U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition report pursuant Section 13 or 15(d) of the Exchange Act of
1934
For the transition period from to
Commission file number 0-26344
Golf Technology Holding, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Idaho 59-3303066
(State or Other Jurisdiction of (I.R.S. Employer ID #)
Incorporation or Organization)
13000 Sawgrass Village Circle, #30, Ponte Vedra Beach, Florida 32082
(Address of Principal Executive Offices)
904/273-8772
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date: $.001 par value Common
Stock - 4,043,408 as of August 7, 1996
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of June 30, 1996 . . . . . . . . . . . . 3
Statements of Operations for the three month and six
month periods ended June 30, 1996 and 1995 . . . . . . 4
Statements of Cash Flows for the six month periods ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION AND SIGNATURES
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . 14
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1
GOLF TECHNOLOGY HOLDING, INC.
BALANCE SHEET
June 30,
Assets 1996
(Unaudited)
Current assets:
Cash $1,993,532
Accounts receivable
Trade 1,407,178
Employees 54,278
---------
1,461,456
Inventories 796,347
Other current assets 252,624
---------
Total current assets 4,503,959
---------
Property and equipment, at cost:
Furniture and fixtures 42,687
Machinery and equipment 638,670
Leasehold improvements 45,814
Vehicles 24,480
---------
751,651
Less accumulated depreciation 118,216
---------
633,435
Notes receivable from related parties 34,105
Certificates of deposits, restricted 182,771
Deposits 408,420
Other assets 41,359
--------
Total assets $5,804,049
=========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable 100,000
Notes payable to related parties 212,500
Accounts payable 654,969
Accrued liabilities 94,303
---------
Total current liabilities 1,061,772
---------
Stockholders' equity:
Preferred stock, Series A 9% Cumulative
Convertible, $.001 par value per share;
aggregate involuntary liquidation
preference of $2,097,917 ($5.38 share),
4,990,000 shares authorized
389,000 shares issued and outstanding 390
Preferred stock, Series B Convertible,
$.001 par value per share; aggregate
involuntary liquidation preference of
$9,231,000 ($1,000.00 share),
10,000 shares authorized 9,231 shares
issued and outstanding 9
Common stock, $.001 par value,
25,000,000 shares authorized 4,043,408
shares issued and outstanding 4,043
Additional paid-in capital 9,698,682
Accumulated deficit (4,960,847)
---------
Total stockholders' equity 4,742,277
---------
Total liabilities and
stockholders' equity $5,804,049
=========
See accompanying notes to financial statements.
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
(Unaudited) (Unaudited)
Net Sales $1,989,936 545,462 $2,541,006 817,313
Cost of sales 717,945 145,779 905,117 263,615
--------- --------- --------- ---------
Gross profit 1,271,991 399,683 1,635,889 553,698
Selling and marketing
expenses 713,404 727,306 1,305,177 1,104,522
General and administra-
tive expenses 446,046 237,914 971,362 485,832
Research and development
costs 38,044 171,780 182,969 255,159
--------- --------- --------- ---------
Operating income (loss) 74,497 (737,317) (823,619) (1,291,815)
--------- --------- --------- ---------
Other income (expense):
Interest income 12,435 1,154 13,319 6,997
Interest expense (26,912) (627) (26,938) (691)
Other, net 16,736 2,405 21,947 5,592
--------- --------- --------- ---------
2,259 2,932 8,328 11,898
Net income (loss) before
income taxes 76,756 (734,385) (815,291) (1,279,917)
Income taxes - - - -
--------- --------- --------- ---------
Net income (loss) 76,756 (734,385) (815,291) (1,279,917)
Preferred stock cumulative
dividends (43,710) - (87,172) -
--------- --------- --------- ---------
Net income (loss) for
common stockholders $ 33,046 (734,385) $(902,463) (1,279,917)
======== ========= ========= =========
Net income (loss) per
average outstanding
common share:
Primary:
Net income (loss) $ 0.01 (0.20) $ (0.23) (0.34)
======== ========= ========= =========
Weighted average shares
outstanding 6,206,109 3,718,408 3,898,107 3,718,408
========= ========= ========= =========
Fully diluted:
Net income (loss) $ 0.01 (0.20) $ (0.23) (0.34)
======== ========= ========= =========
Weighted average shares
outstanding 6,214,602 3,718,408 3,898,107 3,718,408
========= ========= ========= =========
See accompanying notes to financial statements.
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
STATEMENTS OF CASH FLOWS
Six months ended
June 30,
1996 1995
(unaudited)
Cash flows from operating activities:
Net loss $(815,291) (1,279,917)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 47,626 19,001
Changes in operating assets
and liabilities:
Accounts receivable - trade (1,292,763) (241,603)
Accounts receivable - employees (40,354) (8,596)
Inventories (632,728) (100,444)
Other current assets and other
assets (145,665) (41,856)
Deposits (239,449) (57,572)
Accounts payable and accrued
liabilities (327,957) 541,675
--------- ---------
Net cash used in operating
activities (3,446,581) (1,169,312)
--------- ---------
Cash flows from investing activities:
Investment in certificates of deposit,
restricted (135,388) (202)
Notes receivable from related
parties (7,235) (87,436)
Capital expenditures (342,101) (155,438)
--------- ---------
Net cash used in investing
activities (484,724) (243,076)
--------- ---------
Cash flows from financing activities:
Notes payable (137,500) 50,000
Net proceeds from issuance of preferred
and common stock 6,036,427 640,426
Deferred costs related to preferred
stock offering - (42,125)
Collection of account receivable -
related party - 137,638
--------- ---------
Net cash provided by
financing activities 5,898,927 785,939
--------- ---------
Net increase (decrease)
in cash 1,967,622 (626,449)
Cash balance, beginning of period 25,910 658,754
--------- ---------
Cash balance, end of period $1,993,532 32,305
========= =========
See accompanying notes to financial statements.
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company. Golf Technology Holding, Inc. (the "Company")
designs, manufactures and markets Snake Eyes/R/ golf clubs. Snake Eyes/R/
are tour-quality golf clubs marketed to the premium-priced segment of the
golf equipment market.
The predecessor to the Company's operating subsidiary, Golf-Tec
Holding, Inc. ("Golf-Tec"), was formed as a Florida corporation in June
1993 under the name Golf-Tec, Inc. to manufacture and market a line of
golf clubs to be developed by its sole stockholder and director. Golf-Tec
was formed as a Florida corporation in May 1994 to become the parent
company of Golf-Tec Inc., which was merged into Golf-Tec in October 1994.
During the first quarter of 1995, Golf-Tec was acquired by THO2 and
Rare Metals Exploration, Inc., an Idaho corporation incorporated in June
1963 ("THO2"), pursuant to a voluntary share exchange effected between
Golf-Tec's stockholders and THO2 on a one-for-one share basis. THO2
changed its name to Golf-Technology Holding, Inc. in connection with the
share exchange. Subsequent to the acquisition, the former shareholders of
Golf-Tec have the right to an ownership interest in 3,468,337 of
4,043,408, or 86%, of the Company's outstanding shares of common stock.
