SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of report (Date of earliest event reported) May 22, 1996
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Golf-Technology Holding, Inc.
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(Exact name of registrant as specified in its charter)
Idaho 0-26344 59-3303066
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
13000 Sawgrass Village Circle,
Suite 30, Ponte Vedra Beach, Florida 32082
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 273-8772
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On May 22, 1996, Golf-Technology Holding, Inc. (the "Registrant")
completed the issuance and sale of 9,231 shares of its Series B Preferred Stock,
$0.001 par value per share (the "Preferred Stock"), under the terms of a
Regulation S Securities Subscription Agreement dated May 21, 1996 (a copy of
which is attached hereto as Exhibit 10.1). The shares of Preferred Stock were
purchased by RBB Bank Aktiengesellschaft, an Austrian bank ("RBB Bank"), for an
aggregate amount equal to $6,000,150. The shares of Preferred Stock may be
convertible into shares of common stock of the Registrant, par value $0.001 per
share (the "Common Stock"), pursuant to a formula set forth in the Certificate
of Designation for Series B Preferred Stock (the "Certificate of Designation")
(a copy of which is attached hereto as Exhibit 4). The holders of the Preferred
Stock shall possess certain dividend and liquidation preferences as set forth in
the Certificate of Designation. The holders of the Preferred Stock shall have
no voting power and shall not be entitled to participate in any proceeding in
which actions shall be taken by the Registrant or its shareholders.
In connection with the issuance and sale of the Preferred Stock, the
Registrant has entered into a Registration Rights Agreement dated May 21, 1996,
with RBB Bank (a copy of which is attached hereto as Exhibit 10.2), pursuant to
which the Registrant agrees to provide RBB Bank with certain registration rights
with respect to the shares of Common Stock into which shares of Preferred Stock
may be converted. In addition, J.P. Carey Enterprises, Inc., the placement
agent in this transaction, received fifteen percent of the subscription amount
paid by RBB Bank and a warrant to purchase 500,000 shares of Common Stock at a
purchase price of $4.00 per share.
The Registrant has also given Irrevocable Instructions to Transfer
Agent dated as of May 20, 1996, to Interstate Transfer Company (a copy of which
is attached hereto as Exhibit 10.3), which provides for the conversion of shares
of Preferred Stock into shares of Common Stock upon the occurrence of certain
events and in no event later than the 45th day following the date of issuance of
the Preferred Stock.
The Registrant hereby incorporates by reference the description of the
above transaction included in the press release of the Registrant dated May 23,
1996 (attached hereto as Exhibit 20).
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Item 7(c). Exhibits
The following exhibit is filed herewith:
Exhibit Exhibit
Number Title
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4 Certificate of Designation for Series B Preferred Stock as
filed with the Department of State of the State of Idaho on
May 21, 1996.
10.1 Regulation S Securities Subscription Agreement dated May 21, 1996,
between Golf-Technology Holding, Inc. and RBB Bank Aktiengesellschaft.
10.2 Registration Rights Agreement dated May 21, 1996, between Golf-
Technology Holding, Inc. and RBB Bank Aktiengesellschaft.
10.3 Irrevocable Instructions to Transfer Agent dated as of May 20, 1996,
from Golf-Technology Holding, Inc. to Interstate Transfer Company.
20 Press Release dated May 23, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GOLF-TECHNOLOGY HOLDING, INC.
Date: June 6, 1996 By: /s/ Harold E. Hutchins
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Harold E. Hutchins
Vice President and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit Exhibit
Number Title Page No.
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4 Certificate of Designation for Series B Preferred Stock as
filed with the Department of State of the State of Idaho on
May 21, 1996. 6
10.1 Regulation S Securities Subscription Agreement dated May 21,
1996, between Golf-Technology Holding, Inc. and RBB Bank
Aktiengesellschaft. 13
10.2 Registration Rights Agreement dated May 21, 1996, between Golf-
Technology Holding, Inc. and RBB Bank Aktiengesellschaft. 38
10.3 Irrevocable Instructions to Transfer Agent dated as of May 20,
1996, from Golf-Technology Holding, Inc. to Interstate Transfer 47
Company.
20 Press Release dated May 23, 1996. 53
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EXHIBIT 4
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUISHING CHARACTERISTICS OF
SERIES B PREFERRED STOCK
OF
GOLF-TECHNOLOGY HOLDING, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
GOLF-TECHNOLOGY HOLDING, INC.
2. The Articles of Incorporation of the Corporation, as amended,
authorizes the issuance of 5,000,000 shares of Preferred Stock of a par value of
$0.001 per share and expressly vests in the Board of Directors of the
Corporation the authority provided therein to issue any or all of said shares in
one or more series and by resolution or resolutions to establish the
designation, number, full or limited voting powers, or the denial or voting
powers, preferences and relative, participating, optional, and other special
rights and the qualifications, limitations, restrictions, and other
distinguishing characteristics of each series to be issued.
3. On May 17, 1996, the Board of Directors of the Corporation, pursuant
to the authority expressly vested in it as aforesaid, adopted the following
resolutions creating a Series B issue of Preferred Stock:
RESOLVED, that Ten Thousand (10,000) of the Five Million (5,000,000)
authorized shares of Preferred Stock of the Corporation shall be designated
Series B Preferred Stock (the "Series B Preferred Stock") and shall possess the
rights and privileges set forth below:
A. Dividends.
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(i) The holder of each issued and outstanding share of Series B
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Corporation, out of the assets at the time legally available
for such purpose, dividends at a rate of $32.50 per share per annum. No
dividends shall be declared and paid on the Series B Preferred Stock (other than
a dividend payable solely in shares of Series B Preferred Stock) unless all
accrued but unpaid dividends on the Corporation's existing class of Series A
Preferred Stock have been declared and paid in cash. Such dividends shall not
be cumulative and no right to such dividends shall accrue to holders
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of Series B Preferred Stock unless declared by the Corporation's Board of
Directors; provided, however, that if all shares of Series B Preferred Stock
have not been converted into common stock by April 30, 1997, such dividends
shall begin to accumulate on all shares of Series B Preferred Stock which remain
outstanding at such time and shall be payable, subject to clause (ii) below, on
April 30, 1997, and each April 30 thereafter. At the Corporation's election,
such dividends may be declared in cash, or in additional shares of Series B
Preferred Stock in an amount equal to the number of shares of Preferred Stock
which on such date would be convertible into that number of shares of Common
Stock which shall be determined as follows: the amount of the dividend divided
by the closing bid price of the Common Stock on April 30th (or the first
following business day if such date should fall on a holiday). No dividends
shall be declared or paid with respect to the Corporation's Common Stock (other
than a dividend payable solely in Common Stock of the Corporation), or upon any
other class of Preferred Stock of the Corporation with a dividend preference
subordinate to the dividend preference of the Series B Preferred Stock, unless
all accrued but unpaid dividends on the Series B Preferred Stock has been
declared and paid and a dividend of equal or greater amount per share (on an as-
if-converted to Common Stock basis) is first declared and paid with respect to
the Series B Preferred Stock.
(ii) No dividends shall be paid on the Series B Preferred Stock
at such time as:
(a) such payment would violate Idaho law; or
(b) such payment would impair the net capital or other
financial requirements applicable to the Corporation established by the National
Association of Securities Dealers, Inc., the Securities and Exchange Commission,
or any other state of federal securities authority or agency, any state or
federal commodities authority or agency, or any commodities or securities
exchange.
B. Liquidation Preference.
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(i) In the event of any liquidation, dissolution or winding-up
of the Corporation, either voluntary or involuntary (a "Liquidation"), the
holders of shares of the Series B Preferred Stock then issued and outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders, whether from capital, surplus or earnings,
before any payment shall be made to the holders of shares of the Common Stock or
upon any other series of Preferred Stock of the Corporation with a liquidation
preference subordinate to the liquidation preference of the Series B Preferred
Stock, an amount equal to one thousand dollars ($1,000) per share. The
liquidation preference of the Series B Preferred Stock shall be junior in right
of payment to the liquidation preference of the Corporation's existing class of
Series A Preferred Stock. If, upon any Liquidation of the Corporation,
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the assets of the Corporation available for distribution to its shareholders
shall be insufficient to pay the holders of shares of the Series B Preferred
Stock and the holders of any other series of Preferred Stock with a liquidation
preference equal to the liquidation preference of the Series B Preferred Stock
the full amounts to which they shall respectively be entitled, the holders of
shares of the Series B Preferred Stock and the holders of any other series of
Preferred Stock with liquidation preference equal to the liquidation preference
of the Series B Preferred Stock shall receive all of the assets of the
Corporation available for distribution and each such holder of shares of the
Series B Preferred Stock and the holders of any other series of Preferred Stock
with a liquidation preference equal to the liquidation preference of the Series
B Preferred Stock shall share ratably in any distribution in accordance with the
amounts due such shareholders. After payment shall have been made to the
holders of shares of the Series B Preferred Stock of the full amount to which
they shall be entitled, as aforesaid, the holders of shares of the Series B
Preferred Stock shall be entitled to no further distributions thereon and the
holders of shares of the Common Stock and of shares of any other series of stock
of the Corporation shall be entitled to share, according to their respective
rights and preferences, in all remaining assets of the Corporation available for
distribution to its shareholders.
(ii) A merger or consolidation of the Corporation with or into
any other corporation, or a sale, lease, exchange, or transfer of all or any
part of the assets of the Corporation which shall not in fact result in the
liquidation (in whole or in part) of the Corporation and the distribution of its
assets to its shareholders shall not be deemed to be a voluntary or involuntary
liquidation (in whole or in part), dissolution, or winding-up of the
Corporation.
C. Conversion of Series B Preferred Stock.
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The holders of Series B Preferred Stock shall have the following
conversion rights:
(i) Right to Convert. Each share of Series B Preferred Stock
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shall be convertible, on the Conversion Dates and at the Conversion Prices set
forth below, into fully paid and nonassessable shares of Common Stock.
