EXHIBIT 10.63
STOCK PURCHASE AGREEMENT
by and among
KARTS INTERNATIONAL INCORPORATED
and
THE XXXXXXXXX FOUNDATION
Dated as of November 28, 2000
TABLE OF CONTENTS
Page
----
SECTION 1. DESCRIPTION OF TRANSACTION..........................................3
1.1 Description of Securities....................................3
1.2 Closing......................................................3
1.3 Conditions to Closing........................................3
1.4 Definitions..................................................4
SECTION 2. REPRESENTATIONS OF THE COMPANY......................................6
2.1 Corporate Power..............................................6
2.2 Governmental Authorizations, Third Party Consents............6
2.3 Authorization................................................6
2.4 Capitalization...............................................7
2.5 Preemptive Rights, Registration Rights.......................7
2.6 Effect of Transactions.......................................7
2.7 Brokerage....................................................8
2.8 Disclosure...................................................8
SECTION 3. REPRESENTATIONS OF THE INVESTORS....................................8
3.1 Authorization................................................8
3.2 Restrictions on Transferability..............................9
3.3 Status of Investor...........................................9
3.4 Brokerage....................................................9
3.5 Own Account..................................................9
3.6 Governmental Authorizations, Third Party Consents...........10
3.7 Effect of Transactions......................................10
3.8 Consent of Investor.........................................10
SECTION 4. COVENANTS OF THE COMPANY...........................................10
4.1 Use of Proceeds.............................................10
4.2 Restricted Corporate Actions................................10
4.3 Board of Directors..........................................12
4.4 Preservation of Corporate Existence and Property............12
4.5 Shareholder and Director Information........................12
4.6 Liability Insurance.........................................12
4.7 No Impairment...............................................12
4.8 Increase Authorized Shares of Common Stock..................12
4.9 Bylaws......................................................13
4.10 Compliance..................................................13
4.11 Rule 144A Information.......................................13
4.12 Brokerage...................................................13
-i-
SECTION 5. GENERAL............................................................13
5.1 Amendments, Waivers and Consents............................13
5.2 Survival, Assignability of Rights...........................14
5.3 Rights of Investor Inter Se.................................14
5.4 Headings....................................................14
5.5 Governing Law...............................................14
5.6 Notices and Demands.........................................14
5.7 Severability................................................14
5.8 Expenses....................................................15
5.9 Entire Agreement............................................15
5.10 Counterparts................................................15
SCHEDULES AND EXHIBITS
----------------------
Schedule 2.3 - Authorization
Schedule 2.4 - Capitalization
Schedule 2.5 - Preemptive Rights; Registration Rights
Schedule 2.7 - Brokerage
Schedule 4.1 - Use of Proceeds
Schedule 4.2 - Restricted Corporate Actions
-ii-
STOCK PURCHASE AGREEMENT
------------------------
Karts International Incorporated, a Nevada corporation (the "Company")
and The Xxxxxxxxx Foundation (the "Investor"), enter into this Stock Purchase
Agreement, dated November 28, 2000 (this "Agreement ").
SECTION 1.
DESCRIPTION OF TRANSACTION
--------------------------
1.1 Description of Securities. The Company has furnished the Investor
with financial and nonfinancial information concerning the Company and its
assets, liabilities, condition (financial and otherwise), operations, business
and prospects. Based on such information, the representations and warranties set
forth herein and the other terms and provisions hereof, the Investor will
purchase 14,667 shares of Series B Preferred Stock, par value $0.001 per share,
of the Company (the "Series B Preferred"), for an aggregate purchase price of
$1,100,000, all on the terms and subject to the conditions set forth herein.