As of June 30, 1996, 2,343,334 of 3,468,337, or 68%, of Golf Tec's
outstanding shares of common stock have been exchanged for 2,343,334 of
4,043,408, or 58%, of the Company's outstanding shares of common stock.
Management anticipates that the remaining 1,125,003, or 32%, of Golf-Tec's
outstanding shares of common stock will be exchanged for shares in the
Company.
For accounting purposes, the acquisition has been treated as a
recapitalization of Golf-Tec with Golf-Tec as the acquirer. THO2 had zero
net tangible assets (no assets or liabilities) at the date of acquisition.
The historical financial statements prior to 1995 are those of Golf-Tec,
except the number of shares outstanding have been retroactively restated
to reflect the shares outstanding after the recapitalization.
2. Basis of Presentation. The accompanying interim unaudited
financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission, and reflect all
adjustments which, in the opinion of management, are necessary to properly
state the results of operations and financial position. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. The results of
operations are not necessarily indicative of the results for the full
year. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-
KSB, as filed with the Securities and Exchange Commission on April 1,
1996.
3. Liquidity and Capital Resources. The Company has financed its
operations and investment in assets principally through the sale of equity
securities. The Company has incurred operating losses from its inception
through March 31, 1996. Net income was generated in the three months
ended June 30, 1996.
The Company sold 9,231 shares of Series B Preferred Stock to an
overseas investor in May, 1996. This cash infusion, as discussed in Note
6, has significantly contributed to the working capital at June 30, 1996,
and has addressed previous concerns about the Company's liquidity and its
ability to continue operations at current levels and expand its product
lines. The Company believes that it has raised sufficient capital which,
together with projected cash flow from operations, will be sufficient to
meet the Company's working capital needs for at least the next two years.
4. Notes Receivable. The Company has made advances to a shareholder
of the Company of $34,105. The advances do not bear interest and are due
upon demand; however, the Company does not intend to demand repayment of
the advances prior to July 1, 1997. Accordingly, the outstanding balance
at June 30, 1996 has been classified as long term.
5. Representation Agreements. The Company has representation
agreements with seventeen PGA Tour members. The Company has agreed to pay
certain incentives based upon performance under the agreements, including
minimum annual compensation totaling $793,333, $243,750 and $15,000 for
1996, 1997 and 1998, respectively; 2,500 shares of the Company's common
capital stock for 1996; five year stock options for 10,000 shares of the
Company's common capital stock; bonuses of $10,000 to $50,000 per win of
an official PGA Tour event, the Masters, the U.S. Open or the British
Open; bonuses up to $20,000 and $40,000 based on a member's ranking on the
PGA Tour Money List for 1996 and 1997, respectively; and, bonuses up to
$40,000 and $100,000 based on a member's percentage of PGA Tour earnings
for 1996 and 1997, respectively. The Company incurred expenses for
representation agreements of $407,000 and $202,200 for the six months
ended June 30, 1996, and 1995 respectively.
6. Series B Preferred Stock. On May 17, 1996, the Board of Directors
of the Company, adopted a resolution which created a Series B Preferred
Stock. On May 20, 1996, 9,231 shares of its $1,000.00 face value Series B
Preferred Stock were issued, at a discount of $3,081,000, for net proceeds,
including brokers fees of $1,051,372, of approximately $5,098,628.
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 Company, 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
unless all accrued but unpaid dividends on the Company's existing class of
Series A Preferred Stock have been declared and paid in cash. Such
dividends are not cumulative. 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 are payable on April 30,
1997.
Upon liquidation, dissolution or winding up of the Company, holders of the
Series B Preferred Stock are entitled to receive liquidation distributions
equivalent to $1,000.00 per share before any distribution to holders of
Common Stock. The liquidation preference of the Series B Preferred Stock
shall be junior in right of payment to the liquidation preference of the
Company's existing class of Series A Preferred Stock.
The Series B Preferred Stock is convertible 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 price equals the lesser
of the average closing bid price for the five days prior to conversion, or
$6.05, but not less than $4.00 (the floor conversion price). The floor
conversion price is eliminated on October 1, 1996.
Each share of Series B Preferred Stock outstanding on December 31, 1997
automatically shall be converted into Common Stock on such date at the
conversion price then in effect.
7. Earnings per share. Primary and fully diluted earnings per share
for the three months ended June 30, 1996 are based on weighted average
common shares and share equivalents outstanding. Common share equivalents
include dilutive options and warrants, Series B preferred stock, and
certain convertible debt.
In computing fully diluted earnings per share, the conversion of the
Series A preferred stock was not assumed as the effect would be anti-
dilutive.
The following table presents information necessary to calculate earnings
per share for the three month period ended June 30, 1996:
Primary Fully Diluted
Shares outstanding:
Weighted average outstanding 4,010,307 4,010,307
Share equivalents 2,195,802 2,204,195
--------- ---------
Adjusted outstanding 6,206,109 6,214,502
Net income 76,756 76,756
Series A preferred stock cumulative
dividends (43,710) (43,710)
------- -------
Net income for common stockholders $33,046 $33,046
======= =======
Net income per common share $0.01 $0.01
===== =====
For the three months ended June 30, 1995 and the three and six months
ended June 30, 1996 and 1995, the loss per share, assuming full dilution,
are considered to be the same as primary since the effect of the common
stock equivalents would be anti-dilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following management's discussion and analysis of financial
condition and results of operations addresses the performance of the
Company for the three and six month periods ended June 30, 1996 and 1995
(unaudited) and should be read in conjunction with the Company's Financial
Statements (including the notes thereto) appearing elsewhere in this
document. As the Company's acquisition of Golf-Tec has been accounted for
as a recapitalization, the discussion below refers to the operations of
Golf-Tec and its subsidiary, Golf-Tec, Inc., prior to the share exchange
as those of the Company on a consolidated basis.
In June 1995, one of the Company's vendors, which polishes and chromes
clubheads, had a work slowdown due to labor contract negotiations. The
same vendor had a work stoppage in July 1995. This happened at a time
when the Company's sales orders were exceeding projections. This
situation resulted in the Company receiving only limited product shipments
during the second half of 1995, with only slight increases during the
first three months of 1996, and therefore, the Company was able to ship
and invoice only a small number of orders during that period. During the
same period, the Company's sales orders continued to climb, and as of
March 31, 1996, the Company had sales orders of approximately $3,089,381.
The Company has recently developed a relationship with two additional
polishing and chroming vendors and is now receiving product from three
vendors. Product availability has increased beginning April, 1996. As a
result the Company reduced its backlog by 48% from March 31, 1996 to June
30, 1996.
The Snake Eyes/R/ Driver was introduced to the market in April, 1996. The
demand of the Snake Eyes/R/ Driver exceeds the current production
capacity. At June 30, 1996, the Company had sales orders of approximately
7,000 Snake Eyes/R/ Drivers. The Company believes it will be able to be
current in shipping and invoicing Snake Eyes/R/ Drivers by October, 1996.
For the Six Months Ended June 30, 1996
The Company's net sales (unaudited) for the six month period ending
June 30, 1996 and 1995 were $2,541,000 and $817,300, respectively.
