referred to jointly
as the "parties"), is expressly made subject to the following recitals:
RECITALS
WHEREAS, the Company desires to obtain the services of the Consultant and
the Consultant is willing and desires to serve the Company under the terms and
conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
conditions, covenants and agreements set forth below, and other good and
valuable consideration, the parties agree as follows:
1. Engagement. The Company agrees to retain the Consultant and the
Consultant agrees to provide services to the Company upon the terms and
conditions set forth in this Agreement. The Consultant acknowledges that his
relationship with the Company shall, during the period of performance
hereunder, be that of an independent contractor. The Consultant shall be free
to dispose of his time, energy, and skills in such a manner as he sees fit so
long as he performs the duties required of him as provided in paragraph 2.
2. Position, Duties, Best Efforts and Responsibilities. Throughout the
term of this Agreement, the Consultant shall assist, counsel and advise the
Company with respect to the business of the Company, particularly as regards
the manufacture and sale of headwear. In the performance of his services for
the Company, the Consultant shall report to the President of the Company. The
Consultant shall exert his best efforts and shall devote such time as may be
necessary for the conscientious and faithful performance of his services,
duties and responsibilities pursuant to this Agreement, consistent with his
education, training and experience. Notwithstanding anything to the contrary
contained herein, the Consultant shall not be obligated to spend more than
forty (40) hours per month during the first three (3) months of this Agreement
and not more than ten (10) hours per month thereafter in the performance of
services hereunder.
3. Confidential Information. In the performance of his duties
hereunder, the Consultant may receive, have access to or develop information
of a highly confidential nature regarding the Company. The Consultant agrees
that, unless he has the prior written approval of the Company, he will make no
oral or written disclosure of such information either during the term of this
Agreement or for a period of three (3) years following the termination of this
Agreement except to employees of the Company or to persons designated by the
Company to receive such information. Notwithstanding anything to the
contrary, the foregoing covenant shall not apply to any information which (a)
is or becomes public knowledge without breach of this Agreement, (b) is or
becomes publicly available without a confidentiality restriction and without
breach of this Agreement from a source other than the disclosing party, (c)
the recipient can demonstrate was known by the recipient without a
confidentiality restriction at the time of the receipt of such information, or
(d) was independently developed by the recipient by persons who did not have
access to the disclosed information.
4. Restrictive Covenant. During the term of this Agreement, Consultant
shall not, directly or indirectly, participate in any fashion, render any
service of an advisory nature or otherwise to, become an interest holder in or
became employed by, anywhere in the world, an enterprise engaged in the
business of manufacturing and/or distributing or selling headwear (other than
the Company). Nothing herein, however shall prevent the Consultant from
engaging, through Larry Anton & Associates, Inc., in certain activities as
described at Exhibit A hereto or from owning less than ten percent (10%) of
the outstanding capital stock of a public company that is engaged, directly or
indirectly in a business that would violate the foregoing covenant.
5. Compensation. For all services rendered by the Consultant in any
capacity during the term of this Agreement, the Consultant shall be paid
$9,028 per month. As additional consideration, the Consultant will also
receive from the Company a five-year option, in the form set forth as Exhibit
___ attached hereto, to purchase 200,000 shares of the Company's Common Stock
at a strike price of $2.08, representing the average closing ask price of the
Company's Common Stock for the ten (10) trading days beginning five (5)
trading days prior to January 9, 1997. In addition, the Company shall
reimburse the Consultant for the reasonable out-of-pocket expenses incurred by
him in performing consulting services hereunder if such services require the
Consultant to travel more than fifty (50) miles from Fort Worth, Texas,
provided, however, that any such expenses greater than $500 require the prior
written approval of the Company.
6. Term of Engagement. Subject to the provisions for termination, the
term of this Agreement shall be for three (3) years, beginning on January 24,
1997 and ending on January 23, 2000.
7. Termination. This Agreement may be terminated by Consultant at any
time by written notice delivered to the Company. This Agreement may not be
terminated by the Company prior to the end of its stated term. In the event
of the death or Disability of the Consultant during the term of this
Agreement, the Company will continue to make payments pursuant to this
Agreement to the estate of the Consultant for the remaining term of this
Agreement. As used herein, "Disability" shall mean when Optionee is unable to
continue or obtain gainful employment by reason of a medically determined
physical or medical impairment for continuous period of one hundred eighty
(180) days.
