STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT (the "Agreement") is entered into as of
June 30, 2004 (the "Effective Date") between SPORTS ARENAS, INC., a Delaware
corporation ("SAI"), and XXXXXX X. XXXXX, a single man as follows:
1. Recitals
1.1 SAI is a validly existing corporation in good standing under the laws of
the State of Delaware and is authorized to issue one class of common stock
(the "Stock"). As used in this Agreement, the term "Share" shall mean one
issued and outstanding share of the Stock and any property, other than
cash, issued, distributed or acquired by a holder of Shares by reason of
holding such Shares including any stock dividend or stock or debt
instruments resulting from any acquisition, reorganization or other
transaction involving SAI.
1.2 SAI and XXXXXX X. XXXXX are parties to that certain DEBT PAYMENT & EXTRA
COMPENSATION AGREEMENT dated June 30, 2004 (the "DP&EC Agreement"). Among
other provisions of the DP&EC Agreement, it required:
(a) SAI to issue 5,441,734 Shares (each an "Extra Compensation Share") to
XXXXXX X. XXXXX as extra compensation in recognition of guarantees
XXXXXX X. XXXXX provided to subsidiaries of SAI and to allow XXXXXX X.
XXXXX to maintain ownership of at least a majority of the outstanding
capital stock of SAI;
(b) the Extra Compensation Shares to be held in trust by SAI pending the
execution and delivery of this Agreement;
(c) this Agreement to set forth certain minimum rights, privileges and
restrictions applicable to the Extra Compensation Shares;
(d) the parties to negotiate and enter into this Agreement on or before
August 29, 2004; and
(e) a committee of SAI's board of directors composed of directors who are
independent of XXXXXX X. XXXXX (the "Special Committee") to direct
SAI's actions under this Agreement.
1.3 As used in this Agreement, the term:
(a) "Restricted Share" shall refer to each Extra Compensation Share
originally issued to XXXXXX X. XXXXX and any property or Shares later
issued, distributed or acquired with respect to such Extra
Compensation Shares including by reason of any dividend or any
acquisition or reorganization transaction involving SAI; and
(b) "Elkan" shall mean any holder of Restricted Shares including XXXXXX X.
XXXXX and his Permitted Successors (as hereinafter defined).
1.4 As of the Effective Date, SAI and certain of its subsidiaries are indebted
under outstanding financing facilities which contain covenants (each a
"Control Covenant") which either treat a change in control of SAI as an
event of default or allow the creditor to accelerate the indebtedness upon
such a change in control of SAI. The first day upon which no Control
Covenant applies and no creditor may treat a change in control of SAI as an
event of default or allow the creditor to accelerate the indebtedness upon
a change in control of SAI is referred to as the "Zero Covenant Date."
1.5 XXXXXX X. XXXXX'x Extra Compensation Stock is intended to be: (a)
restricted property as such term is defined in Internal Revenue Code
section 83; (b) entitled to reasonable "piggy-back" registration rights;
and (c) protected by reasonable anti-dilution provisions.
2. Restricted Shares Administration
2.1 Each share certificate evidencing the Restricted Shares shall contain the
following legend in a prominent and conspicuous place:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UNDER THE TERMS OF THAT CERTAIN STOCK
RESTRICTION AGREEMENT DATED AS OF JUNE 30, 2004 BETWEEN XXXXXX
X. XXXXX AND THIS CORPORATION, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION."
2.2 Concurrently with the execution of this Agreement, Elkan has endorsed stock
assignment forms separate from the certificates evidencing the Restricted
Shares and has deposited the assignment forms and the certificates with the
secretary of SAI. Despite this endorsement and deposit, Elkan shall have
the right to vote the Restricted Shares and receive the dividends paid on
them until the Restricted Shares are sold or transferred as provided in
this Agreement.
3. SAI Independent Determinations
SAI shall exercise and enforce all of its rights under this Agreement
solely under the supervision and direction of its Special Committee. In no event
shall XXXXXX X. XXXXX perform any duty as a director or officer of SAI with
respect to this Agreement or the exercise or enforcement of SAI's rights
hereunder except as approved, directed or recommended by the Special Committee.
As used in this Agreement, the term "Independent Determination" shall mean a
reasonable determination made by SAI's board of directors or any duly authorized
committee thereof, provided all such directors are independent from Elkan.
4. Restriction On Transfer of Restricted Shares
4.1 Except as otherwise provided herein, Elkan shall not voluntarily or
involuntarily, sell, transfer, assign, pledge, or otherwise dispose of or
encumber the Restricted Shares prior to the later of the Zero Covenant Date
or the fifth anniversary of the Effective Date (such later date, the "5th
Anniversary/Zero Covenant Date"). Consent to one transfer shall not be
considered as consent to any subsequent transfer and any transferee,
whether voluntary or involuntary, shall take such Restricted Shares subject
to the terms of this Agreement.
4.2 Notwithstanding the foregoing, Elkan may transfer Restricted Shares, or a
portion or interest therein, with or without consideration to a trust
settled for estate planning purposes pursuant to which XXXXXX X. XXXXX,
acts as trustee only if: (a) such transfer would not breach any Control
Covenant to which SAI or its subsidiaries are bound; and (b) such
transferee agrees in writing to be bound by this Agreement and hold such
Restricted Shares subject to this Agreement. Any such transferee is
referred to herein as a "Permitted Successor."
