<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
October 19, 1998
------------------------------------------------
Date of Report (date of earliest event reported)
SAINT ANDREWS GOLF CORPORATION
----------------------------------------------------
Exact name of Registrant as Specified in its Charter
Nevada 0-24970 88-0203976
- --------------------------- --------------- ---------------------------
State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada 89118
------------------------------------------------------------------
Address of Principal Executive Offices, Including Zip Code
(702) 798-7777
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
<PAGE>
<PAGE>
ITEM 5. OTHER EVENTS.
On October 19, 1998, Saint Andrews Golf Corporation (the "Company")
issued 250,000 shares of Series B Convertible Preferred Stock to its majority
shareholder, Las Vegas Discount Golf & Tennis, Inc. ("LVDG"), for $2,500,000
in cash. LVDG obtained the funds for this transaction from a private sale of
its common stock to ASI Group, L.L.C. ("ASI"). The details of the transaction
between LVDG and ASI are reported in a Report on Form 8-K dated October 19,
1998, filed by LVDG. The Company is using the $2,500,000 received from the
sale of the Series B Convertible Preferred Stock, together with the proceeds
of a $13,500,000 loan which the Company recently obtained from the Nevada
State Bank, toward the completion of the Company's All-American SportPark in
Las Vegas, Nevada, to pay down short-term debt obligations and for working
capital.
The shares of Series B Convertible Preferred Stock issued to LVDG have a
liquidation value of $10.00 per share and may be redeemed by the Company under
certain circumstances. Each share is convertible into one share of the
Company's Common Stock, is entitled to one vote per share and votes together
with the Common Stock as a single class. The Series B Convertible Preferred
Stock entitles the holder to receive dividends equal to those paid to the
holders of the Company's Common Stock, on an as-converted basis.
On October 9, 1998, the Company opened its All-American SportPark in Las
Vegas. The SportPark has four major attractions: the Pepsi Pavillion, Major
League Baseball Slugger Stadium, NASCAR Speedpark, and Allsport Arena.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) EXHIBITS. The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
3.1 Certificate of Designation for Series B Filed herewith
Convertible Preferred Stock electronically
10.1 Investment Agreement, dated as of October Filed herewith
19, 1998, by and between Las Vegas electronically
Discount Golf & Tennis, Inc. and Saint
Andrews Golf Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SAINT ANDREWS GOLF CORPORATION
Dated: November 3, 1998 By:/s/ Ronald S. Boreta
Ronald S. Boreta, President
2
CERTIFICATE OF DESIGNATION
FOR SERIES B CONVERTIBLE PREFERRED STOCK
SAINT ANDREWS GOLF CORPORATION
SAINT ANDREWS GOLF CORPORATION, a Nevada corporation (the "Corporation"),
hereby certifies to the Secretary of State of the State of Nevada as follows:
RESOLVED: That the Board of Directors of the Corporation, by unanimous
written consent dated September 22, 1998, in lieu of meetings of such Board,
pursuant to Article IV of the Articles of Incorporation, adopted resolutions
approving, proposing and declaring advisable, the establishment of a series or
series of preferred stock of the Corporation in the form of this Certificate
of Designation and the Board of Directors hereby establishes and states the
designation and number of such shares, and fixes the relative rights and
preferences, designations, voting powers, qualification and limitation thereof
as follows:
There is hereby established a series of Preferred Stock of the corporation
designated "Series B Convertible Preferred Stock," par value $.001 per share.
The number of shares of this series of Convertible Preferred Stock shall be
250,000 shares. The powers, designations, preferences and relative,
participating, optional or other special rights of the shares of this series
of Convertible Preferred Stock and the qualifications, limitations and
restrictions of such preferences and rights shall be as follows:
1. Dividend Provisions. No dividends shall be paid on any share of
Common Stock or any other series of Preferred Stock unless a dividend is paid
with respect to all outstanding shares of Series B Convertible Preferred Stock
in an amount for each such share of Series B Convertible Preferred Stock equal
to (a) in the case of a dividend with respect to the Common Stock, the
aggregate amount of such dividends for all shares of Common Stock into which
each such share of Series B Convertible Preferred Stock could then be
converted and (b) in the case of a dividend with respect to the Preferred
Stock, (i) if such Preferred Stock is convertible into Common Stock, the
aggregate amount of such dividends (calculated on the basis per share of
Common Stock into which such Preferred Stock is convertible) for all shares of
Common Stock into which each such share of Series B Convertible Preferred
Stock could then be converted or (ii) if such Preferred Stock is not
convertible into Common Stock, an aggregate amount of such dividends
calculated in accordance with the following formula: aggregate dividends =
[then current liquidation value of Preferred divided by then current liquida-
tion value of Series B Convertible Preferred Stock] x dividend per share of
Preferred Stock x number of shares of Series B Convertible Preferred Stock then
outstanding. Such dividends shall be payable only when, as, and if declared
payable to holders of Common Stock or Preferred Stock, as the case may be, by
the Board of Directors and shall be noncumulative. In the event the
Corporation shall declare a distribution (other than any distributions
described above) payable in securities of other persons, evidences or
indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case the holders of the Series B
Convertible Preferred Stock shall be entitled to a proportionate equitable
share of any such distribution in accordance with provisions set forth above
as though the holders of the Series B Convertible Preferred Stock were the
holders of the number of shares of Common Stock of the corporation into which
their respective shares of Series B Convertible Preferred Stock are
<PAGE>
<PAGE>
convertible or holders of the Preferred Stock as of the record date fixed for
the determination of the holders of Common Stock of the Corporation entitled
to receive such distribution.
2. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holder of
each share of Series B Convertible Preferred Stock shall be entitled to
receive, out of the assets of the Corporation available for distribution to
its stock holders, pro rata with the holders of the Series A Convertible
Preferred Stock with respect to their preference amount before any payment or
distribution shall be made on the Common Stock or any other series of
Preferred Stock as the case may be, an amount per share equal to $10.00. If
the assets and funds to be distributed among the holders of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock shall
be insufficient to permit the payment of the full aforesaid preferential
amount to such holders, then the entire assets and funds of the corporation
legally available for the distribution shall be distributed among the holders
of the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock in proportion to the aggregate preferential amount of all
shares of Series A Convertible Preferred Stock and the Series B convertible
Preferred Stock held by them. After payment has been made to the holders of
the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock, the remaining assets of the Corporation available for
distribution to the holders of the Common Stock shall be distributed, among
the holders of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock and Common Stock pro rata based on the number of
Shares of Common Stock held by each at the time of such liquidation (assuming
conversion of all such Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock).
(b) For purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger
of any other corporation or corporations into the Corporation, or the sale or
any other corporate reorganization, in which shareholders of the corporation
receive distributions as a result of such consolidation, merger, sale of
assets or reorganization, shall be treated as a liquidation, dissolution or
winding up of the Corporation, unless the stockholders of the Corporation hold
more than fifty percent (50%) of the voting equity securities of the successor
or surviving corporation immediately following such consolidation, merger,
sale of assets or reorganization in which event such consolidation, merger,
sale of assets, or reorganization shall not be treated as a liquidation,
dissolution or winding up.
3. Conversion. The Series B Convertible Preferred Stock may be
converted into shares of the Corporation's Common Stock on the following terms
and conditions (the "Conversion Rights"):
(a) Option to Convert. Commencing immediately, holders of the
Series B Convertible Preferred Stock shall have the right to convert all or a
portion of their shares into shares of Common Stock at any time or from time
to time upon notice to the Corporation on the terms and conditions set forth
herein prior to the date fixed for redemption of such shares.
(b) Mechanics of Conversion. Upon the election of a holder of the
Series B Convertible Preferred Stock to convert shares of such Preferred
Stock, the holder of the shares of Series B Convertible Preferred Stock which
are converted shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or any authorized transfer agent
for such stock together with a written statement that he elects to convert his
2
<PAGE>
<PAGE>
preferred stock to common stock. The Corporation or the transfer agent shall
promptly issue and deliver at such office to such holder of Series B
Convertible Preferred Stock a certificate or certificate for the number of
shares of Common Stock to which such holder is thereby entitled. The
effective date of such conversion shall be a date not later than 30 days after
the date upon which the holder provides written notice of his election to
convert to the Corporation or transfer agent.
(c) Conversion Ratio. Each share of Series B Convertible Preferred
Stock may be converted into one (1) fully paid and nonassessable share of
Common Stock (subject to adjustment pursuant to Section 3(d) below). In the
event that upon conversion of shares of Series B Convertible Preferred Stock a
holder shall be entitled to a fraction of a share of Common Stock, no
fractional share shall be issued and in lieu thereof the Corporation shall pay
to the holder cash equal to the fair value of such fraction of a share.
(d) Adjustment of Conversion Rate. If the Corporation shall at any
time, or from time to time, after the effective date hereof effect a
subdivision of the outstanding Common Stock and not effect a corresponding
subdivision of the Series B Convertible Preferred Stock, or if the Corporation
at any time or from time to time after the effective date hereof shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the number of shares of
Common Stock issuable upon conversion of the Series B Convertible Preferred
Stock shall be proportionately increased as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close of
business on such record date.
(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all of the
provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Convertible Preferred Stock against impairment.