1.2 Closing. The closing (the "Closing') of the sale of the Series B
Preferred will take place at the offices of Xxxxxxx Xxxxxx L.L.P., 000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, at 10:00 a.m., on the date of this
Agreement, or such other time and place as agreed to by the parties hereto (the
"Closing Date"). At the Closing, the Company will deliver to the Investor
certificates representing the shares of Series B Preferred being acquired by the
Investor on the Closing Date upon payment of the purchase price by the Investor
to the Company of immediately available funds by wire transfer, or by other form
of payment acceptable to the Company. In addition, at the Closing the Company
shall deliver to the Investors payment for the expenses of the Investor and its
counsel, to the extent such expenses are reimbursable by the Company, as
provided in Section 5.8 below. As of the Closing Date, the Company acknowledges
that it has previously received from the Investor $1,100,000 of the purchase
price for the Series B Preferred Stock.
1.3 Conditions to Closing. The obligation of the Investor to purchase
and pay for the Series B Preferred to be purchased by the Investor on the
Closing Date is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions:
(a) all representations of the Company to the Investor shall
be true, correct and complete as of the Closing Date;
(b) there shall be no change in the business, assets,
financial condition, operation and results of operations of the Company
since September 30, 2000, which, in the Investor's sole judgment, is
materially adverse to the Company;
(c) the Investor, through its personnel and representatives,
shall have completed and been satisfied with the results of their due
diligence review of the Company's business; and
(d) the Company shall have delivered to the Investor:
STOCK PURCHASE AGREEMENT - Page 3
(i) (A) copies of the resolutions of the Company's
Board of Directors authorizing and approving this Agreement
and all of the transactions and agreements contemplated hereby
and thereby, including a copy of the Certificate of
Designation for the Series B Preferred Stock; and (B) the
names of the officer or officers of the Company authorized to
execute this Agreement and any and all documents, agreements
and instruments contemplated herein, all certified by the
Secretary of the Company to be true, correct, complete and in
full force and effect and unmodified as of the Closing Date;
(ii) a certificate of existence for the Company from
the Secretary of State of Nevada has previously been delivered
to the Investor;
(iii) a certificate of account status for the Company
from the Comptroller of the State of Nevada has previously
been delivered to the Investor;
(iv) certificates from each state where the Company
is required to be qualified as a foreign corporation showing
such qualification has previously been delivered to the
Investor; and
(v) such other documents, instruments, and
certificates as the Investor may reasonably request.
1.4 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Articles of Incorporation" shall mean the Articles of
Incorporation of the Company, as amended to date.
"Bylaws" shall mean the Bylaws of the Company, as amended to
date.
"Certificate" shall mean the Certificate of Designation for
the Series B Preferred Stock as filed with the Nevada Secretary of
State on October 6, 2000.
"Common Stock" shall mean the common stock, par value $0.001
per share, of the Company.
"Compensation Committee" shall mean the Compensation Committee
of the Board of Directors of the Company.
"Conversion Shares" shall mean any securities of the Company
issued or issuable upon conversion of the Series B Preferred.
"Employee Benefit Plans" shall mean employee benefit plans
within Section 3(3) of ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
STOCK PURCHASE AGREEMENT - Page 4
"Existing Preferred Shares" shall mean the Company's 9%
Convertible Preferred Stock, Series A Preferred Stock and Series B
Preferred Stock outstanding on the date of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"New Securities" shall mean any shares of capital stock of the
Company, including Common Stock and any series of Preferred Stock,
whether now authorized or not, and rights, options or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities
of any type whatsoever that are, or may become, convertible into or
exchangeable for said shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does not include (i)
the Conversion Shares, (ii) Common Stock offered to the public
generally pursuant to a registration statement under the Securities Act
in connection with a Qualified Public Offering, (iii) securities issued
or sold in connection with stock options granted under the Stock Option
Plan or any other Stock Option Plan approved by the shareholders and
Board of Directors of the Company, including, without limitation, upon
exercise of presently outstanding stock options, net of repurchases and
cancellations and expirations (without exercise) of such options, (iv)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company, (v) stock issued in connection with
any merger or acquisition approved by the Investor, (vi) Common Stock
issued as a dividend or upon conversion of the Company's Existing
Preferred Shares or (vii) Common Stock issued upon the exercise of
warrants of the Company outstanding at the date of this Agreement.
"Preferred Stock" shall mean the preferred stock, par value
$0.001 per share, of the Company, which consists of the Existing
Preferred Shares.