8. General Provisions. (a) The Consultant may not assign any right or
interest nor delegate any duty under this Agreement, nor may the Consultant's
beneficiaries or legal representatives assign any right or interest hereunder,
without the Company's prior written consent, which consent shall not be
unreasonably withheld. (b) Any notice required or permitted under the
provisions of this Agreement shall be deemed to have been given when delivered
in person or five (5) business days after being deposited in the United States
mail, certified or registered, return receipt requested, postage prepaid,
addressed to the person to whom the notice is given at the address specified
below or at such other address as may hereafter be designated by a party
pursuant to notice in writing:
To the Company:
Carlyle Golf, Inc.
10550 East 54th Avenue, Unit E
Denver, Colorado 80239
Attention: Jerome M. Hause, President
To the Consultant:
Laurence H. Anton
8224 White Settlement Road
Fort Worth, Texas 76108
With a copy to:
Kevin G. Levy, Esq.
Kelly, Hart & Hallman, P.C.
201 Main Street, Suite 2500
Fort Worth, Texas 76102.
(c) In the event any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable, such
illegality, invalidity or unenforceability shall not affect any other
provisions of this Agreement. (d) This Agreement embodies the entire
understanding of the parties and there are no further or other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter of this Agreement unless expressly referred to in this
Agreement. (e) Any amendment or modification of this Agreement may be made
only by a writing signed by the parties hereto. (f) Any failure by either
party to comply with any of its obligations, agreements, covenants or
indemnities contained in this Agreement may be waived in writing, but not in
any other manner, by the party against which enforcement of the waiver is
sought, and any such waiver or failure to enforce a party's rights hereunder
in one instance shall not be deemed to be a general waiver of that or any
other provision of this Agreement. (g) This Agreement has been executed and
delivered in the State of Colorado and its validity, interpretation,
performance and enforcement shall be governed by the laws of the State of
Colorado. (h) This Agreement shall be binding upon, and inure to the benefit
of, the Consultant and the Company and their respective permitted successors,
heirs and assigns.
IN WITNESS WHEREOF, this Agreement has been executed in duplicate
originals on the day and year stated below.
COMPANY:
CARLYLE GOLF, INC.,
a Colorado corporation
Date: January 24, 1997 By: /s/ Jerome M. Hause
Jerome M. Hause, President
CONSULTANT:
Date: January 24, 1997 /s/ Laurence H. Anton
Laurence H. Anton
CARLYLE GOLF, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made effective as of the 31st day of December, 1996, by
and between Carlyle Golf, Inc., a Colorado corporation (the "Company"), and
Laurence H. Anton ("Optionee").
WHEREAS, the Board of Directors of the Company has determined that it is
to the advantage and in the best interests of the Company and its Shareholders
to grant the option provided for herein to Optionee;
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right
and option to purchase from the Company, on the terms and conditions
following, all or any part of an aggregate of 200,000 shares of the $.001 par
value common stock (the "Common Stock") of the Company. Optionee may elect to
exercise the option at any time during the term of this Agreement. In no
event shall the Company be required to transfer fractional shares to Optionee.
2. Price of Option. During the term of this option, the exercise price
of the shares subject to this option shall be Two Dollars and Eight Cents
($2.08) per share, subject to adjustment as provided in paragraph 6 below (the
"Exercise Price"), which shall be paid to the Company as set forth in
paragraph 7 below at the time of exercise of the option.
3. Termination of Option. The option and all rights granted by this
Agreement, to the extent those rights have not been exercised, will terminate
and become null and void five (5) years after the date of this Agreement.
4. Death or Disability of Optionee. Notwithstanding anything to the
contrary contained herein, in the event of Optionee's death or Disability (as
hereinafter defined) prior to the exercise in full of this option and prior to
the termination of this Agreement, this option shall terminate one (1) year
after Optionee's death or Disability or upon the expiration of this option
pursuant to paragraph 3 of this Agreement, whichever first occurs; provided,
however, that in the event of Optionee's death or Disability, this option may
be exercised only by the person or persons to whom Optionee's rights under
this Agreement shall have passed by order of court, by will or by the laws of
descent and distribution or by the personal representative of Optionee's
estate. As used herein, "Disability" shall mean when Optionee is unable to
continue or obtain gainful employment by reason of a medically-determined
physical or mental impairment for a continuous period of not less then one
hundred eighty (180) days.
5. Personal Exercise by Optionee. Except as set forth in paragraph 4
this option shall, during the lifetime of Optionee be exercisable only by him
and shall not be transferable by Optionee, in whole or in part. If Optionee
shall attempt any transfer of this option not permitted by paragraph 4 hereof
during his lifetime such transfer shall be void and this option shall
terminate with respect to any shares not theretofore purchased by Optionee
pursuant to the terms and conditions of this option.
