EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is dated as
of September 30, 1997, by and between, on the one hand, Xx. Xxxxxx Xxxxx; and
Xxxxxxx Holdings Limited, a corporation formed under the laws of the Turks and
Caicos Islands, British West Indies ("OHL"); and, on the other hand, Xx. Xxxx
Xxxxxx; Xx. Xxxxxxx Xxxxxx; and Xxxxx Acquisitions II, Inc., a Nevada
corporation ("XXXXX"; Xx. Xxxxxx and Xx. Xxxxxx shall be referred to herein as
the "CONTROLLING XXXXX STOCKHOLDERS").
RECITALS:
WHEREAS, OHL desires to acquire 4,183,125 shares of newly-issued and non-
registered Common Stock, $.001 par value, of Xxxxx (the "NEW SHARES") in
exchange for $4,000,000 cash and the sale to Xxxxx by Xx. Xxxxx or persons
controlled by him of certain patents and patent applications listed on SCHEDULE
1 hereto (the "PATENT RIGHTS"), and the Intangibles (as defined in Section 6.5
hereof), and Xxxxx desires to sell to OHL the New Shares, all on the terms and
conditions set forth herein;
WHEREAS, OHL and Xx. Xxxxx have agreed that, following the purchase and
sale of the New Shares, certain stockholders of Xxxxx just prior to the Closing
(defined below) shall have, under certain circumstances, price support for their
Xxxxx Common Stock in the form of a put option established for such purpose;
WHEREAS, the Controlling Xxxxx Stockholders, who also are the sole
directors and officers of Xxxxx, have agreed that, upon the Closing, Xx. Xxxxxx
shall resign his position as a Director of Xxxxx, and Xx. Xxxxxx shall appoint
Xx. Xxxxx his successor as a Director of Xxxxx, and thereupon resign his
position as a Director and as an officer of Xxxxx;
WHEREAS, the parties hereto have agreed and intend for the New Shares to be
sold by Xxxxx and purchased by OHL in a transaction exempt from the registration
requirements of the U.S. securities laws pursuant to the exemption provided by
Regulation S promulgated by the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and that the
certificates representing the New Shares shall bear the legend set forth on
SCHEDULE 3 hereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representations and warranties
hereinafter set forth, the parties hereto hereby agree as follows:
1. PURCHASE OF NEW SHARES FROM, AND SALE OF PROPERTY TO XXXXX
1.1. PURCHASE OF THE NEW SHARES. Subject to the terms and conditions
of this Agreement, and in reliance upon the representations and warranties of
OHL and Xx. Xxxxx contained herein, Xxxxx shall, at the Closing (as defined in
Section 1.5 below), sell, assign, transfer and deliver to OHL, and OHL shall
purchase, acquire and accept from Xxxxx, all of the New Shares for the
consideration described herein.
1.2. CASH CONSIDERATION FOR THE NEW SHARES. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of Xxxxx and the Controlling Xxxxx Stockholders contained herein, OHL
shall, at the Closing, contribute $4,000,000 to Xxxxx as cash consideration for
the New Shares.
1.3. SALE OF THE PATENT RIGHTS TO XXXXX. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of Xxxxx and the Controlling Xxxxx Stockholders contained herein, Xx.
Xxxxx shall, on or before the six month anniversary of the Closing, cause the
completion of the transfer of the Patent Rights and the Intangibles (as defined
in Section 6.5 below), to Xxxxx, and execute all documentation necessary to sell
the Patent Rights, and all rights and privileges associated therewith, to Xxxxx
for one dollar each, plus certain Contingent Compensation (defined in Section
1.4 below). In the event Xx. Xxxxx does not complete the transfer of the Patent
Rights within the time period provided for above, the Founding Stockholders
(defined in Section 1.4 below) shall be entitled to exercise the Put described
in Section 2 of this Agreement, notwithstanding the conditions described in
Sections 2.1(a) and 2.1(b). Upon the completion of the transfer of the Patent
Rights and Intangibles to Xxxxx, Xx. Xxxxx shall so inform, in writing, the
Escrow Agent under the Escrow Agreement (defined in Section 3.3 hereof) and Xx.