(ii) Mechanics of Conversion. Each holder of Series B Preferred
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Stock who desires to convert the same into shares of Common Stock shall provide
notice ("Conversion Notice") via telecopy to the Corporation. The original
Conversion Notice and the certificate or certificates representing the Series B
Preferred Stock for which conversion is elected, shall be delivered to the
Corporation by international courier, duly endorsed. The date upon which a
Conversion Notice is properly received by the Corporation shall be a "Notice
Date."
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The Corporation shall use all reasonable efforts to issue and deliver
within three (3) business days after the Notice Date, to such holder of Series B
Preferred Stock at the address of the holder on the stock books of the
Corporation, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled as aforesaid; provided that the
original shares of Series B Preferred Stock to be converted are received by the
transfer agent or the Corporation within three business days after the Notice
Date and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the original
shares of Series B Preferred Stock to be converted are not received by the
transfer agent or the Corporation within three business days after the Notice
Date, the Conversion Notice shall become null and void.
(iii) Conversion Dates. The Series B Preferred Stock shall
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become convertible into shares of Common Stock at any time commencing forty-five
(45) days after the last day on which there is an original issuance of the
Series B Preferred Stock (the "Conversion Date").
(iv) Conversion Price. Each share of Series B Preferred Stock
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shall be convertible into the number of shares of Common Stock according to the
following formula:
N x 1,000
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Conversion Price
where:
N = the number of shares of the Series B Preferred Stock for
which conversion is being elected.
and
Conversion
Price = the lesser of (x) the closing bid price of the Corporation's
Common Stock on the date of the original issuance of the
Series B Preferred Stock, or (y) the average closing bid
price of the Corporation's Common Stock for the five (5)
trading days immediately preceding the Notice Date;
provided, however, in no event shall the Conversion Price be
less than $4.00 nor greater than $6.05; provided, further,
however, that the aforesaid $4.00 minimum Conversion Price
shall not be applicable on and after the first to occur of
(i) January 1, 1997, (ii) August 15, 1996, if the Company's
Common Stock has not been listed on the NASDAQ Small Cap
Market on or prior to such date, or (iii)
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October 1, 1996, if the Company's unaudited financial
statements for the quarter ended June 30, 1996 (as set forth
in its Form 10-QSB filed with the Securities and Exchange
Commission) reflected less than $350,000 of net income
before income taxes.
(v) Automatic Conversion. Each share of Series B Preferred
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Stock outstanding on December 31, 1997 automatically shall be converted into
Common Stock on such date at the Conversion Price then in effect, and December
31, 1997 shall be deemed to be the Notice Date with respect to such conversion.
(vi) Fractional Shares. No fractional share shall be issued upon
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the conversion of any shares, share or fractional share of Series B Preferred
Stock. All shares of Common Stock (including fractions thereof) issuable upon
conversion of shares (or fractions thereof) of Series B Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the closing bid price of the Corporation's Common Stock on the
Notice Date multiplied by such fraction.
(vii) Reservation of Stock Issuable Upon Conversion. The
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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 the Series B Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series B 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 then outstanding shares
of the Series B Preferred Stock, the Corporation will take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(viii) Adjustment to Conversion Price.
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(a) If, prior to the conversion of all shares of Series B
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend, or other similar event, the Conversion Price
shall be proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Conversion Price shall be proportionately increased.
(b) If prior to the conversion of all shares of Series B
Preferred Stock, there shall be any merger, consoli-
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dation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Corporation shall be
changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Corporation or another entity,
then the holders of Series B Preferred Stock shall thereafter have the right to
purchase and receive upon conversion of shares of Series B Preferred Stock, upon
the basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
share of stock and/or securities as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the conversion of shares of Series B Preferred
Stock held by such holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the holders of the Series B Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series B Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Corporation shall not effect any
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligation to deliver to the holders of the Series B Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series B Preferred Stock may be entitled to purchase.
(c) If any adjustment under this subsection would create a
fractional share of Common Stock or a right to acquire a fractional share if
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
D. Voting. Except as otherwise provided by the General Corporation
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Law of the State of Delaware, the holders of the Series B Preferred Stock shall
have no voting power whatsoever, and no holder of Series B Preferred Stock shall
vote or otherwise participate in any proceeding in which actions shall be taken
by the Corporation or the shareholders thereof or be entitled to notification as
to any meeting of the Board of Directors or the shareholders.
E. Protective Provisions. So long as shares of Series B Preferred
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Stock are outstanding, the Corporation shall
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<PAGE>
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock so as to affect adversely the Series B
Preferred Stock;
(b) create any new class or series of stock being on a parity
with or having a preference over the Series B Preferred Stock with respect to
dividends, to payments upon Liquidation (as provided for in Section B of this
Designation) or to redemption; or
(c) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the
Series B Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
G. Status of Converted Stock. In the event any shares of Series B
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Preferred Stock shall be converted as contemplated by this Designation, the
shares so converted shall be canceled, shall return to the status of authorized
but unissued Preferred Stock of no designated class of series, and shall not be
issuable by the Corporation as Series B Preferred Stock.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series B Preferred Stock and
fixing the number, powers, preferences and relative, optional, participating,
and other special rights and the qualifications, limitations, restrictions, and
other distinguishing characteristics thereof shall, upon the effective date of
said series, be deemed to be included in and be a part of the Articles of
Incorporation of the Corporation, as amended, pursuant to the provisions of
Section 30-1-16 of the Idaho Business Corporation Act.
Signed on May 17, 1996.
By: /s/ Ernest R. Vadersen
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Ernest R. Vadersen, President
Attest:
/s/ Harold E. Hutchins
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Harold E. Hutchins, Secretary
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EXHIBIT 10.1
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION S
("REGULATION S") PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S)
UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OF SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement" or the
"Subscription Agreement") is executed by the undersigned (the "Subscriber") in
connection with the offer and subscription by the Subscriber for shares of
Series B Preferred Stock (the "Preferred Stock") of GOLF-TECHNOLOGY HOLDING,
INC., an Idaho corporation (the "Company"), and offered in units of not less
than 100 shares. The Company is offering an aggregate face amount of $9,231,000
(U.S.) (9,231 shares with a face amount of $1,000 (U.S.) per share) at an
aggregate purchase price of $6,000,150 (U.S.), the purchase price representing a
35% discount to (or 65% of) the total face amount of the shares purchased. The
rights and preferences of the Preferred Stock, including the terms on which the
Preferred Stock may be converted into Common Stock of the Company ("Shares"),
are set forth in the Certificate of Designation of Series B Preferred Stock
attached hereto as Exhibit A (the "Certificate of Designation"). The
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solicitation of this Subscription and, if accepted by the Company, the offer and
sale of Preferred Stock, are being made in reliance
<PAGE>
upon the provisions of Regulation S ("Regulation S") promulgated under the
United States Securities Act of 1933, as amended (the "Act"). The Preferred
Stock and the Shares issuable upon conversion thereof are sometimes referred to
herein as the "Securities." The Subscriber wishes to subscribe for the number
of shares of Preferred Stock set forth in Section 15 in accordance with the
terms and conditions of the Certificate of Designation and this Agreement. It
is agreed as follows:
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offers to purchase and subscribe for the number of
shares of Preferred Stock, and at the price, set out in Section 15 of this
Agreement. The Closing shall be deemed to occur when this Agreement has been
executed by both the Subscriber and the Company (the "Closing") and payment
shall have been made by the Subscriber, by wire transfer, as directed in writing
by the Company on the day so directed, to an escrow agent, against the Company's
delivery of certificates representing the Preferred Stock subscribed for. If
the Closing does not occur, the funds of the Subscriber shall be returned from
escrow. The payment shall be made by delivering same day funds in United States
Dollars as designated above.
2. Representations; Access to Information; Independent Information;
Independent Investigation
The Subscriber represents and warrants to and covenants with the Company,
on its own behalf and on behalf of each person or entity for which the
Subscriber is acting as a fiduciary, as follows:
2.1 Offshore Transaction. The Subscriber represents and warrants to the
--------------------
Company that (i) neither the Subscriber nor any of the investors on
whose behalf the Subscriber may purchase and hold Preferred Stock or
Shares (the "Investors") is a "U.S. person" as that term is defined in
Rule 902(o) of Regulation S (a copy of which definition is attached as
Exhibit B), and neither the Subscriber nor any Investor is an entity
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organized or incorporated under the laws of any foreign jurisdiction
by any "U.S person" principally for the purpose of investing in
securities not registered under the Act, unless the Subscriber is or
was organized or incorporated by "U.S. persons" who are accredited
investors (as defined in Rule 501(a) under the Act) and who are not
natural persons, estates or trusts ("Institutional Investors"), and
all owners of interests in such entity who are "U.S. persons" are
Institutional Investors, and not natural persons, estates or trusts;
(ii) the Preferred Stock was not offered to the Subscriber or to any
Investor in the United States and at the time of execution of this
Subscription Agreement and of any offer to the Subscriber or to the
Investors to purchase the Preferred Stock hereunder, the Subscriber
and each such Investor was physically outside the United States; (iii)
the Subscriber is purchasing the Securities for its own account and
not on behalf of or for the benefit of any U.S. person and the sale
and resale of the Securities have not been prearranged with any buyer
in the United States; (iv) the Subscriber and to the best knowledge of
the Subscriber each distributor,
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if any, participating in the offering of the Securities, has agreed
and the Subscriber hereby agrees that all offers and sales of the
Securities prior to the expiration of a period commencing on the
Closing of all Preferred Stock offered and ending forty-five (45) days
thereafter (the "Restricted Period") shall not be made to U.S. persons
or for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of Regulation S. Subscriber
has not been engaged or acted as or on behalf of a distributor or
dealer (and is not an affiliate of a distributor or dealer) with
respect to this transaction.
