DEBT CONVERSION AND
REGISTRATION RIGHTS AGREEMENT
DEBT CONVERSION AND REGISTRATION RIGHTS AGREEMENT (this "Agreement")
dated as of December 31, 1996, by and among CARLYLE GOLF, INC., a Colorado
corporation (the "Company"), Star Point Enterprises, Inc. d/b/a Pro-Line Cap
Company, a Texas corporation ("Seller"), the individuals listed on Schedule A
hereto (the "Debtholders"), Xxxxxxxx X. Xxxxx in his individual capacity
("Anton") and Xxxxxxx X. Xxxxx and Xxxxxxxx X. Xxxxx (the "Building Owner").
WHEREAS, the Company is purchasing (the "Transaction") from Seller,
certain assets relating to Seller's headwear manufacturing business pursuant
to that certain Asset Purchase Agreement entered into effective December 31,
1996 among the Company, Seller and Xxxxxxxx X. Xxxxx (the "Asset Purchase
Agreement"); and
WHEREAS, (a) in connection with the Asset Purchase Agreement, the
Debtholders have agreed to convert certain debt obligations of Seller (the
"Anton Debt" as defined in the Asset Purchase Agreement) into shares of the
Company's $.001 par value Convertible Preferred Stock (the "Preferred Shares")
pursuant to this Agreement; (b) in connection with the sale of the building
commonly known as 0000 Xxxxx Xxxxxxxxxx Xxxx xx Xxxx Xxxxx, Xxxxx to the
Company pursuant to an agreement of even date herewith (the "Building Purchase
Agreement"), the Building Owner has agreed to accept, as part payment for the
building, Preferred Shares; (c) Seller will be receiving shares of the
Company's $.001 par value Common Stock (the "Common Shares") under the Asset
Purchase Agreement and (d) Anton may also purchase Common Shares pursuant to
his Stock Option Agreement with the Company;
WHEREAS, because all of the Debtholders, Seller, Anton and the Building
Owner (the "Stock Purchasers") qualify as "accredited investors" as defined by
Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the
"Act"), the transaction will be exempt from registration under Section 4(2)
and 4(6) of the Act and Rules 505 and 506 promulgated thereunder; and
WHEREAS, the Company and the Debtholders have agreed to the terms and
conditions set forth herein regarding the conversion of the Anton Debt into
the Preferred Shares.
NOW, THEREFORE, in consideration of the aforesaid and the mutual promises
hereinafter made, the parties hereto agree as follows (it being agreed that
all capitalized words not otherwise defined herein shall have the meanings set
forth in the Asset Purchase Agreement):
1. Conversion of Debt.
1.01 Preferred Shares. The Company agrees to issue in exchange for
cancellation of the Anton Debt and each of the Debtholders agree to accept in
exchange for cancellation of the Anton Debt owing to each such Debtholder that
number of Preferred Shares as shall be calculated by dividing the principal
and accrued interest on the Anton Debt owing to such Debtholder at Closing as
set forth in Schedule A hereto, by $1.00; such $1.00 per share exchange price
representing the Original Purchase Price for purposes of the terms of the
Preferred Shares described in the Company's Amended and Restated Articles of
Incorporation, dated April 11, 1994 (the "Articles"), a copy of which is
attached hereto as Exhibit 1.02(a), as such Articles are to be amended
pursuant to this Agreement. Attached hereto as Exhibit 1.02(b) is an
Amendment and Waiver (the "Amendment"), authorized by Paragraph 4(c) of
Attachment A to the Articles, to be executed by the Building Owner and to each
Debtholder entitled to receive Preferred Shares pursuant to this Agreement.
The Amendment when executed by all the Debtholders receiving Preferred Shares
hereunder and the Building Owner shall have the effect of amending the terms
of the Preferred Shares and waiving certain rights which would otherwise apply
to holders of Preferred Shares. The Articles as set forth in the attached
Exhibit 1.02(a), as they will be amended by the Amendment attached as Exhibit
1.02(b), contain the terms applicable to the Preferred Shares. Execution and
delivery of the Amendment by all Debtholders entitled to receive Preferred
Shares and the Building Owner is a condition precedent to the Company's
obligations to deliver any Preferred Shares under this Agreement and the Asset
Purchase Agreement.