Xxxxxx, as designated representative of the Founding Stockholders thereunder and
under the Put Agreement (defined in Section 2.1 hereof).
1.4. CONTINGENT COMPENSATION. For the purposes of this Agreement,
"CONTINGENT COMPENSATION" shall mean, for each year (or portion thereof) that
Xxxxx owns any of the Patent Rights, with respect to each Patent Right, 1% of
all net annual revenues recognized by Xxxxx in connection with the commercial
exploitation of each such Patent Right; PROVIDED, HOWEVER, that such
compensation shall not accrue and be payable with respect to any of the Patent
Rights unless Xxxxx has recognized net income from that Patent Right during such
year, as determined in accordance with generally accepted accounting principles,
as applied in the United States; PROVIDED, FURTHER, HOWEVER, that at such time
as a majority of the shares of Common Stock of Xxxxx held by the stockholders of
Xxxxx just prior to the Closing (excluding Xx. Xxxx Xxxxxx) (such stockholders,
excluding Xx. Xxxxxx, shall be referred to herein collectively as the "FOUNDING
STOCKHOLDERS"), as listed on SCHEDULE 2 hereto, are transferred to persons other
than
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Founding Stockholders, Xx. Xxxxx shall be free to renegotiate with Xxxxx the
Contingent Compensation payable to him with respect to each Patent Right.
1.5. CLOSING. Upon satisfaction of the conditions set forth in
Section 7 below, a review of the documentation provided for herein shall occur
at the pre-closing of the transactions contemplated by this Agreement, at the
offices of Loeb & Loeb LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such
other place as mutually agreed upon by the parties hereto, on or before October
15, 1997. Upon (a) satisfaction of all of the conditions set forth in Section 7
hereof, and no sooner than ten (10) days after Xxxxx'x compliance with Rule
14f-1 promulgated by the SEC under the Securities Exchange Act of 1934, as
amended, (b) the payment to Xxxxx by OHL, by Deutsche Bank on behalf of OHL, or
by any other agent of OHL, for the New Shares, and (c) the delivery of the New
Shares by Xxxxx to XXX, the closing (the "CLOSING") of the transactions
contemplated by this Agreement shall be deemed to have occurred in the Turks and
Caicos Islands, British West Indies.
2. PUT OPTION
2.1. PUT OPTION FOR FOUNDING STOCKHOLDERS. Pursuant to the terms of
the Put Agreement, the form of which is attached as EXHIBIT A hereto, all of the
Founding Stockholders, whose holdings of Xxxxx Common Stock shall aggregate, as
of the Closing, 278,750 shares, shall have the right to cause the purchase, at
$3 per share, which price shall be adjusted to give effect to stock splits,
stock dividends, recapitalizations, capital distributions, and similar events,
out of the Put Support Funds described in Section 3.1 below, of up to all of
their Xxxxx Common Stock owned as of immediately prior to the Closing (the
"PUT"), on the following conditions:
(a) The Put will be effective only if, during the six-month period
following the Closing (the "MEASURING PERIOD"), the daily average closing bid
price of the Xxxxx Common Stock is not at least $3 per share for 20 consecutive
trading days, which price shall be adjusted to give effect to stock splits,
stock dividends, recapitalizations, capital distributions, and similar events;
and
(b) If the condition in (a) above is satisfied, the Put shall exist
for the six-month period following the end of the Measuring Period (the "PUT
PERIOD").