2.2 Independent Investigation. The Subscriber, in offering to subscribe
-------------------------
for the Securities hereunder, has relied upon an independent
investigation made by it and has, prior to the date hereof, been given
access to and the opportunity to examine all books and records of the
Company, and all material contracts and documents of the Company. The
Subscriber will keep confidential all non-public information regarding
the Company that the Subscriber receives from the Company. In making
its investment decision to purchase the Preferred Stock, the
Subscriber is not relying on any oral or written representations or
assurances from the Company or any other person or any representation
of the Company or any other person other than as set forth in this
Agreement, public filings of the Company or in a document executed by
a duly authorized representative of the Company making reference to
this Agreement. The Subscriber has such experience in business and
financial matters that it is capable of evaluating the risk of its
investment and determining the suitability of its investment. The
Subscriber is a sophisticated investor, as defined in Rule
506(b)(2)(ii) of Regulation D, and an accredited investor as defined
in Rule 501 of Regulation D, a copy of which definition is attached
hereto as Exhibit C.
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2.3 Economic Risk. The Subscriber understands and acknowledges that an
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investment in the Shares involves a high degree of risk, including a
possible total loss of investment. The Subscriber represents that the
Subscriber is able to bear the economic risk of an investment in the
Preferred Shares. In making this statement the Subscriber hereby
represents and warrants that the Subscriber has adequate means of
providing for the Subscriber's current needs and contingencies; the
Subscriber is able to afford to hold the Preferred Shares for an
indefinite period and the Subscriber further represents that the
Subscriber has such knowledge and experience in financial and business
matters that the Subscriber is capable of evaluating the merits and
risks of the investment in the Preferred Shares to be received by the
Subscriber. Further, the Subscriber represents that the Subscriber is
able to bear the economic risks of an investment in the Preferred
Shares; the Subscriber has no present need for liquidity in such
Preferred Shares; the Subscriber can afford a complete loss of such
investment in the Preferred Shares; and the Subscriber is willing to
accept such investment risks. The Subscriber understands that upon
mutual agreement of the Company and J.P. Carey Enterprises, Inc., as
agent for the Subscribers, the Closing may be for less than _____
Preferred
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Shares.
2.4 No Government Recommendation or Approval. The Subscriber understands
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that no United States federal or state agency or similar agency of any
other country has passed upon or made any recommendation or
endorsement of the Company, this transaction or the subscription of
the Securities.
2.5 No Directed Selling Efforts in Regard to this Transaction. The
---------------------------------------------------------
Subscriber has not, and to the best of the Subscriber's knowledge,
neither the Company nor any distributor, if any, participating in the
offering of the Securities nor any person acting for the Company or
any such distributor has conducted any "directed selling efforts" as
that term is defined in Rule 902 of Regulation S. Such activity
includes, without limitation, the mailing of printed material to
investors residing in the United States, the holding of promotional
seminars in the United States, the placement of advertisements with
radio or television stations broadcasting in the United States or in
publications with a general circulation in the United States, which
discuss the offering of Shares.
2.6 Reliance on Representation. This Agreement is made by the Company
--------------------------
with the Subscriber in reliance upon such Subscriber's representations
and covenants made in this Section 2, which by his execution of this
Agreement the Subscriber hereby confirms. If the Subscriber includes
or consists of more than one person or entity, the obligations of the
Subscriber shall be joint and several and the representations and
warranties herein contained shall be deemed to be made by and be
binding upon each such person or entity and their respective heirs,
executors, administrators, successors and assigns.
2.7 No Registration. Subscriber understands that the Preferred Stock and
---------------
the Common Stock issuable upon conversion of the Preferred Stock have
not been registered under the Act and are being offered and sold
pursuant to an exemption from registration contained in the Act based
in part upon the representations of Subscriber contained herein. The
Common Stock does, however, carry certain registration rights as set
forth in the Registration Rights Agreement executed by the parties
hereto (the "Registration Rights Agreement").
2.8 No Public Solicitation. Subscriber knows of no public solicitation or
----------------------
advertisement of an offer in connection with the proposed issuance and
sale of the Preferred Stock.
2.9 Investment Intent. Subscriber is acquiring the Preferred Stock to be
-----------------
issued and sold hereunder (and the Shares issuable upon conversion of
the Preferred Stock) for the Subscriber's own account (or for
beneficiaries' accounts over which the Subscriber has investment
discretion but no discretionary voting or dispositive authority).
Subscriber and each other party acquiring Preferred Stock and the
shares issuable upon conversion of the Preferred Stock pursuant to
this Agreement are acquiring such securities for investment and not
with
- 16 -
<PAGE>
a view to the distribution thereof. Subscriber understands that
Subscriber must bear the economic risk of this investment indefinitely
unless the sale of such Preferred Stock or such Shares is registered
pursuant to the Act, or an exemption from such registration is
available, and that except as set forth in the Registration Rights
Agreement, the Company has no present intention of registering any
such sale of the Preferred Stock or such Shares. Subscriber
represents and warrants to the Company that it has no present plan or
intention of selling the Preferred Stock or the Shares in the United
States, has made no predetermined arrangements to sell the Preferred
Stock or the Shares other than as provided in the Registration Rights
Agreement and that the offering by the Company of its securities to
the Subscriber, as contemplated in this Subscription Agreement (the
"Offering"), together with any subsequent resale of the Preferred
Stock or the Shares, is not part of a plan or scheme to evade the
registration provisions of the Act. Subscriber currently has no short
position in the Shares, including any short call position or any long
put position or any contract or arrangement that has the effect of
eliminating or substantially diminishing the risk of ownership of the
Preferred Stock or the Shares, nor has engaged in any hedging
transaction with respect to the Preferred Stock or the Shares.
Subscriber covenants that neither Subscriber nor its affiliates nor
any person acting on its or their behalf has the intention of
entering, or will enter during the Restricted Period, into any put
option, short position or any hedging transaction or other similar
instrument or position with respect to the Shares or securities of the
same class as the Shares and neither Subscriber nor any of its
affiliates nor any person acting on its or their behalf will use at
any time Shares acquired pursuant to this Agreement to settle any put
option, short position or other similar instrument or position that
may have been entered into prior to the execution of this Agreement.
2.10 No Sale in Violation of the Act. Subscriber further covenants that
-------------------------------
Subscriber will not make any sale, transfer or other disposition of
the Preferred Stock or the Shares in violation of the Act (including
Regulation S), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder.
2.11 Incorporation and Authority. Subscriber has the full power and
---------------------------
authority to execute, deliver and perform this Agreement and to
perform its obligations hereunder. This Agreement has been duly
approved by all necessary action of Subscriber, including any
necessary shareholder approval, has been executed by persons duly
authorized by Subscriber, and constitutes a valid and legally binding
obligation of Subscriber, enforceable in accordance with its terms.
2.12 No Reliance on Tax Advice. Subscriber has reviewed with his, her or
-------------------------
its own tax advisors the foreign, federal, state and local tax
consequences of this investment, where applicable, and the
transactions contemplated by this
- 17 -
<PAGE>
Agreement. Subscriber is relying solely on such advisors and not on
any statements or representations of the Company or any of its agents
and understands that Subscriber (and not the Company) shall be
responsible for the Subscriber's own tax liability that may arise as a
result of this investment or the transactions contemplated by this
Agreement.
2.13 Independent Legal Advice. Subscriber acknowledges that Subscriber has
------------------------
had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or her own legal counsel.
Subscriber is relying solely on such counsel and not on any statements
or representations of the Company or any of its agents for legal
advice with respect to this investment or the transactions
contemplated by this Agreement, except for the representations,
warranties and covenants set forth herein and in the opinion provided
for in Section 7.5 herein. Subscriber acknowledges that the law firm
of Nelson Mullins Riley & Scarborough, L.L.P., which is acting as
escrow agent in connection with this transaction, is not legal counsel
to Subscriber and has not provided legal advice to Subscriber.
2.14 Compliance. If Subscriber becomes subject to Section 13(d) of the
----------
Exchange Act, Subscriber will duly file the required Schedule
thereunder.
2.15 Not an Affiliate. Subscriber is not an officer, director or
----------------
"affiliate" (as that term is defined in Rule 405 of the Act) of the
Company.
2.16 No Pledges. Subscriber has not pledged the Securities, and will not
----------
pledge the Securities during the Restricted Period (as defined below),
as collateral in a margin account or otherwise with a U.S. person.
2.17 No Inquiries. Subscriber has not been the subject of a regulatory
------------
inquiry by the Commission.
2.18 Warranties of Other Parties. If Subscriber is purchasing the
---------------------------
Preferred Stock for the accounts of parties other than Subscriber (as
contemplated by Section 2.9 above), Subscriber has full power and
authority to make the representations, warranties and agreements made
pursuant to this Agreement on behalf of the owners of such accounts,
and agrees that each representation, warranty and agreement made by
Subscriber herein is also made by and on behalf of each owner of each
such account.
3. Resales
Subscriber acknowledges and agrees that the Securities may and will only be
resold (a) in compliance with Regulation S; (b) pursuant to a Registration
Statement under the Act; or (c) pursuant to an exemption from registration under
the Act.
- 18 -
<PAGE>
4. Legends; Subsequent Transfer of Securities
4.1 Legends. The certificate(s) representing the Preferred Stock shall
-------
bear the legend set forth below and any other legend, if such legend
or legends are reasonably required by the Company to comply with
state, federal or foreign law. Assuming that there are no changes in
the material facts set forth in Section 2 of this Agreement or
applicable law from the date hereof until the date of conversion, and
subject to the Company's transfer agent's receipt of a legal opinion
from legal counsel to the Company, the certificate representing the
Shares into which the Preferred Stock is converted after the
Restricted Period shall not bear a legend.