(f) Reservations of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series B Convertible Preferred Stock, such number
of its shares of Common Stock as shall time to time be sufficient to effect
the conversion of all outstanding shares of Series B Convertible Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all
outstanding shares of Series B Convertible Preferred Stock, the Corporation
will take such corporate action as is necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
4. Status of Converted or Reacquired Stock. In case any shares of
Series B Convertible Preferred Stock shall be converted pursuant to Section 3
hereof, the shares so converted shall cease to be a part of the authorized
capital stock of the Corporation.
5. Voting Rights. Each share of Series B Convertible Preferred Stock
entitles the holder to one (1) vote and with respect to each such vote, a
holder of shares of Series B Convertible Preferred Stock shall have full
voting rights and powers equal to the voting rights and powers of a holder of
3
<PAGE>
<PAGE>
shares of Common Stock, share for share, and shall be entitled to notice of
any shareholders' meeting in accordance with the Bylaws of the Corporation,
and shall be entitled to vote with holders of Common Stock and Series A
Convertible Preferred Stock together as a single class.
6. Redemption Provisions. To the extent permitted under the Nevada
Business Corporation Act, shares of the Series B Convertible Preferred Stock
are redeemable as follows:
(a) Redemption at Option of Corporation. If there is a registration
statement covering the issuance of the Common Stock upon the conversion of the
Series B Convertible Preferred Stock which has been declared effective by the
Securities and Exchange Commission, and both of the following two conditions
have been satisfied:
(i) The Corporation has $1,000,000 of pre-tax income for a
fiscal year according to the audited year-end financial statements; and
(ii) If the closing bid price of the Corporation's common stock
for twenty consecutive trading days equals or exceeds $15.00,
the Corporation may redeem shares of Series B Convertible Preferred Stock.
If fewer than all of the outstanding shares of Series B
Convertible Preferred Stock are to be redeemed, the Company will select those
to be redeemed pro rata or by lot or in such other manner as the Board of
Directors may determine.
(b) Redemption Price. The redemption price per share under this
Section 6 shall be $12.50 per share.
(c) Notice of Redemption. Notice to the holders of shares of Series
B Convertible Preferred Stock to be redeemed shall be given not earlier than
60 days nor later than 30 days before the date fixed for redemption. The
notice of redemption to each stockholder whose shares of Series B Convertible
Preferred Stock are to be redeemed shall specify the number of Series B
Convertible Preferred Stock of such stockholder to be redeemed, the date fixed
for redemption and the redemption price at which shares of Series B
Convertible Preferred Stock are to be redeemed, and shall specify where
payment of the redemption price is to be made upon surrender of such shares,
shall state the conversion rate then in effect, and that the Conversion Rights
of such shares shall cease and terminate at the close of business on the date
fixed for redemption.
7. Preferences Generally. Except as otherwise set forth in this Section
7, the Series B Convertible Preferred Stock shall be pari passu with the
Series A Convertible Preferred Stock. The Corporation shall not authorize or
issue any securities having any rights or preferences senior or preferential
to or pari passu with those of the Series B Convertible Preferred Stock
without the vote of the holders of a majority of the Series B Convertible
Preferred Stock, voting separately as a class, in addition to any other vote
required by law.
8. Notices. Any notice required to be given to holders of shares of
Series B Convertible Preferred Stock shall be deemed given upon deposit in the
United States mail, postage prepaid, addressed to such holder of record at his
address appearing on the books of the corporation, or upon personal delivery
of the aforementioned address.
RESOLVED: This Certificate of Designation effected herein is authorized by
the vote of the Board of Directors on September 22, 1998.
4
<PAGE>
<PAGE>
RESOLVED: The resolutions effected herein were duly adopted in accordance
with the applicable provisions of NRS 78.1955.
IN WITNESS WHEREOF, Saint Andrews Golf Corporation has caused this Certificate
of Designation to be signed and acknowledged by its President and Secretary
this 30th day of September 1998.
ATTEST: SAINT ANDREWS GOLF CORPORATION
/s/ Ron Boreta By: /s/ Ron Boreta
Ron Boreta, Secretary Ron Boreta, President
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, Virginia M. Anglada, a Notary Public, hereby certify that on the 30th
day of September 1998, personally appeared before me Ron Boreta, who being by
me first duly sworn, declared that he signed the foregoing document as both
President and Secretary of the corporation named therein and that he is above
the age of eighteen years and that the statements contained therein are true
and correct to the best of his knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Virginia M. Anglada
Notary Public
[ S E A L ]
My commission expires: April 21, 2002
5
INVESTMENT AGREEMENT
This Investment Agreement is made as of October 19, 1998, between SAINT
ANDREWS GOLF CORPORATION, a Nevada corporation (the "Company"), whose address
is 5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada 89118, and LAS
VEGAS DISCOUNT GOLF & TENNIS, INC., a Colorado corporation (the "Purchaser"),
whose address is 5325 South Valley View Boulevard, Suite 4, Las Vegas, Nevada
89118.
SECTION 1
AUTHORIZATION AND SALE OF SERIES B PREFERRED
1.1 Authorization. The Company will authorize the sale and issuance of
Two Hundred Fifty Thousand (250,000) shares (the "Shares") of its Series B
Convertible Preferred Stock ("Series B Preferred"), having the rights,
privileges and preferences as set forth in the Certificate of Designation (the
"Certificate") in the form attached to this Agreement as Exhibit A. The
Shares of Common Stock into which the Shares will be convertible are referred
to herein as the "Conversion Stock."
1.2 Sale of Series B Preferred. Subject to the terms and conditions
hereof, and in reliance upon the representations, warranties and agreements of
the parties contained herein, the Company will issue and sell to the
Purchaser, and the Purchaser will buy from the Company, Two Hundred Fifty
Thousand (250,000) shares of Series B Preferred at a purchase price of Ten
Dollars ($10.00) per share, for an aggregate purchase price of Two Million
Five Hundred Thousand Dollars ($2,500,000.00). The parties hereto understand
that the number of shares of Series B Preferred to be purchased hereunder may
be reduced, and the aggregate purchase price reduced accordingly, to the
extent Three Oceans, Inc. ("Three Oceans") exercises its rights of first
refusal pursuant to that certain Investment Agreement between Three Oceans and
the Company (the "Sanyo Agreement").
1.3 Summary of Terms of Series B Preferred. The following summary of
the Series B Preferred is provided for information purposes only and is
subject to the description set forth in Exhibit A:
Each share of Series B Preferred is convertible, at the option of the
Purchaser, into one share of the Company's Common Stock, subject to the
Anti-Dilution Provisions set forth herein. In the event of liquidation or
dissolution of the Company, each share of Series B Preferred will have a
$10.00 liquidation preference to be paid pari passu on a prorata basis with
liquidation preference of the Series A Convertible Preferred Stock of the
Company (the "Series A Preferred") and over all other shareholders. After the
distribution described above has been paid, the remaining assets of the
Company available for distribution to shareholders shall be distributed among
the holders of Series B Preferred, the Series A Preferred (together with the
Series B Preferred and any other series of preferred stock of the Company
which may hereafter be issued, the "Preferred") and Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming
conversion of all such Series B Preferred and Series A Preferred). In
addition, holders of Series B Preferred shall be entitled to receive dividends
at a rate equal to the rate per share payable to Common Stock or Series A
Preferred holders, assuming conversion of Series B Preferred and Series A
Preferred, payable out of funds legally available therefor. Such dividends
shall be payable only when, as, and if declared payable to holders of Common
Stock or Series A Preferred by the board of directors of the Company and
shall be non-cumulative. In the event the Company shall declare a
<PAGE>
<PAGE>
distribution payable in securities of other persons, evidences of indebtedness
issued by the Company or other persons, assets (excluding cash dividends) or
options or rights to purchase any such securities or evidences of
indebtedness, then, in each such case the holders of the Series B Preferred
shall be entitled to a proportionate share of any such distribution as though
the holders of the Series B Preferred were the holders of the number of shares
of Common Stock of the Company into which their respective shares of Series B
Preferred are convertible as of the record date fixed for the determination of
the holders of Common Stock of the Company entitled to receive such
distribution. Each share of Series B Preferred will have one vote and will
vote along with the holders of the Common Stock and the Series A Preferred
except as otherwise specified herein. The Series B Preferred can be redeemed
by the Company if there is an effective registration statement filed with the
Securities and Exchange Commission covering the issuance of the Common Stock
upon conversion of the Series B Preferred and the following two conditions are
satisfied: (a) the Company earns $1,000,000 of pre-tax income for a fiscal
year according to the year-end audited financial statements; and (b) the
closing bid price of the Company's Common Stock is a least $15.00 for 20
consecutive trading days. If the Company notifies the Purchaser of its intent
to redeem the Series B Preferred, the Purchaser will have at least 30 days to
elect to convert its Series B Preferred or accept the redemption price of
$12.50 per Share. The Series B Preferred shall be pari passu with the Series
A Preferred and the Company shall not authorize or issue any class or series
of securities having rights or preferences senior to or pari passu with those
of Series B Preferred without a vote of the holders of a majority of the
Series B Preferred outstanding, voting separately as a class.