2.2. PUT RIGHT PERSONAL TO FOUNDING STOCKHOLDERS. The parties hereto
hereby agree that the Put right shall be a personal right granted to the
Founding Stockholders, and that if any Xxxxx Common Stock held by the Founding
Stockholders is transferred to a different beneficial owner, the transferee of
such stock shall have no right to avail itself of the Put. In accordance with
the foregoing, each of the Founding Stockholders shall have the right to put
some or all of his Xxxxx Common Stock to Xxxxx regardless of whether any other
Founding Stockholder avails himself of such right.
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3. PUT ESCROW FUND
3.1. PUT SUPPORT FUNDS. To fund the Put described in Section 2 above,
at the time of the Closing, Xx. Xxxxx shall deposit with Loeb & Loeb LLP, as
Escrow Agent (the "ESCROW AGENT") $836,250, to be held by the Escrow Agent in a
separate account (the "PUT SUPPORT FUNDS").
3.2. RIGHT TO PUT. If the condition causing the Put to be effective
occurs, each Founding Stockholder shall have the right, during the Put Period,
to cause the purchase, out of the Put Support Funds, for $3 per share, which
price shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar events, of the number of
shares of Xxxxx Common Stock held by each Founding Stockholder at the time just
prior to the Closing, as the number of such shares shall be adjusted to give
effect to stock splits, stock dividends, recapitalizations, capital
distributions, and similar events.
3.3. FAILURE OF PUT RIGHT; RETURN OF ESCROW. If, during the Measuring
Period, the daily average closing bid price of the Xxxxx Common Stock is at
least $3 per share for 20 consecutive trading days, which price shall be
adjusted to give effect to stock splits, stock dividends, recapitalizations,
capital distributions and similar events, then the Escrow Agent shall
immediately return to Xx. Xxxxx all amounts on deposit constituting Put Support
Funds pursuant to the terms of the Escrow Agreement, the form of which is
attached as EXHIBIT B hereto. In any event, at the expiration of the Put
Period, all amounts remaining on deposit constituting Put Support Funds shall
immediately be returned to Xx. Xxxxx by the Escrow Agent, or the L/C (defined in
Section 3.4 below) shall terminate and be of no further force or effect, as
applicable, with respect to those Put Support Funds for which no claim has been
made.
3.4. SUBSTITUTION OF L/C FOR CASH. Xx. Xxxxx shall have the right,
during the Measuring Period and with the consent of Xx. Xxxxxx on behalf of the
Founding Stockholders, which consent shall not be unreasonably withheld, to
substitute for the Put Support Funds an irrevocable letter of credit, in the
face amount of $836,250, in favor of the Founding Stockholders, to be issued by
Deutsche Bank AG, New York Branch, or such other banking institution selected by
Xx. Xxxxx and reasonably acceptable to Xx. Xxxxxx, as the designated
representative of the Founding Stockholders.
4. CALL OPTION AND RIGHT OF FIRST REFUSAL
4.1. CALL OPTION FOR XXXXX FOLLOWING CLOSING ON NEW SHARES OF CERTAIN
FOUNDING STOCKHOLDERS. All of the shares of Xxxxx Common Stock issued and
outstanding just prior to the Closing held or controlled by Xx. Xxxx Xxxxxx and
Mr. Shigeru
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Masuda, or their respective affiliates, which currently aggregate 160,000
shares, shall be subject to a call option (the "CALL") whereby Xxxxx shall have
the right, for a period of one year following the Closing (the "CALL PERIOD"),
to purchase such shares at a price of $30 per share, which price shall be
adjusted to give effect to stock splits, stock dividends, recapitalizations,
capital distributions, and similar events, if the closing bid price of a share
of the Common Stock of Xxxxx rises to $30 or more.
4.2. ELIMINATION OF CALL RIGHT IN STOCK TRANSFERRED. The parties
hereto hereby agree that the Call right accruing to Xxxxx with respect to Xx.