1.02 Closing Date; Delivery. The closing of the conversion of the Anton
Debt and the issuance of the Preferred Shares hereunder will be held at the
offices of Xxxxxxx, Xxxxxx L.L.C. in Denver, Colorado on the closing date of
the Asset Purchase Agreement or at such other time and place as to which the
Company, the Debtholders and the Building Owner may agree (the "Closing
Date"). At the Closing the Company will deliver a stock certificate for
343,943 Preferred Shares to the Building Owner and to each Debtholder stock
certificates registered in such Debtholder's name as set forth in Schedule A
representing the Preferred Shares to be received by such Debtholder, against
receipt by the Company for cancellation of the notes representing the Anton
Debt held by each such Debtholder and a copy of the Amendment executed by each
Debtholder and the Building Owner. The Company will not deliver any
certificates representing the Preferred Shares unless and until it shall have
received a copy or copies of the Amendment executed by the Building Owner and
each Debtholder entitled to receive Preferred Shares hereunder. The Preferred
Shares and the shares of the Company's $.001 par value Common Stock (the
"Common Stock") into which the Preferred Shares are convertible together with
the shares of Common Stock to be acquired as set forth above are collectively
referred to herein as the "Shares."
1.03 Investment Representations of the Stock Purchasers.
Each of the Stock Purchasers hereby represent and warrant as follows:
a. The Shares are being or will be acquired for investment only
and not with a view to or for resale or distribution of any part thereof, and
with no present intention of selling, granting participation in, or otherwise
distributing the same except pursuant to the registration rights granted by
Section 3 hereof;
b. Each of the Stock Purchasers has such knowledge and experience
in business and financial matters as to be capable of evaluating the merits
and risks of an investment in the Shares and has sufficient financial
resources to bear the economic risks thereof (including possible complete loss
of such investment) for an indefinite period of time. Each of the Stock
Purchasers has had full and free access to the Company's books, financial
statements, records, contracts, documents and other information concerning the
Company and has been afforded an opportunity to ask questions of the Company's
officers, employees, agents, accountants and representatives concerning the
Company's business, operations, financial condition, assets, liabilities and
other relevant matters, and has been given all such information as has been
requested, in order to evaluate the merits and risks of the investment in the
Shares;
c. Each of the Stock Purchasers qualifies as an "accredited
investor" as defined by Rule 501(a) of Regulation D under the Act; and
d. (i) The Shares are "restricted securities" within the meaning
of Rule 144 under the Act; (ii) the Shares are not being registered at this
time and therefore must be held until they are subsequently registered under
the Act and any applicable state or foreign securities laws (pursuant to
Section 2 hereof or otherwise) unless an exemption from registration is
available; and (iii) the exemption from registration under Rule 144 will not
be available for two years from the date of acquisition of the Shares, and
even then may not be available unless (A) a public trading market still exists
for the shares at that time, (B) adequate information concerning the Company
is then publicly available, and (C) the sale complies with the other terms and
conditions of Rule 144.
1.04 Restrictive Legends. Each certificate evidencing the Shares which
is issued pursuant to this Agreement shall bear the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT OR AN
EXEMPTION THEREFROM.
1.05 Representations of the Company.
a. Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, par value .001 per share, of
which 4,881,524 shares were issued and outstanding as of December 31, 1996,
and 2,500,001 shares of Preferred Stock, par value .001 per share of which no
shares are issued and outstanding as of the date hereof. All of the
outstanding shares of the Company's Common Stock have been validly issued and
are fully paid and nonassessable. Except as described in the Company SEC
Documents, there are no other outstanding securities of the Company
convertible into or exchangeable or exercisable for any shares of capital
stock, nor are there any other outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments, or other contracts, agreements
or understandings of any character obligating the Company to issue additional
shares of capital stock or any other securities convertible into or evidencing
the right to subscribe for any shares of capital stock.
