Exhibit 10.2 Letter Agreement with Distributors June 13, 1997
Level Best Golf, Inc.
00000 - 00xx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Ladies and gentlemen:
This letter will confirm our mutual agreement with respect to our
engagement as exclusive distributors ("Distributors") to act on behalf of
Level Best Golf, Inc. (the "Company") in connection with the offer and sale
on a best efforts basis of US$250,000 aggregate principal amount of Series
A 10% Convertible Debentures of the Company (the "Debentures") pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended (the
"Act").
1. (a) our engagement shall be for a period of 60 days. You represent
that no other public or non-public offering under Regulation S is
presently in progress by the Company that has not been disclosed to
US.
(b) You have represented to us that the Company will have no other
indebtedness senior in priority to the Debentures.
2. (a) You agree to pay the Distributors a placement fee of 5% of the
principal amount of the Debentures sold, which you authorize us to
withhold from the proceeds from the sale of the Debentures. Other
than this placement fee, and the warrant described in paragraph 11
below, the Distributors shall not be entitled to any additional
compensation from the Company. The Company shall pay the legal
fees of the Distributors' legal counsel in the amount of US$5,000,
payable upon funding the Debentures.
(b) Each purchaser of Debentures ( a "Purchaser") will, simultaneously with
the execution of an Offshore Securities Subscription Agreement (the
"Agreement") in the form annexed hereto as Exhibit A, pay the purchase
price for the Debentures to the Distributors, as Escrow Agent. The
Distributors, as Escrow Agent, are authorized to release the funds of
each Purchaser after both (i) the Company approvessuch purchase and
subscription documents (in the form of an exhibit hereto) that have
been submitted and signed by the purchaser, and (ii) the Company has
caused to be delivered to the Distributors or its designee, the
Debenture or Debentures purchased by that Purchaser, and the opinion of
counsel attached as Xxxxx XXX to the Agreement.
(c) The restricted period set forth in SEC Rule 903 (the "Restricted
Period") for each Purchaser shall begin on the date (the "Closing
Date") that the purchase funds are delivered to the Company.
(d) The Distributors (i) represent and warrant, and will provide
confirmatory documentation, that each Purchaser is either purchasing
the Debentures for its own account, or is a fiduciary that has full,
exclusive and irrevocable investment discretion with respect to the
Debentures, which investment discretion cannot be revoked prior to the
180th day after the Closing Date, and
(ii) represent and warrant that no Purchaser is a affiliate of the
Distributors. To the Distributors' knowledge, all representations and
warranties made by Purchasers are true and correct.
(e) The Company shall have the right in its sole discretion to disapprove
any person or entity that is proposed by the Distributors to be a
Purchaser
3. The Company will cause the Debentures to be delivered to the
Distributors, as Escrow Agent, pursuant to the terms of the Joint Escrow
Instructions attached as Annex II to this Agreement.
4. (a) The Distributors represent, warrant and agree that (i) each
Purchaser will be qualified to purchase the Debentures under the
laws of the jurisdiction in which such Purchaser resides and that
the offer and sale of the Debentures will not violate the securities
or other laws of such jurisdiction, and (ii) each Purchaser will
agree that neither it nor any of its affiliates presently have or
will, directly or indirectly, maintain any short position in
securities of the Company during the Restricted Period.
(b) The Distributors understand that the Debentures have not been
registered under the Act and may not be offered or sold within the
United States or to, or for the account or benefit of, United
States persons, except pursuant to an exemption from the
registration requirements of the Act.
S. (a) The Distributors further agree that (i) no offer or sale of the
Debentures will be made by the Distributors to, or accepted by the
Distributors from, any U.S. person or for the account or benefit of
a U.S. person; (ii) ail offers and sales of the Debentures prior to
the expiration of the applicable Restricted Period made by the
Distributors shall be made only in accordance with the provisions of
Rule 903 or 904 of Regulation S, pursuant to registration of the
Debentures under the Act, or pursuant to an available exemption from
the registration requirements of the Act; (iii) all offering
materials and documents used in connection with offers and sales of
the Debentures prior to the expiration of the engagement period
shall be approved in advance by the Company, and shall on the first
page thereof include statements to the effect that the Debentures
have not been registered under the Act but are offered and sold in
reliance on Regulation S under the Securities Act of 1933, and that
neither the Purchaser, nor any direct or indirect purchaser of
Debentures from the Purchaser, may directly or indirectly offer or
sell the Debentures in the United States or to U.S. persons unless
the Debentures are registered under the Act, or an exemption from
the registration requirements of the Act is available; (iv) the
Distributors will not engage in any activity for the purpose of, or
that could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the
securities of the Company, and (v) the Distributors will advise each
Purchaser and potential Purchaser of the matters set forth in this
paragraph 6, and that such Purchaser is relying on its own
investigation with respect to all such matters, and that it will be
given reasonable access to any and all material publicly available
documents and Company personnel it may require for such
investigation.