Xxxxxx'x and Xx. Xxxxxx'x shares of Xxxxx Common Stock issued and outstanding
just prior to the Closing shall operate only so long as those shares remain
owned, either of record or beneficially, by Xx. Xxxxxx or Xx. Xxxxxx,
respectively, and that if any of those shares are transferred by such holders
during the Call Period so that they do not own them, either of record or
beneficially, the Call right in favor of Xxxxx with respect to such transferred
shares shall terminate and be of no further force or effect.
4.3. RIGHT OF FIRST REFUSAL. If the closing bid price of a share of
Xxxxx Common Stock rises to $30 or more, which price shall be adjusted to give
effect to stock splits, stock dividends, recapitalizations, capital
distributions, and similar events, and either Xx. Xxxxxx or Xx. Xxxxxx desire to
sell any of their shares of Xxxxx Common Stock, the stockholder proposing to
sell some or all of his stock shall send a written notice to Xxxxx of his
intention to sell (a "PENDING SALE NOTICE"). Xxxxx shall respond to a Pending
Sale Notice within two business days, indicating to the applicable stockholder
Xxxxx'x intention to either exercise the Call with respect to the shares
proposed to be sold, or to permit the proposed sale to an outside party to go
forward. If Xxxxx elects to exercise the Call with respect to the shares
proposed to be sold, it shall pay to such selling shareholder the call price of
$30 per share in cash, within 15 days of its election to exercise the Call.
This right of first refusal in favor of Xxxxx shall exist for a period of one
year following the Closing, and shall not be triggered by any transfer by Xx.
Xxxxxx or Xx. Xxxxxx that does not change the beneficial ownership of their
respective shares of Xxxxx Common Stock.
5. REPRESENTATIONS AND WARRANTIES OF XXXXX AND THE CONTROLLING XXXXX
STOCKHOLDERS
Xxxxx and the Controlling Xxxxx Stockholders hereby jointly and severally
represent and warrant to each of OHL and Xx. Xxxxx as follows:
5.1. ORGANIZATION. Xxxxx is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, has the
corporate power and authority to carry on its business as presently conducted,
and is qualified to do business in all jurisdictions where the failure to be so
qualified would have a material adverse effect on the business of Xxxxx.
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5.2. CAPITALIZATION.
(a) All of the issued and outstanding shares of Xxxxx Common
Stock are duly authorized, validly issued, fully paid and nonassessable. The
New Shares to be sold to OHL pursuant to Section 1.1 will be newly-issued shares
of Common Stock. The issuance of the New Shares has been duly authorized by the
Board of Directors of Xxxxx, and the New Shares, when issued at Closing in
exchange for the consideration described in Section 1.2, shall be validly
issued, fully paid and non-assessable. Once issued, OHL shall have good and
clear title to the New Shares, free from any claims, liens or other encumbrances
of any nature whatsoever, except those created by OHL and except those that may
exist pursuant to the United States federal securities laws.
(b) There are no outstanding options, warrants, or rights to
purchase any securities or other equity interests of Xxxxx.
(c) Just prior to Closing, Xxxxx shall have 363,750 shares of
Common Stock issued and outstanding, and no shares of Preferred Stock issued and
outstanding. Once issued, the New Shares shall represent 92% of the issued and
outstanding Common Stock of Xxxxx. XXX shall have the ability, immediately upon
the issuance of the New Shares, to exercise all rights customarily appertaining
thereto, and the New Shares shall not be subject to any prohibition or
restriction contained in any Nevada "anti-takeover" statute, rule or regulation.
5.3. SUBSIDIARIES AND INVESTMENTS. Xxxxx does not own any capital
stock or have any interest in any corporation, partnership, or other form of
business organization.