b. Compliance with Laws. The Company holds all licenses, permits
and other authorizations from government authorities necessary for the lawful
conduct of its business except where the failure to hold the foregoing would
not have, individually or in the aggregate, a material adverse effect on the
results of operations, properties, assets, liabilities or financial condition
of the Company. The business and operations of the Company are being
conducted in compliance with all applicable laws, rules, and regulations of
any governmental authority having jurisdiction over such businesses and
operations, except for such noncompliance as would not have, individually or
in the aggregate, a material adverse effect on the results of operations,
properties, assets, liabilities or financial condition of the Company.
c. Company SEC Documents. Each annual and quarterly report to the
Securities and Exchange Commission ("SEC"), each definitive proxy statement
and each current report filed with the SEC since January 1, 1994 (as such
documents have since the time of their filing been amended, the "Company SEC
Documents"), as of their respective dates, complied in all material respects
with the requirements of the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable, and the rules and regulations of
the SEC thereunder applicable to such Company SEC Documents and none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included
in the Company SEC Documents filed with the SEC by the Company comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the financial position of the Company
as at the date thereof and the results of its operations and cash flows for
the periods then ended. There has not been any change, occurrence or
circumstance, which, individually or in the aggregate, will have a material
adverse effect on the results of operations, properties, assets, liabilities
or financial condition of the Company which is not set forth in the Company
SEC Documents.
d. Company Common Stock and Preferred Stock. The Shares to be
issued pursuant to this Agreement, the Asset Purchase Agreement and the
Building Purchase Agreement are duly authorized and, when issued in accordance
with the provisions hereof and thereof, will be validly issued, fully paid and
non-assessable.
e. Registration Statements. Each registration statement to be
filed by the Company hereunder will not, at the time such registration
statement is filed with the SEC and at the time it becomes effective under the
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, the Company makes no representations or
warranties as to information provided in writing by the Seller, Debtholders or
the Building Owner for inclusion in the registration statement. Each
registration statement will comply as to form in all material respects with
the provisions of the Act and the rules and regulations thereunder.
f. Amendment. The Amendment, when duly executed and delivered by
the Building Owner and all Debtholders receiving Preferred Shares hereunder,
will be legally binding and enforceable against the Company in accordance with
its terms without the approval of the stockholders of the Company.
2. Registration Rights
2.01 Demand Registration Rights.
a. Rights to Demand Registration. The Stock Purchasers shall be
entitled to Demand Registration Rights as follows:
(i) If the piggyback registration referenced at Section 2.02(a)
below is not filed within sixty (60) days from the Closing Date, or is not
declared effective within one hundred twenty (120) days from the Closing Date,
or, if all of the Contingent Demand Registrable Securities are not included in
and the subject of an effective registration statement within one hundred
twenty (120) days from the Closing Date Seller, as the recipient of shares
pursuant to the Asset Purchase Agreement, and Anton, as the holder of the
option granted pursuant to that certain Consulting Agreement dated December
31, 1996 between Xxxxxxxx X. Xxxxx and the Company (the Shares held by Seller
or Anton are referred to hereafter as the "Contingent Demand Registrable
Securities") may make a written request (a "Demand Notice") to the Company for
registration under the Act of all or part of the Contingent Demand Registrable
Securities then owned by them (a "Contingent Demand Registration") and the
Company shall thereupon file, as expeditiously as possible, a registration
statement with the SEC and shall use its best efforts to have such
registration statement declared effective promptly by the SEC. Such
Contingent Demand Registration shall be a "shelf registration" so that the
securities may be offered on a delayed or continuous basis pursuant to Rule
415 under the Act and the Company shall keep such registration effective until
the earliest to occur of (A) the expiration of the holding period required by
SEC Rule 144 (to the extent applicable), including any amendments thereto,
(B), a period of three years from the Closing Date or (C) all of the
Contingent Demand Registrable Securities shall be sold;
(ii) At any time beginning one (1) year after the Closing