"Pro Rata Share" shall mean the ratio that (i) the sum of the
total number of shares of Common Stock which are then held by the
Investor and those which the Investor has the right to obtain pursuant
to exercise or conversion of any option, warrant, right or convertible
security (including the Existing Preferred Shares) bears to (ii) the
sum of the total number of shares of Common Stock then outstanding and
which are issuable pursuant to exercise or conversion of any then
outstanding options, warrants, rights or convertible securities
(including the Existing Preferred Shares).
"Requisite Interest" shall mean the vote of the holders of at
least a majority of the then outstanding Series B Preferred (including,
for such purposes, any Conversion Shares into which any of the Series B
Preferred have been converted that have not been sold to the public).
"Securities" shall mean the equity securities of the Company,
including any class or series of Preferred Stock, Common Stock,
instruments convertible or exchangeable into such securities, or rights
to acquire such securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
STOCK PURCHASE AGREEMENT - Page 5
"Series B Preferred" shall mean the Series B Preferred Stock,
$0.001 par value per share, of the Company.
"Stock Option Plan" shall mean the 1998 Stock Compensation
Plan of Karts International Incorporated as it exists on the date of
this Agreement and the 2000 Stock Compensation Plan which is subject to
stockholder approval at the Annual Meeting of Stockholders to be held
on December 12, 2000.
"Subsidiary" shall mean any corporation, partnership, joint
venture, limited liability company or other legal entity in which the
Company owns, directly or indirectly, an equity interest.
"To the best knowledge of the Company" shall mean those facts
after due inquiry that are actually known by the officers of the
Company.
SECTION 2.
REPRESENTATIONS OF THE COMPANY
------------------------------
As part of the basis of this Agreement, the Company hereby represents
and warrants to the Investor, at the Closing Date, that:
2.1 Corporate Power. The Company and the Subsidiaries have all required
corporate power and authority to own their respective properties and to carry on
their respective businesses as presently conducted and as proposed to be
conducted. The Company has all required corporate power and authority to execute
and deliver this Agreement and the other agreements contemplated herein, to
issue and sell the Series B Preferred hereunder, to issue shares of Common Stock
upon conversion of the Series B Preferred, and to carry out the transactions
contemplated by this Agreement and the other agreements contemplated herein. At
the Closing, true, correct and complete copies of the Articles of Incorporation
and Bylaws of the Company, as amended, shall be delivered to the Investor.
2.2 Governmental Authorizations, Third Party Consents. No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any governmental authority or any other individual, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind is necessary or required in connection with the
execution, delivery or performance by the Company of this Agreement, or any
other documents executed pursuant to this Agreement, other than as specifically
required by this Agreement, the filing of a registration statement pursuant to
the Amended Registration Rights Agreement, the filing of a Form D with the
Securities and Exchange Commission and filings required under applicable state
securities or "blue sky" laws.
2.3 Authorization. Except as indicated on Schedule 2.3 hereof, all
corporate action on the part of the Company, its directors and shareholders
necessary for (a) the authorization, execution, delivery and performance of this
Agreement and the other agreements contemplated herein by the Company, (b) the
authorization, sale, issuance and delivery of the Series B Preferred (including
the Conversion Shares) and (c) the performance of all of the Company's
obligations hereunder and under the other agreements contemplated herein has
been taken. This Agreement and all documents executed pursuant to this Agreement
are valid and binding obligations of the Company, enforceable according to their
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditor rights, (ii) laws and judicial decisions
regarding indemnification for violations of federal securities laws, (iii) the
availability of specific performance or other equitable remedies, and (iv) with
respect to any indemnification agreements set forth herein or therein,
principles of public policy.