5.4. FINANCIAL STATEMENTS. Xxxxx has provided to OHL and Xx. Xxxxx
financial statements for Xxxxx consisting of (i) an unaudited Balance Sheet as
of June 30, 1997, (ii) an unaudited Statement of Operations for Xxxxx for the
six (6) month period ended June 30, 1997, (iii) an unaudited Statement of
Stockholder's Equity as of June 30, 1997, and (iv) an unaudited statement of
Cash Flows for the six (6) month period ended June 30, 1997 (collectively, the
"XXXXX FINANCIAL STATEMENTS"). The Xxxxx Financial Statements (a) were prepared
in accordance with the books and records of Xxxxx; (b) were prepared in
accordance with generally accepted accounting principles consistently applied;
(c) are accurate and fairly present the financial condition and the results of
operations as of the relevant date thereof and for the period covered thereby;
(d) contain and reflect all necessary adjustments and accruals for a fair
presentation of the financial condition and the results of operations for the
period covered by said financial statements; and (e) contain and reflect
adequate provisions for all reasonably anticipated liabilities with respect to
the period then ended. The immediately preceding representation is qualified
only in that it is made to the best knowledge of the Controlling Xxxxx
Stockholders.
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5.5. ABSENCE OF MATERIAL CHANGES. Since June 30, 1997, there has not
been any material adverse change in the condition (financial or otherwise) of
the properties, assets, liabilities or business of Xxxxx, except changes in the
ordinary course of business which, individually and in the aggregate, have not
been materially adverse, and except for distributions of cash to the Founding
Stockholders, as permitted by the Letter of Intent dated August 1, 1997 (the
"LETTER OF INTENT"), among Xx. Xxxxx, Xxxxx and the Controlling Xxxxx
Stockholders.
5.6. NO LIABILITIES. As of the time of the Closing, Xxxxx shall have
no liabilities, contingent or otherwise, other than (a) those imposed by this
Agreement, (b) liabilities incurred in the ordinary course of business,
excluding any legal and accounting fees, and (c) those liabilities otherwise
disclosed to Xx. Xxxxx and OHL in writing on or prior to the Closing, provided
that the liabilities disclosed pursuant to this clause (c) in the aggregate
shall not exceed $5,000. At the Closing, Xxxxx shall possess not less than
$5,000 in cash or cash equivalents. Xxxxx has, and will have, no liabilities to
Global Business Alliance, Inc., contingent or otherwise. Any agreements between
Xxxxx and Global Business Alliance, Inc. have terminated and have no further
force or effect.
5.7. LITIGATION. There is no litigation, proceeding, or investigation
pending or, to the best knowledge of Xxxxx and the Controlling Xxxxx
Stockholders, threatened against Xxxxx, or affecting any of its properties or
assets, or against any officer, director, stockholder, or consultant of Xxxxx
that might result in, either in any case or in the aggregate, any material
adverse change in the business, operations, affairs, or financial condition of
Xxxxx or its properties or assets, or that might call into question the validity
of this Agreement, or any action taken or to be taken pursuant hereto.
5.8. CONTRACTS AND UNDERTAKINGS. Except for ordinary banking
relations and an oral agreement relating to the provision of services in the
ordinary course of business by its transfer agent, as of the Closing, there will
be no contracts, agreements, leases, licenses, arrangements, commitments or
other undertakings (collectively "CONTRACTS") to which Xxxxx shall be a party or
to which its property shall be subject, other than this Agreement.
5.9. NO CONFLICT. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i) conflict
with or result in a breach of any term or provision of, or constitute a default
under, the Certificate of Incorporation or By-Laws of Xxxxx, or any material
Contract to which Xxxxx or either Controlling Xxxxx Stockholder is a party or by
which it or any of their respective assets are bound, (ii) require any
authorization, consent or approval of, exemption or other action by, or notice
to, any third party, (iii) result in the creation or imposition of any lien or
other encumbrance upon any of Xxxxx'x or either Controlling Xxxxx Stockholder's
assets, or (iv) violate or require any consent or notice under any law or order
to which Xxxxx, either Controlling Xxxxx Stockholder or any of their respective
assets are subject.
