-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GrqZHCyRpCNX7sHqOOMErNaFV5hneYxCTPYOHDidqNhm5LjIiCkaMBHiWovR9/LE kALSetb3erm7gCDPFklMog== 0000892569-97-002479.txt : 19970912 0000892569-97-002479.hdr.sgml : 19970912 ACCESSION NUMBER: 0000892569-97-002479 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19970908 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED MATERIALS GROUP INC CENTRAL INDEX KEY: 0000806514 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS FOAM PRODUCTS [3086] IRS NUMBER: 330215295 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-39148 FILM NUMBER: 97676988 BUSINESS ADDRESS: STREET 1: 20211 SOUTH SUSANA RD CITY: RANCHO DOMINQUEZ STATE: CA ZIP: 90221 BUSINESS PHONE: 3105495444 MAIL ADDRESS: STREET 1: 20211 SOUTH SUSANA RD CITY: RANCHO DOMINGUEZ STATE: CA ZIP: 90221 FORMER COMPANY: FORMER CONFORMED NAME: FAR WEST VENTURES INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PICKUP RICHARD H/ CENTRAL INDEX KEY: 0000905980 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: WEDBUSH MORGAN SECURITIES INC STREET 2: 500 NEWPORT CENTER DR SUITE 550 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: PICKUP RICHARD H/DITO DEVCAR INC DATE OF NAME CHANGE: 19930524 SC 13D 1 SCHEDULE 13D FOR RICHARD H. PICKUP 1 -------------------------- OMB APPROVAL -------------------------- OMB Number: 3235-0145 Expires: October 31, 1994 Estimated average burden hours per form.......14.90 -------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. _________)* ADVANCED MATERIALS GROUP, INC. - -------------------------------------------------------------------------------- (NAME OF ISSUER) COMMON STOCK - -------------------------------------------------------------------------------- (TITLE OF CLASS OF SECURITIES) COMMISSION FILE NO. 0-16401 - -------------------------------------------------------------------------------- (CUSIP NUMBER) RICHARD H. PICKUP, C/O WEDBUSH MORGAN SECURITIES, INC. 610 NEWPORT CENTER DR., SUITE 1300 NEWPORT BEACH, CALIFORNIA, 92660 -- (714) 759-1311 - -------------------------------------------------------------------------------- (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) AUGUST 17, 1997 - -------------------------------------------------------------------------------- (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with the statement [ ]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1: and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP No. Com. File No. 0-16401 SCHEDULE 13D Page 2 of 7 Pages ---------------------- ----- ----- (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Dito-Caree, LP, a Nevada limited partnership -- Tax I.D. No. 88-0302506 Richard H. Pickup, an individual -- Social Security No. ###-##-#### --------------------------------------------------------------------- (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ x ] (b) [ ] --------------------------------------------------------------------- (3) SEC USE ONLY --------------------------------------------------------------------- (4) SOURCE OF FUNDS* PF and WC --------------------------------------------------------------------- (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) --------------------------------------------------------------------- (6) CITIZENSHIP OR PLACE OF ORGANIZATION -- Dito-Caree, LP is a limited partnership organized under and pursuant to the laws of the State of Nevada. Richard H. Pickup is an individual maintaining his residence in the State of California and is a citizen of the U.S. --------------------------------------------------------------------- (7) SOLE VOTING POWER Dito-Caree, LP -- 900,000 (plus rights to NUMBER OF exercise warrants to acquire SHARES an additional 430,096 shares BENEFICIALLY Richard H. Pickup -- 0 OWNED BY -------------------------------------------------------- EACH (8) SHARED VOTING POWER REPORTING NONE PERSON -------------------------------------------------------- WITH (9) SOLE DISPOSITIVE POWER Dito-Caree, LP -- 900,000 Richard H. Pickup -- 0 -------------------------------------------------------- (10) SHARED DISPOSITIVE POWER NONE -------------------------------------------------------- (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Dito-Caree, LP -- 900,000 Richard H. Pickup -- 0 --------------------------------------------------------------------- (12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] --------------------------------------------------------------------- (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Dito-Caree, LP -- 10.64% Richard H. Pickup -- 0% --------------------------------------------------------------------- (14) TYPE OF REPORTING PERSON* Dito-Caree, LP -- PN Richard H. Pickup -- IN --------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. 