STOCK PURCHASE AGREEMENT - Page 6
2.4 Capitalization. The authorized and issued capital stock of the
Company is as set forth in Schedule 2.4. All of the presently outstanding shares
of capital stock of the Company have been validly authorized and issued and are
fully paid and nonassessable. The Series B Preferred have been validly
authorized and, when delivered and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable and free of all encumbrances and
restrictions, except restrictions on transfer imposed by applicable federal and
state securities laws and the Certificate. The relative rights, preferences,
restrictions and other provisions relating to the Series B Preferred are as set
forth in the Certificate. The Company does not have sufficient authorized shares
of its Common Stock available for issuance upon conversion of the Series B
Preferred Stock. The Company has agreed to seek approval of its stockholders for
the increase of the Company's authorized shares of Common Stock to 90 million
shares at the Annual Meeting of Stockholders to be held on December 12, 2000.
After such stockholder approval has been obtained, the Company will have
authorized and reserved for issuance upon conversion of the Series B Preferred
not less than 3,000,000 shares of its Common Stock, and the Conversion Shares
will be, when and if issued, validly authorized and issued, fully paid and
nonassessable, and free of all encumbrances and restrictions, except
restrictions on transfer imposed by applicable federal and state securities laws
and the Articles of Incorporation. Except as provided in Schedule 2.4, the
Company has not issued any other shares of its capital stock and there are no
outstanding options, warrants, subscriptions or other rights or obligations to
purchase or acquire any of such shares, nor any outstanding securities
convertible into or exchangeable for such shares. Except as disclosed on
Schedule 2.4 or as contemplated under this Agreement (and the other agreements
executed in connection herewith), there are no agreements to which the Company
is a party or has knowledge regarding the issuance, registration, voting or
transfer of or obligation (contingent or otherwise) of the Company or any
Subsidiary to repurchase or otherwise acquire or retire or redeem any of its
outstanding shares of capital stock. No dividends are accrued but unpaid on any
capital stock of the Company.
2.5 Preemptive Rights, Registration Rights. There are no preemptive
rights affecting the issuance or sale of the Company's capital stock. Except as
disclosed in Schedule 2.5, the Company is not under any contractual obligation
to register (in compliance with the filing requirements and being deemed
effective under the Securities Act) any of its presently outstanding Securities
or any of its Securities which may hereafter be issued, except as described in
the Amended Registration Rights Agreement.
2.6 Effect of Transactions. The Company's execution and delivery of
this Agreement and the other agreements contemplated herein, its performance of
the transactions contemplated by this Agreement and the other agreements
contemplated herein, and the performance of the businesses of the Company and
each Subsidiary as now conducted, does not and will not violate any terms of the
Articles of Incorporation or Bylaws or violate any judgment, decree or order, or
any material contract or obligation of the Company or such Subsidiary, as the
case may be, or any statute, rule or regulation of any federal, state or local
government or agency applicable to the Company or any such Subsidiary, or any
material contract to which any employee of the Company or any Subsidiary is
bound. The offer and sale of the Series B Preferred will be in compliance with
all federal and state securities laws. No consent, approval or filing with any
regulatory agency is required to be taken by the Company or any Subsidiary in
connection with the transactions contemplated by this Agreement, except those
which the Company or such Subsidiary has obtained or made in a timely manner,
except for any filing of Form D or any applicable state blue sky filing that may
be made by the Company after the Closing.
STOCK PURCHASE AGREEMENT - Page 7
2.7 Brokerage. Except as provided in Schedule 2.7, there are no claims
for brokerage commissions, finder's fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement or
agreement made by the Company or any Subsidiary.
2.8 Disclosure. This Agreement and the exhibits and schedules hereto,
when taken as a whole with other documents and certificates furnished by the
Company and any Subsidiary to the Investors or their counsel, do not contain any
untrue statement of material fact or omit any material fact necessary in order
to make the statements therein not misleading; provided, however certain
materials provided to the Investor contain projections and estimates of future
events, and such projections and estimates have been based upon certain
assumptions that management of the Company and the Subsidiaries made in good
faith and believed were reasonable at the time such materials were prepared.
There is no fact known to the Company, any Subsidiary that has not been
disclosed to the Investors prior to the date of this Agreement that materially
and adversely affects the business, assets, properties, prospects or condition
(financial or otherwise) of the Company or its Subsidiaries, taken as a whole,
or the ability of the Company or any Subsidiary to perform under this Agreement
or the other agreements contemplated hereby or to consummate the transactions
contemplated hereby or thereby.