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5.10. AUTHORITY. Xxxxx and the Controlling Xxxxx Stockholders have
full power and authority to enter into this Agreement and to carry out the
transactions contemplated herein. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized and approved by the Board of Directors of Xxxxx, and no other
corporate proceedings on the part of Xxxxx are necessary to authorize this
Agreement and the transactions contemplated hereby.
5.11. DISCLOSURE. Neither this Agreement nor any other agreement,
document, certificate or written statement furnished to OHL or Xx. Xxxxx by
Xxxxx, the Controlling Xxxxx Stockholders or any financial advisor or consultant
of Xxxxx in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact or when taken as a whole omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
5.12. REGULATION S.
(a) Xxxxx and the Controlling Xxxxx Stockholders have not taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in a manipulation of the price of the
New Shares (including making, or causing to be made, any short sales of Xxxxx'x
Common Stock) in order to facilitate the sale or resale of the New Shares.
(b) Xxxxx and each Controlling Xxxxx Stockholder represents and
warrants that neither Xxxxx nor, to the best of their knowledge, any
distributor, if any, participating in the offering of the New Shares nor, to the
best of their knowledge, any person acting for Xxxxx or any such distributor has
(i) undertaken any activity for the purpose of, or which could reasonably be
expected to have the effect of, conditioning the United States market for the
New Shares, or (ii) conducted any "directed selling efforts" as that term is
defined in Regulation S. Such activity includes, without limitation, the
mailing of printed material to investors residing in the United States, the
holding of promotional seminars in the United States, the placement of
advertisements with radio or television stations broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of the New Shares.
6. REPRESENTATIONS AND WARRANTIES OF OHL AND XX. XXXXX
XXX and Xx. Xxxxx hereby jointly and severally represent and warrant to
Xxxxx and the Controlling Xxxxx Stockholders as follows:
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6.1. ORGANIZATION.
(a) OHL is a corporation duly organized, validly existing, and
in good standing under the laws of the Turks and Caicos Islands, British West
Indies, has the corporate power and authority to carry on its business as
presently conducted, and is qualified to do business in all jurisdictions where
the failure to be so qualified would have a material adverse effect on the
business of OHL.
(b) The copies of the Certificate of Incorporation of OHL, as
certified by the Registrar of Companies of Turks and Caicos Island, and the
Articles of Association of OHL, heretofore furnished to Xxxxx, are complete and
correct copies of the Certificate of Incorporation and the Articles of
Association of OHL, as in effect on the date hereof and as of the Closing.
(c) Xx. Xxxxx is the sole beneficial shareholder of OHL.
Unicorn Management Limited is the sole director of OHL, acting as the director
representative of Xx. Xxxxx and Unicorn Secretaries Limited is the Secretary of
OHL, acting as the officer representative of Xx. Xxxxx.
6.2. AUTHORITY. Each of OHL and Xx. Xxxxx has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated herein. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the Board of Directors of OHL, and no other corporate
proceedings on the part of OHL or any other entity are necessary to authorize
this Agreement and the transactions contemplated hereby.
6.3. REGULATION S.
(a) Xx. Xxxxx and XXX certify that neither is a "U.S. Person,"
as defined in Rule 902(o) of Regulation S ("Regulation S") promulgated under the
Securities Act, and that the purchase of the New Shares by OHL is not taking
place within the "United States," as defined in Rule 902(p) of Regulation S, but
rather in an offshore transaction. Xx. Xxxxx and XXX acknowledge that Xxxxx has
not solicited any offer to purchase the New Shares within the United States.
(b) Xx. Xxxxx and XXX understand that the New Shares are not
registered under the Securities Act and, until so registered, may not be sold in
the United States unless an exemption from the registration requirements of the
Securities Act is available. Xx. Xxxxx and OHL acknowledge that the New Shares
have not been registered under the laws of any other country or jurisdiction,
and Xxxxx takes no responsibility for complying with such laws. Furthermore,
the New Shares may be immediately resold only in compliance with the terms and
requirements of Regulation S in markets outside the United States to buyers who
are not U.S. Persons.