Date, those Stock Purchasers representing a majority in interest receiving
Preferred Shares under Section 6.1 of the Asset Purchase Agreement may give a
Demand Notice to the Company for registration under the Act of all or part of
the shares of Common Stock issuable upon conversion of the Preferred Shares,
including any additional shares of Common Stock issued as a stock dividend or
stock split or other distribution recapitalization or reclassification with
respect to the Preferred Shares or the Common Stock issued upon conversion
thereof (such shares being referred to hereafter as "Preferred Demand
Registrable Securities"). Upon receipt of such a Demand Notice covering the
Preferred Demand Registrable Securities, the Company shall thereupon, as
expeditiously as possible, file a registration statement with the SEC and use
its best efforts to have the registration statement declared effective
promptly by the SEC (a "Preferred Demand Registration"). Such Preferred
Demand Registration shall be a "shelf registration" so that the securities may
be offered on a delayed or continuous basis pursuant to Rule 415 under the Act
and the Company shall keep registration effective until the earliest to occur
of (A) the expiration of the holding period required by SEC Rule 144 (to the
extent applicable), including any amendments thereto, (B) a period of three
(3) years, or (C) all of the Preferred Demand Registrable Securities in
question shall be sold;
(iii) If at the time of either Demand Notice (a) the Company
is engaged in a registered public offering or in a merger, consolidation,
recapitalization or acquisition, or any other similar activity outside of the
ordinary course of business which, in the good faith judgment of the Board of
Directors of the Company, would be materially and adversely affected by the
requested registration, or (b) the Board of Directors of the Company makes a
good faith determination that the public disclosures required to be made in
the requested registration statement would have a material and adverse impact
on the business, financial condition or prospects of the Company, the Company
may, at its option, direct that such request be delayed for a period of not
more than sixty (60) days (provided that the total aggregate delay shall not
exceed 180 days).
b. Effective Registration Statement. A registration requested
pursuant to this Section 2.01 will not be deemed to have been effected unless
it has become effective; provided, that if, within 135 days after it has
become effective, the offering of Contingent Demand or Preferred Demand
Registrable Securities pursuant to such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or
other governmental agency or court, such registration will be deemed not to
have been effected. Nevertheless, if any such stop order is rescinded, the
effective period shall continue upon such rescission and be extended by the
number of days by which such stop order reduced the effective period.
2.02 Piggyback Registration.
a. Immediate Piggyback Rights. The Company agrees that it will
make its best efforts to include the Contingent Demand Registrable Securities
in a registration statement on Form S-3 presently intended to be filed by the
Company with the SEC within thirty (30) days from the Closing Date.
b. Right to Piggyback on Registration of Common Stock. Subject to
Section 2.02(c), if at any time, beginning one year after the Closing Date,
the Company proposes to register any Common Stock under the Act in connection
with the offering of such Common Stock (except for registration on Form S-4 or
S-8 or a registration in connection with an exchange offer solely to existing
securityholders) (a "Piggyback Registration"), the Company shall promptly give
to each Stock Purchaser prior written notice of such determination no later
than 45 days prior to the proposed filing date of such registration statement.
Any Stock Purchaser wishing to register all or any portion of the Purchaser's
Contingent Demand or Preferred Demand Registrable Securities (hereafter
"Piggyback Registrable Securities") must give written notice to the Company of
intent to participate no less than 15 days after the receipt of such notice.
Upon receipt of a request for Piggyback Registration, the Company will use its
best efforts to effect the prompt registration under the Act of such Piggyback
Registrable Securities. Any Stock Purchaser holding Piggyback Registrable
Securities initially requesting to be included in such registration may elect,
in writing, prior to the effective date of the registration statement filed in
connection with such registration, not to register such Piggyback Registrable
Securities in connection with such registration.
c. Selection of Underwriter(s). If the Company proposes to
register Common Stock under the Act in a transaction to which Piggyback
Registration would attach and in its sole discretion decides such registration
shall be underwritten, the Company shall have sole discretion in the selection
of any underwriter(s) to manage such registration.