5. Forfeiture/Redemption of Restricted Shares
5.1 The Restricted Shares are intended to be restricted property as defined
under Internal Revenue Code section 83.
5.2 For purposes of this Agreement, the terms:
(a) "Other SAI-HSE Agreement" means any material agreement between XXXXXX
X. XXXXX and SAI or its subsidiaries;
(b) "Notice/Cure Period" shall mean with respect to any Other SAI-HSE
Agreement, notice of a material breach and a period to cure such
breach equal to the longer of: (1) the period provided for a party to
cure such breach after notice under the Other SAI-HSE Agreement; or
(2) 30 days after notice of such breach if the breach can reasonably
be cured within 30 days; or (3) if such breach cannot be reasonably
cured within 30 days, a reasonable period not to exceed 180 days after
notice of such breach providing the party who has allegedly breached
the Other SAI-HSE Agreement diligently and continuously prosecutes
such cure;
(c) "Cause" means XXXXXX X. XXXXX'x: (1) repeated and continued failure to
perform his duties and responsibilities as an SAI employee (including
noncompliance with any written policy of SAI adopted or confirmed by
an Independent Determination) in good faith after having a reasonable
opportunity to cure such failure upon receiving specific written
notice of such failure from SAI; (2) commission of any act of fraud
with respect to SAI; (3) conviction of a felony or a crime involving
moral turpitude if such felony or crime caused material harm to the
business and affairs of SAI; or (4) default under any Other SAI-HSE
Agreement after the expiration of a the Notice/Cure Period;
(d) "Permanent Disability" means a physical or mental condition which
prohibits XXXXXX X. XXXXX from performing his duties as an employee of
SAI with reasonable accommodation which he may request for a period of
180 consecutive days, all as determined by an Independent
Determination; and
(e) "SAI Business" means: (a) the manufacture and sale of carbon fiber
tube products; and (b) the ownership, purchase and sale of commercial
real estate.
5.3 At any time between the Effective Date and the 5th Anniversary/Zero
Covenant Date (the "5th Anniversary/Covenant Period") (except as otherwise
provided below), all Restricted Shares shall be forfeited to SAI upon SAI's
Independent Determination if XXXXXX X. XXXXX:
(a) is terminated as an employee, officer or agent of SAI for Cause;
(b) voluntarily terminates his employment with SAI, except as a result of
XXXXXX X. XXXXX'x Permanent Disability or if SAI by an act resulting
from an Independent Determination has: (1) relieved XXXXXX X. XXXXX of
his title or duties as chief executive officer of SAI or any SAI
operations or subsidiaries other than XXXXXX SPORTS, LLC; or (2)
substantially reduced XXXXXX X. XXXXX'x basic compensation program
from that in effect on the Effective Date;
(c) usurps a business opportunity presented to SAI or XXXXXX X. XXXXX
relating to the SAI Business without first having offered the
opportunity to SAI and SAI having rejected the opportunity by an
Independent Determination; or
(d) competes or acquires a controlling interest in a business that
competes against SAI in the SAI Business without SAI's prior consent
by an Independent Determination.
5.4 At any time during the 5th Anniversary/Zero Covenant Period (except as
otherwise provided below), SAI by an Independent Determination may purchase
any or all of the Restricted Shares for $.05936 per Restricted Share
adjusted for inflation since the Effective Date if:
(a) as determined by Independent Determination in accordance with
generally accepted accounting principles consistently applied on the
90th day prior to the fifth anniversary of the Effective Date, the net
fair market value of SAI's assets has failed to increase by at least
2.5 percent per annum, compounded annually, over the period between
the Effective Date and the 90th day prior to the fifth anniversary of
the Effective Date after adjustments for any distributions made to
SAI's shareholders approved by an Independent Determination;
(b) SAI by an Independent Determination for business reasons unrelated to
XXXXXX X. XXXXX'x ownership of Restricted Stock, or the fair market
value of such Restricted Stock, substantially reduces XXXXXX X.
XXXXX'x basic compensation program from that in effect on the
Effective Date and as a result XXXXXX X. XXXXX voluntarily terminates
his employment with SAI;
(c) except as otherwise permitted or required by this Agreement, Xxxxx
xxxxx or transfers any Restricted Stock prior to the 5th
Anniversary/Zero Covenant Date without SAI's consent by an Independent
Determination; or
(d) XXXXXX X. XXXXX defaults under any Other SAI-HSE Agreement after the
expiration of the Notice/Cure Period, but only if the damages
sustained by SAI or its subsidiary under such Other SAI-HSE Agreement
exceeds $25,000.
5.5 If an event occurs during the 90 day period prior to the expiration of the
5th Anniversary/Zero Covenant Period that would allow SAI to compel a
forfeiture or purchase Restricted Shares under Sections 5.3 or 5.4, above,
SAI's right to compel a forfeiture or purchase Restricted Shares shall be
extended to the 90th day after such event regardless of the expiration of
the 5th Anniversary/Zero Covenant Period.