1.4 Adjustment of Price and/or Terms. If at any time and each time
within three (3) years after the Closing (as defined in Section 2.1 below),
the Company offers to sell or grants, sells or issues shares of its capital
stock to any persons or entity other than the Purchaser at a lower price per
share than the purchase price paid by the Purchaser for the Shares and/or on
more favorable terms and conditions than those afforded to the Purchaser in
connection with the purchase of the shares of Series B Preferred (taking into
account any equitable adjustment in accordance with the Anti-Dilution
Provisions), the Company agrees to retroactively apply such lower price and/or
more favorable terms and conditions to the Shares purchased by the Purchaser
or to the Conversion Stock acquired by the Purchaser. At the Purchaser's
request, the Company shall either (a) issue the Purchaser additional shares of
Series B Preferred in the amount equal to (i) the amount of any such
overpayment by the Purchaser divided by (ii) such lower price charged by the
Company to any person or entities or (b) deliver to the Purchaser the amount
of any such overpayment in cash.
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Series B
Preferred hereunder shall be held at the offices of the Company sixteen days
from the execution hereof (the "Closing"), or at such other time and place
upon which the Company and the Purchaser shall agree (the date of the Closing
is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates, registered in the Purchaser's name representing
Two Hundred Fifty Thousand (250,000) Shares against payment of the purchase
price therefor, by check payable to the Company or wire transfer per the
Company's instructions. The total purchase price shall be paid by the
Purchaser to the Company in one installment without interest thereon.
2
<PAGE>
<PAGE>
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit B (which Schedule makes specific reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty to which such exception
shall apply), the Company represents and warrants to the Purchaser as follows:
3.1 Definition of Material. For purposes of this Section 3, material
shall mean anything having a value or effect of more than $50,000.
3.2 Organization and Standing; Articles and By-Laws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Nevada and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction, and the failure to be
qualified will not have a material adverse affect on the Company's business as
now conducted or as now proposed to be conducted. The Company has furnished
the Purchaser with copies of its Articles of Incorporation (the "Articles")
and By-Laws, as amended. Said copies are true, correct and complete and
contain all amendments through the Closing Date.
3.3 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, at the Closing will
have all requisite legal and corporate power and authority to sell and issue
the Shares hereunder, to issue the Conversion Stock upon conversion of the
Shares, and to carry out and perform its obligations under the terms of this
Agreement.
3.4 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.5 Capitalization. The authorized capital stock of the Company
consists, or upon the filing of the Certificate will consist, of 10,000,000
shares of Common Stock, of which 3,000,000 shares are issued and outstanding,
and 5,000,000 shares of Preferred Stock, of which (a) 500,000 shares have been
designated "Series A Preferred" and are issued and outstanding and (b) 250,000
shares have been designated "Series B Preferred," of which none is issued and
outstanding prior to the Closing. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved shares of Series B Preferred for issuance hereunder,
250,000 shares of Common Stock upon conversion of the Series B Preferred,
500,000 shares of Common Stock upon conversion of Series A Preferred, 500,000
shares for issuance upon exercise of outstanding Class A Warrants (exercise
price of $6.50), 100,000 shares of Common Stock for issuance upon exercise of
outstanding Underwriter's Warrants (exercise price of $5.40), 250,000 shares
of Common Stock for issuance upon exercise of the option under the Sanyo
Agreement and 50,000 shares of Common Stock for issuance upon exercise of the
Underwriter's Class A Warrants (exercise price of $7.80). Options to purchase
657,000 shares of Common Stock are issued and outstanding under the Company's
employee stock option plan. All outstanding securities of the Company were
issued in compliance with applicable federal and state securities laws. The
Series B Preferred shall have the rights, preferences, privileges and
restrictions set forth in the Certificate. Except as set forth above, there
are no options, warrants or other rights to purchase any of the Company's
capital stock. Except as set forth in any agreement entered into with the
Purchaser, the Company is not a party or subject to any agreement or
3
<PAGE>
<PAGE>
understanding, and there is no agreement or understanding between any persons
that affects or related to the voting or giving of written consents with
respect to any security or the voting by a director of the Company.
3.6 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares and the Conversion
Stock and the performance of all of the Company's obligations hereunder has
been taken or will be taken prior to the Closing. This Agreement, when
executed and delivered by the Company, shall constitute a valid and legally
binding obligation of the Company, enforceable in accordance with its
respective terms. The Shares, when issued in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable and
will have the rights, preferences and privileges described in the Certificate;
the Conversion Stock has been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement and the Certificate, will be
validly issued, fully paid and nonassessable; and the Shares and Conversion
Stock will be free of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon the holders hereof through no action
of the Company; provided, however, that the shares of the Conversion Stock
will be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein. Except as set forth in the Sanyo
Agreement, the Shares are not subject to any preemptive rights or rights of
first refusal.
3.7 Financial Statements. The Company has delivered to the Purchaser
its audited balance sheet and statements of operations and cash flow was of
and for the period ended December 31, 1997, and its combined unaudited balance
sheet and statements of operations and cash flows as of and for the period
ended June 30, 1998 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated, except that the
unaudited financial statements do not contain footnotes. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the period,
indicated therein. The financial statements for the year ended December 31,
1997, were audited by Arthur Andersen LLP.
3.8 Absence of Changes. Since June 30, 1998: (a) the Company has not
entered into any transaction which was not in the ordinary course of business,
(b) there has been no materially adverse change in the condition (financial or
otherwise), business, property, assets or liabilities of the Company other
than changes in the ordinary course of business, none of which, individually
or in the aggregate, has been materially adverse, (c) there has been no damage
to, destruction of or loss of physical property (whether or not covered by
insurance) materially and adversely affecting the business or operations of
the Company, (d) the Company has not declared or paid any dividend or made any
distribution on its stock, or redeemed, purchased or otherwise acquired any of
its stock, (e) the Company has not increased the compensation of any of its
officers, or the rate of pay of its employees as a group, except as part of
regular compensation increases in the ordinary course of business, (f) there
has been no resignation or termination of employment of any key officer,
consultant or employee of the Company, and the Company does not know of the
impending resignation or termination of employment of any such officer,
consultant or employee that if consummated would have a material adverse
effect on its business, (g) there has been no labor dispute involving the
Company or its employees and none is pending or, to the best of the Company's
knowledge, threatened, (h) there has not been any change, except in the
ordinary course of business, in the contingent obligations of the Company, by
4
<PAGE>
<PAGE>
way of guaranty, endorsement, indemnity, warranty or otherwise, (i) there have
not been any loans made by the Company to any of its employees, officers or
directors other than travel advances and office advances made in the ordinary
course of business and (j) to the best of the Company's knowledge, there has
been no other event or condition of any character pertaining to and materially
and adversely affecting the assets or business of the Company.
3.9 Material Liabilities. The Company has no material liabilities or
obligations, absolute or contingent (individually or in the aggregate) except
(a) the liabilities and obligations set forth in the Financial Statements, (b)
liabilities and obligations which have been incurred subsequent to June 30,
1998, in the ordinary course of business which have not been in the aggregate
materially adverse, (c) liabilities and obligations under lease for its
principal offices and for equipment, and (d) liabilities and obligations under
sales, procurement and other contracts and arrangements entered into in the
normal course of business.
3.10 Title to Properties and Assets; Liens, etc. The Company has good
and marketable title to its properties and assets, and has good title to all
of its leasehold interests in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the lien of current taxes not yet due
and payable. Each of the Company's assets is in good repair and good,
marketable and operating condition and is suitable for the purposes for which
it presently is being used and is intended to be used by the Company and is
adequate and suitable to meet all present and reasonably anticipated future
requirements of the Company. The Company's assets conform to all applicable
laws, ordinances, codes, rules and regulations, and the Company has not
received any notice to the contrary. The Company does not own, of record or
beneficially, any real property. Exhibit C sets forth a list and description
of all property leased or subleased to or by the Company.
3.11 Compliance with Other Instruments; None Burdensome, etc. The
Company is not in violation of any term of its Articles or By-Laws, or, in any
material respect, of any term or provision of any mortgage, indebtedness,
indenture, contract, security agreement, agreement, instrument, judgment or
decree, and, to the best of its knowledge, is not in violation of any order,
statute, rule or regulation applicable to the Company where such violation
would materially and adversely affect the Company. The execution, delivery
and performance of and compliance with this Agreement, and the issuance of the
Series B Preferred and the Conversion Stock has not resulted and will not
result in any violation of, or conflict with, or constitute a default (or an
event that might, with the passage of time or the giving of notice or either
of them, constitute a default) under any of the terms of, result in the
termination of, result in the loss of any right under, or give to any other
person the right to cause such a termination of or loss under, and will be in
compliance with, the Company's Articles, By-Laws and all of its agreements,
permits and licenses or any provision of federal, state, local or foreign
statute rule ordinance or regulation applicable to the Company or result in
the creation of, any mortgage, pledge, lien, encumbrance or charge upon any of
the capital stock, properties or assets of the Company or the creation,
maturation or acceleration of any liability or obligation of the Company (or
give to any other person the right to cause such a creation, maturation or
acceleration); and there is no such violation or default which adversely
affects the business of the Company or any of its properties or assets.