"The shares of preferred stock of Golf-Technology
Holding, Inc. (the "Issuer") represented by this
certificate have been issued pursuant to
Regulation S, promulgated under the Securities Act
of 1933, as amended (the "Act"), and have not been
registered under the Act or any applicable state
securities laws. These shares may not be offered
or sold within the United States or to or for the
account of a "U.S. Person" (as that term is
defined in Regulation S) during the period
commencing on the sale of these securities and
ending on the forty-fifth (45th) day following
completion of the Regulation S offering of the
Issuer pursuant to which these shares have been
issued, which day is ______________, 1996 (the
"Restricted Period"). The shares of preferred
stock represented by this certificate may first be
converted into common stock of the issuer on
________________, 1996. The Issuer will notify
the transfer agent of the date of completion of
such offering and of the expiration of such
Restricted Period. Following expiration of the
Restricted Period, these shares may not be offered
or sold unless such offer or sale is registered or
exempt from registration under the Act."
4.2 Transfers. Subject to receipt of a legal opinion from legal counsel
---------
to the Company, the Company agrees, and shall instruct its agents,
that the Securities may be transferred to any person or entity who is
not an affiliate of the Company if such transfer occurs after the
Restricted Period, without (a) any further restriction on transfer
(provided the transfer is made in compliance with the Act) or (b) the
entry of a "stop transfer" order against such Securities, and the
Securities delivered to the transferee shall not bear a legend. The
Company may place a stop transfer order on any Common
- 19 -
<PAGE>
Stock issued upon conversion of Preferred Stock during the Restricted
Period for the duration of the Restricted Period. Upon election by
the Subscriber to convert the Preferred Stock into Shares, the
Subscriber shall deliver to the Company a duly completed Notice of
Conversion (a "Notice of Conversion") in the form attached to this
Agreement.
5. Issuance of Further Securities
5.1 Restrictions on Additional Issuances. The Company will not issue any
------------------------------------
debt or equity securities for cash in public or private capital
raising transactions for a period of six (6) months after the Closing,
without the prior written consent of the Subscriber; provided,
however, the requirement for Subscriber's prior written consent shall
not apply to: (i) the issuance of securities pursuant to the exercise
of options or warrants issued and outstanding on April 15, 1996; (ii)
any transaction involving the Company's arrangements, now or in the
future, with commercial banks or other lending institutions; (iii)
issuances of securities pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization whereby the Company owns more than
fifty percent (50%) of the voting power of such corporation following
such transaction; (iv) any acquisition or disposition of a product or
a license by the Company on the condition that such issuance is
approved by the Board of Directors of the Company; or (v) the issuance
of securities upon exercise or conversion of the Company's Series A or
Series B Preferred Stock outstanding on the date of the Closing
(collectively, the "Permitted Issuances"). The Company additionally
agrees not to issue, except as dividends upon outstanding shares of
Series B Preferred Stock, any shares of Series A or Series B Preferred
Stock at any time subsequent to the Closing, and agrees that issuances
of Series A or Series B Preferred Stock subsequent to the Closing
shall not constitute Permitted Issuances.
5.2 Right of First Refusal. The Company hereby grants to the Subscriber
----------------------
the right of first refusal to purchase all (or any part) of New
Securities (as defined in this Section) that the Company may, from
time to time, propose to sell and issue. "New Securities" shall mean
any capital stock of the Company, whether now authorized or not, and
rights, options or warrants to purchase said capital stock, and debt
or equity securities of any type whatsoever that are, or may become,
convertible into said capital stock; provided, however, that the term
"New Securities" does not include Permitted Issuances. In the event
that the Company proposes to undertake an issuance of New Securities,
it shall give the Subscriber written notice of its intention,
describing the type of New Securities, the price and the general terms
upon which the Company proposes to issue the same. The Subscriber
shall have fifteen (15) days from the date of receipt of any such
notice to agree to purchase all or less than all of the New Securities
for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity
of New Securities to be purchased. If the Subscriber fails to
exercise
- 20 -
<PAGE>
in full the right of first refusal within such fifteen (15) day
period, the Company shall have sixty (60) days thereafter to sell the
New Securities respecting which the Subscriber's rights were not
exercised, at a price and upon general terms no more favorable to the
purchasers thereof than specified in the Company's notice. In the
event that the Company has not sold the New Securities within such
sixty (60) day period, the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the
Subscriber in the manner provided above. The right of first refusal
granted under this Section shall terminate upon the earlier of: (i)
May 21, 1999; or (ii) the date upon which the Subscriber ceases to own
any securities: (a) purchased in the Offering; (b) issued with
respect to or upon conversion of securities purchased in the Offering;
or (c) purchased pursuant to the right of first refusal granted under
this Section.
6. Representations, Warranties and Covenants of Company
The Company represents and warrants to and covenants with the Subscriber as
follows:
6.1 Organization, Good Standing, and Qualification. The Company is a
----------------------------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Idaho and has all requisite corporate
power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on the
business or properties of the Company and its subsidiaries taken as a
whole. The Company to its knowledge is not the subject of any pending
or threatened investigation or administrative or legal proceeding by
the Internal Revenue Service, the taxing authorities of any state or
local jurisdiction, or the Securities and Exchange Commission which
have not been disclosed in the reports referred to in Section 6.5
below.
6.2 Corporate Condition. None of the Company's filings made pursuant to
-------------------
the Exchange Act, including, but not limited to, those reports
referenced in Section 6.5 below, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements made, in light of the circumstances under which
they were made, not misleading. There have been no material adverse
changes in the Company's financial condition or business since the
date of those reports which have not been disclosed to Subscriber in
writing.
6.3 Authorization. All corporate action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance
(or reservation for issuance) and delivery of the Preferred Stock
being sold hereunder and the Common Stock issuable upon conversion of
the Preferred Stock have been taken, and this
- 21 -
<PAGE>
Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms.
6.4 Valid Issuance of Preferred Stock and Common Stock. The Preferred
--------------------------------------------------
Stock, when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, will be validly issued,
fully paid and nonassessable and, based in part upon the
representations of the Subscriber in this Agreement, will be issued in
compliance with all applicable U.S. federal and state securities laws.
The Common Stock issuable upon conversion of the Preferred Stock when
issued in accordance with the terms of the Certificate of Designation,
shall be duly and validly issued and outstanding, fully paid and
nonassessable, and based in part on the representations and warranties
of Subscriber and any transferee of the Preferred Stock, will be
issued in compliance with all applicable U.S. federal and state
securities laws.
6.5 Current Public Information. The Company represents and warrants to
--------------------------
the Subscriber that the Company is a "reporting issuer" as defined in
Rule 902(l) of Regulation S and it has a class of securities
registered under Section 12(g) of the Exchange Act and has filed all
the materials required to be filed as reports pursuant to the Exchange
Act for a period of at least twelve months preceding the date hereof
(or for such shorter period as the Company was required by law to file
such material). The Subscriber has obtained copies of the Company's
Form 10-KSB Annual Report for the year ended December 31, 1995 and
Form 10-QSB for the fiscal quarter ended March 31, 1996. The Company
undertakes to furnish the Subscriber with copies of such other
information as may be reasonably requested by the Subscriber prior to
consummation of this Offering.
6.6 No Directed Selling Efforts in Regard to this Transaction. The
---------------------------------------------------------
Company has not, and to the best of the Company's knowledge neither
the Subscriber nor any distributor, if any, participating in the
offering of the Securities nor any person acting for the Company or
any such distributor has conducted any "directed selling efforts" as
that term is defined in Rule 902 of Regulation S. Such activity
includes, without limitation, the mailing of printed material to
investors residing in the United States, the holding of promotional
seminars in the United States, the placement of advertisements with
radio or television stations broadcasting in the United States or in
publications with a general circulation in the United States, which
discuss the offering of Shares. The Company represents and warrants
that the Offering is not part of a plan or scheme to evade the
registration provisions of the Act.
6.7 No Conflicts. The execution and delivery of this Agreement and the
------------
consummation of the issuance of the Securities and the transactions
contemplated by this Agreement do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions
of, or constitute a default under, the Certificate of Incorporation or
bylaws of the Company,
- 22 -
<PAGE>
or any indenture, mortgage, deed of trust or other material payment or
instrument to which the Company is a party or by which it or any of
its properties or assets are bound, or any existing applicable decree,
judgment or order of any court, Federal or State regulatory body,
administrative agency or other governmental body having jurisdiction
over the Company or any of its properties or assets.
6.8 Issuance of Securities. The Company will issue one or more
----------------------
certificates representing the Preferred Shares in the name of
Subscriber in such denominations to be specified by the Company prior
to closing. Upon conversion of the Preferred Shares in accordance
with their terms, the Company will issue one or more certificates
representing Shares in the name of Subscriber and in such
denominations to be specified by Subscriber prior to conversion.
Subject to the Company's transfer agent's receipt of a legal opinion
from legal counsel to the Company, the Shares to be issued upon
conversion of the Preferred Shares shall not bear any restrictive
legends. The Company further warrants that no instructions other than
these instructions, and instructions for a "stop transfer" until the
end of the Restricted Period, have been given to the transfer agent
and also warrants that the Shares shall otherwise be freely
transferable by Subscriber on the books and records of the Company
subject to compliance with Federal and State securities laws, the
receipt of a legal opinion from legal counsel to the Company and the
terms of the Preferred Shares. The Company will notify the transfer
agent of the date of completion of the Offering and of the date of
expiration of the Restricted Period. Nothing in this section shall
affect in any way Subscriber's obligations and agreement to comply
with all applicable securities laws upon resale of the Securities.
6.9 No Action. The Company has not taken and will not take any action
---------
that will affect in any way the running of the Restricted Period or
the ability of Subscriber to resell freely the Securities in
accordance with applicable securities laws and the Agreement.
6.10 Compliance with Laws. As of the date hereof, the conduct of the
--------------------
business of the Company complies in all material respects with all
material statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto. The Company has not received
notice of any alleged violation of any statute, law, regulations,
ordinance, rule, judgement, order or decree from any governmental
authority. The Company shall comply with all applicable securities
laws with respect to the sale of the Securities, including but not
limited to the filing of all reports required to be filed in
connection therewith with the Securities and Exchange Commission or
any stock exchange or the NASDAQ Stock Market or any other regulatory
authority.