d. Priority on Piggyback Registrations. If the underwriter(s) of
an underwritten Piggyback Registration (or if a Piggyback Registration is not
underwritten, holders of a majority of the securities being registered) advise
the Company in writing that in its or their opinion the number of securities
proposed to be sold in such Piggyback Registration exceeds the number which
can be sold without adversely affecting the price at which the securities are
to be sold in such offering, the Company will include in such registration
only the number of securities which, in the opinion of such underwriter(s) (or
the securityholders, as the case may be) can be sold in such offering without
so affecting such price. The Piggyback Registrable Securities so included in
such Piggyback Registration shall be apportioned (i) first, to any Common
Stock that the Company proposes to sell, and (ii) second, pro rata among any
shares of Common Stock outstanding with registration rights (including but not
limited to holders of Piggyback Registrable Securities) that were granted
prior to the date hereof) that such rightholders propose to sell in each case
according to the total number of shares of Common Stock requested for
inclusion by said selling securityholders, or in such other proportions as
shall mutually be agreed to among such selling securityholders.
e. The amount of shares which may be sold by Stock Purchasers
under any Registration Statement contemplated by Section 2 hereof, will not
exceed the amounts which would be permitted if such sales were being made in
accordance with Rule 144(e)(1) under the Act.
2.03 Registration Procedures. It shall be a condition precedent to the
obligations of the Company and any underwriter(s) to take any action pursuant
to this Article II that the Stock Purchasers requesting inclusion in any
Piggyback Registration, Contingent Demand Registration or Preferred Demand
Registration (a "Registration") shall furnish to the Company such information
regarding them, the Piggyback Contingent Demand or Preferred Demand
Registrable Securities (collectively, "Registrable Securities") held by them,
the intended method of disposition of such Registrable Securities, and such
agreements regarding indemnification, disposition of such securities and the
other matters referred to in this Article II as the Company shall reasonably
request. With respect to any Registration which includes Registrable
Securities held by a Stock Purchaser, the Company will, subject to Sections
2.01 and 2.02, as expeditiously as practicable:
(a) Prepare and file a Form S-3 registration statement, or, if is
not able to use a Form S-3, then another appropriate form prescribed by the
Commission and file with the Commission any necessary amendments to the
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective;
(b) Prepare and file with the Commission such amendments and post-
effective amendments to such registration statement and any documents required
to be incorporated by reference therein as may be necessary to keep the
registration statement effective for a period of time as necessary to complete
the offering which later period shall be not more than 180 days following the
effective date of such registration statement and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Act (or any successor rule);
(c) Furnish to such Stock Purchaser and the underwriter(s) if any,
without charge, such number of conformed copies of the registration statement
and any post-effective amendment thereto, upon request, and a such number of
copies of the final prospectus and any preliminary prospectus(es) and any
amendments or supplements thereto, and any exhibits or documents incorporated
therein by reference as such Stock Purchaser or underwriters may reasonably
request;
(d) Immediately notify such Stock Purchaser, at any time when a
prospectus relating thereto is required to be delivered under the Act, when
the Company becomes aware of any event which causes the prospectus to contain
any untrue statement of material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made not misleading and, as promptly as practicable
thereafter, prepare and file and furnish a supplement or amendment to such
prospectus correcting same;
(e) Use its best efforts to cause all securities included in such
registration statement to be listed, by the date of the first sale of
securities pursuant to such registration statement, on the NASDAQ Small Cap
Market or such market or exchange on which the Company's Common Stock shall
then be traded;
(f) Make generally available to its security holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later than
90 days after the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date of
the registration statement, which statement shall cover said 12-month period;
(g) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
(h) As promptly as practicable after filing with the Commission of
any subsequently filed document which is incorporated by reference into a
registration statement (such as a Form 10-QSB), deliver a reasonable number of
copies of such document to such Stock Purchaser;
(i) Prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify the securities
covered by the registration statement for offer and sale under the securities
or blue sky laws of each state of the United States as such Stock Purchaser or
underwriter(s), may reasonably request and to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Securities
covered by the applicable registration statement;
(j) Enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions customarily taken by
registrants as sellers of a majority of such Registrable Securities or the
underwriter(s), if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(k) Obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form as may reasonably be
requested;
(l) Make available for inspection by any Stock Purchaser holding
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such Stock Purchaser or any such underwriter, all pertinent financial
and other records, pertinent corporate documents and properties of the
Company, and supply all information reasonably requested by any such Stock
Purchaser, underwriter, attorney, accountant or agent in connection with such
registration statement;
(m) Cooperate with such Stock Purchaser and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing the Shares to be sold under the
registration statement, and enable such securities to be in such denominations
and registered in such names as the Stock Purchaser or the underwriter(s), if
any, may request; and
(n) Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc., as
may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Registrable
Securities.