3.12 Intangible Assets.
(a) The Company (i) owns or has the right to use, free and clear of
all liens, claims and restrictions, all Intellectual Property (as hereinafter
defined) used in the conduct of its business as now conducted or as proposed
to be conducted without infringing upon or otherwise acting adversely to the
5
<PAGE>
<PAGE>
right or claimed right of any person under or with respect to any of the
foregoing, and (ii) is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner of, license
of, or other claimant to, any patent, trademark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise. "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable) and whether or not reduced
to practice, all improvements thereto, and all patents, patent applications
and patent disclosures, together with all reissuance, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and producing processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software and information systems, programs,
(including data and related documentation), whether owned or leased by the
Company, (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium). The Company has taken all
necessary action to maintain and protect each item of Intellectual Property
that it owns or uses and has never granted any sublicense or similar right to
any third party with respect to such Intellectual Property.
(b) The Company owns and has the unrestricted right to use all
Intellectual Property required for or incidental to the development,
construction and operation of the SportPark segment of its business, free and
clear of any rights, liens or claims of others, including without limitation,
former employers of all current and former employees, consultants, officers,
directors and shareholders of the Company.
(c) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the stockholders and directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company has ever received any charge, complaint, claim, demand
or notice alleging any such interference, infringement, misappropriation or
violation (including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party). No third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of the Company.
(d) Exhibit D identifies each patent or registration which has been
issued to the Company with respect to any of its Intellectual Property, each
pending patent application or application for registration which the Company
has made with respect to any of its Intellectual Property, and each license,
agreement or other permission which the Company has granted to any third party
with respect to any of its Intellectual Property. The Company has delivered
to the Purchaser correct and complete copies of all such patents,
registrations, applications, licenses, agreements and permissions (as amended
to date). Exhibit D also identifies each trade name or unregistered trademark
used by the Company in connection with any of its businesses. With respect to
each item of Intellectual Property required to be identified in Exhibit D:
(i) the Company possesses all right, title and interest in and to the item,
free and clear of any Liens, license or other restriction, (ii) the item is
not subject to any outstanding injunction, judgment, order, decree, ruling or
6
<PAGE>
<PAGE>
charge, (iii) no action, suit proceeding hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of each of the
shareholders and the directors and officers (and employees with responsibility
for Intellectual Property matters) of the Company, is threatened which
challenges the legality, validity, enforceability, use or ownership of the
item and (iv) the Company has never agreed to indemnify any person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item.
3.13 Litigation, etc. There is no suit, action, hearing, investigation,
claim or litigation, or legal, administrative, arbitration or other proceeding
pending or, to the best knowledge of the Company after due inquiry, threatened
against or affecting the Company, its business or any of its property or
assets, before any court, arbitrator, or federal, state, municipal or other
governmental board, department, agency or instrumentality, and there is no
basis for any such action. There is no judgment, decree, injunction, ruling,
award, charge, order or writ of any court, governmental department,
commission, agency, instrumentality, arbitration or other person outstanding
against, binding upon or involving the Company, its business, any directors or
officers of the Company. None of the matters set forth on Exhibit B could
result in any material adverse effect. The Company owns policies of casualty,
liability or other forms of insurance which provide coverages in amount and
scope sufficient to cover every claim, action, cause of action, suit,
proceeding, litigation, arbitration or investigation arising out of, related
to, or in connection with those matters listed on the schedule of exception.
Neither the Company nor any of its directors, officers or employees is
currently charged with, or is currently under investigation with respect to,
any violation of any provision of any foreign, federal, state or local law or
administrative regulation in respect of the business of the Company. The
Company is not in default with respect to any judgment, decree, injunction,
ruling, award, order or writ of any foreign, federal, state, municipal agency
or other governmental department, board, commission, bureau, agency or
instrumentality.
3.14 Employees. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract,
non-disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. There
are no controversies pending nor, to the best knowledge of the Company any
basis of any such controversies, between the Company and any of its employees.
To the knowledge of the Company, and the directors and officers (and employees
with responsibility for employment matters) of the Company, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not bound by any collective bargaining agreement, nor
has the Company experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has not
committed any unfair labor practice. None of the shareholders or the
directors or officers (or employees with responsibility for employment
matters) of the Company has any knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company.
3.15 Employee Agreements. There are no pension, profit-sharing, bonus,
group insurance, death benefit, vacation pay, severance pay, sick leave,
holiday pay, welfare, or any other employee benefit or "fringe benefit" plans
or arrangements relating to the current or former employees or consultants of
the Company. In addition, there are no employment, deferred compensation,
collective bargaining, retainer, savings, consulting, non-competition,
retirement or incentive agreements, contracts, plans or arrangements relating
to, with or for the benefit of any officers or employees of the Company or
other persons.
7
<PAGE>
<PAGE>
3.16 Certain Transactions. The Company is not indebted, directly or
indirectly, to any of its officers, directors or shareholders or to their
respective spouses or children, in any amount whatsoever; none of said
officers, directors or shareholders, or any members of their immediate
families, are indebted to the Company or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or
with which the Company has a business relationship, or any firm or corporation
which competes with the Company, except that officers, directors and/or
shareholders of the Company may own less than 1% of the stock of
publicly-traded companies which may compete with the Company. No officer,
director or shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any contract with the Company. The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.17 Material Contracts and Obligations. Attached hereto as Exhibit E
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by the Company; or which involve transactions or
proposed transactions between the Company and its officers, directors,
affiliates or any affiliate thereof. Copies of certain of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by the Purchaser and its counsel. All
of such agreements and contracts are valid, binding and in full force and
effect in all respects, assuming due execution by the other parties to such
agreements and contracts. To the best knowledge of the Company, the Company
and each other party to each such agreement and contract has performed all
obligations required to be performed by it thereunder and is not in breach or
default, and is not alleged to be in breach or default, in any respect
thereunder, and no event has occurred and no condition or state of facts
exists (or would exist upon the giving of notice or the lapse of time or any
of them) that would become or cause a breach, default or event of default
thereunder, would give to any person the right to cause such a termination or
would cause an acceleration of any obligation thereunder.
3.18 Registration Rights. Except as set forth in this Agreement or as
set forth in the Sanyo Agreement, the Company is not under any contractual
obligation to register (as defined in Section 8.1 below) any of its presently
outstanding securities or any of its securities which may hereafter be issued.
3.19 Governmental Consent, etc. No consent, approval, order or
authorization of (of designation, declaration or filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Series B Preferred and the Conversion Stock, or the consummation of any
other transaction contemplated hereby, except (a) filing of the Certificate in
the office of the Secretary of the State of Nevada, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) or the offer and sale of the Series B Preferred
and the Conversion Stock under applicable estate securities laws, which
filings and qualifications, if required, will be accomplished in a timely
manner.
3.20 Offering. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the
Series B Preferred to be issued in conformity with the terms of this
Agreement, and the issuance of the Conversion Stock upon conversion of the
Series B Preferred, constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
8
<PAGE>
<PAGE>
3.21 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
3.22 Tax Matters. The Company (a) has timely filed all tax returns that
are required to have been filed by it with all appropriate federal, state,
county and local governmental agencies (and all such returns fairly reflect
the Company's operations for tax purposes), (b) has timely paid all taxes owed
by it for which it is obligated to withhold from amounts owing to any employee
(including without limitation social security taxes), creditor or third party
(other than taxes the validity of which are being contested in good faith by
appropriate proceedings), and (c) has not waived any statute of limitations
with respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency. The assessment of any additional taxes for a period
for which returns have been filed is not expected to exceed the recorded
liability therefor, and there are no material unresolved questions or claims
concerning the Company's tax liability. The Company's tax returns have not
been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to
any of said returns which, if determined adversely to the Company, would
result in the assertion by any taxing authority of any valid deficiency in any
material amount for taxes.
3.23 Insurance. With respect to each insurance policy maintained by the
Company: (a) the policy is legal, valid, binding, enforceable and in full
force and effect, (b) the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
consummation of the transactions contemplated hereby, (c) neither the Company
nor any other party to the policy is in breach of default (including with
respect to the payment of premiums or the giving of notices) and (d) no party
to the policy has repudiated any provision thereof. The Company has been
covered since its formation by insurance in type, scope and amount that (x)
meet the minimum requirements of any contract, lease or agreement to which the
Company is a party and (y) is customary and reasonable for the business in
which it has engaged during such period including, without limitation, fire,
casualty, liability and key-man life (on the lives of Ron and Vaso Boreta)
insurance polices. The Company has not failed to give any notice or present
any claim under any insurance policy in a due and timely fashion.
3.24 Environmental and Safety Regulations. The Company is not in
violation of any environmental laws or regulations, including without
limitation any and all applicable federal, state and local laws, regulations
and ordinances relating to air and water pollution and handling and disposal
of chemical and hazardous materials (hereinafter the "Environmental Laws").
The Company possesses all of the authorizations, permits and approvals
required to be obtained by applicable Environmental Laws; neither the Company
nor any stockholder has received any notice from any governmental authority or
has knowledge of any governmental inquiry or investigation or any other claim,
suit or proceeding against or involving the Company with respect to any actual
or alleged violation of any applicable Environmental Law and all hazardous
waste and chemical waste materials have been disposed of in accordance with
all applicable Environmental Laws. There have been no spills, dumping,
discharge or clean-up of hazardous waste or chemical materials in violation of
any Environmental Laws on or at any premises owned or any premises occupied by
the Company.