6.11 Litigation. Except as disclosed in the Company's Annual Report on
----------
Form 10-KSB, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending
or, to the
- 23 -
<PAGE>
knowledge of the Company, threatened, against or affecting the
Company, or any of its properties, which could reasonably be expected
to result in any material adverse change in the business, financial
condition or results of operations of the Company, or which could
reasonably be expected to materially and adversely affect the
properties or assets of the Company.
6.12 No U.S. Offering. The Company represents that it has not offered the
----------------
Securities to the Subscriber or any Investor in the U.S. or to any
person in the United States or any U.S. person.
6.13 Disclosures. There is no fact known to the Company (other than
-----------
general economic conditions known to the public generally) that has
not been disclosed in writing to the Subscriber that (a) could
reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company,
or which could reasonably be expected to materially and adversely
affect the properties or assets of the Company or (b) could reasonably
be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Subscription
Agreement and the issuance of the Preferred Stock hereunder.
6.14 Commissions. Except for a fee which is payable by the Company to J.P.
-----------
Carey Enterprises, Inc., no other person, firm or corporation will be
entitled to receive any brokerage fee, commission or other similar
payment from the Company in connection with the consummation of the
transactions contemplated hereby and the Company shall not make any
such payment to any person, firm or corporation other than J.P. Carey
Enterprises, Inc.
6.15 Capitalization. The Company, as of the date of the Closing, will have
--------------
outstanding the number of shares of Common Stock, Preferred Stock and
Warrants as set forth on Exhibit D.
---------
7. Additional Covenants of Company
7.1 Accountants. The Company shall, until at least the second anniversary
-----------
of the date of the Closing (the "Closing Date"), maintain as its
independent auditors an accounting firm that is authorized to practice
before the SEC.
7.2 Corporate Existence and Taxes. The Company shall, until at least the
-----------------------------
second anniversary of the Closing Date, maintain its corporate
existence in good standing, and shall pay all its taxes when due
except for taxes which the Company disputes.
7.3 Reserved Shares and Listings. For so long as any shares of Preferred
----------------------------
Stock held by the Subscriber remain outstanding:
(a) the Company will reserve from its authorized but unissued shares
of Common Stock ("Common Stock") a sufficient number of Shares to
- 24 -
<PAGE>
permit the conversion in full of the outstanding shares of
Preferred Stock; and
(b) the Company will, immediately following the Closing, utilize its
reasonable best efforts to cause its shares of common stock to be
listed on the NASDAQ SmallCap Market and, once listed, will
utilize its reasonable best efforts to maintain such listing.
7.4 Liquidated Damages for Late Conversion. As set forth in the
--------------------------------------
Certificate of Designation, the Company shall use all reasonable
efforts to issue and deliver, within three business days after the
Subscriber has fulfilled all conditions and submitted all necessary
documents duly executed and in proper form required for conversion
(the "Deadline"), to the Subscriber or any party receiving Preferred
Stock by transfer from the Subscriber (together with the Subscriber, a
"Holder"), at the address of the Holder on the books of the Company, a
certificate or certificates for the number of Shares of Common Stock
to which the Holder shall be entitled. The Company understands that a
delay in the issuance of the Shares of Common Stock beyond the
Deadline could result in economic loss to the Holder. As compensation
to the Holder for such loss, the Company agrees to pay liquidated
damages to the Holder for late issuance of Shares upon conversion in
accordance with the following schedule (where "No. Business Days Late"
is defined as the number of business days beyond three business days
from the date of receipt by the Company of a Notice of Conversion and
the transfer agent of all necessary documentation duly executed and in
proper form required for conversion, including the original
certificate representing the Preferred Shares to be converted, all in
accordance with this Agreement, the Certificate of Designation and the
requirements of the transfer agent):
No. Business Days Late Liquidated Damages
---------------------- ------------------
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
> 10 $5,000 + $1,000 for each
Business Day Late beyond 10 days
The Company shall pay the Holder any liquidated damages incurred under
this Section by check upon the earlier to occur of (i) issuance of the
Shares to the Holder or (ii) each monthly anniversary of the receipt
by the Company
- 25 -
<PAGE>
of such Holder's Notice of Conversion. Nothing herein shall limit the
Subscriber's right to pursue actual damages for the Company's failure
to issue and deliver shares of Common Stock to the Subscriber in
accordance with the terms of the Certificate of Designation.
7.5 Conversion Notice. The Company agrees that, in addition to any other
-----------------
remedies which may be available to the Subscriber, including, but not
limited to, remedies available under Section 7.4 of this Agreement, in
the event the Company fails for any reason to effect delivery to the
Subscriber of certificates representing Shares within three business
days following receipt by the Company of a Notice of Conversion, the
Investor will be entitled to revoke the Notice of Conversion by
delivering a notice to such effect to the Company whereupon the
Company and the Subscriber shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
7.6 Opinion of Counsel. Subscriber shall, upon purchase of the shares of
------------------
Preferred Stock, receive an opinion letter from Pryor, Cashman,
Sherman & Flynn, counsel to the Company, to the effect that (i) the
Company is duly incorporated and validly existing; (ii) this
Agreement, the issuance of the Preferred Stock, and the issuance of
the Common Stock upon conversion of the Preferred Stock have been duly
approved by all required corporate action, and that all such
securities, upon due issuance, shall be validly issued and
outstanding, fully paid and nonassessable; (iii) this Agreement and
the Registration Rights Agreement are valid and binding obligations of
the Company, enforceable in accordance with their terms, except as
enforceability of any indemnification provisions may be limited by
principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and rules of laws governing specific performance and other
equitable remedies; and (iv) based upon the representations and
warranties of the Company and each Subscriber in the Offering, the
offer and sale of the Preferred Stock to the Subscriber is exempt from
the registration requirements of the Securities Act; except that with
respect to the foregoing opinions counsel may add such qualifications
as are consistent with firm practice, including an assumption that the
transaction does not constitute a plan or scheme to evade the
registration provisions of the Act.
7.7 Consultation with Legal Counsel. The Company shall consult with its
-------------------------------
legal counsel regarding its Exchange Act filing requirements
including, but not limited to, the possible obligation of the Company
to file Forms 10-C and Form 8-K in connection with the Offering, and
will timely make any and all such filings deemed necessary by such
counsel.
7.8 Registration Rights. The Company will grant the Subscriber the
-------------------
registration rights covering the Shares issuable on conversion of the
Preferred Stock on substantially the terms of the Registration Rights
Agreement attached hereto as Exhibit E on the Closing Date.
---------
- 26 -
<PAGE>
8. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Georgia, U.S.A., applicable to agreements made in and
wholly to be performed in that jurisdiction, except for matters arising under
the Act or the Exchange Act which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined in either a federal or
state court sitting in the State of Georgia, U.S.A.
9. Entire Agreement; Amendment
This Agreement, the Certificate of Designation, the Registration Rights
Agreement and the other documents delivered pursuant hereto 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
enforcement of any such amendment, waiver, discharge or termination is sought.
10. Notices, Etc.
Any notice, demand or request required or permitted to be given by either
the Company or the Subscriber pursuant to the terms of this Agreement shall be
in writing and shall be deemed given when delivered personally or by facsimile,
with a hard copy to follow by two day courier addressed to the parties at the
addresses of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one instrument.
12. 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;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
13. Titles and Subtitles
The titles and subtitles used in this Agreement are used for convenience
only and are
- 27 -
<PAGE>
not to be considered in construing or interpreting this Agreement.
14. Amount
The undersigned Subscriber hereby subscribes for ________ shares of
Preferred Stock with a face value of __________ Dollars ($______________) (U.S.)
and pays herewith funds in the amount of _____________________________ Dollars
($_____________________) (U.S.).
The undersigned Subscriber acknowledges that this subscription shall not be
effective unless accepted by the Company as indicated below.
Dated this 21ST day of May, 1996.
RBB Bank Aktiengesellschaft
- ------------------------------------
(Name) (Please Print)
/s/ Herbert StrauB
- ------------------------------------
(Signature)
Leonhardstr. 5, 8010 Graz, Austria
- ------------------------------------
(Mailing Address)
Austria
- ------------------------------------
(Place of Execution)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 21st DAY OF MAY, 1996.
GOLF-TECHNOLOGY HOLDING, INC.
By: /s/ Harold E. Hutchins
--------------------------------
Print Name: Harold E. Hutchins
------------------------
Title: Vice President and CFO
-----------------------------
- 28 -
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the share(s) of Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert _____ shares of Series B
Preferred Stock ("Preferred Stock"), represented by stock certificate No(s).
____ (the "Preferred Stock Certificate(s)") into shares of common stock ("Common
Stock") of Golf-Technology Holding, Inc. (the "Company") according to the
conditions of the Certificate of Designation of Series B Preferred Stock, as of
the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the undersigned for any conversion, except for transfer taxes, if
any.
The undersigned represents that it and each person or entity on whose behalf it
holds shares of Preferred Stock to be converted into Common Stock (each an
"Investor"): (i) is familiar with and understands the terms, conditions and
requirements contained in Regulation S ("Regulation S") and Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"); (ii) is not a "U.S.
Person" or "distributor" as defined in Regulation S; (iii) purchased the shares
of Preferred Stock for which conversion is being elected, and is purchasing the
Common Stock referenced herein, for its own account and for the account of each
Investor and not for the account or benefit of any U.S. Person; (iv) will comply
with the transfer restrictions contained in Section 4(1) of the Act and Rule 144
promulgated thereunder to the extent they are applicable; (v) has not had a
"short" position in the Company's securities at any time since the Purchase of
the Preferred Stock (including any short call position or any long put position
or any contract or arrangement that had the effect of eliminating or
substantially diminishing the risk of ownership of the Preferred Stock) nor has
it engaged in any hedging transaction with respect to the Preferred Stock or the
Common Stock; (vi) has no prior understanding with respect to the sale of the
Common Stock to any third party; (vii) has not engaged in any "directed selling
efforts" (as such term is defined in Regulation S) with respect to the Preferred
Stock or the Common Stock issuable upon conversion of the Preferred Stock;
(viii) purchased the Preferred Stock with investment intent, is purchasing the
Common Stock with investment intent and presently has no intent to sell, dispose
of or otherwise transfer the Common Stock; (ix) will make any sale, transfer or
other disposition of the Common Stock in full compliance with the Act, the
Exchange Act, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder; and (x) received the offer to
purchase the Preferred Stock outside the United States and, at the time the
Subscription Agreement pursuant to which the Preferred Stock was executed was,
and upon execution of this Notice of Conversion is, outside the United States.