Management attributes the increase in sales for the six months ended June
30, 1996 to the increase in product availability beginning in April, 1996.
This allowed the Company to reduce its backlog by 48% from March 31, 1996
to June 30, 1996.
The Company's gross profit (and gross profit margin) for the six months
ended June 30, 1996 was $1,635,900 (68%) compared to $553,700 (64%) for the
six months ended June 30, 1995. The increase in the gross profit is
attributed to the increase in product availability beginning in April,
1996.
Operations resulted in net losses of $815,300 and $1,279,900 for the
six months ended June 30, 1996 and June 30, 1995, respectively. The net
loss for the six months ended June 30, 1995 is attributable primarily to
the beginning of a national advertising campaign which included monthly
major magazine advertising as well as weekly television advertising on
ESPN.
The operating loss incurred during the six months ended June 30, 1996
was primarily due to three factors: tour player contract expenses,
increased staffing, and shortage of deliverable product. Tour player
contract expenses increased from $202,200 for the six months ended June
30, 1995 to $406,900 for the same period in 1996. General and
administrative expenses were $971,400 for the six months ended June 30,
1996, up from $485,800 for the same period in 1995. The majority of this
increase was due to the adding of new employees in the administration
departments to handle the increased order volume. Also, the general and
administrative expenses of the Company's manufacturing plant, located in
Michigan, are included as General and Administrative expenses beginning
April, 1996. Prior to this date, these costs were included in Research
and Development, as the Snake Eyes/R/ Driver was still in the development
stage. The Company experienced a shortage of deliverable product due to a
lack of deliveries from a primary vendor as noted in the previous discussion
of revenues. Although there was an increase in product flow and avail-
ability beginning January, 1996, the level of product flow was not adequate
to meet shipping requirements until April, 1996.
For the Three Months Ended June 30, 1996
The Company's net sales (unaudited) for the three month period ending
June 30, 1996 and 1995 were $1,989,900 and $545,500, respectively.
Management attributes the increase in sales for the three months ended
June 30, 1996 to the increase in product availability beginning in April,
1996. This allowed the Company to reduce its backlog by 48% from March 31,
1996 to June 30, 1996.
The Company's gross profit (and gross profit margin) for the three months
ended June 30, 1996 was $1,272,000 (64%) compared to $399,700 (73%) for the
three months ended June 30, 1995. The decrease in gross profit margin is
attributed to the increase in freight costs for both receiving raw materials
as well as shipping product. Also, additional labor costs were incurred for
overtime due to the efforts the Company made during this period to reduce
its backlog.
Operations resulted in net income of $76,800 and net loss of $734,400
for the three months ended June 30, 1996 and June 30, 1995, respectively.
The net loss for the three months ended June 30, 1995 is attributable
primarily to the beginning of a national advertising campaign which
included monthly major magazine advertising as well as weekly television
advertising on ESPN.
The net income generated during the three months ended June 30, 1996
was primarily affected by three factors: significant increase in
deliverable product, increased staffing, and reduction of research and
development costs. The Company experienced a significant increase in
deliverable product, as noted in the previous discussion of revenues.
General and administrative expenses were $446,000 for the three months
ended June 30, 1996, up from $237,900 for the same period in 1995. The
majority of this increase was due to the adding of new employees in the
administration departments to handle the increased order volume. Also,
the general and administrative expenses of the Company's manufacturing
plant, located in Michigan, are included as General and Administrative
expenses beginning April, 1996. Prior to this date, these costs were
included in Research and Development, as the Snake Eyes/R/ Driver was
still in the development stage. Research and developments costs were
$38,000 for the three months ended June 30, 1996, down from $171,800 for
the same period in 1995. The research and development costs incurred
during this period of 1995 were related to the development of the Snake
Eyes/R/ Driver. The decrease in these expenses is primarily related to
introducing the Snake Eyes/R/ Driver to the market in April, 1996.
Liquidity and Capital Resources
The Company sold 9,231 shares of Series B Preferred Stock to an
overseas investor in May, 1996. This cash infusion, as discussed in Part
II, Item 2, has significantly contributed to the working capital at June
30, 1996, and has addressed previous concerns about the Company's
liquidity and its ability to continue operations at current levels and
expand its product lines. The Company believes that it has raised
sufficient capital which, together with projected cash flow from
operations, will be sufficient to meet the Company's working capital needs
for at least the next two years.
<PAGE>
PART II. OTHER INFORMATION AND SIGNATURES
Item 2. Changes in Securities
On May 17, 1996, the Board of Directors of the Company, adopted a
resolution which created a Series B Preferred Stock. On May 20, 1996,
9,231 shares of its $1,000.00 face value Series B Preferred Stock were
issued, at a discount of $3,081,000 for net proceeds, including brokers
fees of $1,051,372, of approximately $5,098,628.
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 Company, 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
unless all accrued but unpaid dividends on the Company's existing class of
Series A Preferred Stock have been declared and paid in cash. Such
dividends are not cumulative. 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 are payable on April 30,
1997.
Upon liquidation, dissolution or winding up of the Company, holders of the
Series B Preferred Stock are entitled to receive liquidation distributions
equivalent to $1,000.00 per share before any distribution to holders of
Common Stock. The liquidation preference of the Series B Preferred Stock
shall be junior in right of payment to the liquidation preference of the
Company's existing class of Series A Preferred Stock.
The Series B Preferred Stock is convertible 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 price equals the lesser
of the average closing bid price for the five days prior to conversion, or
$6.05, but not less than $4.00 (the floor conversion price). The floor
conversion price is eliminated on October 1, 1996.
Each share of Series B Preferred Stock outstanding on December 31, 1997
automatically shall be converted into Common Stock on such date at the
conversion price then in effect.
The certificate of designation for the Series B Preferred Stock is
included in Exhibit 3, and describes, in detail, the dividend rights,
liquidation preference, conversion dates and conversion prices for the
Series B Preferred Stock.
Item 3. Defaults Upon Senior Securities
The Company has Series A Cumulative Preferred Stock dividends in
arrears of $149,917 as of June 30, 1996. To date, the Company has not
paid dividends. The arrearage for Series A Cumulative Preferred Stock
dividends is $168,169 as of August 7, 1996.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
3. Articles of Incorporation, as amended
4. Subscription Agreement for Series B Preferred Stock, including
Registration Rights Agreement as Exhibit E thereto
11. Computation of Earnings Per Share
27. Financial Data Schedule
B. Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and 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: August 7, 1996 By: /s/ Harold E. Hutchins
Harold E. Hutchins, Vice
President and Chief Financial
Officer
<PAGE>
PART III. INDEX TO EXHIBITS
Exhibit 3 Articles of Incorporation, as amended
Exhibit 4 Subscription Agreement for Series B Preferred Stock,
including Registration Rights Agreement as Exhibit E
thereto
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
THO2 AND RARE METALS EXPLORATION, INC.
(Name changed to GOLF-TECHNOLOGY HOLDING, INC.)
We the undersigned natural persons over the age of twenty-one (21)
years acting as directors of a Corporation under the Idaho Code, hereby
adopt the following Amended and Restated Articles of Incorporation for
such Corporation and declare that they shall supersede the original
Articles of Incorporation and all Amendments thereto.