The Stock Purchasers, upon receipt of any notice from the Company of any
event of the kind described in paragraph (d) of this Section 2.03, will
forthwith discontinue disposition of the securities until the Stock
Purchasers' receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (d) of this Section 2.03 or until they are advised
in writing (the "Advice") by the Company that the use of the prospectus may be
resumed, and have received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus. In the event the
Company shall give any such notice, the time periods mentioned in paragraph
(b) of this Section 2.03 shall be extended by the number of days during the
period from and including any date of the giving of such notice to and
including the date when each seller of securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by paragraph (d) of this Section 2.03 hereof or the
Advice.
2.04 Registration Expenses. In the case of any Registration, the Company
shall bear all of the costs and expenses of such Registration (including,
without limitation, the expenses of preparing any registration statement, SEC,
NASD and state "blue sky" filing registration and qualification fees, the cost
of providing any legal opinion or "cold comfort" letters reasonably requested
by the Stock Purchasers, and printing costs, provided, however, that the
Company shall not be responsible for legal fees or expense of counsel for any
of the Stock Purchasers, or for any underwriter's discounts or commissions
that are attributable to the Registrable Securities of a Stock Purchaser.
2.05 Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless to the full extent permitted by law each Stock
Purchaser, its officers, directors, employees and agents and each person who
controls (within the meaning of the Act and the Exchange Act such Stock
Purchaser, including, without limitation, any general partner or manager of
any thereof, against all losses,claims, damages, liabilities and expenses
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or
preliminary prospectus in which such Stock Purchaser is participating or any
amendment thereof or supplement thereto or in any document incorporated by
reference therein or any omission or alleged omission to state therein a
material fact necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading, except insofar as
the same are caused by, based upon or contained in any information with
respect to such Stock Purchaser furnished in writing to the Company by such
Stock Purchaser expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Stock Purchaser from whom the person asserting
such loss, claim, damage or liability purchased the securities if it is
determined that it was the responsibility of such Stock Purchaser to provide
such person with a current copy of the prospectus and such current copy of the
prospectus would have cured such loss, claim, damage or liability. The
Company will also indemnify underwriters (as such term is defined in the Act),
their officers, directors, employees and agents and each person who controls
such persons (within the meaning of the Act) to the same extent as provided
above with respect to the indemnification of the Stock Purchasers.