The undersigned has obtained representations from each Investor with respect to
compliance with paragraphs (i) - (x) of this Notice.
Conversion Formula: ______________________________
Date of Conversion
______________________________
Applicable Conversion Price
______________________________
Signature
______________________________
Name
Address:
______________________________
______________________________
- 29 -
<PAGE>
* No shares of Common Stock will be issued until the original Preferred Stock
Certificate(s) to be converted and the Notice of Conversion are received by the
Company's Attorney or Transfer Agent. The original Preferred Stock
Certificate(s) to be converted and the Notice of Conversion must be received by
the Company's Attorney or Transfer Agent by the third business day following the
Date of Conversion, or such Notice of Conversion shall become null and void in
the discretion of the Company.
<PAGE>
EXHIBIT A
---------
Certificate of Designation
for Series B Preferred Stock
<PAGE>
EXHIBIT B
---------
Definition of "U.S. Person"
Pursuant to Rule 902 (c), (o) and (p) of Regulation S, the terms "U.S. person"
and "United States" are defined as follows:
(o) U.S. Person.
-----------
(1) "U.S. person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or
incorporated under the laws of the United States;
(iii) Any estate of which any executor or administrator
is a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located
in the United States;
(vi) Any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) Any discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized
incorporated, or (if an individual) resident in the United States; and
(viii) Any partnership or corporation if: (A) organized
or incorporated under the laws of any foreign jurisdiction; and (B) formed by a
U.S. person principally for the purpose of investing in securities not
registered under the Securities Act of 1933, as amended (the "Act") unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) of the Act) who are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (o)(1) of this rule, any discretionary
account or similar account (other than an estate or trust) held for the benefit
or account of a non-U.S. person by a dealer or other professional fiduciary
organized, incorporated, or (if an individual) resident in the United States
shall not be deemed a "U.S. person".
<PAGE>
(3) Notwithstanding paragraph (o)(1), any estate of which any
professional fiduciary acting as executor or administrator is a U.S. person
shall not be deemed a U.S. person if:
(i) An executor or administrator of the estate who is not a U.S.
person has sole or shared investment discretion with respect to the assets of
the estate; and
(ii) The estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1), any trust of which any
professional fiduciary acting as trustee is a U.S. person shall not be deemed a
U.S. person if a trustee who is not a U.S. person has sole or shared investment
discretion with respect to the trust assets, and no beneficiary of the trust
(and no settlor if the trust is revocable) is a U.S. person.
(5) Notwithstanding paragraph (o)(1), an employee benefit plan
established and administered in accordance with the law of a country other than
the United States and customary practices and documentation of such country
shall not be deemed a U.S. person.
(6) Notwithstanding paragraph (o)(1), any agency or branch of a U.S.
person located outside the United States shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for valid business reasons;
and
(ii) The agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or banking regulation,
respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans shall not be deemed
"U.S. persons".
(p) United States. "United States" means the United States of America,
-------------
its territories and possessions, any State of the United States, and the
District of Columbia.
<PAGE>
EXHIBIT C
---------
Definition of "Accredited Investor"
Pursuant to Rule 501 (a) of Regulation D, the term "Accredited Investor" is
defined as follows:
1. Any bank as defined in section 3(a)(2) of the Securities Act of 1933 (the
"Act"), or any savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to section 15
of the Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act; Small Business Investment Company licensed
by the U.S. Small Business Administration under section 301(c) or (d) of
the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of
its employees, if such plan has total assets in excess of $5,000,000;
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors.
2. Any private business development company as defined in section 202(a)(22)
of the Investment Advisers Act of 1940.
3. Any organization described in section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000.
4. Any director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer.
5. Any natural person whose individual net worth, or joint net worth with that
person's spouse, at the time of his purchase exceeds $1,000,000.
6. Any natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year.
<PAGE>
7. Any trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in section (b)(2)(ii) of
Rule 506.
8. Any entity in which all of the equity owners are accredited investors.
<PAGE>
EXHIBIT D
---------
Outstanding Common Stock, Preferred Stock
and Warrants
Golf-Technology Holding, Inc.
As of May 20, 1996
3,918,408 Shares of Common Stock
394,600 Shares of Preferred Stock
978,000 Options
246,294 Warrants
<PAGE>
EXHIBIT E
---------
Registration Rights Agreement
EXHIBIT 10.2
GOLF-TECHNOLOGY HOLDING, INC.
Registration Rights Agreement
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
May 21, 1996, by and among GOLF-TECHNOLOGY HOLDING, INC., an Idaho corporation
(the "Company"), and the persons and entities listed on Exhibit A attached
hereto (the "Investors").
Recitals
--------
WHEREAS, pursuant to Subscription Agreements (the "Agreements"), by and among
the Company and the Investors, the Company has agreed to sell and the Investors
have agreed to purchase an aggregate of up to 9,231 shares of Series B Preferred
Stock of the Company (the "Preferred Shares") convertible into shares of the
Company's Common Stock, $.001 par value per share (the "Shares"); and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Agreements, the Company has agreed to
provide the Investors with certain registration rights with respect to the
Shares;
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreements and this
Registration Rights Agreement, the Company and the Investors agree as follows:
Agreement:
---------
8. 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.
"Common Stock" shall mean the Company's Common Stock, par value $.001 per
share.
"Initiating Holders" shall mean holders of the Company's Preferred Shares
having an aggregate initial purchase price from the Company of $500,000 or more.
"Other Registrable Securities" shall mean those shares of Common Stock
heretofore or hereafter issued pursuant to one or more agreements granting the
purchasers of such securities the right to have the Company register such
securities or include such securities in any other registration of the Company's
equity securities.
<PAGE>
"Registrable Shares" shall means (i) the Shares, and (ii) any Common Stock
of the Company issued or issuable in respect of the Shares or upon any stock
split, stock dividend, recapitalization or similar event; provided, however,
that Registrable Shares or other securities shall no longer be treated as
Registrable Shares if (A) they have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, (B)
they have been sold in a 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 removed upon consummation of
such sale or (C) the Shares are available for sale under the Securities Act
(including Rule 144), in the opinion of counsel to the Company, without
compliance with the registration and prospectus delivery requirements of the
Securities Act so that all transfer restrictions and restrictive legends with
respect thereto may be removed upon the consummation of such sale.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expense incurred by the Company in
compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements (not to exceed $20,000) of one counsel for all the selling holders
of Registrable Shares for a limited "due diligence" examination of the Company,
and the reasonable expenses of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company, and excluding all
underwriting discounts and selling commissions applicable to the sale of the
Registrable Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares and all fees and
disbursements of one counsel for the selling holders of Registrable Shares
(other than the fees disbursements of such counsel included in Registration
Expenses).
9. Requested Registration.
----------------------
The following registration rights will apply if, and only if, at any time
prior to the termination of this Agreement, Regulation S promulgated under the
Securities
- 39 -
<PAGE>
Act is rescinded or modified so as to preclude Initiating Holders from reselling
in United States public securities markets Shares received from the Company
pursuant to the Agreements following expiration of the Restricted Period (as
defined in the Agreements), or if, for any other reason, the Company refuses to
issue Shares bearing no restrictive legend to Initiating Holders after
expiration of the Restricted Period; provided, however, that no Investor shall
be entitled to request registration pursuant to this Agreement (and such
Investor shall not be considered an Initiating Holder pursuant to this
Agreement, and the securities held by such Investor shall not be considered
Registrable Shares pursuant to this Agreement) if a representation or warranty
of such Investor in the Agreements between the Investor and the Company is
inaccurate or was inaccurate when made, or the Investor has failed to comply
with the covenants and agreements of the Investor set forth in the Agreements
between the Investor and the Company:
(a) Request for Registration. If the Company shall receive from
------------------------
Initiating Holders, at any time after two (2) and prior to thirty-six (36)
months following the final closing of the sale of Preferred Shares pursuant to
the Agreements, a written request that the Company effect a registration with
respect to all, but not less than all, of the Registrable Shares held by such
Initiating Holders (which notice shall specify the intended method of
disposition), the Company shall:
(i) promptly give written notice of the proposed registration to
all other holders of Registrable Shares; and
(ii) as soon as practicable use its best efforts to effect such
registration (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Shares as are specified in such request, together with all or such
portion of the Registrable Shares of any holder or holders of Registrable Shares
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided that the Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this Section 2:
(A) after the Company has effected one such
registration pursuant to this Section 2(a) and such registration has been
declared or ordered effective by the Commission and the sale of such
Registrable Shares shall have closed; or
(B) within the period starting with the date sixty
(60) days prior to the Company's good faith estimated date of filing of,
and ending one hundred eighty (180) days following the effective date of,
any registered offering of the Company's securities to the general public.
- 40 -
<PAGE>
Subject to the foregoing limitations in clauses (A) and (B)
above, the Company shall file a registration statement covering the Registrable
Shares so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders, but no later than forty-five (45)
days following receipt of such request or requests, except in the event audited
financial statements not previously prepared are required to be prepared prior
to the filing of such registration statement, in which case such registration
statement must be filed as soon as practicable, but in any event within ninety
(90) days following receipt of such request or requests.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provision of Section 2(b) below, include
Other Registrable Securities, other securities of the Company which are held by
officers or directors of the Company or which are held by other holders of
registration rights, and may include securities of the Company being sold for
the account of the Company.