3 ITEM 1. SECURITY AND ISSUER This Schedule 13D relates to shares of Common Stock ("Shares") of Advanced Materials Group, Inc., a Nevada corporation ("AMG") whose executive offices are located at 20211 South Susana Road, Rancho Dominguez, California 90221. Shares of AMG are traded on the NASDAQ over the counter National Market System under the trading symbol of ADMG. ITEM 2. IDENTITY AND BACKGROUND This Schedule 13D is an original filing and is filed by Dito-Caree, LP, a Nevada limited partnership ("Caree"), and Richard H. Pickup, an individual ("Mr. Pickup"). It is acknowledged that Mr. Pickup controls Caree and, by reason of his control of Caree, it is acknowledged that Mr. Pickup is an affiliate of Caree, and, therefore, Caree and Mr. Pickup are acknowledged to be a "group" concerning the acquisition and holding of Shares, although no formal arrangement, agreement or understanding has been entered into between Mr. Pickup and Caree (nor any of the other individuals or entities identified herein) concerning the Shares. The filing of this Schedule 13D is to disclose the execution of an acquisition agreement dated the 13th day of August, 1997 (the "Acquisition Agreement") by and between Trilon Dominion Partners, LLC ("Trilon"), as Seller, and Timothy R. Busch, as Trustee of the Timothy R. Busch Living Trust, under Declaration of Trust dated September 7, 1983 ("Trust"), and the Trust's assignees and designees under the Acquisition Agreement including Caree. Said Acquisition Agreement (a copy of which is attached hereto as an exhibit) is subject to a number of contingencies and conditions, therefore, the 1,600,807 Shares to be transferred under the terms of the Acquisition Agreement (together with warrants as referenced within the Acquisition Agreement) shall not be transferred until the close of the acquisition transaction, which is anticipated to occur on or before September 15, 1997. Caree does anticipate the transaction will close and, upon the close of the transaction, Caree will acquire and own, as a designee of the Buyer under the Acquisition Agreement, 900,000 Shares, together with rights to warrants convertible into Shares, which warrants, if exercised, potentially would give to Caree the right to acquire an additional 430,096 Shares. Under the terms of the Acquisition Agreement with Trilon, a total of 1,600,807 total Shares are to be acquired, together with 900,065 warrants, upon payment of a total cash consideration of $2,921,162.25 (allocable $2,801,412.25 for the Shares and $119,750 for the warrants). In connection with such transaction, Caree shall acquire 900,000 Shares and 430,096 warrants, for a total consideration of $1,690,114. The balance of said Shares and warrants (consisting of 700,807 Shares and 469,969 warrants) shall be acquired by the Lenawee Trust ("Lenawee") (as identified in Item 3 hereinbelow), as assignee and designee of the Trust, and entities and individuals associated with (but not controlled by) Lenawee. None of the reporting entities currently own any Shares of AMG, however, upon acquisition of the Shares, it is anticipated the total holdings of Shares by Caree shall exceed 10% of the issued and outstanding Shares of AMG. This Schedule 13D is being filed by the following individuals and entities: (a) Richard H. Pickup, an individual ("Mr. Pickup"). His business address is 610 Newport Center Drive, Suite 1300, Newport Beach, California 92660. Mr. Pickup beneficially owns no AMG Shares and it is not anticipated that he shall acquire any Shares as a result of the transaction with Trilon described herein. Although Mr. Pickup does not own, and it is not anticipated he shall, of record, beneficially own, any AMG Shares, he is deemed to control Caree. 