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(c) Each of OHL and Xx. Xxxxx shall not take any action in
relation to the New Shares unless the action is permissible under and does not
violate the Securities Act, including, without limitation, Regulation S and any
other securities laws or rules or regulations thereunder.
(d) Xx. Xxxxx and OHL, collectively with their representatives,
have such knowledge and experience in financial, tax and other business matters
as to enable them to utilize the information made available by Xxxxx to evaluate
the merits and risks of and to make an informed investment decision with respect
to the purchase of the New Shares.
(e) OHL is purchasing the New Shares for its own account and
benefit and not as a nominee or for the account of any other person or entity.
OHL has sufficient financial resources to hold the New Shares for an indefinite
period of time.
(f) Xx. Xxxxx and XXX have not taken, and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in a manipulation of the price of the New Shares
(including making, or causing to be made, any short sales of Xxxxx'x Common
Stock) in order to facilitate the sale or resale of the New Shares.
(g) The transactions contemplated by this Agreement are not part
of a plan or scheme to evade the registration provisions of the Securities Act.
(h) To the best knowledge of Xx. Xxxxx and XXX, without any
independent inquiry, neither Xxxxx nor any distributor, if any, participating in
the offering of the New Shares nor any person acting for Xxxxx or any such
distributor has (i) undertaken any activity for the purpose of, or which could
reasonably be expected to have the effect of, conditioning the United States
market for the New Shares, or (ii) conducted any "directed selling efforts" as
that term is defined in Regulation S. Such activity includes, without
limitation, the mailing of printed material to investors residing in the United
States, the holding of promotional seminars in the United States, the placement
of advertisements with radio or television stations broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of the New Shares.
6.4. LITIGATION. There is no litigation, proceeding or investigation
pending or, to the knowledge of OHL or Xx. Xxxxx, threatened, against OHL or Xx.
Xxxxx affecting any of their respective properties or assets, or, to the
knowledge of OHL or Xx. Xxxxx, against any officer, director, or stockholder of
OHL that might result in, either in any case or in the aggregate, any material
adverse change in the business, operations, affairs or condition of Xx. Xxxxx or
XXX or any of his or its properties or assets, or that might call
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into question the validity of this Agreement, or any action taken or to be taken
pursuant hereto.
6.5. PATENT RIGHTS AND INTANGIBLES. Other than the Patent Rights, all
patents, patent applications, copyrights, registered and unregistered
trademarks, tradenames, and licenses (collectively "INTANGIBLES") directly or
indirectly owned by Xx. Xxxxx and required for the commercial exploitation of
the Patent Rights, are set forth on SCHEDULE 1. To the best knowledge of Xx.
Xxxxx and XXX, the Patent Rights and Intangibles do not infringe or conflict
with asserted rights of other parties in the jurisdictions in which such Patent
Rights and Intangibles are currently being employed or are reasonably
anticipated to be employed. The Patent Rights and Intangibles are free of
restrictions on or conditions to transfer or assignment. Xx. Xxxxx, directly or
indirectly, has good and marketable title under the laws of the various
jurisdictions, as required, to the Patent Rights and Intangibles, free and clear
of all licenses, liens, encumbrances and claims. The sole remedy available to
Xxxxx and the Controlling Xxxxx Stockholders for the breach of certain
representations contained in this Section 6.5 and elsewhere in this Agreement
that are discussed in Section 8.1(f) shall be as provided for in Section 8.1(f).
6.6. EXCHANGE ACT FILINGS. If the Closing occurs, Xx. Xxxxx and XXX
undertake to use their best efforts, from the Closing through the end of the Put
Period (referred to in Section 2.1(b)), to assist Xxxxx in the preparation and
timely filing of all filings required by the Securities Exchange Act of 1934 and
filings with any governmental agency required as a result of the transactions
described in this Agreement, including the preparation of certified financial
statements in form acceptable for filing with the Securities and Exchange
Commission pursuant to Regulation S-B, S-K or S-X, for particular inclusion in a
Form 8-K relating to the transactions described in this Agreement, and Form 10-K
and Form 10-Q filings. All such filings shall be made at Xxxxx'x expense. Xx.