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be GOLF-TECHNOLOGY HOLDING, INC.
ARTICLE II
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE III
PRINCIPAL PLACE OF BUSINESS/REGISTERED AGENT
The post office address of the Corporation's principal place of
business is 13000 Sawgrass Village Circle,Suite 30, Ponte Vedra Beach,
Florida 32082, and the name of its agent at such address is Ernie
Vadersen. The registered agent and its address in the State of Idaho is
Jill Patterson, 1300 Mill Road, McCall, Idaho 83638.
ARTICLE IV
PURPOSE
This Corporation is organized to engage in any lawful business or
activity which may be conducted under the laws of the State of Idaho or
any other state, country or jurisdiction wherein this Corporation shall be
authorized to transact business.
ARTICLE V
CAPITALIZATION
The aggregate number of shares the Corporation shall have authority
to issue shall consist of twenty five million (25,000,000) shares of
common stock, par value One Tenth of a Cent ($.001) per share, with equal
rights, preferences and restrictions. Fully paid stock of the Corporation
shall not be liable to any further call or assessment. There shall be no
cumulative voting and shareholders shall no preemptive rights to acquire
any securities of the Corporation.
The foregoing Amended and Restated Articles of Incorporation were
voted upon at the Special Meeting of Shareholders held December 29, 1994,
notice of which was given twenty (20) days prior to the Meeting. There
were 10,000,000 shares outstanding and entitled to vote at the Meeting and
5,416,721 shares (54.2%) were represented at the Meeting in person and by
proxy. Those shares voting in favor of adopting such Amended and Restated
Articles of Incorporation were 5,302,887, and those shares voting against
were 113,834. Also, Articles I, II, IV and V were amended by affirmative
amendment approved by the Shareholders by a vote of 5,302,887 shares for,
and 113,834 shares against each such amendment.
Shareholders also ratified a proposal to reverse split the
outstanding shares of the Corporation's common stock on a one (1) for
forty (40) shares basis, effective date December 29, 1994 as determined by
the Board of Directors. The President and Secretary of the Corporation
are hereby authorized and directed that upon surrender of certificates
representing forty shares of common stock, par value $.50 per share, to
issue to the record holder thereof certificates representing one (1) share
of common stock, par value $.001 per share. The stated capital of the
Corporation has therefore been reduced from $500,000 to $250.
DATED this 29th day of December, 1994.
/s/ J. Rockwell Smith
J. ROCKWELL SMITH, President
/s/ Stacie Nolan
STACIE NOLAN, Secretary
<PAGE>
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
THE UNDERSIGNED, the President and Secretary respectively of THO2 and
Rare Metals Exploration, Inc., a corporation organized and existing under
the laws of the State of Idaho, to be now known as Golf Technology
Holding, Inc., do hereby certify that at the Special Meeting in Lieu of
Annual Meeting of Shareholders of said Corporation properly called and
held on December 29, 1994, the foregoing Amended and Restated Articles of
Incorporation for said Corporation were duly adopted and authorized by
more than fifty percent (50%) of the outstanding and issued shares of said
Corporation, which shares were properly represented and voted at said
Meeting. Also that said Meeting was held pursuant to a resolution of the
Board of Directors setting forth the Amended and Restated Articles of
Incorporation, and reverse stock split of the issued and outstanding
shares, and directing that they be submitted to a vote at the Special
Meeting of Shareholders, and that written notice of said Special Meeting
setting forth the proposed Restated Articles of Incorporation was given by
first class mail to each shareholder of record entitled to vote thereon at
least twenty (20) days prior to the holding of the Meeting. The
Undersigned further certify that the foregoing Amended and Restated
Articles of Incorporation correctly set forth the corresponding provisions
of the Articles of Incorporation as heretofore amended and that the
amendments and restated articles adopted by the shareholders correctly
state the date of adoption thereof, the number of shares outstanding, the
number of shares voted for and the number of shares voted against such
amendments.
/s/ J. Rockwell Smith
J. ROCKWELL SMITH, President
/s/ Stacie Nolan
STACIE NOLAN, Secretary
SUBSCRIBED AND SWORN to before me this 29th day of December, 1994.
/s/ James A. Patterson
NOTARY PUBLIC
Residing at:
My Commission Expires: [Notary's Seal]
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
GOLF-TECHNOLOGY HOLDING, INC.
The following provisions of the Articles of Incorporation of GOLF-
TECHNOLOGY HOLDING, INC., an Idaho corporation (hereinafter called
"Corporation"), are amended in the following particulars:
1. The name of this Corporation is Golf-Technology Holding, Inc.
2. An Amendment to Article V of the Articles of Incorporation has
been adopted pursuant to Section 30-1-59 of the Idaho Business Corporation
Act, to authorize the issuance of five million (5,000,000) shares of
preferred stock. As amended, Article V shall now read as follows:
CAPITALIZATION
(a) In General. The aggregate number of shares the
Corporation shall have authority to issue shall consist of
thirty million (30,000,000) shares, par value one-tenth of a
cent ($.001) per share. Of that amount, twenty-five million
(25,000,000) shall be common shares (the "Common Stock") and
five million (5,000,000) shall be preferred shares (the
"Preferred Stock"). Fully paid stock of the Corporation shall
not be liable to any further call or assessment. There shall be
no cumulative voting and shareholders shall have no pre-emptive
rights to acquire any securities of the Corporation.
(b) Preferred Stock. The Board of Directors is authorized
to provide for the issuance of the Preferred Stock in one or
more series by filing the appropriate Certificate Of Designation
with the Secretary of State of Idaho which shall be effective
without shareholder action, is authorized to establish the
number of shares to be included in each series and the
preferences, limitations and relative rights of each series.
Such preferences must include the preferential right to receive
distributions of assets upon the dissolution of the Corporation
before shares of Common Stock are entitled to receive such
distributions, or both.
(c) Common Stock. The Common Stock shall have equal
rights, designations and restrictions. Holders of Common Stock
are entitled to one vote per share on all matters required by
Idaho law to be approved by the shareholders. Subject to the
rights of any outstanding classes or series of Preferred Stock
having preferential dividend rights, holders of Common Stock are
entitled to such dividends as may be declared by the Board of
Directors out of funds lawfully available therefor. Upon the
dissolution of the Corporation, holders of Common Stock are
entitled to receive, pro rata in accordance with the number of
shares owned by each, the net assets of the Corporation
remaining after the holders of any outstanding classes or series
of Preferred Stock having preferential rights to such assets
have received the distributions to which they are entitled.
3. The above amendment to Article V of the Articles of
Incorporation shall be effective as of filing date with the Secretary of
State.
4. The foregoing amendment to Articles of Incorporation of Golf-
Technology Holding, Inc. was adopted by the Corporation by virtue of
unanimous consent of the Directors dated April 6, 1995, and a majority
vote of the shareholders at a Special Meeting of the Shareholders held on
April 18, 1995. Notice of the Special Meeting of the Shareholders was
given more than ten (10) days prior to the Meeting. There were 3,918,408
shares outstanding and entitled to vote at the Meeting and 2,285,132
shares (58%) were present in person or by proxy. Those shares voting in
favor of adopting the Amendment to the Articles of Incorporation were
2,282,132 and those voting against were 3000.