(b) Indemnification by the Stock Purchasers. In connection with
any Registration in which a Stock Purchaser is participating, such Stock
Purchaser will furnish to the Company in writing such information and
affidavits with respect to such Stock Purchaser as the Company reasonably
requests for use in connection with any registration statement or prospectus
and agrees to indemnify and hold harmless the Company, its directors, officers
and agents and each person who controls (within the meaning of the Act and the
Exchange Act) the Company against any losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue statement of a material fact
or any omission to state a material fact necessary to make the statements in
the registration statement or prospectus or preliminary ,prospectus in light
of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information or affidavit such Stock Purchaser furnished in
writing to the Company by such Stock Purchaser expressly for use therein;
provided, however, that the amount recoverable by the Company from any Stock
Purchaser under this indemnification provision shall not exceed the amount of
net proceeds received by the Stock Purchaser from the sale of Registrable
Securities hereunder; and provided, further, that the indemnity agreement
contained in this Section 2.05(b) shall not apply to amounts paid in
settlement of any loss, claim, damage, liability or action arising pursuant to
a registration under Article II if such settlement is effected without the
consent of the Stock Purchaser (which consent shall not be unreasonably
withheld). The indemnification provided in subparagraphs (a) and (b) hereof
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Company or any of the prospective sellers, or any of their
respective affiliates, directors, officers or controlling persons and shall
survive the transfer of such securities by such seller.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying party, permit the
indemnifying party to assume the defense of such claim, jointly with any other
indemnifying party similarly notified to the extent it may elect, with counsel
reasonably satisfactory to the indemnified party. The failure to so notify
the indemnifying party shall relieve the indemnifying party from any liability
hereunder with respect to the action to the extent that such failure
materially prejudices the indemnifying party; provided, however, that any such
failure shall not relieve the indemnifying party from any other liability
which it may have to any other party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated to pay
the reasonable fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification provided
for in the preceding paragraphs (a) and (b) of this Section 2.05 is
unavailable to an indemnified party as contemplated by the preceding
paragraphs (a) and (b) of this Section 2.05 for any reason, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations.
(e) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.05 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Act.
2.06 Exchange Act Reports. The Company agrees that at all times after it
has filed a registration statement pursuant to the requirements of the Act
relating to any class of equity securities of the Company, it will use its
best efforts to file in a timely manner all reports required to be filed by it
pursuant to the Exchange Act to the extent the Company is required to file
such reports. Upon request of a Stock Purchaser, the Company will furnish the
requesting Stock Purchaser with such information as may be necessary to enable
such Stock Purchaser to effect sales pursuant to Rule 144A.
2.07 Participation in Registrations. No Stock Purchaser may participate
in any Registration hereunder unless such Stock Purchaser (a) agrees to sell
the Stock Purchaser's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements as set forth herein, and (b) completes and executes all
questionnaires, powers of attorney, underwriting agreements and other
documents customarily required under the terms of such underwriting
arrangements.
3. Miscellaneous
3.01 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telex, facsimile or similar
writing) and shall be given to such party at its address or telex or facsimile
number set forth on the signature pages hereof or such other address or telex
or facsimile number as such party may hereafter specify in writing to the
Secretary of the Company for the purpose by notice to the party sending such
communication. Each such notice, request or other communication shall be
effective (i) if given by telex or facsimile, when such message is transmitted
to the number set forth on such signature pages or such other number as a
party may specify in writing to the Secretary of the Company or (ii) if given
by any other means, the earlier of (x) when delivered by hand to the address
set forth on such signature pages or such other address as a party may specify
in writing to the Secretary of the Company or (y) five business days after the
mailing of such notice by certified mail. If more than one Stock Purchaser
specified the same address for such notices, then a single notice to such
address shall be deemed to be notice to all Stock Purchasers at that address.
3.02 Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or assigns any legal
or equitable right, remedy or claim under or in respect of any agreement or
any provision contained herein. This Agreement constitutes the entire
agreement and understanding, and supersedes and terminates all prior
agreements and understandings, both oral and written, between the parties
hereto relating to the subject matter hereof.
3.03 Waiver. Any party hereto may, without binding any other party, by
written notice to another party (a) extend the time for the performance of any
of the obligations or other actions of such other party under this Agreement;
(b) waive compliance with any of the conditions or covenants of such other
party contained in this Agreement; and (c) waive or modify performance of any
of the obligations of such other party under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein. Neither the waiver by any party hereto of a
breach of any provision hereof or any preceding or succeeding breach nor the
failure by any party to exercise any right or privilege hereunder shall be
deemed a waiver of such party's rights or privileges hereunder nor shall it be
deemed a waiver of such party's rights to exercise the same at any subsequent
time or times hereunder.
3.04 Amendment. This Agreement may be amended, modified or supplemented
only by a written instrument executed by all of the parties hereto (including
Transferees of Stock Purchasers).