SECTION 3.
REPRESENTATIONS OF THE INVESTORS
--------------------------------
As part of the basis of this Agreement, the Investor hereby represents
to the Company, at the Closing Date, that:
3.1 Authorization. The execution of this Agreement and the documents
executed by the Investor pursuant to this Agreement have been authorized by all
necessary action on the part of the Investor, have been executed and delivered,
and constitute valid, legal, binding and enforceable agreements of the Investor,
except as may be limited by (a) applicable bankruptcy, insolvency,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditor rights, (b) laws and judicial decisions
regarding indemnification for violations of federal securities laws, (c) the
availability of specific performance or other equitable remedies, and (d) with
respect to any indemnification agreements set forth herein or therein,
principles of public policy.
STOCK PURCHASE AGREEMENT - Page 8
3.2 Restrictions on Transferability. The Investor understands that
because the Series B Preferred have not been, and the Conversion Shares when
issued will not have been, registered under the Securities Act, it cannot
dispose of any or all of the Series B Preferred or Conversion Shares unless they
are subsequently registered under the Securities Act or exemptions from
registration are available. The Investor understands that no public market now
exists for any of the Securities issued by the Company, except for the Common
Stock of the Company, and that there is no assurance that a public market will
ever exist for the Series B Preferred. The Investor acknowledges and understands
that, except as provided in the Amended Registration Rights Agreement, it has no
registration rights. Although it may be possible in the future to make limited
public sales of the Series B Preferred and/or Conversion Shares without
registration under the Securities Act, Rule 144 is not now available and there
is no assurance that it will become available for any purpose. By reason of
these restrictions, the Investor understands that it may be required to hold the
Series B Preferred and/or the Conversion Shares for an indefinite period of
time. The Investor agrees that in no event will it make a transfer or
disposition of any of the Series B Preferred (or the Conversion Shares) unless
and until, if requested by the Company, at the expense of the Investor or
transferee, it shall have furnished to the Company an opinion of counsel or
other evidence, reasonably satisfactory to the Company, to the effect that such
transfer maybe made without registration under the Securities Act. The Investor
understands that each certificate representing the Series B Preferred and
Conversion Shares will bear appropriate state "blue sky" legends and a legend
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SHARES MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.
3.3 Status of Investor. The Investor is knowledgeable and experienced
in making venture capital investments, and able to bear the economic risk of
loss of its investment in the Company. The Investor is an "accredited investor,"
as that term is defined in Rule 501 (a) of Regulation D under the Securities
Act.
3.4 Brokerage. There are no claims for brokerage commissions, finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by the Investor.
3.5 Own Account. The Investor is acting on its own behalf in connection
with the investigation and examination of the Company and its decision to
execute these documents. Investor has received (i) the Company's annual report
filed with the SEC on Form 10-K for the year ended December 31, 1999, (ii) the
Company's quarterly reports filed with the SEC on Form 10-Q for the quarters
ended March 31 and June 30, 2000, and (iii) such other information regarding the
Company as has been requested by the Investor or its representatives.
STOCK PURCHASE AGREEMENT - Page 9
3.6 Governmental Authorizations, Third Party Consents. Based upon the
information provided to the Investor by the Company, no approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
governmental authority or any other individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind is necessary or required by the Investor in connection with the
execution, delivery and performance by the Investor of this Agreement, or any
other documents executed pursuant to this Agreement; provided, however, that the
Investor makes no representations with respect to applicable federal or state
securities laws; and provided, further, however, that any liability of the
Investor resulting from a breach of this representation shall be limited to the
aggregate purchase price paid by the Investor for the Series B Preferred
purchased hereunder.
3.7 Effect of Transactions. The Investor's execution, delivery and
performance of this Agreement and the other agreements contemplated by this
Agreement will not violate any terms of its organizational documents or, to its
knowledge, violate any judgment, decree or order, or any material contract or
obligation of the Investor or any statute, rule or regulation of any federal,
state or local government or agency applicable to the Investor.