9
<PAGE>
<PAGE>
3.25 Employee Benefit Plans.
(a) The Company has never maintained or contributed to, and does
not maintain or contribute to any Employee Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974, as amended. The Company has
not incurred any liability under ERISA (including any withdrawal liability) or
under the Internal Revenue Code of 1986, as amended Code (the "Code"), with
respect to any Employee Benefit Plan.
(b) The Company does not contribute to, nor has ever had
contributed to and has never been required to contribute to any multi-employer
plan or has any liability (including withdrawal liability) under any
multi-employer plan.
(c) The Company does not maintain or contribute to, nor has it ever
maintained or contributed to, nor has it ever been required to contribute to
any Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Code Section 4980B).
3.26 Minute Books. The minute books of the Company contain a complete
summary of all meetings of directors and shareholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately.
3.27 Legal Compliance. The Company has complied with all applicable
laws, statutes, and ordinances (including without limitation all rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings
and charges thereunder) of federal, state, local and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against it alleging any failure to so comply. The Company has all
permits, certificates, licenses, approvals and other authorizations required
in connection with the operation of its business, all of which are valid and
effective. No notice has been issued and no investigation or review is
pending or threatened by any governmental entity with respect to (a) any
alleged violation by the Company of any law, statute or ordinance, rule,
regulation, code, plan, injunction, judgment, order, decree, ruling, charge,
policy or guideline of any federal, state, local or foreign governmental
entity(or agency thereof), or (b) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of the Company.
3.28 Disclosure. This Agreement with the Exhibits hereto and all
information provided by the Company to the Purchaser do not contain any untrue
statement of a fact or omit to state a fact necessary in order to make the
statements contained herein not misleading in light of the circumstances under
which they were made.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 Experience. It has experience in evaluating and investing in
private placement transactions of securities in companies so that it is
capable of evaluating the merits and risks of its investment in the Company
and has the capacity to protect its own interests.
10
<PAGE>
<PAGE>
4.2 Investment. It is acquiring the Shares and the Conversion Stock for
investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. It
understands that the Shares and the Conversion Stock have not been registered
under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed
herein.
4.3 Rule 144. It acknowledges that the Shares and the Conversion Stock
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. It is aware
of the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less
than one year after a party has purchased and paid for the security to be
sold, the sale being effected through a "brokers transaction" or in
transactions directly with a "market maker" and the number of shares being
sold during any three month period not exceeding specified limitations.
4.4 Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and
has had the opportunity to review the Company's facilities. It has also had
an opportunity to ask questions of officers of the Company, which questions
were answered to its satisfaction. It understands that such discussions, as
well as any written information issued by the Company, were intended to
describe certain aspects of the Company's business and prospects but were not
a thorough or exhaustive description. However, no investigation by, or
furnishing of information to, the Purchaser shall affect or modify the
representations, warranties and agreements of the Company set forth herein or
the right of the Purchaser to rely exclusively thereon and to seek and obtain
all damages and other remedies available to the Purchaser in connection with
the breach of any of the representations, warranties and covenants contained
herein.
4.5 Authorization. This Agreement when executed and delivered by the
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms subject to (a) the laws of
bankruptcy and the laws affecting creditor's rights generally and (b) the
availability of equitable remedies.
4.6 Brokers or Finders. The Company has not incurred and will not
incur, directly or indirectly, as a result of any action taken by the
Purchaser, any liability for brokerage or finder's fees or agents' commissions
or any similar charges in connection with this Agreement.
4.7 Required SEC Filings. The Purchaser acknowledges that within 10
days after the Closing, it will be required to file an amended Schedule 13D or
Schedule 13G, as appropriate, and a Form 4 with the Securities and Exchange
Commission.
SECTION 5
THE PURCHASER'S CONDITIONS TO CLOSING
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the below-listed conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto. If at the Closing Date any of the conditions specified in this
11
<PAGE>
<PAGE>
Agreement shall not have been fulfilled, the Purchaser shall, at the
Purchaser's election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights Investor may have by
reason of such nonfulfillment.
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true, complete and
correct when made, and shall be true, complete and correct on the Closing
Date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 Good Standing Certificate. The Company shall have delivered to the
Purchaser a certificate of good standing of the Company under the laws of the
State of Nevada.
5.5 Certificate of Amendment. The Certificate shall have been filed
with the Secretary of State of the State of Nevada.
5.6 Legal Matters. All matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have been reasonably
approved by counsel to the Purchaser.
5.7 Co-Sale Agreement. The Purchaser and each of Messrs. John Boreta,
Ron Boreta or Vaso Boreta or Boreta Enterprises Ltd. or any of their
respective affiliates shall each have entered into a Co-Sale Agreement which
shall have a term of two years in the form attached hereto as Exhibit F.
5.8 Right of First Refusal. The Company shall have complied with all
provisions of the Sanyo Agreement as such provisions relate to, or are applied
to, this Agreement or consummation of the transactions contemplated hereby.
5.9 Opinion of the Company's Counsel. The Purchaser shall have received
from Krys, Boyle, Freedman & Sawyer, P.C., counsel to the Company, an opinion
dated the Closing Date, in form and substance satisfactory to the Purchaser,
to the effect that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, and the Company
has the requisite corporate power and authority to own it properties and to
conduct its business.
(b) The Company is not presently required to be qualified to do
business as a foreign corporation in any state or jurisdiction of the United
States.
(c) The Company has the requisite corporate power and authority to
execute, deliver and perform this Agreement. The Agreement has been duly and
validly authorized by the Company, duly executed and delivered by an
authorized officer of the Company and constitutes legal, valid and binding
obligations of the Company, subject to bankruptcy and other laws of general
application affecting the rights and remedies of creditors and except insofar
12
<PAGE>
<PAGE>
as the enforceability of the indemnification provisions of Section 8.11 of the
Agreement may be limited by applicable laws and except that no opinion need be
given as to the availability of equitable remedies.
(d) The capitalization of the Company is as follows:
(i) Preferred Stock. 5,000,000 shares of Stock, of which (A)
500,000 shares have been designated Series A Preferred Stock and are issued
and outstanding and (B) 250,000 shares have been designated as Series B
Preferred and purchased pursuant to this Agreement. Such shares of Series B
Preferred Stock have been duly authorized, issued and delivered, are validly
outstanding, fully paid and nonassessable, and have been approved by all
requisite shareholder action. The respective rights, privileges and
preferences of the Preferred Series B are as stated in the Certificate
attached as Exhibit A to the Agreement. The Conversion Stock has been duly
and validly reserved for issuance and, when issued in accordance with the
Certificate, will be validly issued, fully paid and nonassessable.
(ii) Common Stock. 10,000,000 shares of Common Stock, of
which 3,000,000 shares have been duly authorized, issued and delivered and are
validly outstanding, fully paid and nonassessable and were issued in
compliance with all applicable federal and state securities laws.
(iii) Except for (A) the conversion privileges of the Series A
Preferred Stock, (B) the conversion privileges of the Series B Preferred, (C)
the rights of first refusal contained in Section 9 hereof, (D) the rights of
first refusal contained in the Sanyo Agreement, (E) 250,000 shares of Common
Stock reserved for issuance upon the exercise of the stock option granted in
the Sanyo Agreement, (F) 500,000 shares of Common Stock reserved for issuance
upon exercise of outstanding Class A Warrants, (G) 150,000 shares of Common
Stock reserved for issuance upon exercise of outstanding Underwriter's
Warrants and (H) 657,000 shares of Common Stock reserved for issuance to
employees and consultants upon exercise of outstanding stock options, there
are no preemptive rights or, to the best of counsel's knowledge, options,
warrants, conversion privileges or other rights (or agreements of any such
rights) outstanding to purchase or otherwise obtain any of the Company's
securities.
(e) The certificates representing shares of the Preferred Stock and
shares of Common Stock are in due and proper form and have been duly and
validly executed by the officers of the Company named thereon.
(f) The execution, delivery, performance and compliance with the
terms of this Agreement do not violate any provision of any federal, state or
local law, rule or regulation or of any judgment, writ, decree or order
binding upon the Company or any provision of the Company's amended Articles or
By-Laws.
(g) All consents, approvals, orders or authorizations of, and all
qualifications, registrations, designations, declarations or filings with, any
federal or state governmental authority on the part of the Company required in
connection with the consummation of the transactions contemplated by this
Agreement have been obtained and are effective as of the Closing, and such
counsel is not aware of any proceedings, or threat thereof, which question the
validity thereof.
(h) Based in part upon the representations of the Purchaser in this
Agreement, the offer and sale of the Series B Preferred pursuant to the terms
of this Agreement are exempt from the registration requirements of Section 5
of the Securities Act by virtue of Section 4(2) thereof, and from the
qualification requirements of the securities laws of the State of Nevada, or
all requisite permits, qualifications and orders have been obtained.
13
<PAGE>
<PAGE>
(i) Except as set forth on the Schedule of Exceptions attached to
the Agreement as Exhibit B, such counsel is not aware of any action,
proceeding or investigation pending against the Company or any of its
officers, directors or employees, or that any of the foregoing has received
any threat thereof, which questions the validity of the Agreement or the right
of the Company or its officers, directors and employees to enter into such
agreement or which might result, either individually or in the aggregate, in
any adverse change in the assets, condition, affairs or prospects of the
Company, nor is such counsel aware of any litigation pending, against the
Company or any of its officers, directors or employees' or that any of the
foregoing has received any threat thereof, by reason of the proposed
activities of the Company, the past employment relationships of its officers,
directors or employees, or negotiations by the Company or any of its officers
or directors with possible investors in the Company.