6. Anti-Dilution
6.1 As of the Effective Date, the number of issued and outstanding Restricted
Shares held by Elkan equals 50 percent of all issued and outstanding
Shares, on a fully-diluted basis, plus one Share (hereinafter referred to
as "50%+1 Control"). Further, other than the Shares (including the
Restricted Shares), SAI has no other issued and outstanding securities.
6.2 If during the 5th Anniversary/Zero Covenant Period SAI issues any
additional Shares, options, rights or other securities to holders other
than Elkan (each an "Non-Elkan Security") such that Elkan would no longer
hold 50%+1 Control, SAI shall offer to sell and issue to Elkan, for such
consideration as hereinafter provided, that number of securities having the
same rights, privileges, preferences and limitations as the Non-Elkan
Securities (each a "Restoring Security") which would result, if all
Restoring Securities are purchased, in Elkan continuing to hold 50%+1
Control. All Restoring Securities shall be subject to the terms and
provisions of this Agreement as if such Restoring Securities constituted
their commercially reasonable equivalent in Restricted Shares and each
Restricted Security shall be a Restricted Share under this Agreement.
6.3 With respect to each issuance of Non-Elkan Securities, SAI shall offer to
sell the corresponding Restoring Securities to Elkan for an aggregate
purchase price equal to the "fair market value" of the Restoring Securities
as determined by an independent third-party appraiser selected as set forth
below.
6.3.1"Fair market value" of the Restoring Securities shall be determined
by such independent appraiser to be the aggregate consideration paid
by the purchasers of Non-Elkan Securities minus an appropriate
discount for the risks and restrictions placed the Restoring
Securities by this Agreement. Otherwise, the Restoring Securities
shall be offered and sold subject to the same terms and conditions as
are applicable to the Non-Elkan Securities.
6.3.2Except as otherwise provided herein, the independent third-party
appraiser shall be selected by Independent Determination.
Notwithstanding the foregoing, if Elkan holds less than 50%+1 Control
prior to an issuance of Non-Elkan Securities, the selection of such
appraiser for purposes of valuing the Restoring Securities to be
offered and sold in response to such issuance shall in addition be
subject to the approval of Elkan.
6.4 If SAI proposes to undertake an issuance of Non-Elkan Securities, SAI shall
give to Elkan notice of its intention to issue Non-Elkan Securities (the
"Restoring Notice") describing the type of Non-Elkan Securities, the price
and the general terms upon which SAI proposes to issue such Non-Elkan
Securities and the number and price of the Restoring Securities to which
Elkan is entitled to purchase hereunder. Within 20 days from the date of
such Restoring Notice, Elkan may notify SAI of Elkan's election to purchase
such Restoring Securities for the price and upon the general terms
specified in the Restoring Notice, which notice shall also state therein
the quantity of Restoring Securities to be purchased. Elkan's right to
purchase Restoring Securities shall forever lapse and terminate if Elkan
fails to timely notify SAI of Elkan's election to purchase such Restoring
Securities or to the extent Elkan elects to purchase less than all of the
Restoring Securities that Elkan would be entitled to purchase.
7. Bring-Along Right
7.1 Notwithstanding anything to the contrary herein, if SAI by an Independent
Determination approves a proposal, and such proposal is also approved by
the holders of Shares other than Elkan Shares ("Non-Elkan Shares") by a
majority vote of such Non-Elkan Shares (except for shares as to which
dissenters rights may be validly exercised), to transfer all Non-Elkan
Shares by means of sale, tender offer, contribution, merger, consolidation,
share exchange or sale of all or substantially all assets or other
disposition to be consummated in a single transfer or a series of related
transfers to a single purchaser or a group of purchasers (collectively the
"Purchaser") as part of a single transaction or group of related
transactions (such transfer transactions being referred to as a
"Transfer"), SAI at any time prior to the Zero Covenant Date shall have the
right (a "Bring-Along Right") to compel Elkan to tender all Elkan Shares to
the Purchaser at the same price per Share and on the same terms and
conditions as apply to the Transfer of the Non-Elkan Shares.
7.2 If SAI elects to exercise such Bring-Along Right, it shall notify Elkan at
least 30 days prior to the date proposed for the Transfer of: (a) SAI's
exercise of such Bring-Along Right; (b) the identity and address of the
Purchaser; (c) the proposed amount and form of consideration and terms of
payment offered by the Purchaser; and (d) any other material terms
pertaining to the Transfer.
7.3 Neither Elkan nor any holder of Non-Elkan Shares shall be obligated to
consummate the sale of any Shares if the Purchaser does not offer to and in
fact purchase all of the then issued and outstanding Shares (except for
shares as to which dissenters rights may be validly exercised). If the
Purchaser offers to purchase all such Shares, the Transfer shall be
consummated on the terms and conditions approved by in the Independent
Determination.
7.4 Notwithstanding any other provision of this Agreement, if SAI exercises its
Bring-Along-Right, the restrictions on the transfer of Restricted Shares
set forth in Article 4 and SAI's right to compel a forfeiture or purchase
Restricted Shares under Article 5 shall terminate upon consummation of the
Transfer and any securities received by Elkan in connection with such
Transfer shall not be subject to such restrictions on transfer or rights to
compel forfeiture or purchase.