IN WITNESS WHEREOF, the undersigned President and Secretary of the
Corporation have executed this Amendment to Articles of Incorporation of
Golf-Technology Holding, Inc. this 25th day of April, 1995.
/s/ Ernest R. Vadersen
ERNEST R. VADERSEN, President
/s/ Harold E. Hutchins
HAROLD E. HUTCHINS, Secretary
<PAGE>
STATE OF FLORIDA
COUNTY OF ST JOHNS
THE UNDERSIGNED, the President and Secretary respectively of GOLF-
TECHNOLOGY HOLDING, INC., a corporation organized and existing under the
laws of the State of Idaho, do hereby certify that a the Special Meeting
of the Shareholders of said Corporation properly called and held on April
18, 1995, the foregoing Articles of Amendment to the Articles of
Incorporation for said Corporation were duly adopted and authorized by
more than fifty percent (50%) of the outstanding and issued shares of said
Corporation, which shares were properly represented and voted at said
Meeting. Also that said Meeting was held pursuant to a resolution of the
Board of Directors setting forth the Articles of Amendment to the Articles
of Incorporation, and directing that they be submitted to a vote at the
Special Meeting of Shareholders, and that written notice of said Special
Meeting setting forth the proposed Amendment to the Articles of
Incorporation was given by first class mail to each shareholder of record
entitled to vote thereon at least ten (10) days prior to the holding of
the Meeting. The undersigned further certify that the foregoing Articles
of Amendment to the Articles of Incorporation correctly set forth the
corresponding provisions of the Articles of Incorporation as heretofore
amended and that the amendments of the articles adopted by the
shareholders correctly state the date of adoption thereof, the number of
shares outstanding, the number of shares voted for and the number of
shares voted against such amendments.
/s/ Ernest R. Vadersen
ERNEST R. VADERSEN, President
/s/ Harold E. Hutchins
HAROLD E. HUTCHINS, Secretary
SUBSCRIBED AND SWORN to before me this 25th day of April, 1995.
(SEAL) /s/ John E. Knight
My Commission Expires:
Print:
Notary Public, State and County
Aforesaid
[Notary's Seal] Commission No.
Personally Known
Identification
<PAGE>
STATEMENT OF
RESOLUTION ESTABLISHING SERIES OF SHARES
OF
GOLF-TECHNOLOGY HOLDING, INC.
Pursuant to the provisions of Section 30-1-16 of the Idaho Business
Corporation Act, the undersigned Corporation submits this Statement of
Resolution establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof:
1. The name of the Corporation is GOLF-TECHNOLOGY HOLDING, INC.
(the "Corporation").
2. On April 21, 1995, the Board of Directors of the Corporation
duly adopted a resolution establishing and designating a series of shares
consisting of 2,000,000 shares designated as Series A Preferred Stock
("Series A Preferred Stock"), and fixing and determining the relative
rights and preferences thereof.
3. A copy of the resolution by the Board of Directors establishing
the A Preferred Stock is annexed hereto as Exhibit "A" and by this
reference made a part hereof.
DATED: April 21 , 1995. GOLF-TECHNOLOGY HOLDING, INC.
By:/s/ Ernest R. Vadersen
Ernest R. Vadersen, President
/s/ Harold E. Hutchins
Harold E. Hutchins, Secretary
<PAGE>
ACKNOWLEDGEMENT
STATE OF FLORIDA
COUNTY OF ST. JOHNS
THE UNDERSIGNED, the President and Secretary, respectively, of
Golf-Technology Holding, Inc., a corporation organized and existing under
the laws of the State of Idaho, do hereby certify that at a Special
Meeting of the Board of Directors of said Corporation properly called and
held on April 21, 1995, the Board of Directors duly adopted the resolution
establishing and designating a series of shares consisting of 2,000,000
shares, designated as Series A Preferred Stock, and fixing and determining
the relative rights and preferences thereof. The undersigned further
certify that the foregoing Statement and Exhibit thereto correctly sets
forth the resolution adopted by the Board of Directors and correctly
states the date of adoption thereof.
/s/ Ernest R. Vadersen
Ernest R. Vadersen, President
/s/ Harold E. Hutchins
Harold E. Hutchins, Secretary
SUBSCRIBED AND SWORN to before me this 21st day of April , 1995.
/s/ John E. Knight
[Notary's Seal]
Print:
Notary Public, State and County Aforesaid
Commission No.
My Commission Expires:
Personally Known
Type of Identification
<PAGE>
UNANIMOUS WRITTEN CONSENT TO
RESOLUTIONS IN LIEU OF SPECIAL MEETING OF
THE BOARD OF DIRECTORS OF
GOLF-TECHNOLOGY HOLDING, INC.
Pursuant to the authority contained in Section 30-1-44 of the Idaho
Business Corporation Act (the "Act"), the adoption of the following
resolution is consented to by the undersigned, who are all of the
directors of this Corporation:
RESOLVED, that pursuant to the authority expressly granted
to the Corporation's Board of Directors by Article V of the
Restated Articles of Incorporation of the Corporation, the
Board of Directors hereby establishes a series of the
Corporation's preferred stock, $0.001 per value per share,
and hereby fixes the designation, the number of shares and
the relative rights, preferences and limitations thereof as
set forth on the attached statement designating the rights
and preferences of the preferred stock, which is attached
hereto as Exhibit "A" and by this reference incorporated
herein.
FURTHER RESOLVED, that this unanimous written consent shall
be effective as of April ____, 1995.
/s/ Ernest R. Vadersen
Ernest R. Vadersen, President
/s/ Harold E. Hutchins
Harold E. Hutchins, Secretary
/s/ Daniel R. Murphy
Daniel R. Murphy
<PAGE>
Exhibit A
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
TO BE CONTAINED IN THE CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK OF GOLF-TECHNOLOGY HOLDING, INC.
(a) Voting Rights. (i) Except as otherwise provided herein or as
required by law, the holders of shares or Series A Preferred Stock shall
not be entitled to vote on any matters that come before the shareholders.
(ii) In the event the Corporation shall fail to pay current
dividends on the Series A Preferred Stock on four Dividend Payment Dates
(as defined herein), whether consecutive or non-consecutive, the holders
shall be entitled to vote, on a one-vote-per-share of Series A Preferred
Stock basis, with the holders of the Common Stock on all matters submitted
to the Company's shareholders. The holders shall continue to be entitled
to the foregoing right to vote, notwithstanding the subsequent payment of
any or all such dividends.
(iii) On all matters on which the Series A Preferred Stock
is entitled to vote by law, the holders shall be entitled to one vote per
share of Series A Preferred Stock, voting separately as a single class.