3.8 Consent of Investor. Investor hereby consents as required under the
Stock Purchase Agreement dated May 17, 2000 and the Stock Purchase Agreement
dated October 9, 2000 between the Company and Investor to the amendment of the
Company's Articles of Incorporation increasing the authorized shares of common
stock of the Company from 35,000,000 shares to 90,000,000 shares and the
issuance by the Company of the Series B Preferred Stock.
SECTION 4.
COVENANTS OF THE COMPANY
------------------------
The Company hereby covenants that, except as otherwise provided below,
for so long as the Investor holds any of the Series B Preferred that:
4.1 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Series B Preferred for the purposes set forth on Schedule 4.1. It is
the intention of the Company and the Subsidiaries to conduct their businesses in
accordance with the current business plan of the Company, which has previously
been delivered to the Investor.
4.2 Restricted Corporate Actions. The Company will not, without the
written approval of the holders of a Requisite Interest, take any of the
following actions:
(a) repurchase any Common Stock or Preferred Stock, other than
(i) the redemption of the Series B Preferred in accordance with the
Certificate, (ii) the redemption of the Series A Preferred Stock, (iii)
the purchase of Common Stock from employees pursuant to agreements with
the Company as of the Closing Date to repurchase such stock; provided
that the purchase price shall not exceed the price paid by such
employee for such stock, or (iv) as indicated on Schedule 4.2 hereof;
STOCK PURCHASE AGREEMENT - Page 10
(b) declare or pay any dividend (other than a stock dividend)
on the Common Stock or Preferred Stock (other than dividends on the
shares of Series A Preferred and dividends on the Existing Preferred
Stock in accordance with the terms of such stock as they exist on the
date of this Agreement);
(c) except to the extent necessary to comply with foreign
laws, create any subsidiary in which the Company owns less than one
hundred percent (100%) of the equity securities, or permit any
Subsidiary to issue any equity securities to anyone other than the
Company or a wholly-owned Subsidiary of the Company or merge with or
into any Subsidiary;
(d) create any new class or series of shares that has a
preference over or is on a parity with the Series B Preferred with
respect to voting or liquidation preferences (except that the Company
may grant voting rights to shares of a series of Preferred Stock which
have the right to vote with holders of Common Stock on an as-converted
basis, but in any event not in preference over the Series B Preferred);
(e) enter into any arrangement or agreement which (i)
conflicts with the rights of the holders of Series B Preferred (ii)
restricts the Company's performance under this Agreement or any other
documents executed in connection herewith or (iii) could result in the
redemption of any shares of Common Stock,
(f) except for the amendment of the Articles of Incorporation
to increase authorized common stock to 90,000,000 shares, subject to
the approval of the Company's stockholders, amend the Articles of
Incorporation or Bylaws;
(g) except as indicated on Schedule 4.2, adopt or amend an
Employee Benefit Plan or amend the Stock Option Plan;
(h) make any investments except (i) bank deposits in federally
insured financial institutions, (ii) investments in direct government
obligations of the United States of America, (iii) commercial paper of
a domestic issuer rated A-1 or better or P-1 or better by Standard &
Poor's Corporation or Xxxxx'x Investor Services, Inc., respectively,
maturing not more than three months from the date of acquisition, and
(iv) investments of the type set forth Schedule 4.2;
(i) acquire substantially all of the assets, properties or
capital stock of another person or entity in any single transaction or
series of related transactions;
(j) issue any stock, options, or securities convertible or
exercisable into the capital stock of the Company, including, without
limitation, pursuant to the Stock Option Plan, with exercise prices at
less than fair market value, as determined by the Compensation
Committee; or
(k) issue any stock, options or securities convertible or
exercisable into the capital stock of the Company, which are senior to
the Series B Preferred in liquidation rights or otherwise.
