Series D Preferred Stock Purchase Agreement

SERIES D PREFERRED STOCK PURCHASE AGREEMENT


THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of August 21, 1996, by and between Nevada Bob's Holdings, Inc., a Delaware corporation (the "Company"), and The Arnold Palmer Golf Company, a Tennessee corporation (the "Investor").


In consideration of the promises herein made and on the terms and subject to the conditions herein contained, the Company and the Investor agree as follows:


SECTION 1


Contribution to the Company


1.1 Purchase and Sale of Stock. The Company will sell to the Investor, and the Investor will purchase from the Company, a total of 625,000 shares of the Company's Series D Preferred Stock, ("Preferred Shares") at the per share purchase price of $8.00 and an aggregate purchase price of $5,000,000 (the "Purchase Price"). The Preferred Shares will have and be subject to all the rights, preferences, privileges and restrictions with respect to the Series D Preferred Stock set forth in the form of the Company's Fourth Amended and Restated Certificate of Incorporation attached hereto as Exhibit A (the "Amended Certificate").


1.2 Closing. The purchase and sale of the Preferred Shares will take place at 10:00 a.m. PDT on August 21, 1996, at the offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, Three Embarcadero Center, Seventh Floor, San Francisco, California, or such other time and such place as the Company and the Investor mutually agree (which time and place are designated the "Closing").


SECTION 2


Representations and Warranties of the Company


Except as set forth on SCHEDULE 2 the Company hereby represents and warrants to, and agrees with, the Investor as follows:


2.1 Organization and Standing; Certificate and By-Laws. The Company is a corporation duly organized and existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Company has all requisite corporate power and authority to own and operate its properties and assets, and to carry on its business as presently conducted and as proposed to be conducted. The Company is duly qualified


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to do business as a foreign corporation in each jurisdiction in which the failure to so qualify would have a material adverse effect on the Company's execution, delivery and performance of this Agreement, the transactions contemplated hereby and the Company's business generally. The Company has furnished the Investor with copies of its Restated Certificate of Incorporation in effect as of the date hereof (the "Restated Certificate") and Bylaws, as amended. Said copies are true, correct and complete and contain all amendments through the date hereof.


2.2 Corporate Power. The Company has all requisite legal and corporate power and authority to execute and deliver this Agreement and to carry out and perform its obligations under the terms of this Agreement.


2.3 Affiliates. Other than Nevada Bob's Pro Shop, Inc., the Company has no Affiliates and does not otherwise own or control, directly or indirectly, any equity interest in any corporation, association, partnership, trust, limited liability company or other business entity. "Affiliate" means any corporation, association, partnership, trust, limited liability company or other business entity that the Company, directly or indirectly, controls; and "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity through the majority ownership of voting securities.


2.4 Capitalization. The authorized capital of the Company consists of: (i) twenty-one million five hundred thousand (21,500,000) shares of Common Stock, twenty million (20,000,000) shares of which are designated as Series A Common Stock and one million five hundred thousand (1,500,000) shares of which are designated as Series B Common Stock; and (ii) ten million (10,000,000) shares of Preferred Stock, six hundred twenty-nine thousand (629,000) shares of which are designated as Series A Preferred Stock, eight thousand (8,000) shares of which are designated as Series B Preferred Stock and four hundred four thousand two hundred twenty-six (404,226) shares of which are designated as Series C Preferred Stock and eight million nine hundred fifty-eight thousand seven hundred seventy-four (8,958,774) shares of which are undesignated Preferred Stock. The number of issued and outstanding shares of each series of Common Stock and Preferred Stock is as follows: (i) six million eight hundred sixty-one thousand (6,861,000) shares of Series A Common Stock, (ii) one million five hundred thousand (1,500,000) shares of Series B Common Stock, (iii) six hundred twenty-nine thousand (629,000) shares of Series A Preferred Stock, (iv) eight thousand (8,000) shares of Series B Preferred Stock and (v) four hundred four thousand two hundred twenty-six (404,226) shares of Series C Preferred Stock. The outstanding shares of Common Stock and Preferred Stock have been duly authorized and validly issued, and are fully paid and non-assessable, with no preemptive rights. All outstanding securities of the Company were issued in compliance with applicable federal and state securities laws. Except for (i) the conversion privileges of Steven Cinelli, (ii) the right of first refusal of Kasumi Sports World, Inc, with respect to certain shares issued by the Company to third