(j) The Company is not in violation of any provisions of its
Articles or Bylaws, and neither of such documents is in violation of any
provision of the Corporation Law of the State of Nevada.
5.10 No Material Adverse Change. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the business or any of the assets, results of
operations, liabilities, prospects or conditions, financial or otherwise, of
the Company.
SECTION 6
THE COMPANY'S CONDITIONS TO CLOSING
The Company's obligation to sell and issue the Shares at the Closing is,
at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 Representations. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Legal Matters. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any of the shares
of Series B Preferred or shares of Conversion Stock:
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of operations and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form similar information of the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
14
<PAGE>
<PAGE>
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in
any event within 45 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of operations and consolidated statements
of cash flows of the Company and its subsidiaries, if any, for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail and signed, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of the Company.
(c) Within 15 days after the end of each fiscal month, unaudited
consolidated balance sheets of the Company as of the end of such month,
unaudited consolidated statements of operations including income statements,
and unaudited consolidated rolling cash flow projections for each month and
for the current fiscal year to date. Such financial statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied (other than accompanying notes), all in reasonable detail
subject to year-end audit adjustments.
(d) Promptly after each meeting or the execution of an action by
written consent, copies of the minutes of proceedings or actions by written
consent of the Company's Board of Directors and shareholders.
(e) With reasonable promptness, such other information and data
with respect to the Company and its subsidiaries, if any, as the Purchaser may
from time to time reasonably request.
(f) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to visit
and inspect any of the properties of the Company or any of its subsidiaries,
to examine its books of account and records, and to discuss their affairs,
finances and accounts with their officers, all at such reasonable times as
often as may be reasonably requested, provided, however, that the Company
shall not be obligated to provide any information, other than to the
representatives of the Purchaser on the Board of Directors, that it reasonably
considers to be a trade secret or to contain confidential information.
7.2 Assignment of Rights to Financial Information. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by the
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that the Purchaser may
assign such rights to a parent, subsidiary or affiliate of the Purchaser upon
notice to the Company thereof.
7.3 Use of Proceeds. The Company shall completely segregate the
proceeds from the sale of the Shares from all other funds of the Company.
These funds shall be strictly and exclusively used for activities directly
related to the SportPark segment of the Company's business and shall not be
used for the Company's franchise business or for any other purposes. The
Company shall maintain a separate accounting for the use of these proceeds and
provide a copy of such accounting to the Purchaser upon request.
7.4 Rule 144 Reporting. With a view to making available to the
Purchaser the benefits of certain rules and regulations of the Securities and
Exchange Commission which may permit the sale of the Conversion Stock to the
public without registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
15
<PAGE>
<PAGE>
(b) Use its best efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) So long as the Purchaser owns any Restricted Securities (as
defined in Section 8.1 hereof) furnish to the Purchaser forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company filed with
the Securities and Exchange Commission, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtained by the Company as the Purchaser may reasonably request in availing
itself of any due or regulation of the Securities and Exchange Commission
allowing the Purchaser to sell any such securities without registration.
7.5 Protective Provisions. For so long as the Purchaser or its
assignees is a holder of any shares of the Series B Preferred or Conversion
Stock, the Company shall not without the Purchaser's prior written consent:
(a) change any of the terms of Series B Preferred as stated in the
Certificate or any amendment, addition, change, modification or deletion of
any portion of the By-Laws or Articles of the Company;
(b) authorize or issue (i) any class or series of securities having
rights senior to or pari passu with those of the Series B Preferred or (ii)
any rights to purchase or any securities or instruments convertible or
exchangeable into any such securities;
(c) sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or effect any merger, consolidation,
reorganization or amalgamation of the Company, with another corporation;
(d) adopt a statutory plan of share exchange;
(e) redeem or repurchase (or enter into any agreement to become so
obligated) any shares of Common Stock or Series B Preferred (other than
pursuant to employee stock vesting or employee stock repurchase agreements or
pursuant to the Certificate);
(f) enter into any transaction with or increase the compensation
paid or issue any securities of the Company, rights or options to purchase any
securities of the Company or any instrument convertible or exchangeable or
payable or satisfied with any securities of the Company or any other
compensation derived from or based on the profits or securities of the Company
to any of Messrs. John Boreta, Ron Boreta or Vaso Boreta or Boreta Enterprises
Ltd. or any of their respective affiliates;
(g) subject to the Sanyo Agreement and to the Agreement, dated as
of July 29, 1996, by and between Three Oceans and the Company regarding the
granting of certain rights to Three Oceans by the Company, including the right
to participate in the ownership, development, management, and/or operation of
a SportPark in Asia, Anaheim, California or Las Vegas, Nevada, the right to
invest in or finance certain transactions, the right to supply certain
products to the Company and certain signage rights, purchase, sell or lease
any material parcel of real property for any SportPark, any single sport
interactive entertainment or training complex ("Single Sport Complex") or
similar facility or enter into any single transaction or series of related
transactions in excess of $100,000 with respect to or relating to or in
connection with any Single Sport Complex or similar facility without first
providing the Purchaser an opportunity to approve the transactions(s) and to
review and provide comments on the relevant documents prior to closing the
transaction;
16
<PAGE>
<PAGE>
(h) dissolve or liquidate the Company and/or its assets or close
the business of the Company; or
(i) file a petition to appoint a receiver for the Company or file a
voluntary petition for bankruptcy, insolvency or to make any assignment for
the benefit of creditors of the Company.
7.6 Principal Business. The Company shall ensure that all its principal
shareholders officers and directors (a) direct or refer all opportunities
relating to, similar to or of the same nature as the Company's Sports Park
business exclusively to the Company, (b) not realize any profit or gain with
respect to such opportunities to the detriment or in lieu of the Company and
(c) not otherwise misappropriate any corporate opportunity.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS; INDEMNIFICATION
8.1 Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Stock issued or issuable pursuant to
conversion of the Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934 as amended
or any similar federal statute and the rules and regulations of the
Commissions thereunder all as the same shall be in effect at the time.
"Holder" shall mean the Purchaser and any person holding Registrable
Securities or shares to whom the rights under this Section 8 have been
transferred in accordance with Section 8.2 hereof.
"Registrable Securities" means (i) the Conversion Stock, and (ii) any
Common Stock of the Company issued or issuable in respect of the Conversion
Stock or other securities issued or issuable pursuant to the conversion of the
shares upon any Recapitalization or any Common Stock otherwise issued or
issuable with respect to the Shares provided however that shares of Common
Stock or other securities shall only be treated as Registrable Securities if
and so long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction or (B)
sold or are available for sale in the opinion of counsel to the Company in a
single transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are or may be removed upon the
consummation of such sale.
The term "register," "registered" and "registration" refer to a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses
as defined below, incurred by the Company in complying with Sections 8.5, 8.6
and 8.7, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the
17
<PAGE>
<PAGE>
compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Restricted Securities" shall mean the securities of the Company required
to bear the legend set forth in Section 8.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the notes and regulations of the Commission
thereunder all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered
by the holders.
8.2 Restriction on Transferability. The Shares and the Conversion Stock
shall not be sold, assigned, transferred or pledged except upon satisfaction
of the conditions specified in this Section 8, which conditions are intended
to ensure compliance with the provisions of the Securities Act. The Purchaser
will cause any proposed assignee, transferee, or pledge of the shares of
Conversion Stock held by the Purchaser to agree to take and hold such
securities subject to the provisions and conditions of this Section 8.
8.3 Restrictive Legend. Each certificate representing (i) the Shares,
(ii) the Conversion Stock and (iii) any other securities issued in respect of
the Shares or the Conversion Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar events, shall (unless
otherwise permitted by the provisions of Section 8.4 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
The Purchaser consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Shares or the Conversion
Stock in order to implement the restrictions on transfer established in this
Section 8.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 8.4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities (other than
(i) transfers not involving a change in beneficial ownership or (ii)
transactions involving the distribution of Restricted Securities by the
Purchaser to a parent, subsidiary or affiliate of the Purchaser), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall
be accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected
18
<PAGE>
<PAGE>
without registration under the Securities Act, or (ii) a "no action" letter
from the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder
to the Company. Each certificate evidencing the Restricted Securities
Transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
8.3 above, except that such certificate shall not bear such restrictive legend
if in the opinion of counsel for such holder and the Company such legend is
not required in order to establish compliance with any provision of the
Securities Act.
8.5 Request for Registration.
(a) Request for Registration. If the Company shall receive from
the Purchaser at any time a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws, and appropriate compliance with the Securities Act) and
as would permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any Holder or holders
joining in such request as are specified in a written request received by the
Company within twenty (20) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 8.5:
(A) After the Company has initiated one such registration
pursuant to this Section 8.5(a);
(B) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred twenty (120) days after the effective date of, a
Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(b) Subject to the foregoing clauses (A) and (B), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Purchaser.
The registration statement filed pursuant to the request of the Purchaser may
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(c) Underwriting. The right of any Holder to registration pursuant
to Section 8.5 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities in the
19
<PAGE>
<PAGE>
underwriting (unless otherwise mutually agreed by a majority in interest of
the Purchaser and such holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he or she holds.