8. Registration Rights
8.1 As used in this Agreement, the following terms shall have the following
respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act;
(b) "Elkan Registrable Securities" means Elkan Shares and all Restoring
Securities which are Registrable Securities;
(c) the terms "register," "registered" and "registration" (without an
initial capital letter) refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities
Act, and the declaration or ordering of the effectiveness of such
registration statement.
(d) "Registrable Securities" means any SAI securities which have not been
registered;
(e) "Registration Expenses" shall mean all expenses, except as otherwise
stated below, incurred in connection with registration of Designated
Registrable Securities (as defined below), qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of
counsel for SAI, blue sky fees and expenses, the expense of any
special audits incident to or required by any such registration (but
excluding the compensation of regular employees of SAI, which shall be
paid in any event by SAI) and the reasonable fees and disbursements of
one counsel for Elkan;
(f) "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;
and
(g) "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the registration of
Designated Registrable Securities that are not Registration Expenses.
8.2 Except as otherwise provided herein, If SAI by an Independent Determination
proposes to register any of its Registrable Securities ("SAI Designated
Registrable Securities"), to be effective at any time after the 5th
Anniversary/Zero Covenant Date including appropriate qualification under
applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and
any other governmental requirements or regulations (an "SAI Registration"),
SAI shall:
(a) promptly give notice of the proposed SAI Registration to Elkan; and
(b) as soon as practicable, exercise commercially reasonable efforts to
include the Elkan Shares in such registration statement covering the
Registrable Securities, including appropriate qualification under
applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act
and any other governmental requirements or regulations (a "Piggyback
Registration") as Elkan may request within 20 days after SAI's notice
and as would permit or facilitate the sale and distribution of all or
such portion of such Elkan Registrable Securities as are specified in
such request (the Registrable Securities subject to such Piggyback
Registration as Elkan has requested are referred to as "Elkan
Designated Registrable Securities").
8.3 By notice to Xxxxx, XXX shall have the right to terminate or withdraw any
SAI Registration and Piggyback Registration prior to the effectiveness of
such registration
8.4 If the SAI Registration is for a public offering involving an underwriting,
SAI shall so advise Elkan as part of the notice of the SAI Registration and
the right of Elkan to request Piggyback Registration of Elkan Designated
Registrable Securities shall be conditioned upon Elkan's commercially
reasonable cooperation and participation in such underwriting arrangements
and the inclusion of such Elkan Designated Registrable Securities in the
underwriting.
8.4.1SAI and Elkan shall enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by
SAI, but subject to Elkan's approval.
8.4.2If the managing underwriter advises SAI and Elkan that marketing
factors require a limitation of the number of Elkan Designated
Registrable Securities and SAI Designated Registrable Securities (each
"Designated Registrable Securities") to be underwritten, the number of
shares of Designated Registrable Securities that may be included in
the registration and underwriting shall be allocated between Elkan and
SAI in proportion, as nearly as practicable, to the respective amounts
of Designated Registrable Securities proposed for registration by
Elkan and SAI. No Designated Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. To facilitate the allocation of
Designated Registrable Securities, the underwriters may round to 100
the number of Designated Registrable Securities to be underwritten and
registered by SAI and Elkan.
8.4.3If SAI or Elkan (subject to SAI's Bring-Along Rights under Article 7)
disapproves of the terms of the underwriting, such person may elect to
withdraw its Designated Registrable Securities therefrom and from
registration by notice to the other and the managing underwriter. The
Designated Registrable Securities so withdrawn shall not be
transferred in a public distribution prior to 180 days after the
effective date of such registration, or such other shorter period of
time as the underwriters may require.
8.4.4For purposes of this Agreement, any Designated Registrable Securities
withdrawn from underwriting and registration shall no longer be
Designated Registrable Securities.
8.5 From and after the Effective Date, SAI shall not enter into any agreement
granting any holder or prospective holder of any securities of SAI
registration rights with respect to such securities without Elkan's consent
unless: (a) such other registration rights are subordinate to the
registration rights granted to Elkan hereunder; and (b) the holders of such
rights are subject to market standoff obligations no more favorable to such
persons than those contained herein.
8.6 All Registration Expenses incurred in connection with registration of
Designated Registrable Securities shall be borne by SAI. Unless otherwise
stated, all Selling Expenses relating to Elkan Designated Registrable
Securities shall be borne by Elkan and all Selling Expenses relating to SAI
Designated Registrable Securities shall be borne by SAI.