4 (b) Dito-Caree, LP ("Caree") is a Nevada limited partnership which currently owns no Shares, however, it is anticipated it will acquire the Shares and warrants specified hereinabove, including acquiring 900,000 Shares, upon the close of the anticipated transaction with Trilon. Caree was organized to transact business as a limited partnership within the State of Nevada and Caree's mailing address is 3753 Howard Hughes Parkway, Suite 200, Las Vegas, Nevada 89109. The current General Partner of Caree is Gamebusters, Inc., a Nevada corporation, whose business address is 3753 Howard Hughes Parkway, Suite 200, Las Vegas, Nevada 89109, with the officers being David B. Hehn, as President and Secretary/Treasurer, and the directors being David B. Hehn and Richard H. Pickup. All stock of Gamebusters, Inc. is controlled by Richard H. Pickup. Over the past five years, none of the filing persons, or any of the entities identified hereinabove, including any officer or director of any corporation identified herein, have (1) been convicted in a criminal proceeding, or (2) been a party to a civil proceeding of a judicial or administrative body which resulted in a judgment, decree or final order enjoining future violations of or prohibitions or mandating activity subject to federal or state securities laws or finding any violations with respect to such laws. Although Richard H. Pickup is the controlling person of Caree, and it is acknowledged that he exercises sufficient control in order to consider Caree to be treated with Mr. Pickup as a "group," there exists no agreements or understandings, either in writing or orally, between Mr. Pickup and Caree concerning their Shares, nor the holding voting or acquisition or disposition of any Shares of AMG. Further, each of the reporting persons or entities herein disavows any instance as a group with any other party acquiring Shares as identified under Item 3 hereinbelow. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The transaction giving rise to this Schedule 13D filing involves the execution of an Acquisition Agreement with Trilon to purchase and acquire a total of 1,600,807 Shares of AMG upon the close of a purchase transaction memorialized in an agreement dated the 13th day of August, 1997 (a copy of which is attached hereto). It is anticipated that upon the close of that transaction, a total of 900,000 Shares shall be delivered to Caree and 700,807 Shares shall be delivered to Lenawee and related individuals (which trust it is acknowledged is an affiliate of and is controlled by Timothy R. Busch together with various individuals who are members of, employees of, or affiliated with The Busch Firm, Mr. Busch's law firm). Each share of Common Stock was acquired in connection with a transaction with Trilon at a purchase price (attributable both to the Shares and the additional warrants described in the Acquisition Agreement) approximately $1.75 per share, with total additional consideration of $119,750 being attributable to the acquisition of warrants described in the Acquisition Agreement (it is also anticipated that transactional expenses, including legal fees and other expenses incurred to document and complete the transaction and transfer the Shares from Trilon under the terms of the Acquisition Agreement, will approximate $85,000, which additional transactional expenses are to be shared on a pro rata basis among the purchasers of the Shares). The negotiation of the Acquisition Agreement and the transfer of Shares to be acquired by Caree shall be purchased in a private placement transaction as negotiated with Trilon. All funds used to acquire Shares shall be working capital of Caree or personal funds of Mr. Pickup. In addition to Caree, other individuals or entities which shall participate in the private purchase transaction under the Acquisition Agreement with Trilon, consist of Lenawee, with its Trustees being Gregory A. Busch and David Keligian, both of whom maintain offices at 2532 Dupont Drive, Irvine, California 92612, and the ultimate beneficiary of that Trust is acknowledged -4- 5 to be Timothy R. Busch, principal in The Busch Firm, a law firm maintaining offices at 2532 Dupont Drive, Irvine, California 92612. Lenawee, and certain other individuals or entities who are affiliated with or consultants to or associated with The Busch Firm, or members thereof, shall also acquire Shares under the Acquisition Agreement. Lenawee and those individuals associated with The Busch Firm shall acquire 700,807 Shares together with 469,969 warrants, Lenawee shall acquire the substantial portion of those Shares and warrants, with the balance of those Shares and warrants being acquired by members of The Busch Firm or related individuals designated as David B. Hehn, David Keligian, Gregory A. Busch, George Mulcaire, Jim Scheinkman, Karen Busch, Four JM LLC (which entity has, as