STOCK PURCHASE AGREEMENT - Page 11
4.3 Board of Directors. The Company has agreed with the Series A
Preferred holders that the Company shall take all appropriate actions to provide
that Series A Preferred holders' nominees can hold a majority of the seats on
the Board. Unless otherwise agreed to by the directors nominated by the Series A
Preferred holders, the Board of Directors will meet at least quarterly. The
Company will reimburse the directors for all expenses incurred by such directors
in connection with attending any board meetings or other board functions. The
Investor shall have the right to receive notice of and have one (1)
representative attend all meetings and other functions of the Board of Directors
and the Company will reimburse the Investor's representative for all expenses
incurred by such representative in connection with attending any such board
meetings or other board functions, which representative may also be a
representative of the Series A Preferred Stockholders.
4.4 Preservation of Corporate Existence and Property. The Company
agrees to preserve, protect, and maintain, and cause each Subsidiary to
preserve, protect, and maintain, (a) its corporate existence, and (b) all
rights, franchises, accreditations, privileges, and properties the failure of
which to preserve, protect, and maintain might have a material and adverse
effect on the business, affairs, assets, prospects, operations, or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a whole.
4.5 Shareholder and Director Information. At the request of the
Investor, the Company shall promptly deliver to the Investor information
regarding the securityholders, officers and directors of the Company, including,
without limitation, names, addresses, types of securities held and terms of
securities held.
4.6 Liability Insurance. The Company will use its best efforts to
maintain comprehensive liability insurance (including automobile liability
coverage) at regular premium rates with insurer(s) of recognized responsibility
in an amount which is commercially reasonable for the benefit of itself and the
Subsidiaries.
4.7 No Impairment. The Company and the Subsidiaries will observe and
honor in good faith all rights of the Investors, under the terms of this
Agreement or any other documents executed in connection herewith, and will take
no action that would impair or otherwise prejudice such rights.
4.8 Increase Authorized Shares of Common Stock. The Company at the
Annual Meeting of Stockholders to be held on December 12, 2000 will seek
stockholder approval for an amendment of the Company's Articles of Incorporation
increasing the authorized shares of common stock of the Company from 35,000,000
shares to 90,000,000 shares. Upon such stockholder approval, the Company shall
thereafter at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, for the purpose of effecting the conversion of
the Series B Preferred and otherwise complying with the terms of this Agreement,
such number of its duly authorized shares of Common Stock as shall be sufficient
to effect the conversion of the Series B Preferred from time to time outstanding
or otherwise to comply with the terms of this Agreement. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of the Series B Preferred or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
The Company will obtain any authorization, consent, approval or other action by
or make any filing with any court or administrative body that may be required
under applicable state securities laws in connection with the issuance of shares
of Common Stock upon conversion of the Series B Preferred.
STOCK PURCHASE AGREEMENT - Page 12
4.9 Bylaws. The Company shall at all times cause its Bylaws to provide
that the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of this Agreement or the Articles
of Incorporation. The Company shall at all times maintain provisions in its
Bylaws and/or Articles of Incorporation indemnifying all directors against
liability and absolving all directors from liability to the Company and its
stockholders to the maximum extent permitted under the laws of the State of
Nevada.
4.10 Compliance. The Company shall comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could materially and adversely affect the business or condition,
financial or otherwise of the Company and the Subsidiaries, taken as a whole.
4.11 Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, provide
in writing, upon the written request of the Investor or a prospective buyer of
the Series B Preferred or Conversion Shares from the Investor, all information
required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the
Commission under the Securities Act ("Rule 144A Information"). The Company's
obligations under this Section 4.11 shall at all times be contingent upon the
Investor obtaining from the prospective buyer of Series B Preferred or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Series B
Preferred or Conversion Shares.
4.12 Brokerage. The Company agrees to indemnify and hold harmless the
Investors for any brokerage commissions, finder's fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by the Company or any Subsidiary.
SECTION 5.
GENERAL
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5.1 Amendments, Waivers and Consents. Unless otherwise specified in
this Agreement, any consents required and any waiver, amendment or other action
of the Investor or holders of the Series B Preferred (or Conversion Shares) may
be made by consent(s) in writing signed by the holders of a Requisite Interest.