8.7 In the case of each Piggyback Registration effected by SAI pursuant to this
Agreement, SAI shall keep Elkan advised as to the status thereof and, at
SAI's expense, shall further:
(a) prepare and file with the Commission a registration statement and such
amendments and supplements thereto as may be necessary or appropriate
with respect to such securities and use commercially reasonable
efforts to cause such registration statement to become and remain
effective for at least 120 days or until the distribution described in
the registration statement has been completed, whichever first occurs;
(b) furnish to Elkan and to the underwriters of the Designated Registrable
Securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as Elkan and underwriters may reasonably request
in order to facilitate the public offering of such securities;
(c) use commercially reasonable efforts to register and qualify the
Designated Registrable Securities covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by Elkan, provided that
SAI shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
(d) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriters of such offering; and
(e) notify Elkan at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
8.8 SAI, to the fullest extent permitted by law, shall protect, defend,
indemnify and hold harmless Elkan each of its officers and directors and
partners, and each person controlling Elkan within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification
or compliance has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or
any amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by SAI of
the Securities Act, the Securities Exchange Act of 1934, state securities
law or any rule or regulation promulgated under the such laws applicable to
SAI in connection with any such registration, qualification or compliance.
8.8.1SAI shall reimburse Elkan, its officers, directors and partners and
each person controlling Elkan, each such underwriter and each person
who controls any such underwriter, for any legal and any other
expenses reasonably incurred, as such expenses are incurred, in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action, provided that SAI 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 or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to
SAI by an instrument duly executed by Elkan or any controlling person
or underwriter and stated to be specifically for use therein.
8.9 In the case of any Piggyback Registration of Elkan Designated Registrable
Securities, Elkan to the fullest extent permitted by law shall protect,
defend, indemnify and hold harmless SAI, each of its directors and
officers, each underwriter, if any, of any Designated Registrable
Securities, each person who controls SAI or such underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact made by Elkan and contained in any such registration
statement, prospectus, offering circular or other document, or any omission
(or alleged omission) by Elkan to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
8.9.1Elkan shall reimburse SAI and its directors, officers, partners,
persons, underwriters or control persons for any legal or any other
expenses reasonably incurred, as such expenses are incurred, in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to SAI by an instrument duly executed by Elkan and stated to
be specifically for use therein.
8.9.2The indemnity agreement provided in this section shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the Elkan's consent.
Further, Elkan's indemnity liability under this section shall be
limited in an amount equal to the net proceeds of the Elkan Designated
Registrable Securities sold by Elkan if the Piggyback Registration
occurs as a result of SAI exercising its Bring-Along Right.
8.9.3Elkan shall not be required to indemnify any person against any
liability arising from: (a) any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency is
corrected in the final prospectus; or (b) out of the failure of any
person to deliver a prospectus as required by the Securities Act.
8.10 Each party entitled to indemnification hereunder (an "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
litigation, shall be subject to the approval of the Indemnified Party and
the Indemnified Party may participate in such defense at such party's
expense.
8.10.1 The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its indemnity
obligations unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action,
in which case the Indemnifying Party shall be relieved of its
indemnity obligations to the extent of such prejudice
8.10.2 The Indemnifying Party shall not assume the defense for matters as
to which representation of both the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate due to
actual or potential differing interests between them, but shall
instead in such event pay the fees and costs of separate counsel for
the Indemnified Party.
8.10.3 Except with the consent of each Indemnified Party, no Indemnifying
Party in the defense of any such claim or litigation shall consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
8.11 Elkan in any Piggyback Registration shall furnish to SAI such information
regarding Elkan, the Elkan Designated Registrable Securities and the
distribution proposed by Elkan as SAI may reasonably request in connection
with such Piggyback Registration.
8.12 With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of the
Registrable Securities to the public without registration, SAI shall use
commercially reasonable efforts to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports and other
documents required of SAI under the Securities Act and the Securities
Exchange Act of 1934, as amended; and
(c) so long as Elkan owns any Elkan Registrable Securities, furnish to
Elkan forthwith upon request: (1) a statement by SAI as to its
compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Securities Exchange Act of 1934; (2) a copy of
the most recent annual or quarterly report of SAI; and (3) such other
reports and documents of SAI and other information in the possession
of or reasonably obtainable by SAI as Elkan may reasonably request in
availing itself of any rule or regulation of the Commission allowing
Elkan to sell any such securities without registration.
8.13 Elkan's right to cause a Piggyback Registration of Elkan Designated
Registrable Securities may be assigned to a transferee or assignee in
connection with any transfer or assignment of such Elkan Registrable
Securities by Elkan, provided: (a) Elkan is not in default under this
Agreement and no uncured noticed breach exists at the time of such
transfer; (b) such transfer may be effected in accordance with applicable
securities laws; (c) such assignee or transferee acquires at least one
percent (1%) of SAI's outstanding Shares (on a common-equivalent basis);
(d) notice of the transfer and the transferee is promptly given to SAI; and
(e) such transferee agrees in writing to be bound by the provisions of this
Agreement.
8.14 Elkan's right to cause a Piggyback Registration of Elkan Designated
Registrable Securities shall terminate upon the earliest to occur of the
date: (a) of Elkan's default under this Agreement; (b) that Elkan can sell
all of the Elkan Registrable Securities pursuant to Rule 144(k) promulgated
under the Securities Act; (c) that Elkan can sell all of the Elkan
Registrable Securities pursuant to Rule 144 promulgated under the
Securities Act in any 90 day period; or (d) 10 years after the Effective
Date.