(b) Underwriting. If the Initiating Holders intend to distribute the
------------
Registrable Shares covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to Section
2 and the Company shall include such information in the written notice referred
to in Section 2(a)(i) above. The right of any holder of Registrable Shares to
registration pursuant to Section 2 shall be conditioned upon such holder's
participation in such underwriting and the inclusion of such holder's
Registrable Shares in such underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such holder with respect to
such participation and inclusion) to the extent provided herein. A holder of
Registrable Shares may elect to include in such underwriting all or a part of
the Registrable Shares it holds.
(i) If the Company shall request inclusion in any registration
pursuant to Section 2 of securities being sold for its own account, or if
officers or directors of the Company holding other securities of the Company or
other holders of registration rights, shall request inclusion in any
registration pursuant to Section 2, the Initiating Holders shall, on behalf of
all holders of Registrable Shares, offer to include Other Registrable Securities
and the securities of the Company, such officers and directors and such other
holders of registration rights in the underwriting and may condition such offer
on their acceptance of the further applicable provisions of this Agreement. The
Company shall (together with all holders of Registrable Shares, officers and
directors, other holders of registration rights and holders of Other Registrable
Securities proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
representative of the underwriters selected for such underwriting by the
Company, which underwriter(s) shall be reasonably acceptable to a majority in
interest of the Initiating Holders.
(ii) Notwithstanding any other provision of this Section 2, if
- 41 -
<PAGE>
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the Company shall so advise all holders of Registrable Shares and
other shareholders whose securities would otherwise be underwritten pursuant
hereto, and the number of Registrable Shares and other securities that may be
included in the registration and underwriting shall be allocated in the
following manner: the securities of the Company held by officers and directors
of the Company (other than Registrable Shares) shall be excluded from such
registration and underwriting to the extent required by such limitation, and, if
a limitation on the number of shares is still required, the Other Registrable
Securities shall be excluded pro rata with Registrable Shares, unless another
method of determining such exclusion is specified in the agreements governing
the Other Registrable Securities, according to the relative number of Other
Registrable Securities requested to be included in such registration and
underwriting, from such registration and underwriting to the extent required by
such limitation, and, if a limitation on the number of shares is still required,
the number of Registrable Shares that may be included in the registration and
underwriting shall be allocated among all holders of Registrable Shares in
proportion, as nearly as practicable, to the respective amounts of Registrable
Shares which they had requested to be included in such registration at the time
of filing the registration statement. No Registrable Shares or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall also be included in such registration.
(iii) If the Company or any officer, director or holder of
Registrable Shares or Other Registrable Securities who has requested inclusion
in such registration and underwriting as provided above disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the underwriter and the Initiating Holders. The
securities so withdrawn shall also be withdrawn from registration.
10. Expenses of Registration. The Company shall bear all Registration
------------------------
Expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be borne by the holders of the securities so registered pro rata
on the basis of the number of their shares so registered.
11. Registration Procedures. Pursuant to this Agreement, the Company will
-----------------------
keep each holder of Registrable Shares advised in writing as to the initiation
of a registration under this Agreement and as to the completion thereof. At its
expense, the Company will:
(a) Use reasonable efforts to keep such registration effective for a
period of one hundred eighty (180) days or until the holder or holders of
Registrable Shares have completed the distribution described in the registration
statement relating thereto or until the securities registered cease to be
Registerable Shares, whichever first occurs;
- 42 -
<PAGE>
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of securities
covered by such registration statement; and
(c) Furnish such number of prospectuses and other documents
incidental thereto, including any amendment of or supplement to the prospectus,
as a holder of Registrable Shares from time to time may reasonably request.
12. Indemnification.
---------------
(a) The Company will indemnify each holder of Registrable Shares,
each of its officers, directors and partners, and each person controlling such
holder of Registrable Shares, with respect to which registration has been
effected pursuant to this Agreement, and each underwriter, if any and each
person who controls any underwriter, and their respective counsel against all
claims, losses, damages and liabilities (or actions, proceedings or settlements
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, or other
document incident to any such registration, 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 not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable
to the Company in connection with any such registration and will reimburse each
such holder of Registrable Shares, each of its officers, directors and partners,
and each person controlling such holder of Registrable Shares, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses as they are reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided, however, that the indemnity contained in this Section 5(a) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such Settlement is effected without the consent of the Company; and
provided further that the Company shall 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 based upon written information
furnished to the Company by such holder of Registrable Shares or underwriter and
stated to be specifically for use therein. The foregoing indemnity agreement is
further subject to the condition that insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in a
preliminary prospectus, such indemnity agreement shall not inure to the benefit
of the foregoing indemnified parties if copies of a final prospectus correcting
the misstatement, or alleged misstatement, omission or alleged omission upon
which such loss, liability, claim or damage is based is timely delivered to such
indemnified party and a copy thereof was not furnished to the person asserting
the loss, liability, claim or damage.
(b) Each holder of Registrable Shares will, if Registrable Shares
- 43 -
<PAGE>
held by it are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such holder of Registrable Shares and each of its officers, directors and
partners, and each person controlling such holder of Registrable Shares, and
their respective counsel against all claims, losses, damages and liabilities (or
actions, proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
relating to such Holder 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
relating to such holder or necessary to make the statements therein relating to
such holder not misleading or any violation by such holder of any rule or
regulation promulgated under the Securities Act applicable to such holder and
relating to action or inaction required of such holder in connection with any
such registration; and will reimburse the Company, such holders of Registrable
Shares, directors, officers, partners, persons, underwriters or control persons
for any legal or any other expense reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) relating to such
holder 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 such holder of Registrable Shares and stated to be
specifically for use therein; provided, however, that such indemnification
obligations shall not apply if the Company modifies or changes to a material
extent written information furnished by such Holder.
(c) Each party entitled to indemnification under this Section 5 (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
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 any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense at such Indemnified Party's expense. 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. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
- 44 -
<PAGE>
13. Information by Holder of Registrable Shares. Each holder of
-------------------------------------------
Registrable Shares shall furnish to the Company such information regarding such
holder of Registrable Shares and the distribution proposed by such holder of
Registrable Shares as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration referred to in this
Agreement.
14. Miscellaneous.
-------------
14.1 Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Georgia without giving effect to
conflict of laws.
14.2 Successors and Assigns. 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.
14.3 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subject
matter hereof.
14.4 Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to an Investor, at such Investor's address set forth
on Exhibit A hereof, or at such other address as such Investor shall have
furnished to the Company in writing, or (b) if to the Company at 13000 Sawgrass
Village Circle, Suite 30, Ponte Vedra Beach, Florida 32082, Attn: President, or
at such other address as the Company shall have furnished to each Investor and
each such other holder in writing.
14.5 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any Registrable 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 thereunder occurring, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions of
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.
14.6 Counterparts. This agreement may be executed in any number
------------
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<PAGE>
of counterparts, each of which may be executed by less than all of the
Investors, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
14.7 Severability. In the case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
14.8 Amendments. The provisions of this Agreement may be amended at
----------
any time and from time to time, and particular provisions of this Agreement may
be waived, with and only with an agreement or consent in writing signed by the
Company and by the Investors currently holding fifty percent (50%) of the
Registrable Shares as of the date of such amendment or waiver.
14.9 Termination of Registration Rights. This Agreement shall
----------------------------------
terminate at such time as there ceases to be at least $500,000 in face amount of
outstanding Preferred Shares which constitute Registrable Shares as defined
herein.
The foregoing Registration Rights Agreement is hereby executed as of the date
first above written.
GOLF-TECHNOLOGY HOLDING, INC. INVESTOR
------------------------------
By: By:
-------------------- ---------------------------
Name: Name:
------------------ -------------------------
Title: Title:
----------------- -----------------------------
EXHIBIT 10.3
IRREVOCABLE INSTRUCTIONS TO TRANSFER AGENT
------------------------------------------
These irrevocable instructions ("Irrevocable Instructions"), dated as of
May 20, 1996, are given by GOLF-TECHNOLOGY HOLDING, INC., an Idaho corporation
(the "Company"), to its registrar and transfer agent, INTERSTATE TRANSFER
COMPANY ("Transfer Agent"), with respect to the following:
Recitals
WHEREAS, the Company is offering to sell 9,231 shares of Series B Preferred
Stock (the "Preferred Shares") of the Company for an aggregate purchase price of
Six Million One Hundred Fifty Dollars ($6,000,150) (U.S.) under the terms set
forth in the Certificate of Designation of Series B Preferred Stock (the
"Certificate of Designation") and the Regulation S Subscription Agreements
("Subscription Agreements") executed by the Company and the other signatories
thereto (the "Subscribers"), copies of each of which are annexed hereto; and
WHEREAS, each of the Subscribers that is issued Preferred Shares pursuant
to a Subscription Agreement is entitled at any time on or after the 45th day
after the date of the last closing of a sale of Preferred Shares (which date the
Company will certify to the Transfer Agent in writing within 7 days of the date
hereof) until such shares are converted (the "Unrestricted Conversion Dates") to
convert its Preferred Shares into shares of common stock of the Company, par
value $.001 per share ("Converted Stock"), at the conversion prices specified in
the Certificate of Designation, by delivering the Preferred Shares to be
converted along with the notice required by the Subscription Agreements ("Notice
of Conversion") to the Transfer Agent; and
WHEREAS, the Company and the Subscribers have agreed that, subject to the
Transfer Agent's receipt of a legal opinion from legal counsel to the Company,
which legal opinion shall rely, in part, upon the truth and correctness of the
representations and warranties made by the Subscribers in the Notice of
Conversion submitted to the Transfer Agent, the certificates for the Converted
Stock shall bear no restrictive legend; and
WHEREAS, the Company and the Subscribers have agreed that the Company will
provide the Transfer Agent with irrevocable instructions to convert one or more
of any Subscriber's Preferred Shares into shares of Converted Stock upon
receipt, within the Unrestricted Conversion Dates, of the certificates
representing the Preferred Shares to be converted along with a valid Notice of
Conversion, as defined herein, from a Subscriber and shall direct its legal
counsel to issue an opinion letter;
<PAGE>
and
WHEREAS, the Transfer Agent has agreed to act as conversion transfer agent
on behalf of the Company on the terms and conditions set forth in these
Irrevocable Instructions;
NOW, THEREFORE, in consideration of the premises, the Company and Transfer
Agent agree and the Company irrevocably instructs Transfer Agent as follows:
1. ISSUANCE OF CONVERTED SHARES. Upon receipt by the Transfer Agent,
----------------------------
within the Unrestricted Conversion Dates, of one or more Preferred Shares to be
converted, along with a valid Notice of Conversion from a Subscriber pursuant to
the Certificate of Designation, the Company hereby irrevocably directs the
Transfer Agent to a) calculate the number of shares of Converted Stock to which
that Subscriber is entitled (which number is determined by the formula in the
Certificate of Designation, b) notify the Company in writing, by facsimile,
within two (2) business days after receipt of a facsimile of the Notice of
Conversion, of the number of shares of Converted Stock to be issued, and v) use
its reasonable efforts to issue the appropriate number of shares of Converted
Stock directly to the Subscriber within three (3) business days of the date of
receipt of the Notice of Conversion and the original stock certificates ("Stock
Certificates") representing the Preferred Shares to be converted in accordance
with the Certificate of Designation. Subject to Transfer Agent's receipt of a
legal opinion from legal counsel to the Company, the certificates representing
the Converted Stock issued in the name of Subscriber shall bear no restrictive
legend. The Company acknowledges that its legal counsel will require
certifications and representations from the Company regarding the Company's
compliance with applicable securities regulations in order for it to render a
legal opinion in connection with the issuance of Converted Stock, and, to the
extent such requested certifications and representations are true and correct,
the Company shall cause its officers to make such representations as may be
requested by legal counsel to the Company, including the execution and delivery
to such legal counsel of an Officer's Certificate substantially in the form
attached hereto as Exhibit A.