Any specific reference to approval or action by a Requisite Interest shall not
imply that other references to approval or action by the Investor or holders of
Series B Preferred (or Conversion Shares) requires each holder's approval or
action, unless a higher or lower approval is so specifically stated in such
specific reference. Any amendment or waiver made according to this Section 5.1
will be binding upon each holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities have been converted) and each future holder. Any amendment or waiver
by the Company must be made in writing. This Agreement may not be amended,
except in a written document signed by the Company and holders of a Requisite
Interest.
STOCK PURCHASE AGREEMENT - Page 13
5.2 Survival, Assignability of Rights. All representations of the
parties made in this Agreement and in the certificates, exhibits, schedules or
other written information delivered or furnished by one party to the other in
connection with this Agreement will survive the delivery of the Series B
Preferred for a period of two (2) years subsequent to the Closing. All covenants
and agreements made in this Agreement will survive the Closing, and will bind
and inure to the benefit of the parties' hereto and their respective successors
and assigns. Each Investor shall have the right to transfer any or all of its
rights hereunder to any purchaser of Series B Preferred or Conversion Shares;
provided such transferee executes a signature page to this Agreement thereby
agreeing to be bound by and entitled to the benefits of this Agreement. The
Company may not assign its rights or obligations hereunder without the consent
of the Investor, as provided in Section 5.1.
5.3 Rights of Investor Inter Se. The Investor shall have the absolute
right to exercise or refrain from exercising any right or rights which the
Investor may have by reason of this Agreement or any Series B Preferred or
Conversion Shares, including, without limitation, the right to consent to the
waiver of any obligation of the Company under this Agreement and to enter into
an agreement with the Company for the purpose of modifying this Agreement or any
agreement effecting any such modification, and the Investor shall not incur any
liability to any other Investor with respect to exercising or refraining from
exercising any such right or rights.
5.4 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
5.5 Governing Law. THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PROVISIONS THEREOF.
5.6 Notices and Demands. Any notice or demand which is permitted or
required hereunder will be deemed to have been sufficiently received (except as
otherwise provided herein) (a) upon receipt when personally delivered, (b) or
one (1) day after sent by overnight delivery or telecopy providing confirmation
or receipt of delivery, or (c) three (3) days after being sent by certified or
registered mail, postage and charges prepaid, return receipt requested to the
following addresses: if to the Company at the address as shown on the signature
page of this Agreement (with a copy as shown), or at any other address
designated by the Company to the Investors in writing; if to an Investor, at its
mailing address as shown on the signature pages of this Agreement (with a copy
as shown), or at any other address designated by the Investor to the Company in
writing.
5.7 Severability. If any provision of this Agreement is held invalid
under applicable law, such provision will be ineffective to the extent of such
invalidity, and such invalid provision will be modified to the extent necessary
to make it valid and enforceable. Any such invalidity will not invalidate the
remainder of this Agreement.
STOCK PURCHASE AGREEMENT - Page 14
5.8 Expenses. The Company will pay (a) all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement, and (b) the reasonable out-of-pocket expenses of the Investors
and the reasonable legal fees and disbursements incurred by one counsel for the
Investors with respect to this Agreement and the transactions contemplated
hereby. If any party is required to take any action to enforce its rights under
this Agreement, the prevailing party shall be entitled to its reasonable
expenses, including attorneys' fees, in connection with any such action.
5.9 Entire Agreement. This Agreement and the exhibits to this Agreement
constitute the entire agreement of the parties relating to the transactions
contemplated herein.
5.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be taken to be an original; but such
counterparts will together constitute one document.
STOCK PURCHASE AGREEMENT - Page 15
The undersigned have executed this Agreement as of the day and year
first written above.
KARTS INTERNATIONAL INCORPORATED
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
Address: X.X. Xxx 000
00000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
With a copy to: Xxxx Xxxxxxx, Esq.
Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
THE XXXXXXXXX FOUNDATION
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
Address: 0000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
STOCK PURCHASE AGREEMENT - Page 16