8.15 In connection with any public offering of SAI's securities, Elkan upon
SAI's commercially reasonable request or the commercially reasonable
request of the underwriters managing any underwritten offering of SAI's
securities shall not to sell, make any short sale of, loan, grant any
option for the purchase of or otherwise dispose of any securities of SAI
(other than those included in the registration), without the prior written
consent of SAI or such underwriters, as the case may be, for a period of
time as may be requested by the underwriters not to exceed 180 days from
the effective date of such registration. SAI shall have the right to
instruct its transfer agent to place stop-transfer notations in its records
to enforce the provisions of this section.
8.16 If any term or provision set forth in this Article 8 conflicts with any
other term or provision of this Agreement, the other term or provision
shall supersede the term or provision of this Article 8 and shall control.
9. Default and Remedies
9.1 A material breach under this Agreement shall occur upon a party's: (a)
failure to timely perform or satisfy any obligation which it is required to
perform or satisfy under this Agreement; or (b) breach of any warranty made
by such party; (c) default under the DP&EC Agreement; or (d)
misrepresentation or omission of a material fact which induced (either
entirely or partly) another party to enter into this Agreement.
9.2 If a material breach occurs under this Agreement, an aggrieved party shall
notify each breaching party and the other parties of the obligation
breached and the provisions of this Agreement under which the obligation
arises. After such party's notice, the breaching party shall either: (a)
cure the breach; or (b) be deemed in default under this Agreement: (1) on
or after the 30th day after notice of such breach if the breach can
reasonably be cured within 30 days; or (2) if such breach cannot be
reasonably cured within 30 days, on the last day of a reasonable cure
period not to exceed 180 days after notice of such breach providing the
breaching party diligently and continuously prosecutes such cure.
9.3 A party not in default shall have the right to seek and obtain any remedy
it may have hereunder, at law or in equity and to enforce one or more of
the remedies successively or concurrently and any such action shall not
stop or prevent such party from pursuing any other remedy which it may have
hereunder, at law or in equity. No act or failure to act by a party under
this Agreement shall be deemed or construed to be a waiver of, or an
election with respect to, such party's rights under this Agreement or
applicable law.
10. Miscellaneous
10.1 Attorneys' Fees. If any party employs counsel to enforce or interpret this
Agreement, including the commencement of any legal proceeding whatsoever
(including insolvency, bankruptcy, arbitration, mediation, declaratory
relief or other litigation), the prevailing party shall be entitled to
recover its reasonable attorneys' fees and court costs (including the
service of process, filing fees, court and court reporter costs,
investigative fees, expert witness fees and the cost of any bonds, whether
taxable or not) in addition to any other remedy it may obtain or be
awarded. Any judgment or final order issued in any legal proceeding shall
include such reimbursement for attorneys' fees and costs. In any legal
proceeding, the "prevailing party" shall mean the party determined by the
court to most nearly prevail and not necessarily the party in whose favor a
judgment is rendered.
10.2 Interpretation. Wherever the context of this Agreement requires, all words
used in the singular shall be construed to have been used in the plural,
and vice versa, and the use of any gender specific pronoun shall include
any other appropriate gender. The term "person" shall refer to any
individual, corporation or legal entity having standing to bring an action
in its own name under California law. The use of the conjunctive "or" shall
mean "and/or" unless otherwise required by the context in which the
conjunctive "or" is used. The term "including" shall mean "including
without limitation" and "including but not limited to" unless otherwise
required by the context in which the term "including" is used. This
Agreement has been negotiated at arm's length and each party has been
represented or has had the opportunity to be represented by independent
legal counsel in this transaction. This Agreement was executed voluntarily
without any duress or undue influence on the part of or on behalf of the
parties hereto. The parties acknowledge they have read and understood this
Agreement and its legal effect. Accordingly, each party hereby waives any
benefit under any rule of law (including Section 1654 of the California
Civil Code) or legal decision that would require interpretation of any
ambiguities in this Agreement against the party drafting it.
10.3 Headings and Labels. In this Agreement, articles are distinguished by
article numbers having no decimal point or no numbers to the left of the
decimal point (i.e. "Article 12" or "12."), sections are distinguished by
section numbers on both sides of a single decimal point (i.e. "12.2") and
subsections are distinguished by subsection numbers on both sides of two
decimal points (i.e. "12.2.2") Reference to an "article" shall include the
terms and provisions of each section thereunder and reference to a
"section" shall include the terms and provisions of each subsection under
such section. Article, section, and subsection titles and captions
contained in this Agreement are inserted as a matter of convenience and for
reference and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any of its provisions.
10.4 Recitals. The recitals set forth at the beginning of this Agreement of any
matters or facts shall be conclusive proof of the truthfulness thereof and
the terms and conditions set forth in the recitals, if any, shall be deemed
a part of the Agreement.
10.5 Assignment. XXXXXX X. XXXXX shall not voluntarily or by operation of law
assign, hypothecate, convey, give, transfer, mortgage, sublet, license or
otherwise transfer or encumber all or any part of his rights, duties or
other interests in this Agreement or the proceeds thereof without the prior
consent of SAI after an Independent Determination approving such action.