(b) Dividend Rights. (i) Each issued and outstanding share of
Series A Preferred Stock shall entitle the holder of record thereof to
receive, when, as and if declared by the Board of Directors, out of any
funds legally available therefor, dividends in cash at the annual rate of
nine percent (9%), as adjusted for stock splits, stock dividends,
recapitalization, reclassifications and similar events, payable quarterly
on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1995 (each a "Dividend Payment Date"). Dividends and
distributions (other than those payable solely in Common Stock) may be
paid, or declared and set aside for payment, upon shares of Common Stock
in any calendar year only if dividends shall have been paid, or declared
and set apart for payment, on account of all shares of Series A Preferred
Stock then issued and outstanding, at the aforesaid rate of such calendar
year.
(ii) The right to dividends upon the issued and outstanding
shares of Series A Preferred Stock shall be cumulative from the date of
issuance of such share of Preferred Stock to which the dividend relates so
that such rights shall be deemed to accrue, whether earned, or whether
there be funds legally available therefor, or whether said dividends shall
have been declared; and if such dividends shall not have been declared and
paid, the deficiency shall first be fully paid on the Series A Preferred
Stock, before any dividend or other distribution (other than those payable
solely in Common Stock) may be paid, or declared and set apart for
payment, to the holders of shares of Common Stock, and shall in any event
be paid upon conversion of the Series A Preferred Stock, in cash, or at
the election of the holder of shares of Series A Preferred Stock, partly
in cash and partly in shares of Common Stock, or all in shares of Common
Stock, at the fair market value of the Common Stock at the time of
payment, as determined in as set forth in paragraph (e) hereof. Any
accumulation of dividends on the shares of Series A Preferred Stock shall
not bear interest. The dividends payable upon the issued and outstanding
shares of Series A Preferred Stock shall be payable upon a pro rata basis.
(iii) The restrictions on dividends and distributions with
respect to shares of Common Stock and of Series A Preferred Stock set
forth in paragraph (b) hereof are in addition to, and not in derogation
of, the other restrictions on such dividends and distributions set forth
herein.
(iv) The Holders shall be entitled to the voting rights set
forth in paragraph (a)(ii) in the event dividends are not paid on four
Dividend Payment Dates.
(c) Liquidation Rights. In the event of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation,
the holders of record of shares of Series A Preferred Stock shall be
entitled to receive, out of the assets of the Corporation legally
available therefor, five Dollars ($5.00) per share of Series A Preferred
Stock, plus a further amount per share equal to dividends, if any (i) then
declared and unpaid on account of shares of Series A Preferred Stock and
(ii) whether or not declared, then accrued in accordance with the
provisions of subparagraph (b)(ii) hereof before any payment shall be made
or any assets distributed to the holders of shares of Common Stock. If,
upon any liquidation, dissolution, or winding up, whether voluntary or
involuntary, the assets thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit payment to such holders of
the full preferential amounts aforesaid, then the entire assets of the
Corporation to be distributed shall be distributed ratably among the
holders of Series A Preferred Stock.
(d) Conversion Rights. (i) Subject to the terms and conditions
hereof, each holder of record of shares of Series A Preferred Stock may,
at any time, upon surrender to the Corporation of the certificates
therefor at the principal office of the Corporation or at such other place
as the Corporation shall designate, convert all or any part of such
holder's shares of Series A Preferred Stock into such number of fully paid
and non-assessable shares of Common Stock of the Corporation (as such
Common Stock shall then be constituted) equal to the product of (A) the
number of shares of Series A Preferred Stock which such holder shall then
surrender to the Corporation, multiplied by (B) the number determined by
dividing Five Dollars ($5.00) by the Conversion Price (as hereinafter
defined) per share for the Series A Preferred Stock in effect at the time
of conversion.
(ii) For purposes of this Certificate Designation:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Corporation after the Issuance Date (as defined
herein) whether or not subsequently reacquired or retired by the
Corporation, other than (i) shares of Common Stock issued upon conversion
of the Series A Preferred Stock, (ii) any shares of the Company's Common
Stock issued pursuant to shares which are currently reserved for issuance
under the Golf-Tec Holding, Inc. Stock Option Plan (as such plan may be
reconstituted to purchase Common Stock of the Company) and (iii) up to
500,000 shares of Common Stock (which number may be proportionately
increased or decreased solely in the event of a subdivision or combination
of the Company's Common Stock or the payment of a dividend on all shares
of the Company's Common Stock payable in Common Stock of the Company)
issued pursuant to options, other rights and convertible securities having
exercise or conversion prices below the Conversion Price in effect which
options, rights or securities are issued as incentive compensation to
employees of the Company or its affiliates or to independent contractors
who act as agents for the Company or its affiliates in connection with the
Company's product sales.
"Conversion Price" shall mean the price at which shares of the
Common Stock shall be deliverable upon conversion of the Series A
Preferred Stock. The Conversion Price shall initially be Five Dollars
($5.00). The Conversion Price shall be subject to adjustment as provided
below:
"Convertible Securities" shall mean any evidences of indebtedness,
shares or securities convertible into, exercisable for or exchangeable for
Additional Shares of Common Stock.
"Issuance Date" shall mean the date the first share of Series A
Preferred Stock is issued.
"Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities.
(iii) Adjustments to Conversion Price for Diluting Issues
(A) In the event the Corporation at any time or from time to time
shall declare or pay any dividend on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification,
stock split or otherwise than by payment of a dividend in Common Stock),
then and in any such event, the Conversion Price in effect shall be
proportionately decreased:
(i) in the case of any such dividend, immediately after the
close of business on the record date for the determination of holders of
any class of securities entitled to receive such dividend, or
(ii) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such
subdivision becomes effective.
(B) In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall, concurrently
with the effectiveness of such combination or consolidation, be
proportionately increased.
(C) In case of any consolidation or merger of the Corporation with
or into another corporation or the conveyance of all or substantially all
of the assets of the Corporation to another corporation, each share of
Series A Preferred Stock shall thereafter be convertible into the number
of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Series A Preferred Stock would have been entitled upon
such consolidation, merger or conveyance; and, in any such case,
appropriate adjustment (as determined by the Board of Directors) shall be
made in the application of the provisions herein set forth with respect to
the rights and interest thereafter of the holders of the Series A
Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be possible, in relation to any, shares of stock or other
property thereafter deliverable upon the conversion of the Series A
Preferred Stock.
(D) If the Common Stock issuable upon conversion of the Series A
Preferred Stock shall be changed into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization
or reclassification, be proportionately adjusted such that the Series A
Preferred Stock shall be convertible into, in lieu of the number of shares
of Common Stock which the holder would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock into
which the Common Stock issuable upon conversion of the Series A Preferred
Stock immediately prior to such effectiveness would have been changed.
(E) If and whenever, after the Issuance Date, the Corporation
shall issue or sell, or is, in accordance with subparagraphs (E)(1)
through (E)(6), deemed to have issued or sold, any Additional Shares of
Common Stock for a consideration per share less than the Conversion Price
in effect for the Series A Preferred Stock, immediately prior to the time
of such issue or sale, then, forthwith upon such issue or sale, such
Conversion Price shall be reduced as of the opening of business on the
date of such issue or sale, to a price determined by multiplying the
Conversion Price for the Series A Preferred Stock by a fraction (a) the
numerator of which shall be (A) the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus (B) the number of
shares of Common Stock which the aggregate consideration received (or by
express provision hereof deemed to have been received) by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price for the Series A Preferred Stock and (b)
the denominator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date of such issue after
giving effect to such issue of Additional Shares of Common Stock.