8.6 The Company Registration.
(a) Notice of Registration. If at any time or from time to time
the Company shall determine to register of its securities, either for its own
account or the account of a Holder or Holders, other than a registration
relating solely to employee benefit plans or a post effective amendment to the
registration statement for the Company's initial public offering, the Company
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under the sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made within 20 days after receipt of such written notice
from the Company, by any Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and any other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 8.6, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities to be included in such registration. The Company
shall so advise all Holders and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such holders at the time of filing
the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of
shares allocated to any Holder or other shareholder to the nearest 100 shares.
If any Holder or other shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall
not be transferred in a public distribution prior to 90 days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require. The Company may
include shares of Common Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 8.6, so long as the amount of
Registrable Securities otherwise includable in such registration statement
would not thereby be diminished.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 8.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
20
<PAGE>
<PAGE>
8.7 Registration on Form S-3.
(a) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form
S-3 (such requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders).
(b) If a request complying with the requirements of Section 8.7(a)
hereof is delivered to the Company, the provisions of Section 8.5(a)(i) and
(ii) and Section 8.5(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Section 8.5(c)
hereof shall apply to such registration.
8.8 Expenses of Registration. All Registration Expenses incurred in
connection with the registration pursuant to Section 8.5, 8.6 and 8.7 shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating
to securities registered on behalf of the Holders and all other Registration
Expenses shall be borne by the Holders of such securities pro rata on the
basis of the number of shares registered.
8.9 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section
8, the Company will keep each Holder advised in writing as to the initiation
of each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days, and prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement effective for
at least one hundred twenty (120) days, provided that no such registration
shall constitute a shelf registration under Rule 415 promulgated by the
Commission under the Securities Act;
(b) Enter into a written underwriting agreement in customary form
and substance reasonably satisfactory to the Company, the Holders and the
managing underwriting or underwriters of the public offering of such
securities, if the offering is to be underwritten in whole or in part;
(c) Furnish to the Holders participating in such registration and
to the underwriters of the securities being registered such reasonable number
of copies of the registration statement, preliminary prospectus' final
prospects and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders may reasonably
request within ten (10) days prior to the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business a
foreign corporation in any jurisdiction where it is not so qualified;
(e) Notify the Holders (of if they have appointed an
attorney-in-fact, such attorney-in-fact) participating in such registration,
21
<PAGE>
<PAGE>
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
(f) Notify such Holders or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(g) Prepare and file with the Commission promptly upon the request
of such registration statement or prospectus which, in the reasonable opinion
of counsel for such Holders, is required under the Securities Act or the rules
and regulations thereunder in connection with the distribution of the
Registration Securities by such Holders;
(h) Prepare and promptly file with the Commission, and promptly
notify such Holders or their attorney-in-fact of the filing of, such amendment
or supplement to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances in which they
were made;
(i) In case any of such Holders or any underwriter for any such
Holders is required to deliver a prospectus at a time when the prospectus then
in effect may no longer be used under the Securities Act, prepare promptly
upon request such amendment or amendments to such registration statement and
such prospectus as may be necessary to permit compliance with the requirements
of the Securities Act;
(j) Advise such Holders or their attorney-in-fact, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(k) At the request of any such holder, furnish on the effective
date of the registration statement and, if such registration includes an
underwritten public offering, at the closing provided for in the underwriting
agreement, (i) an opinion, dated each such date, of the counsel representing
the Company for the purpose of such registration, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
covering such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto, proceedings under state
and federal securities laws other matters relating to the Company, the
securities being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and (ii) to the extent the
Company's accounting firm, is willing to do so, a letter dated each such date,
from the independent public accountants of the Company, addressed to the
underwriters, if any, and to the Holder or Holders making such request,
stating that they are independent public accountants within the meaning of the
Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the
registration statement or the prospectus or any amendment or supplement
thereto comply in all material respects with the applicable accounting
requirements of the Securities Act, and additionally covering such other
22
<PAGE>
<PAGE>
financial matter, including information as to the period ending not more than
five (5) business days prior to the data of such letter with respect to the
registration statement and prospectus, as the underwriters or such requesting
Holder or Holders may reasonably request.
8.10 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 8.
8.11 Indemnification.
(a) The Company will defend, indemnify and hold the Purchaser, each
Holder, each of its officers, directors and partners, and each person
controlling the Purchaser and each such Holder within the meaning of Section
15 of the Securities Act, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages or liabilities (or actions
in respect thereof), including without limitation, any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on (i) any breaches of the representations, warrants or covenants
contained herein, or (ii) any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement, prospectus,
offering circular or other document or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on
any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein, light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, and each such holder, each of its officers and directors, and each
person controlling such holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to
be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company each to its directors and
officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Section 15 of the Securities
Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement prospectus' offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
23
<PAGE>
<PAGE>
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein. Notwithstanding
the foregoing, the liability of each Holder under this subsection (b) shall be
limited to an amount equal to the initial public offering price of the shares
sold by such Holder, unless such liability arises out of or is based on
willful conduct by such Holder.
(c) Each party entitled to indemnification under this Section 8.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall, when applicable, permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 8
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
the Indemnifying Party shall not assume the defense for matter as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8.12 Transfer of Registration Rights. The rights to cause the Company
to register securities granted the Purchasers under Sections 8.5, 8.6 and 8.7
may be assigned to a transferee or assignee in connection with any transferor
assignment of Registrable Securities by the Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws and (ii) such assignee or transferee acquires at least 10,000 of the
Shares and /or Conversion Stock (appropriately adjusted for Recapitalization).
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to any parent, subsidiary or affiliate of the
Purchaser, without compliance with item (ii) above, provided, written notice
thereof is promptly given to the Company.
8.13 Standoff Agreement. Each Holder agrees, so long as such Holder
holds at least five percent (5%) of the Company's outstanding voting equity
securities, that, upon request of the Company or the underwriters managing an
underwritten offering of the Company's securities, it will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, a the case may be, for such period of time (not to exceed one
hundred and twenty (120) days) from the effective date of such registration as
may be requested by the underwriters; provided that the officers and directors
of the Company who own stock of the Company also agree to such restrictions.
24
<PAGE>
<PAGE>
SECTION 9
THE PURCHASER'S RIGHT OF FIRST REFUSAL
9.1 Right of First Refusal. The Company hereby grants to the Purchaser
the right of first refusal to purchase its pro rata share of all or any part
of any New Securities (as defined in this Section 9.1) which the Company may,
from time to time, propose to sell and issue. The Purchaser's pro rata share,
for purposes of this right of first refusal, is the ratio that the sum of the
number of shares of Common Stock issuable upon conversion of the shares held
by the Purchaser and the number of shares of Conversion Stock then held by the
Purchaser bears to the sum of the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon conversion
of the then outstanding Preferred Stock convertible into Common Stock.
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred
Stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible into said shares of
Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) the Shares and the Conversion Stock, (ii)
securities offered to the public generally pursuant to a registration
statement or pursuant to Regulation A under the Securities Act, (iii)
securities issued in the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company or its shareholders own not less than fifty-one percent
(51%) of the voting power of the surviving or successor corporation, (iv)
shares of the Company's Common Stock or related options exercisable for such
Common Stock issued to employees, officers and directors of the Company
pursuant to any arrangement approved by the Board of Directors of the Company,
(v) stock issued pursuant to any rights or agreements, including without
limitation convertible securities, options, warrants, provided that the rights
of first refusal established by this Section 9.1 apply with respect to the
initial sale or grant by the Company of such rights or agreements, and (vi)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give the Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The Purchaser shall have fifteen (15)
days from the date of receipt of any such notice to agree to purchase up to
the Purchaser's respective pro rata share of such New Securities for the price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Purchaser fails to exercise such right of
first refusal within said fifteen (15) day period, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by the Purchaser at the price and upon
the terms no more favorable to the purchasers of such securities than
specified in the Company's notice. In the event the Company has not sold the
New Securities or entered into an agreement to sell the New Securities within
said ninety (90) day period (or sold and issued New Securities in accordance
with the foregoing within sixty (60) days from the date of said agreement),
the Company shall not thereafter issue or sell any of such New Securities,
without first offering such securities in the manner provided above.
25
<PAGE>
<PAGE>
(d) The right of first refusal hereunder is not assignable except
to a parent, subsidiary or affiliate of the Purchaser, without the prior
written consent of the Company, which consent will not be unreasonably
withheld.
SECTION 10
INDEMNIFICATION
10.1 Survival of Representations. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall
survive the Closing, but all claims for damages made by virtue of such
representations, warranties and agreements shall be made under this Section
10. The representations and warranties set forth herein are cumulative, and
any limitation or qualification set forth in any one representation and
warranty therein shall not limit or qualify any other representation and
warranty therein.