Any attempt to make an assignment in violation of this provision shall be a
material breach under this Agreement and any assignment in violation of
this provision shall be null and void. Absent an express signed written
agreement by SAI after an Independent Determination approving such action,
no assignment of any of the rights or obligations under this Agreement
shall result in a novation or in any other way release the assignor from
its obligations under this Agreement. SAI may voluntarily or by operation
of law assign, hypothecate, convey, give, transfer, mortgage, sublet,
license or otherwise transfer or encumber all or any part of his rights,
duties or other interests in this Agreement or the proceeds thereof without
the prior consent of XXXXXX X. XXXXX after an Independent Determination
approving such action. Except as provided to the contrary in this
Agreement, this Agreement shall be binding on and inure to the benefit of
the parties and their successors and assigns.
10.6 Governing Law & Trial by Reference. This Agreement shall be construed and
interpreted in accordance with the laws of the State of California. Any
action brought to interpret or enforce this Agreement shall be tried by the
reference procedures set forth in California Code of Civil Procedure
Section 638 et seq. upon motion by either party to the Superior Court for
the County of San Diego, California. A single referee shall be appointed to
try the matter and such referee shall be a retired judge of the California
Superior Court, California Court of Appeals or California Supreme Court.
Each party may reject two referees appointed by the court and hereby waives
the right to trial by jury. The referee shall be compensated at the rate
per hour charged by senior attorneys in major San Diego County law firms.
During the pendency of the reference proceeding, each party shall pay
one-half of the cost thereof. Upon the conclusion of the reference
proceeding, the losing party shall pay all of remaining unpaid costs of the
reference proceeding and reimburse the prevailing party for any such costs
previously paid by the prevailing party. Such reimbursement shall be
included in any judgment or final order issued in the reference proceeding.
Except as otherwise required by law, each party shall exercise its best
efforts to keep the referenced proceeding and the testimony and evidence
presented therein confidential.
10.7 Integrated Agreement; Modifications. This Agreement, including the exhibits
hereto, contains all the agreements of the parties concerning the subject
hereof and cannot be amended or modified except by a written instrument
executed and delivered by the parties. There are no other representations,
agreements, arrangements or understandings, either oral or written, between
or among the parties hereto relating to the subject matter of this
Agreement that are not fully expressed herein. In addition there are no
representations, agreements, arrangements or understandings, either oral or
written, between or among the parties upon which any party is relying upon
in entering this Agreement that are not fully expressed herein. Without
limiting the generality of the foregoing, no party has represented to any
other party and no party is relying on any information concerning the
federal or state income taxes which may or may not result the consummation
of the transactions contemplated herein.
10.8 Severability. If any term or provision of this Agreement is determined to
be illegal, unenforceable or invalid in whole or in part for any reason,
such illegal, unenforceable or invalid provisions or part thereof shall be
stricken from this Agreement, and such provision shall not affect the
legality, enforceability or validity of the remainder of this Agreement. If
any provision or part thereof of this Agreement is stricken in accordance
with the provisions of this section, then the stricken provision shall be
replaced, to the extent possible, with a legal, enforceable and valid
provision that is as similar in tenor to the stricken provision as is
legally possible.
10.9 Notices. Any delivery of this Agreement, notice, modification of this
Agreement, collateral or additional agreement, demand, disclosure, request,
consent, approval, waiver, declaration or other communication that a party
desires or is required to give to another party or any other person shall
be in writing. Any such communication may be served personally, transmitted
by facsimile or nationally recognized overnight delivery service (i.e.,
Federal Express) or sent by prepaid, first class mail to the party's
address as set forth below:
If to SAI: SPORTS ARENAS, INC.,
0000 Xxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Telephone (000) 000-0000
Fax (000) 000-0000
Attention: Xxxxxx X. Xxxxx
(email: xxxxxx@xxxxxxxxxx.xxx)
Xxxxxx X. Xxxxxxx
(email: xxxxxxxx@xxxxxxxxxx.xxx)
with copies to: Xxxxxx X. Xxxxxx
XXXXXX &CLENDENINN
000 X. Xxxxx Xx., 00xx Xxx.
Xxxx Xxxx Xxxx, XX 00000
Telephone (000) 000-0000
Fax (000) 000-0000
email: xxxxxxx@xxxxxxxxx.xxx
and Xxxxx X. Xxxxxx
XXXXXXXX, XXXXXX & PIZZUTOO, A L.C.
000 Xxxx X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Telephone (000) 000-0000
Fax (000) 000-0000
email: xxxxxxx@xxxxxx.xxx
If to Elkan: Xxxxxx X. Xxxxx
0000 Xxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Telephone (000) 000-0000
Fax (000) 000-0000
email: xxxxxx@xxxxxxxxxx.xxx
with a copy to: Xxxxxxx XxXxxx
SHEPPARD, MULLIN, XXXXXXX & HAMPTON LLP
00000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Telephone (000) 000-0000
Fax: (000) 000-0000
email: xxxxxxx@xxxxxxxxxxxxxx.xxx
--------------------------
10.9.1 Each party shall make an ordinary, good-faith effort to ensure it
will accept or receive notices that are given in accordance with this
section and that any person to be given notice actually receives such
notice. Each party transmitting a communication by facsimile shall
also transmit a confirming copy of such communication by personal
delivery, U.S. Mail or nationally recognized overnight delivery
service.