its ultimate member beneficiaries, John F. Moody, Joseph W. Moody; Jeffrey Moody and Jane Fowler), Clay Stevens, Steve Howard, Doug Stevens, Rudy Fuchs, John Savage, Sherrie Schaeffer, Dennis W. Harwood and Rick Weiner. Each of the filing persons specifically disaffirm the existence of any group, relationship, contracts, or agreements by and between Lenawee or any of the individuals named in the preceding paragraph who shall be acquiring Shares. Further, each of those individuals and entities identified shall acquire Shares directly from Trilon and no loans or contributions of funds as between any of the individuals identified as participating in the transaction and the filing persons shall exist, and no agreements or understandings are executed or entered into by and between Caree or Mr. Pickup and any of the individuals identified above. It is to be noted that Mr. Busch of The Busch Firm does act, from time to time, as legal counsel to Mr. Pickup and to Caree, however, and no agreements, understandings exist in relation to any holding or voting of the Shares to be acquired. Each of the filing persons herein specifically disaffirms the existence of any "group" for filing purpose under Section 13(d) of the Act existing as of the date of acquiring the Shares from Trilon and any other entity or individual identified herein is not acknowledged to be a member of any group with Mr. Pickup or Caree. ITEM 4. PURPOSE OF TRANSACTION Each of the filing persons has purchased the Shares in AMG for investment purposes only and no agreement, formal or informal, written or oral, has been entered into by and between any of the filing persons concerning the formation of any group nor taking any form of group action. Certain representatives of Caree and Mr. Pickup have made inquiries of certain management personnel of AMG concerning business operations of AMG, however, no form of proposal, understanding or any other form of arrangements have been made, proposed or discussed during those conversations. None of the filing persons have entered into any commitment, understanding or binding obligation with one or more of the filing persons or any third persons concerning the acquisition and disposition of Shares. Rights of the filing persons shall include the making of further acquisitions of Shares from one or more sellers, either through open market purchases or in privately negotiated transactions, and in disposing of all or any portion of the Shares of AMG common stock held by all or any of the filing persons to one or more purchasers, either through open market or in privately negotiated transactions. None of the filing persons, including Mr. Richard H. Pickup, has any present plans in connection with any of the foregoing actions, nor any of those actions specified hereinbelow, however none of the foregoing or following actions by any of the filing persons can be ruled out in the future for either the short or long term. Further, none of the filing persons has any present plans or proposals which may relate to our result in: A. The acquisition or disposition by any person of any additional securities of the issue or the disposition of securities of the issuer. -5- 6 B. An extraordinary corporate transaction, such a merger, reorganization or liquidation involving the issuer or any of its subsidiaries. C. The sale or transfer of a material amount of assets of the issuer or any of its subsidiaries. D. A change in the present board of directors or management of the issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies upon the board (except to vote for directors as specified above). E. Any material change in the present capitalization or dividend policy of the issuer. F. Any material change in the issuer's business or corporate structure. G. Changes in the issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the issuer by any person. H. Causing a class of securities of the issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association. I. Causing a class of equity securities of the issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or J. Any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER As of the date of this filing, none of the filing persons owns any Shares or securities of AMG. Upon satisfaction of the conditions under the Acquisition Agreement and the close of the transaction contemplated under the terms of the Acquisition Agreement, it is anticipated that each of the filing persons shall