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parties, as provided in the Contribution and Investor Rights Agreement dated January 31, 1996 between Kasumi Sports World, Inc. and the Company and (iii) as otherwise provided herein, there are no outstanding obligations, warrants, preemptive rights or other agreements or commitments to which the Company is a party, or by which the Company is otherwise bound, providing for the issuance of any additional shares or for the purchase of shares of the Company's stock.


2.5 Authorization. The execution, delivery and performance by the Company of this Agreement, and all other agreements or instruments executed and delivered by the Company in connection with the transactions contemplated hereunder, including the Amended Certificate (i) have been duly authorized by all necessary corporate action and duly executed and delivered by the Company and (ii) will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws or court decisions relating to or affecting the rights of creditors generally.


2.6 Material Liabilities. The Company has no material liabilities or obligations, absolute or contingent (individually or in the aggregate), except (i) the liabilities and obligations set forth in SCHEDULE 2; (ii) liabilities and obligations which have been incurred in the ordinary course of business which are not, in the aggregate, materially adverse to the Company and (iii) liabilities and obligations under sales, procurement, leases and other contracts and arrangements entered into in the ordinary course of business.


2.7 Litigation, etc. There are no actions, suits, proceedings or investigations pending against the Company or its properties before any court or governmental agency, nor, to the best of the Company's knowledge, threatened, except as set forth in SCHEDULE 2.


2.8 Compliance with Other Instruments, None Burdensome, etc. The Company is not, and will not be, in violation of any term of its Restated Certificate (or the Restated Certificate, as amended upon filing of the Amended Certificate) or By-Laws, or, in any material respect, of any term or provision of any material mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or decree, and is not in violation of any order, statute, rule or regulation applicable to the Company where such violation would materially and adversely affect the Company. The execution, delivery and performance of and compliance with this Agreement have not resulted and will not (i) result in any material violation of, or material conflict with, or constitute a material default under, the Company's Restated Certificate (or the Restated Certificate, as amended after filing of the Amended Certificate) or By-Laws or any of its material agreements, or (ii) give rise to or result in the creation of any mortgage, pledge, lien, encumbrance, charge or right of any third party upon any of the properties or assets of the Company or under any provision of any law, regulation, ordinance or other legal requirement or any


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judgment, injunction, order, governmental permit, license or decree applicable to the Company, which would materially and adversely affect the Company.


2.9 Registration Rights. Except pursuant to the Contribution and Investors' Rights Agreement dated January 31, 1996 between the Company and Kasumi Sports World, Inc. and as otherwise provided herein, the Company is not under any contractual obligation to register under the Securities Act of 1933, as amended (the "Securities Act"), any of its presently outstanding securities or any of its securities which may hereafter be issued.


2.10 Govenmental Consents. No consent, approval, qualification, order or authorization of, or filing with, any local, state or federal governmental authority is required on the part of the Company in connection with the Company's execution, delivery or performance of this Agreement, except the filing of the Amended Certificate with the Secretary of State of the State of Delaware and taking such action as may be necessary to secure an exemption under applicable state securities laws from qualification of the issuance of the Preferred Shares to the Investor.


2.11 Brokers and Finders. No agent, broker, investment banker or other firm or person acting on behalf or under the authority of the Company is or will be entitled to any broker's or finder's fee or any other commission or similar fee from the Company in connection with any of the transactions contemplated by this Agreement,


2.12 Financial Statements. Company has delivered to Investor the audited balance sheets of the Company and Nevada Bob's Pro Shop, Inc., respectively, as of December 31, 1995 and related consolidated statements of income, shareholder's equity and cash flows for the year ended December 31, 1995 for each company ("Financial S ...