10.2 Indemnification by the Company. Notwithstanding any term in this
Agreement to the contrary, the Company, shall indemnify, defend, save and hold
the Purchaser and its officers, directors, employees, agents and Affiliates
(excluding Ron Boreta, Vaso Boreta, John Boreta and the Company; collectively,
"Purchaser Indemnitees") harmless from and against all demands, claims,
allegations assertions, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious; collectively, "Purchaser Damages") asserted against, imposed
upon, resulting to, required to be paid by or incurred by any Purchaser
Indemnitees, directly or indirectly, in connection with, arising out of, which
could result in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Company in this Agreement, in any
certificate or document furnished pursuant hereto by the Company or any other
agreement to which the Company is or is to become a party, or (b) a breach or
nonfulfillment of any covenant or agreement made by the Company in or pursuant
to this Agreement or in any other agreement to which the Company is or is to
become a party.
10.3 Indemnification by the Purchaser. The Purchaser shall indemnify,
defend, save and hold the Company and its officers, directors, employees,
agents and Affiliates (excluding Ron Boreta, Vaso Boreta, John Boreta and the
Purchaser; collectively, "Company Indemnitees") harmless from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, deficiencies, liabilities, costs and expenses (including reasonable
legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
the underlying demands, claims, allegations, etc., of third parties are
meritorious (collectively, "Company Damages") asserted against, imposed upon,
resulting to, required to be paid by or incurred by any Company Indemnitees,
directly or indirectly, in connection with, arising out of, which would result
in, or which would not have occurred but for, (a) a breach of any
representation or warranty made by the Purchaser in this Agreement or in any
certificate or document furnished pursuant hereto by buyer or any other
agreement to which the Purchaser is a party and (b) a breach of nonfulfillment
of any covenant of agreement made by the Purchaser in or pursuant to this
Agreement and in any other agreement to which the Purchaser is a party.
10.4 Notice of Claims. If any Purchaser Indemnitee or Company
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred
or will suffer or incur any Purchaser Damages or Company Damages, as the case
may be ("Damages"), for which it is entitled to indemnification under this
Section 10, such Indemnified Party shall so notify the party or parties from
26
<PAGE>
<PAGE>
whom indemnification is being claimed (the "Indemnifying Party") with
reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The failure of an
Indemnified Party to give any notice required by this Section shall not affect
any of such party's rights under this Section 10 or otherwise except and to
the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnified Party.
10.5 Third Party Claims. The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnified Party may compromise or
settle the same, provided that the Indemnified Party shall give the
Indemnifying Party advance notice of any proposed compromise or settlement.
The Indemnified Party shall permit the Indemnifying Party to participate in
the defense of any such action or suit through counsel chosen by the
Indemnifying Party, provided that the fees and expense of such counsel shall
be borne by the Indemnifying Party. If the Indemnified Party permits the
Indemnifying Party to undertake, conduct and control the conduct and
settlement of such action or suit, (a) the Indemnifying Party shall not
thereby permit to exist any encumbrance upon any asset of the Indemnified
Party; (b) the Indemnifying Party shall not consent to any settlement that
does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to the Indemnified
Party; (c) the Indemnifying Party shall permit the Indemnified Party to
participate in such conduct or settlement through counsel chosen by the
Indemnified Party; and (d) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party for the full amount of any Damages including
fees and expenses of counsel for the Indemnified Party incurred after giving
the foregoing notice to the Indemnifying Party and prior to the assumption of
the conduct and control of such action or suit by the Indemnifying Party.
10.6 Good Faith Efforts to Settle Disputes. The Purchaser and the
Company agree that, prior to commencing any litigation against the other
concerning any matter with respect to which such party intends to claim a
right of indemnification in such proceeding, the respective chief executive
officers (or officers holding such authority) of such parties shall meet in a
timely manner and attempt in good faith to negotiate a settlement of such
dispute during which time such officers shall disclose to the others all
relevant information relating to such dispute. In the event that the parties
are unable to amicably resolve the matter or matters in dispute, the parties
shall submit all matters still in dispute to arbitration in accordance with
the arbitration rules of the American Arbitration Association. The Purchaser
shall select an arbitrator and the Company shall select an arbitrator and the
two arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators shall be final and binding on the parties. Such matter shall
be submitted to arbitration within thirty (30) days from the date that either
the Company or the Purchaser declares that any matter in dispute cannot be
amicable resolved. All costs and expenses of arbitration shall be paid
equally by the Purchaser on one hand and the Company on the other. Any cash
or other monetary award shall be paid within thirty (30) days of the
arbitrators final decision. Arbitration shall be held in Las Vegas, Nevada.
SECTION 11
MISCELLANEOUS
11.1 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of Nevada.
27
<PAGE>
<PAGE>
11.2 Events of Default and Remedies.
(a) For purpose of this Agreement, the term "Event of Default"
shall mean the occurrence or happening of any breach or violation of or
default in the observation or performance of any term, agreement, covenant,
representation, warranty, condition or stipulation contained or referred to in
this Agreement by any party to this Agreement.
(b) (i) Upon the occurrence of an Event of Default, the
non-defaulting party shall have all rights and remedies afforded by law or
equity, including the remedy of specific performance, it being recognized that
the Series B Preferred and Conversion Stock and the rights and benefits to be
derived therefrom are unique and special. Any party awarded a money judgment
against the other shall be entitled to recover in addition thereto interest
thereon at the rate of twelve percent (12%) per annum.
(ii) Each right, power and remedy provided for in this
Agreement, or now or hereafter existing at law or in equity shall be
cumulative and may be exercised successively or concurrently and shall be in
addition to every other such right, power or remedy. The exercise or
beginning of the exercise by either party of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise of
all such other rights, powers or remedies. No failure or delay on the party
of any party to exercise any such right, power or remedy shall operate as a
waiver thereof. No waiver by a party will be effective unless and until it is
in writing and signed by an authorized representative of such party.
(c) Each party will pay to the other, in addition to all other sums
due all costs and expenses (including, without limitation, attorneys' fees,
brokerage fees and accountants' fees) reasonably incurred by or on behalf of a
party in exercising and protecting their rights and remedies hereunder,
enforcing the obligations of the other party hereunder and defending any
unsuccessful counterclaim, cross-claim or other claim asserted by the other
party.
11.3 Set Off. In addition to, and not in lieu of, any and all other
remedies which the Purchaser otherwise may have at law or in equity, or
pursuant to this Agreement, the Purchaser shall have the right to set off,
counterclaim and recoup any loss against any amounts to be paid to the Company
under this Agreement.
11.4 Nonexclusivity. The foregoing set off right and the
indemnification provision set forth in Section 8 are in addition to, and not
in lieu or derogation of, any statutory, equitable or common law remedy the
Purchaser may have arising out of or as a result of this Agreement or for
breach of representations, warranties or covenants herein. Neither the
exercise of nor the failure to exercise the set off right set forth in Section
10.3 shall constitute an election of remedies.
11.5 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the closing of the transactions contemplated hereby.
11.6 Anti-Dilution Provisions. The "Anti-Dilution Provisions" shall
provide that in the event that any of the securities referenced herein as
presently constituted, shall be changed into or exchanged for a different
number or kind of securities or interests of the Company or of another entity
(whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares, sale of assets or
otherwise), or if the number of such securities shall be increased through the
28
<PAGE>
<PAGE>
payment of a dividend, or if the Company makes any other distribution of
securities or other property including cash in respect of such securities,
then there shall be substituted for and added to such securities, as the case
may be, theretofore subject or which may become subject to the terms of this
Agreement, the number and kind of securities, interests or property into which
each outstanding security shall be so changed, or for which each such security
shall be exchanged, or to which each such security shall be entitled, as the
case may be, and the purchase price per security appropriately adjusted.
11.7 Assignment; Successors and Assigns. The rights and obligations of
the Company and the rights of the Purchaser to purchase the Shares shall not
be assignable without the written consent of the other; provided, however, the
Purchaser may assign its rights and obligations under this Agreement to a
parent, subsidiary or affiliate of the Purchaser upon notice to the Company
thereof. Except as otherwise provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
11.8 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly
provided herein, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom endorsement of any such amendment, waiver, discharge or
termination is sought.
11.9 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by confirmed facsimile to the correct
facsimile number or otherwise delivered by hand or by messenger, addressed (a)
if to the Purchaser, at its address set forth on the cover page of this
Agreement, or at such other address as the Purchaser shall have furnished to
the Company in writing, or (b) if to any other holder of any Shares or
Conversion Stock, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares or
Conversion Stock who has so furnished an address to the Company, or (c) if to
the Company, one copy shall be sent to its address set forth on the cover page
of this Agreement and addressed to the attention of the Corporate Secretary,
or at such other address as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid.
11.10 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares or Conversion Shares upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Except as provided in Section 11.8 hereof, any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
29
<PAGE>
<PAGE>
breach of default under this Agreement or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to
any holder, shall be cumulative and not alternative.
11.11 Expenses. Except as otherwise provided herein, the Company and
the Purchaser shall each bear their own expenses incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.13 Confidentiality. Neither party shall make or issue, or cause to
be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party. This
provision shall not apply, however, to any announcement or written statement
which in the opinion of counsel to such party is required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange.
11.14 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
11.15 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing
or interpreting this Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
"PURCHASER"
LAS VEGAS DISCOUNT GOLF & TENNIS,
INC., a Colorado corporation
By: /s/ Vaso Boreta
Name: Vaso Boreta
Title: President
"COMPANY"
SAINT ANDREWS GOLF CORPORATION, a
Nevada corporation
By: /s/ Ronald S. Boreta
Name: Ronald S. Boreta
Title: President
30