own the following Shares: (a) Richard H. Pickup, an individual, shall own none of the Shares or securities of AMG. (b) Dito-Caree, LP, a Nevada limited partnership, currently owns no Shares of AMG, however, upon the close of the transaction, it is contemplated that Caree shall own 900,000 Shares, plus rights to warrants representing a right to acquire an additional 430,096 Shares. It is anticipated that the Shares will be acquired upon the close of the transaction anticipated to occur on or before September 15, 1997, and a total consideration shall be paid by Caree to acquire said Shares (and warrants) in the sum of $1,690,114. Upon completion of the transaction, Caree's holdings of 900,000 Shares would represent approximately 10.64% of all outstanding Shares. The percentage of Caree's Shares are based upon a total of 8,460,000 Shares of Common Stock as reflected on AMG's most recent filings with the Securities and Exchange Commission. -6- 7 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER A copy of the contract dated the 13th day of August, 1997 by and between Trilon and Trust, under which Caree is entitled to receive Shares, is attached hereto as an exhibit. No other contract, arrangement, understanding or relationship exists with respect to the securities of AMG between any of the entities or persons disclosed herein or Richard H. Pickup. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Attached hereto as Exhibit 7.1 is a copy of the contract dated the 13th day of August 1997 by and between Trilon and the Trust. SIGNATURE After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this statement is true, complete and current. Dated: September 5, 1997 DITO-CAREE, LP, a Nevada limited partnership By: GAMEBUSTERS, INC. a Nevada corporation Its General Partner By: [SIG] -------------------------------- David B. Hehn President RICHARD H. PICKUP /s/ RICHARD H. PICKUP ---------------------------------- Richard H. Pickup An individual -7- EX-7.1 2 CONTRACT BETWEEN TRILON AND THE TRUST 1 TIMOTHY R. BUSCH LIVING TRUST U/T/D/9/7/83 2532 Dupont Drive Irvine, California 92612-1254 August 13, 1997 VIA FACSIMILE (212) 867-2955 AND AIRBORNE DELIVERY Trilon Dominion Partners, LLC 245 Park Avenue, 28th Floor New York, N.Y. 10167 Attn: Scott Flamm Re: Our File No. 2240-O-4.3 ----------------------- Binding Letter Agreement to Purchase Securities Dear Mr. Flamm: This letter agreement ("Letter Agreement") shall document the parties' binding obligation to purchase and sell the Securities (defined below). 1.0 Background. Trilon Dominion Partners, LLC ("Seller") and representatives of Buyer (as defined below) have been negotiating various terms and conditions pertaining to the sale of the Securities of Advanced Materials Group, Inc., a Nevada corporation ("Company"). The Seller has offered to sell the Securities ("Transaction") for the purchase consideration set forth below, and is willing to make the representations, warranties and covenants provided below to induce Buyer to consummate the Transaction. The Buyer has offered to buy the Securities for the purchase consideration set forth below, and is willing to make the representations, warranties and covenants provided below to induce Seller to consummate the Transaction. The Buyer is willing to purchase the Securities subject to the terms and conditions set forth below. The parties anticipate that they may subsequently enter into a more detailed purchase and sale agreement ("Purchase Agreement") to consummate the EXHIBIT 7.1 2 Scott Flamm August 13, 1997 Page 2 Transaction. However, the parties wish to enter into this binding Letter Agreement, and Seller and Buyer are relying on same, as consideration for both parties' incurrence of certain costs necessary to consummate the Transaction. The binding nature of this Letter Agreement is not dependent upon the entering into of a subsequent Purchase Agreement, if any. 2.0 Buyer. The Buyer shall be the Timothy R. Busch Living Trust (an affiliate of Timothy R. Busch) or its assignees or designees, including Dito Caree Limited Partnership ("Dito") or its affiliates. 3.0 Securities. The securities to be purchased ("Securities") are: 3.1 1,600,807 common voting shares in the Company (the "Stock"). 