For purposes of this subparagraph E, the following subparagraphs
(1) to (6) shall also be applicable:
(E)(1) Issuance of Options. In case at any time after the
Issuance Date the Corporation shall in any manner grant (whether directly
or by assumption in a merger or otherwise) any Options for the purchase of
Common Stock or any stock or Convertible Securities whether or not such
Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Additional Shares of Common Stock are issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus, in
the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (ii) the total maximum number of Additional Shares
of Common Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options) shall be less than the Conversion Price in
effect for the Series A Preferred Stock immediately prior to the time of
the granting of such Options, then the total maximum number of Additional
Shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to
have been issued for such price per share as of the date of granting of
such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise provided in
subparagraph E(3), no adjustment of either Conversion Price shall be made
upon the actual issue of such Additional Shares of Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Additional shares of Common Stock upon conversion or
exchange of such Convertible Securities.
(E)(2) Issuance of Convertible Securities. In case the
Corporation at any time after the Issuance Date shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
Additional Shares of Common Stock Issuable upon the conversion or exchange
of all such Convertible Securities) shall be less than the Conversion
Price in effect for the Series A Preferred Stock, immediately prior to the
time of such issue or sale, then the total maximum number of Additional
Shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that
(a) except as otherwise provided in subparagraph (E)(3), no adjustment of
the Conversion Price shall be made upon the actual issue of such
Additional Shares of Common Stock upon conversion or exchange of such
Convertible Securities and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchaser
any such Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of this
subparagraph (E)(1), no further adjustment of such Conversion Price shall
be made by reason of such issue or sale.
(E)(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph (E)(1), the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in subparagraph (E)(1) or
(E)(2), or the rate at which Convertible Securities referred to in
subparagraph (E)(1) or (E)(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect for the Series A Preferred
Stock, at the time of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold, but only
if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced; and on the expiration of any Option the
issuance of which has reduced the Conversion Price or the termination of
any such right to convert or exchange Convertible Securities the issuance
of which has reduced the Conversion Price, the Conversion Price then in
effect hereunder shall forthwith be increased to the Conversion Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never
been issued.
(E)(4) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction therefrom
of any expenses incurred on any underwriting commissions or concessions
paid or allowed by the Corporation in connection therewith. In case any
shares of Common Stock, Options or Convertible Securities shall be issued
or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed
to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Corporation, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any Options
shall be issued in connection with the issue and sale of other securities
of the Corporation, together comprising one integral transaction in which
no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
(E)(5) Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling
them to subscribe for or purchase Common Stock, Options or convertible
Securities, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(E)(6) Treasury Shares. The disposition of any shares of
Common Stock owned or held by or for the account of the Corporation shall
be considered an issue or sale of Additional shares of Common Stock for
the purpose of this subparagraph E.
(iv) Whenever the Conversion Price or the amount of Common
Stock or other securities deliverable upon the conversion of Series A
Preferred Stock shall be adjusted pursuant to the provisions hereof, the
Corporation shall forthwith file, at its principal executive office and
with any transfer agent or agents for its Series A Preferred Stock and
Common Stock, a statement, signed by the Chairman of the Board, President,
or one of the Vice Presidents of the Corporation, and by its Chief
financial Officer or one of its Assistant Treasurers, stating the newly
adjusted conversion Price and adjusted amount of its Common Stock or other
securities deliverable per share of Series A Preferred Stock calculated to
the nearest one one-hundredth and setting forth in reasonable detail the
method of calculation and the facts requiring such adjustment and upon
which such calculation is based. A copy of such statement shall be sent
to each holder of Series A Preferred Stock. Each adjustment shall remain
in effect until a subsequent adjustment hereunder is required.
(v) The Corporation shall at all times reserve and keep
available out of its authorized but unissued common Stock the full number
of shares of Common Stock deliverable upon the conversion of all the then
outstanding shares of Series A Preferred Stock and shall take all such
action and obtain all such permits or orders as may be necessary to enable
the Corporation lawfully to issue such Common Stock upon the conversion of
Series A Preferred Stock.
(vi) No fractions of shares of Common Stock shall be issued
upon conversion, but in lieu thereof the Corporation shall pay cash equal
to such fraction multiplied by the fair market value of a share of Common
Stock as determined pursuant to paragraph (c) hereof.
(vii) The Corporation will not, by amendment of this
Certificate of Designation or by amendment of its Certificate of
Incorporation (the "Charter") or through any reorganization, transfer of
assets, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of this paragraph (d) and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights
of the holders of the Series A Preferred Stock against impairment.
(e) Redemption. (i) The Corporation may, at its option, redeem
the Series A Preferred Stock, in whole and not in part, out of funds
legally available therefor, by action of the Board of Directors, at any
time on or after six months from the date of issuance of the last share of
Preferred Stock pursuant to the Corporation's Confidential Private
Placement Memorandum dated January 19, 1995 at a redemption price of $5.00
per share, plus all accrued and unpaid dividends on a share of Series A
Preferred Stock, upon notice and in the manner set forth in, and subject
to the conditions of, this paragraph (e); provided, the current market
price of the Common Stock (the closing sale price as reported by the
Nasdaq National Market or, if not traded thereon, the closing bid price as
reported by Nasdaq or, if not quoted thereon, the closing bid price in the
National Quotation Bureau sheet listing for the Common Stock) equals or
exceeds $7.50 per share (as may be adjusted proportionately upward or
downward solely in the event of a subdivision or combination of the
Company's Common Stock or the payment of a dividend on all of the
Company's Common Stock payable in Common Stock of the Company) for 20
consecutive trading days ending no more than 10 days prior to the date of
notice of redemption.
(ii) Redemption Notice. If the Corporation elect to redeem
the Preferred Stock, the Corporation shall mail, postage prepaid, not less
than 30 days nor more than 60 days prior to the business day designated in
such notice for the closing of such redemption (the "Redemption Date"),
written notice thereof (the "Redemption Notice"), to each holder of record
of the Series A Preferred Stock, at his post office address last shown on
the records of the Corporation. Each such Redemption Notice shall state:
(A) The number of shares of Series A Preferred Stock held by
the holder that the Corporation shall redeem;
(B) The Redemption Date and Redemption Price;
(C) The date upon which the holder's conversion rights (as
set forth in paragraph (d) above) as to such shares terminate which
termination shall be five days before the Redemption Date; and
(D) That the holder is to surrender to the Corporation, in
the manner and at the place designated, his certificate or certificates
representing the shares of Series A Preferred Stock to be redeemed.
(iii) Surrender of Certificates; Payment. On or before
the Redemption Date, each holder of shares of Series A Preferred stock,
unless such holder has exercised his right to convert the shares as
provided in paragraph (d) hereof, shall surrender the certificate or
certificates representing such shares to the Corporation, in the manner
and at the place designated in the Redemption Notice, and thereupon the
Redemption Price for such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and retired.