(b) For the purposes of this letter agreement, a U.S. person means a U.S.
Person as that term is defined in Rule 902(o) of Regulation S.
6. The Distributors are independent contractors, and are not the agent
of the Company. The Distributors are not authorized to bind the Company,
or to make any representations or warranties on behalf of the Company.
7. The Company represents, warrants and agrees that, in addition to the
warranties to be made by the Company to the Purchasers:
(a) The Company is required to file reports pursuant to Section 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Company has timely filed all the materials required to
be filed for a period of at least 12 months preceding the date of
this letter agreement, and the Company will continue to file all
such materials on a timely basis.
(b) The Company is a reporting issuer as defined by Rule 902 of
Regulation S. The Company is in full compliance, to the extent
applicable, with all reporting obligations under Section 15(d) of
the Exchange Act. The common stock is quoted on the National
Association of Securities Dealers, Inc.'s OTC Bulletin Board, and
the Company has received no notice, either oral or written, with
respect to its continued eligibility for such quoting.
(c) The Company has all requisite corporate power and authority to
execute and perform this letter agreement. All corporate action
necessary for the authorization, execution, delivery and
performance of this letter agreement and the transactions
contemplated hereby have been taken. This agreement constitutes a
valid and binding obligation of the Company.
(d) The execution and performance of this letter agreement by the
Company and the offer and sale of the Debentures will not violate
any provision of the certificate of incorporation or bylaws of the
Company or any material agreement or other instrument to which the
Company is a party or by which it is bound, the violations of which
in each case or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company. Any
material or necessary approvals, U.S. government and private, will
be obtained by the Company prior to the issuance of the Debentures
(e) The Company makes no other representation or warranty with respect
to the Company, its finances, assets, business or prospects, or
otherwise, except as expressly set forth herein or in the
Agreement.
8. The Company will provide the Distributors, as Escrow Agent, with an
opinion of counsel substantially in the form attached as Xxxxx XXX to the
Agreement.
9. During the time commencing upon completion of this distribution and
ending 120 days thereafter, the Company will not make any further offer or
sale off common stock or securities convertible into common stock in any
non-public offering for cash consideration, without the prior written
approval of the Distributor. Further, during the time period commencing on
the Closing Date of the first tranche and ending one year after the closing
of the second tranche of Debentures hereunder, the Distributors will have
the right of first refusal on any further offer or sale of securities by
the Company in any non-public offering other than offers or sales of
securities to strategic investors or sales pursuant an unsolicited offer to
buy securities. Such right of first refusal must be exercised in writing
within 5 days of the date of notice from the Company of its offer to sell
securities, and the sale must be consummated within 10 days thereafter. If
the right of first refusal is not so exercised or the sale is not
consummated, the Company shall be entitled to offer and sell the securities
to third parties.
10. The Company will not, for a period of 180 days from the date hereof,
list is shares on any additional securities market (other than the NASDAQ
National Market) without the written consent of the Distributors.
11. The Company agrees to issue the Distributor, within 10 days after the
Closing Date, transferable divisible warrants (the "Warrants") under
Regulation S for shares of the Company's common stock equal to 10% of the
number of shares of common stock into which the Debentures would be
convertible as at such Closing Date. The Warrants shall bear an exercise
price per share of common stock equal to 120% of the Market Price, as
defined in the Debentures, on the Closing Date, and shall be exercisable
for a period of 5 years thereafter. The form of the Warrants shall be
reasonably satisfactory to the Distributor and its legal counsel, and shall
contain (i) piggyback registration rights, and (ii) demand registration
rights commencing 24 months from date of issue.
12. As more fully described in Exhibit B hereto, which is incorporated
herein by reference, the Company will indemnify and hold the Distributor
(including its partners, agents, employees, and controlling persons within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
harmless from and against certain claims, liabilities, losses, damages and
expenses incurred, including fees and disbursements of counsel, related to
arising out of this engagement. Exhibit B will be executed and delivered
simultaneously with this letter agreement.
13. This letter agreement will be governed and construed under the laws
of Canada. Any controversy or claim arising out of or relating to this
letter agreement (whether in contract or tort, or both) shall be determined
by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction.
14. A facsimile transmission of this signed agreement shall be legal and
binding on the parties hereto. Terms otherwise not defined herein shall
have the meaning ascribed to them in the Agreement.
Very truly yours,
THOMSON KERNAGHAN & CO. INC.
By /s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx, Vice President
Accepted and agreed.
LEVEL BEST GOLF, INC.
By /s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx, President
Date signed June 6, 1997