---------
2. DISPUTE AS TO NUMBER OF CONVERTED SHARES TO BE ISSUED. In the event
-----------------------------------------------------
that the number of shares that the Transfer Agent reasonably calculated to be
due a particular Subscriber upon conversion is different from the number of
shares claimed by the Subscriber, by virtue of the conversion price or other
information set forth in its Notice of Conversion, the Transfer Agent shall
nevertheless use its reasonable efforts to issue to the Subscriber a number of
shares equal to the lesser of the two numbers within three (3) business days,
and, as to the issuability of the remaining disputed number of shares, shall
submit the dispute within two (2) business days to the Company's usual legal
counsel ("Counsel") for determination. In the event of such a dispute, the
Company agrees to instruct its Counsel to resolve any such dispute and notify
the parties of the result within three (3) business days after receipt of notice
of such dispute. Within two (2) business days of its receipt of the Counsel's
results, the Transfer Agent shall issue to the
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<PAGE>
Subscriber any additional shares to which the Subscriber is entitled, based upon
the Counsel's results. The Transfer Agent is authorized to rely on the
Counsel's results.
3. REQUIRED CONVERSION. In accordance with the Certificate of
-------------------
Designation, on December 31, 1997 all Preferred Shares convert into shares of
common stock of the Company at the conversion prices described in Section 5 of
the Certificate of Designation. At such time, Transfer Agent shall issue a
certificate or certificates for the shares of Converted Stock, in accordance
with Sections 1 and 2 above, registered in the name of the person in whose name
the Preferred Shares are registered on the records of the Company regarding
registration and transfers of the Preferred Shares or otherwise as Transfer
Agent may be notified by Counsel on the third business day following said date,
and shall deliver the shares of Converted Stock to the Subscriber upon receipt
of the surrendered Stock Certificates from the Subscriber.
4. FEES. The Company hereby agrees to pay the Transfer Agent for all
----
services rendered hereunder.
5. NOTICES. Any notice or demand to be given or that may be given under
-------
this Agreement shall be in writing and shall be (a) delivered by hand, or (b)
delivered through or by expedited mail or package service, or (c) transmitted by
telecopy, in each case with personal delivery acknowledged, addressed to the
parties as follows:
As to the Company:
Golf-Technology Holding, Inc.
13000 Sawgrass Village Circle, Suite 30
Ponte Vedra Beach, Florida 32082
ATTN: Mr. Harold E. Hutchins
Telephone: (904) 273-8772
Facsimile: (904) 273-9067
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<PAGE>
As to the Transfer Agent:
Interstate Transfer Company
56 West 400 South
Suite 260
Salt Lake City, Utah 8401
ATTN: Ms. Janis Patterson
Telephone: (801) 531-7860
Facsimile: (810) 595-0967
6. CANCELLATION OF STOCK CERTIFICATES. Upon issuance of any Converted
----------------------------------
Stock, the Transfer Agent shall mark on the face of the Stock Certificates so
converted or redeemed the word "canceled" and shall return a copy of such
canceled Stock Certificate to the Company.
7. NONCONTRAVENTION. The Company undertakes that it will not at any time
----------------
take any action to undertake any activity that would in any way impede, restrict
or limit the right and ability of any holder of Preferred Shares to convert
its/his/her Preferred Shares into shares of Converted Stock pursuant to the
terms and provisions of this Agreement.
Accordingly, the Company agrees that (i) the instructions and procedures
set forth above in this Agreement constitute irrevocable instructions,
directions and authorizations to the Transfer Agent that shall be faithfully
complied with by the Transfer Agent, and (ii) should the Transfer Agent at any
time receive or have received any written or oral communication from the Company
or otherwise that could in any way be construed to constitute an authorization
or direction for the Transfer Agent to act contrary to or to not faithfully
comply with, the irrevocable instruction, direction and authorization set forth
in this Section 7, the Transfer Agent shall totally disregard such communication
and instead unqualifyingly and promptly comply with the terms hereof.
The Transfer Agent's execution of this Agreement shall constitute the
Transfer Agent's acknowledgement and agreement of its obligation to
unqualifyingly and promptly comply with the foregoing. Each of the Subscribers
is an intended third party beneficiary of these Irrevocable Instructions.
8. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
---------------
the Transfer Agent, each officer, director, employee and agent of the Transfer
Agent, and each person, if any, who controls the Transfer Agent within the
meaning of the Securities Act of 1933, as amended (the "Act") or the Securities
Exchange Act of 1934, as amended (the Exchange Act") against any losses, claims,
damages or liabilities, joint or several, to which it, they or any of them or
such controlling person, may become subject, under the Act or otherwise, insofar
as such losses, claims damages or liabilities (or actions in respect thereof)
arise out of or are based upon the performance by the Transfer Agent of its
duties pursuant to the Agreement; and will reimburse the Transfer Agent, and
each officer, director, employee and agent of the Transfer Agent, and each such
controlling person for any
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<PAGE>
legal or other expenses reasonably incurred by it or any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Company will not be liable in any case if
such loss, claim, damage or liability arises out of or is based upon any action
not taken in good faith, or any action omission that constitutes gross
negligence or willful misconduct.
Promptly after receipt by an indemnified part under this Section of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the Company under this Section, notify in
writing the Company of the commencement thereof, and failure so to notify the
Company will relieve the Company from any liability under this Section as to the
particular item for which indemnification is then being sought, but not from any
other liability which it may have to any indemnified party. In case any such
action is brought against any indemnified party, and it notifies the Company of
the commencement thereof, the Company will be entitled to participate other
indemnifying party, similarly notified, to assume the defense thereof, with
counsel who shall be to the reasonable satisfaction of such indemnified party,
and after notice from indemnifying party to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The Company shall not be liable to any such indemnified
party on account of any settlement of any claim of action effected without the
consent of the Company.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Georgia, without giving effect to
conflicts of law provisions.
10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
----------------------------
Exhibits hereto, constitute the full and entire understanding of the parties
with respect to the subject matter hereof. 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 enforcement of any such amendment,
waiver, discharge or termination is sought.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of May
20, 1996.
COMPANY:
GOLF-TECHNOLOGY HOLDING, INC.
By: /s/ Harold E. Hutchins
----------------------------------
Harold E. Hutchins, Vice President
and Chief Financial Officer
AGREED TO AND ACCEPTED:
TRANSFER AGENT:
INTERSTATE TRANSFER COMPANY
By: /s/ Janis A. Patterson
----------------------------------
Print Name: Janis A. Patterson
--------------------------
Title: President
-------------------------------
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EXHIBIT 20
For Snake Eyes Golf Clubs
For Release: Immediate
Contact: Chuck Phillips - Work (904) 285-4555/Home (904) 285-5681
Snake Eyes Golf clubs Receives $6 Million Private Placement
-----------------------------------------------------------
to Support Rapid Sales Growth
-----------------------------
PONTE VEDRA BEACH, FL, May 23, 1996 - - Ernie Vadersen, Chairman and Chief
Executive Officer of Snake Eyes Golf Clubs, announced today that the company has
completed a private placement equity funding for $6 million, which will support
the company's rapid sales growth.
The funding announcement coincided with a second piece of financial news
for the TOUR QUALITY golf club manufacturer and marketer which is the company
had its first profitable month in April after a scant 15 months in business.
As of April, 1996, the company boasts a scoring club product line
consisting of three wedges (pitching, sand, and lob); three highly innovative
putters, and a state-of-the-art driver. Snake Eyes expects to include irons,
fairway woods and additional putters by mid-1997, positioning the company as a
full line producer.
Chairman Vadersen declared on behalf of the company and its shareholders
that these financial hallmarks are as important as the fact that 65 PGA Tour
players and 39 senior Tour players had Snake Eyes wedges in their bags during
tournaments in 1995.
According to Vadersen, the new equity funding and the ever-improving month-
to-month operating performance of the company only solidifies the company's
position in the domestic and worldwide golf market.
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