3.2 Warrants ("Warrants") evidencing the holder's rights to purchase shares of additional Company common stock on the following terms: No. of Shares Exercise Price Expiration Date - ------------- -------------- --------------- 35,000 $0.90 per share 9/30/99 840,000 $2.98 per share 3/24/99 60,000 $0.75 per share 12/22/2000 30,000 $0.75 per share 12/22/2000 4.0 Payment of Purchase Price. The Purchase Price shall be Two Million Nine Hundred Twenty-One Thousand One Hundred Sixty-Two Dollars and Twenty-Five Cents 3 Scott Flamm August 13, 1997 Page 3 ($2,921,162.25). The Purchase Price is allocable One Dollar and Seventy-Five Cents ($1.75) per share of Stock (a total of Two Million Eight Hundred One Thousand Four Hundred Twelve Dollars and Twenty-Five Cents ($2,801,412.25)) and a total of One Hundred Nineteen Thousand Seven Hundred Fifty Dollars ($119,750.000) to the Warrants. The Buyer shall deliver a deposit ("Deposit") of One Hundred Thousand Dollars ($100,000.00) within seventy-two (72) hours of the full execution of this Letter Agreement. The Deposit shall be nonrefundable, except in the event of Seller's breach of this Letter Agreement or Seller's failure to satisfy the conditions set forth in Paragraph 7.0 herein. The balance of the Purchase Price shall be payable in cash at the Closing. 5.0 Seller's Warranties, Representations and Covenants. The Seller warrants, represents and covenants as follows: (a) The Securities are validly issued, fully paid and non-assessable. The Warrants have not previously been exercised, are fully assignable to Buyer and immediately exercisable without condition and are evidenced by written instruments containing only customary terms for this type of security. (b) The Seller has authority to enter into this Letter Agreement and this Letter Agreement is Seller's valid and binding obligation, enforceable in accordance with its terms. (c) Neither the Seller nor the Securities are subject to any judgments, orders, decrees, claims, litigation, agreements, or instruments which may interfere with (i) the Seller's ability to perform its obligations or (ii) the value of the Securities. (d) Seller has good marketable title to the Securities, free and clear from any and all liens, encumbrances, pledges, claims or rights of any other parties. 4 Scott Flamm August 13, 1997 Page 4 (e) Seller has no liability to pay any broker, agency, or finder fees or commissions with respect to the Transaction. (f) Seller shall reasonably cooperate with Buyer to cause, the Company to enter into the agreement described in Section 7.0(a) hereof. Seller's representations and warranties shall survive the Closing. 6.0 Buyer's Warranties, Representations and Covenants. The Buyer warrants, represents and covenants as follows: (a) The Buyer has authority to enter into this Letter Agreement and this Letter Agreement is Buyer's valid and binding obligation, enforceable in accordance with its terms. (b) The Buyer is not subject to any judgments, orders, decrees, claims, litigation, agreements, or instruments which may interfere with the Buyer's ability to perform its obligations under this Letter Agreement. (c) The Buyer represents that the Buyer and all of its assignees or designees are either accredited investors or are, together with their purchaser representatives, if any, sophisticated investors within the meaning of applicable securities laws. (d) The Buyer represents that, except as provided herein, the Securities are being purchased for Buyer's own account, for investment purposes only, and not for the account of any other person, and not with a view to distribution, assignment, or resale to others or to fractionalize in whole or in part and that the offering and sale of the Securities is intended to be exempt from registration under the Securities Act of 1933 and that the Buyer is not acting as an underwriter for the purposes of said Act. In furtherance thereof, Buyer represents, warrants, and agrees that no other person has or will transfer such Securities or rights thereto unless such transaction is registered or qualified under the Securities 5 Scott Flamm August 13, 1997 Page 5 Act of 1933 and applicable state securities laws or unless an exemption from the registration requirements of the Securities Act of 1933 and such laws is available. 