3.05 Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by any Stock Purchaser except (a) as otherwise contemplated
hereunder or (b) with the written consent of the Company which shall not be
unreasonably withheld.
3.06 Termination. The right of any Stock Purchaser to Demand
Registration or Piggyback Registration hereunder will terminate at such time
as there are no longer Registerable Securities held by that Stock Purchaser or
assignee thereof.
3.07 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF COLORADO WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
3.08 Pronouns. Whenever the context may require any pronoun used herein
shall include the corresponding masculine, feminine or neuter forms.
3.09 Attorneys Fees. In the event of a dispute concerning the provisions
of this Agreement which results in litigation, arbitration or other dispute
resolution proceedings, the parties agree that the legal fees and other
expenses of the prevailing party shall be borne by the other, non-prevailing
parties to the dispute.
3.010 Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
3.011 Counterparts. This Agreement may be executed in any number of
counterparts or separate number of counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to be one and the
same instrument.
3.012 Defined Terms. All defined terms used but not otherwise
defined herein shall have the respective meanings given them in the Asset
Purchase Agreement.
3.013 Board Representation. So long as the Stock Purchasers or their
affiliates, or members of the Anton family, directly or indirectly, continue
to hold either (a) ten percent (10%) or more of the outstanding Common Stock
of the Company or (b) Preferred Stock, or Common Stock and Preferred Stock
which, if the Preferred Stock was converted into Common Stock, would together
represent at least ten percent (10%) of the then outstanding Common Stock of
the Company (including the shares that would be so converted), the Stock
Purchasers shall have the right to designate one person for nomination to the
Company's Board of Directors. The Company agrees to nominate such designee at
each annual or special meeting of stockholders at which directors are to be
elected. Such designee will be compensated at a level commensurate with the
compensation received by the Company's outside directors. If a person
designated by the Stock Purchasers ceases to serve on the Company's Board of
Directors for any reason the Stock Purchasers shall have the authority to
designate another person to fill the vacancy on the Company's Board.
IN WITNESS WHEREOF, the Company, Anton, the Building Owner and each Stock
Purchaser have executed this Agreement effective as of the day and year first
above written.
The Company:
CARLYLE GOLF, INC.
By:/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
President and Chief Operating Officer
Notices: 00000 X. 00xx Xxxxxx
Xxxx X
Xxxxxx, XX 00000
Facsimile: 303/371-3189
The Stock Purchasers:
STAR POINT ENTERPRISES, INC.
D/B/A PRO-LINE CAP COMPANY
By: /s/ Xxxxxxxx X. Xxxxx
Title: President
/s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx as Life Tenant
/s/ Xxxxxxxx X. Xxxxx
Xxxxxxxx X. Xxxxx as Remainderman
Xxxxxxx Xxxxx Ten-Year Grit Trust
By: /s/ Xxxxxxxx X. Xxxxx
Trustee
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Individually
The Building Owner:
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
By: /s/ Xxxxxxxx X. Xxxxx
Xxxxxxxx X. Xxxxx
/s/ Xxxxxxxx X. Xxxxx
Xxxxxxxx X. Xxxxx in his individual
capacity
Notices to the Stock Purchasers, the
Building Owner and Anton:
c/o Xxxxx X. Xxxx, Esq.
Xxxxx, Xxxx & Xxxxxxx
000 Xxxx Xxxxxx, #0000
Xxxx Xxxxx, XX 00000
Facsimile 817/878-9280
Schedule A
Stock Purchasers
Name and Address Principal Amount of Note Plus Accrued
Interest to be Converted
Xxxxxxx X. Xxxxx as life tenant 427,991
and Xxxxxxxx X. Xxxxx as
Remainderman
0000 Xxx Xxxxx Xx.
Xxxx Xxxxx, Xxxxx 00000
Xxxxxxx Xxxxx Ten-Year Grit Trust 345,959
0000 Xxx Xxxxx Xx.
Xxxx Xxxxx, Xxxxx 00000
Xxxxxxx Xxxxx 202,539
0000 Xxx Xxxxx Xx.
Xxxx Xxxxx, Xxxxx 00000