(iv) Rights Subsequent to Redemption. If the Redemption
Notice shall have been duly given, and if on the Redemption Date the
Redemption Price therefor is either paid or made available for payment
through the deposit arrangement specified in subparagraph (vii) below,
then notwithstanding that the certificates evidencing any of the shares of
Series A Preferred Stock so called for redemption shall not have been
surrendered, the dividends with respect to such shares shall cease to
accrue after the Redemption Date and all rights with respect to such
shares shall forthwith terminate after the Redemption Date, except only
the right of the holders to receive the Redemption Price without interest
upon surrender of their certificate or certificates therefor.
(v) Deposit of Funds. On or prior to the Redemption Date,
the Corporation shall deposit with any bank or trust company, having a
capital and surplus of at least $100,000,000 as a trust fund, a sum equal
to the aggregate Redemption Price of all shares of Series A Preferred
Stock called for redemption on such Redemption Date and not yet converted,
with irrevocable instruction and authority to the bank or trust company to
pay, on and after each such Redemption Date, the Redemption Price to the
respective holders upon the surrender of their share certificates. From
and after the date of such deposit (but not prior to the Redemption Date),
the Series A Preferred Stock shall be redeemed. The deposit shall
constitute full payment of the shares of their holders, and from and after
the Redemption Date the Series A Preferred Stock shall be deemed to be no
longer outstanding, and the holders thereof shall cease to be shareholders
with respect to such shares and shall have no rights with respect thereto
except the rights to receive, from the bank or trust company, payment of
the Redemption Price of the shares, without interest, upon surrender of
their certificates therefor. Any funds so deposited and unclaimed at the
first anniversary of the Redemption Date shall be released or repaid to
the Corporation, after which the holders of shares called for redemption
shall be entitled to receive payment of the Redemption Price only from the
Corporation.
(f) Protective Provisions. So long as any shares of Series A
Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote of the holders of record of sixty-six and two-thirds
percent (66 %) of the outstanding shares of Series A Preferred Stock
voting as a class:
(i) Amend, repeal or modify any provision of, or add any
provision to, the Corporation's Charter or By-laws or this Certificate of
Designation if such action would alter or change the rights, preferences,
privileges or powers of, or the restrictions provided for the benefit of,
the Series A Preferred Stock so as to affect the Series A Preferred Stock
adversely; or
(ii) Reclassify the shares of Common Stock or any other shares
of stock hereafter created junior to the Series A Preferred Stock as to
dividends or assets into shares of Series A Preferred Stock or into shares
having any preference or priority as to dividends or assets superior to or
on a parity with that of the Series A Preferred Stock.
<PAGE>
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 and 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.
(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 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 one 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 or federal securities authority or
agency, any state or federal commodities authority or agency, or any
commodities or securities exchange.
B. Liquidation Preference.
(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, 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.
The holders of Series B Preferred Stock shall have the
following conversion rights:
(i) Right to Convert. Each share of Series B Preferred
Stock 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 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."
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 Corportion 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 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 shall be convertible into the number of shares of Common Stock
according to the following formula:
N x 1,000
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) 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 taxed.
(v) Automatic Conversion. Each share of Series B
Preferred 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 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 Commn 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
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.
(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, consolidation,
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 Sock, 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 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 holder 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 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 Stock are outstanding, the Corporation shall 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 hereafter from time to time amended).
G. Status of Converted Stock. In the event any shares of
Series B 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 21, 1996.
By: /s/ Ernest R. Vadersen
Ernest R. Vadersen, President
Attest:
/s/ Harold E. Hutchins, Secretary
Harold E. Hutchins, Secretary
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 solicitation of this Subscription and, if accepted by
the Company, the offer and sale of Preferred Stock, are being made in
reliance 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 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, 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.
2.3 Economic Risk. The Subscriber understands and acknowledges that
an 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 Shares.
2.4 No Government Recommendation or Approval. The Subscriber
understands 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 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 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.
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 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
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 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, 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 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 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 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.
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 not to be considered in construing or
interpreting this Agreement.
14. Amount
The undersigned Subscriber hereby subscribes for 9.231 shares of
Preferred Stock with a face value of 1.000 Dollars ($One thousand) (U.S.)
and pays herewith funds in the amount of six million one hundred fifty
Dollars (6.150.000 US$) Dollars ($6.150.000) (U.S.).
The undersigned Subscriber acknowledges that this subscription shall
not be effective unless accepted by the Company as indicated below.
Upon acceptance the company agrees to the changes outlined in the
coversheet.
(32.5$ dividend, no floor, . . .)
Dated this 13th day of May, 1996.
RBB Bank Aktiengesellschaft
(Name) (Please Print)
/s/ Herbert Strauss
(Signature) Herbert StrauB (B=ss)
Leonhardstr. 5, 8010 Graz, Austria
(Mailing Address)
Austria
(Place of Execution)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 14th DAY OF MAY,
1996.
GOLF-TECHNOLOGY HOLDING, INC.
By:/s/ Ernest R. Vadersen
Print Name: Ernest R. Vadersen
Title: Chairman, CEO
With the following conditions:
1. Stock must be listed on Nasdaq by August 15, 1996 or $4 floor on
conversion will be removed.
2. Earnings on June 30, 1996 must be greater than $350,000 as
reported on Form 10-QSB or the $4 floor on conversion will be
removed on October 1, 1996. If earnings are greater than
$350,000 then the $4 floor will be removed on January 1, 1997.
The above is based on pre-tax earnings.
<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:
______________________________
______________________________
* 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".
(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.
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
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:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"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.
"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).
2. 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 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.
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 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.
3. 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.
4. 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;
(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.
5. 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 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 the defense
of such claim and litigation resulting therefrom.
6. 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.
7. Miscellaneous.
7.1 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.
7.2 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.
7.3 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
7.4 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.
7.5 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.
7.6 Counterparts. This agreement may be executed in any number
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.
7.7 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.
7.8 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.
7.9 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
RBB Bank Aktiengesellschaft
By: /s/ Ernest R. Vadersen By: /s/ Herbert Strauss
Name: Ernest R. Vadersen Name: Herbert Strauss
Title: President Title: Headtrader
Exhibit 11
GOLF TECHNOLOGY HOLDING, INC.
COMPUTATION OF EARNINGS PER SHARE
See Note 7 of Part I, Item 1, which is incorporated
herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GOLF TECHNOLOGY HOLDING, INC. AS OF AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,993,532
<SECURITIES> 0
<RECEIVABLES> 1,512,153
<ALLOWANCES> 104,975
<INVENTORY> 796,347
<CURRENT-ASSETS> 4,503,959
<PP&E> 751,651
<DEPRECIATION> 118,216
<TOTAL-ASSETS> 5,804,049
<CURRENT-LIABILITIES> 1,061,772
<BONDS> 0
0
399
<COMMON> 4,043
<OTHER-SE> 4,737,835
<TOTAL-LIABILITY-AND-EQUITY> 5,804,049
<SALES> 2,541,006
<TOTAL-REVENUES> 2,541,006
<CGS> 905,117
<TOTAL-COSTS> 2,459,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 75,264
<INTEREST-EXPENSE> 26,938
<INCOME-PRETAX> (815,291)
<INCOME-TAX> 0
<INCOME-CONTINUING> (815,291)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (815,291)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