7.0 Conditions to the Closing The Buyer's obligation to close this transaction is subject to satisfaction of the following conditions: (a) The Company shall have entered into a binding written agreement providing as follows: (i) The Company shall as promptly as practicable file an S-3 Registration Statement causing the registration of the resale of the Stock and the shares subject to the Warrants (collectively, the "Registered Securities") with the Securities Exchange Commission and applicable state securities agencies; (ii) The Company shall file an amendment to such Registration Statement to reflect the Transaction as soon as practicable following the Closing; and (iii) The Company shall use its best efforts to cause such Registration Statement and prospectus to become and remain current and effective for a period of two (2) years following the Closing (or, in the case of the shares subject to the Warrants, two (2) years following the exercise thereof) and take such actions to permit the Registered Securities to be freely tradeable in Buyer's hands as expeditiously as possible. The costs relating to registration will be at Company or Seller's expense, except that Buyer will pay all reasonable incremental costs of the Company attributable to the need to amend the Registration Statement to reflect the Transaction. Such agreement shall contain other customary provisions contained in registration rights agreements that are not inconsistent with the foregoing, in form and substance reasonably satisfactory to Buyer. 6 Scott Flamm August 13, 1997 Page 6 (b) All of the Seller's representations and warranties set forth above being true and correct as of the Closing. 8.0 Closing. Closing shall occur at the offices of The Busch Firm on the fifth (5th) business day following the satisfaction of all of the conditions set forth in Section 7.0, provided that in no event shall the Closing occur after September 15, 1997 ("Closing"). 9.0 Compliance. The parties intend that the purchase and sale of the Securities in the Transaction shall be pursuant to a so-called "Section 4(1-1/2) Transaction" and that the parties shall provide such instruments to each other and to the Company to ensure that the purchase and sale of the Securities hereunder comprises an exempt transaction under the Securities Act of 1933 and applicable state securities laws. The foregoing shall not limit the Buyer's rights to cause the registration of the Securities for resale as provided herein. 10.0 Liquidated Damages. In event of Buyer's breach of any term of this Letter Agreement, Seller's exclusive remedy shall be to retain the Deposit as liquidated damages and Seller shall have no other recourse against Buyer. 11.0 Miscellaneous. If either party institutes any legal proceeding against the other in connection with this Letter Agreement or any matter arising out of or in connection with this Letter Agreement, the prevailing party in such proceeding shall be entitled to recover court costs and such reasonable attorneys' fees as the court may deem proper, including all costs and expenses of any appellate court proceedings or bankruptcy court proceedings. Time is of the essence of this Letter Agreement. This Letter Agreement embodies the entire agreement and understanding between the parties relating to the subject matter of this Letter 7 Scott Flamm August 13, 1997 Page 7 Agreement and neither this Letter Agreement nor any provision of this Letter Agreement may be amended, waived, or discharged, except by a written instrument executed by the party against whom enforcement of such amendment, waiver, or discharge is sought. This Letter Agreement shall be interpreted and enforced in accordance with California law, and the sole and proper venue shall be Orange County, California. This Letter Agreement may be executed in counterparts each of which, taken together, shall constitute a complete agreement. This Letter Agreement may be executed by signing and forwarding the signature to the other party via facsimile, provided that the original signature of this Letter Agreement is sent immediately thereafter via overnight mail. If the foregoing correctly sets forth your agreement, please execute a counterpart to this Letter Agreement below and return it by facsimile (with a hard copy by overnight mail) to Rick S. Weiner of The Busch Firm at the address listed above. Very truly yours, TIMOTHY R. BUSCH LIVING TRUST U/T/D/ 9/7/83 By: /s/ TIMOTHY R. BUSCH -------------------------------------- Timothy R. Busch Its: Trustee -------------------------------------- [ACCEPTANCE ON THE FOLLOWING PAGE] 8 Scott Flamm August 13, 1997 Page 8 Agreed to and accepted on this 14th of August, 1997. TRILON DOMINION PARTNERS, LLC By: /s/ SCOTT FLAMM ----------------------------- SCOTT FLAMM Its: Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----