6. Adjustment of Shares and Price. In the event that, prior to the
exercise of this option in its entirety, there shall be any stock dividend or
subdivision of the shares of the Common Stock of the Company into a greater
number of shares, the purchase price hereunder shall be proportionately
reduced and the number of shares subject to this option shall be
proportionately increased; conversely, in the event of any combination of the
outstanding shares of Common Stock of the Company, the purchase price
hereunder shall be proportionately increased and the number of shares subject
to this option shall be proportionately reduced. In the event of any other
change and/or reclassification of the outstanding shares of Common Stock of
the Company, the Board of Directors of the Company shall have authority to
make such adjustments, if any, in the purchase price, and number of shares
subject to this option as it may, in its discretion, deem fair and equitable
under the circumstances.
7. Manner of Exercise of Option.
a. This option may be exercised by Optionee (or by his successor
or successors under paragraph 4 hereof) by giving written notice to the
Company of an election to exercise this option. Such notice shall specify the
number of shares to be purchased hereunder and the date, not less than five
(5) nor more than fifteen (15) days after the date of such notice, on which
the shares will be taken and payment made for them. The notice shall be
delivered either personally or by registered or certified mail to the
principal office of the Company, postage prepaid. The Purchase Price shall be
paid in full at the time of exercise (i) in cash or by bank check for all
shares purchased pursuant thereto, or (ii) through a "cashless" or "net-issue"
exercise ("Cashless Exercise"), in which case upon receipt of Optionee's
written request, the Company will issue to Optionee the number of shares of
Common Stock with an aggregate Fair Market Value equal to the difference
between the Exercise Price of the option and the Fair Market Value times the
number of options exercised. Upon receipt of such notice and, if applicable,
payment for the shares being exercised, the Company shall deliver the
certificates representing such shares to Optionee forthwith.
b. As used herein, the term "Fair Market Value" shall mean, for
any date, the price determined as follows:
i) the average, calculated over a period of the twenty (20)
prior consecutive trading days (not including the date on which the
determination is made), of the last reported sale price for the Common Stock
on each such trading day on the principal securities exchange or automated
quotation service on which the Common Stock is listed or quoted or if no such
sale takes place on such date, the average of the closing bid and asked prices
thereof as officially reported;
ii) if the Common Stock shall not be listed or quoted as
provided in clause (i) above, such twenty (20) trading day average of the
Common Stock as reported on the OTC Bulletin Board or, in the absence of such
reports, as determined in good faith by the Board of Directors of the Company.
c. In the event that Optionee shall exercise this option with
respect to less than all of the shares of Common Stock that may be purchased
under the terms hereof, the Company shall issue to Optionee certificates for
the shares of Common Stock for which this Option is being exercised in such
denominations as are required for delivery to Optionee, and the Company shall
thereupon deliver such certificates to or in accordance with the instructions
of Company, in form and substance identical to this option for the balance of
shares of Common Stock then issuable pursuant to the terms of this option.
8. Optionee Representations. Optionee, by its execution of this
Agreement, acknowledges, understands and represents that:
a. This option is a "restricted security";
b. Neither the Company nor any of its officers, agents or
representatives have made or can make any assurance that either the granting
or the exercise of this option will not give rise to adverse tax consequence
to Optionee;
c. Upon exercise of this option, Optionee will receive "restricted
securities" and consents to the imposition by the Company of a restrictive
legend on any and all certificates representing said shares and the imposition
by the Company of "stop transfer" order upon such certificate(s) with its
Officers;
d. Optionee may not sell, transfer, assign, encumber or otherwise
dispose of all, or any portion, of this option except in accordance with the
terms and conditions contained herein;
e. Optionee is acquiring this option and any shares purchased
pursuant to this option for investment purposes only and not for distribution;
f. Optionee shall have no voting, dividend, participation,
liquidation or other stockholder rights with respect to the shares covered by
this option unless and until this option is exercised as to such shares;
g. Optionee is familiar with the Company's business and financial
condition and realizes that no assurance can be given with respect to its
ultimate commercial success; and
h. Optionee shall have no right to remedies against the Company or
against any of its Officers, Directors, agents or representatives on account
of any tax consequences flowing from the granting or exercise of this option.
9. Successors and Assigns. Except as stated herein, this Agreement
shall be binding upon the Company and its successors and assigns, and
Optionees and his heirs, legal representatives and successors.
10. Governing Law. This Agreement shall be governed by the laws of the
State of Colorado.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Company and by Optionee on the 24th day of
January, 1997, effective as of December 31, 1996.
CARLYLE GOLF, INC., a Colorado corporation
ATTEST:
By: /s/Jerome M. Hause
Jerome M. Hause, President
/s/Wendy K. Williams
Wendy K. Williams, Secretary
ACCEPTED this 24th day of January, 1997.
OPTIONEE:
/s/ Laurence H. Anton