10.9.2 Any such communication shall be deemed effective upon personal
delivery, two days after transmitting the notice by nationally
recognized overnight delivery service or three days after mailing in
accordance with this section. Any such communication transmitted by
facsimile shall be effective upon confirmed receipt of the
communication transmitted by facsimile, personal delivery of the
confirming copy, two days after transmitting the confirming copy by
nationally recognized overnight delivery service or three days after
mailing the confirming copy in accordance with this section. Any party
may change its address by notice to the other party.
10.10Time. Time is of the essence to the performance of each and every
obligation under this Agreement.
10.11Reasonable Consent and Approval. Whenever a party is required or permitted
to give its consent or approval under this Agreement, such consent or
approval shall not be unreasonably withheld or delayed. 10.12 SAI Board
Approval. SAI represents to XXXXXX X. XXXXX the transactions contemplated
by this Agreement have been approved in advance by SAI's Special Committee
and full board of directors in accordance with applicable law.
10.13Further Assurances. The parties at their own cost and expense shall
execute and deliver such further documents and instruments and shall take
such other actions as may be reasonably required or appropriate to carry
out the intent and purposes of this Agreement.
10.14Waivers. Any waiver by any party shall be in writing and shall not be
construed as a continuing waiver. No waiver will be implied from any delay
or failure to take action on account of any default by any party. Consent
by any party to any act or omission by another party shall not be construed
to be a consent to any other subsequent act or omission or to waive the
requirement for consent to be obtained in any future or other instance.
10.15Counsel. This Agreement was prepared by Xxxxx X. Xxxxxx of XXXXXXXX,
XXXXXX & XXXXXXX, A Law Corporation ("OC&P"), on behalf of SAI and reviewed
by Xxxxxx X. Xxxxxx of FABIAN & XXXXXXXXX ("F&C") on behalf of the Special
Committee and by Xxxxxxx XxXxxx of SHEPPARD, MULLIN, XXXXXXX & XXXXXXX, LLP
on behalf of XXXXXX X. XXXXX. Messrs. Xxxxxx and Xxxxxx have advised XXXXXX
X. XXXXX that neither OC&P nor F&C are representing XXXXXX X. XXXXX or his
interests in connection with the negotiation and preparation of this
Agreement, the subjects addressed herein and related matters (collectively
the "Subject Matter"). Further, Xx. Xxxxxx has disclosed to SAI, the
Special Committee and XXXXXX X. XXXXX that: (a) OC&P currently represents
and has previously represented SAI and XXXXXX X. XXXXX (each an "OC&P
Client") and their interests in other matters; and (b) the relevant
circumstances and reasonably foreseeable adverse consequences of OC&P
representing only SAI and its interests in the Subject Matter. Each OC&P
Client acknowledges such OC&P Client has interests which are potentially
adverse to the interests of the others. By executing and delivering this
Agreement, each OC&P Client and the Special Committee confirms it has
granted its consent to Xx. Xxxxxx and OC&P representing only SAI and its
interests in the Subject matter. Such consent may be revoked at any time by
any OC&P Client or the Special Committee.
10.16Signatures/Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall
not be effective until the execution and delivery between each of the
parties of at least one set of counterparts. A party may deliver this
Agreement by facsimile providing such party transmits the original to Xxxxx
X. Cramer, OLMSTEAD, XXXXXX & XXXXXXX, A X.X., 000 Xxxx X, Xxxxxx, Xxx.
0000, Xxx Xxxxx, Xxxxxxxxxx 00000 on or before the 75th day after the
Effective Date. The parties authorize each other to detach and combine
original signature pages and consolidate them into a single identical
original. Any one of such completely executed counterparts shall be
sufficient proof of this Agreement.
10.17Date and Delivery of Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the parties intend this Agreement shall be
deemed effective, executed and delivered for all purposes under this
Agreement, and for the calculation of any statutory time periods based on
the date an agreement between parties is effective, executed or delivered,
as of the Effective Date.
10.18Counting of Days. If a party is required to complete the performance of an
obligation under this Agreement by a date certain and such date is a
Saturday, Sunday or Federal bank holiday (collectively, a "Nonbusiness
Day"), the date for the completion of such performance will be the next
succeeding day that is not a Nonbusiness Day.
IN WITNESS WHEREOF, this Agreement is executed to be effective as of the
Effective Date set forth above.
SAI: SPORTS ARENAS, INC.,
a Delaware corporation
BY: /s/XXXXXX X. XXXXX
-----------------------------
Xxxxxx X. Xxxxx, President
BY: /s/XXXXXX X. XXXXXXX
-----------------------------
Xxxxxx X. Xxxxxxx, Secretary
XXXXXX X. XXXXX: /s/XXXXXX X. XXXXX
---------------------------
XXXXXX X. XXXXX, a single man
APPROVED
Special Committee: /s/XXXXXXX XXXXXX
------------------------------------------
Xxxxxxx Xxxxxx, Sole Member,
Special Committee of the Board of Directors,
SPORTS ARENAS, INC., a Delaware corporation