Xxxxx and OHL are unaware of any fact relating to the Intangibles and Patent
Rights or themselves which would prevent compliance with the filing requirements
of United States Federal or State securities laws. However, no representation
or warranty is made as to any facts relating to Xxxxx or any other person or
entity that would prevent such compliance.
6.7. FOREIGN CORRUPT PRACTICES ACT. Xx. Xxxxx and OHL have not
conducted their operations in connection with the Patent Rights and Intangibles
in any way which resulted or may result in a violation of the Foreign Corrupt
Practices Act.
6.8. BANKRUPTCY. Neither Xx. Xxxxx nor XXX is insolvent or bankrupt
and there is no pending insolvency or bankruptcy proceeding of any kind
affecting them, the Patent Rights, the Intangibles or any of their assets,
properties or business.
6.9. NO CONFLICT. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i) conflict
with or result in
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a breach of any term or provision of, or constitute a default under, the
Certificate of Incorporation or Bylaws of OHL, or any material Contract to which
OHL or Xx. Xxxxx is a party or by which it or any of their respective assets are
bound, (ii) require any authorization, consent or approval of, exemption or
other action by, or notice to, any third party, (iii) result in the creation or
imposition of any lien or other encumbrance upon any of OHL's or Xx. Xxxxx'x
assets or (iv) violate or require any consent or notice under any law or order
to which OHL, Xx. Xxxxx or any of their respective assets are subject.
6.10. COMPLIANCE WITH LAW. OHL has in all material respects complied
with, and it is now in all material respects in compliance with, all federal and
state laws applicable to OHL.
6.11. SUBSIDIARIES AND INVESTMENTS. OHL does not own any capital stock
or have any interest in any corporation, partnership or other form of business
organization.
6.12. DISCLOSURE. Neither this Agreement nor any other agreement,
document, certificate or written statement furnished to Xxxxx or the Controlling
Xxxxx Stockholders by or on behalf of OHL or Xx. Xxxxx in connection with the
transactions contemplated hereby, contains any untrue statement of material fact
or when taken as a whole omits to state a fact necessary in order to make the
statements contained herein or therein not misleading.
7. CONDITIONS TO CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF OHL AND XX. XXXXX. The obligations
of OHL and Xx. Xxxxx under this Agreement shall be subject to each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF XXXXX TO BE TRUE. The
representations and warranties of Xxxxx and the Controlling Xxxxx Stockholders
herein contained shall be true in all material respects as of the time of the
Closing. Xxxxx and the Controlling Xxxxx Stockholders shall have performed in
all material respects all obligations and complied in all material respects with
all covenants and conditions required by this Agreement to be performed or
complied with by them at or prior to the Closing and OHL and Xx. Xxxxx shall be
furnished with a certificate of the President of Xxxxx, in his corporate
capacity, dated the day of the Closing, certifying to the truth of such
representations and warranties as of the Closing and to the fulfillment of such
covenants and conditions.
(b) AGREEMENTS. All agreements and certificates referred to in
this Agreement, including the Escrow Agreement, the Put Agreement and any
investment certificates, shall have been executed and delivered.
12
(c) NO LEGAL PROCEEDINGS. No injunction or restraining order
shall be in effect prohibiting this Agreement, and no action or proceeding shall
have been instituted and remain pending before the court to restrain or prohibit
the transactions contemplated by this Agreement.
(d) STATUTORY REQUIREMENTS. All statutory requirements for the
valid consummation by Xxxxx and the Controlling Xxxxx Stockholders of the
transactions contemplated by this Agreement shall have been fulfilled. All
authorizations, consents and approvals of all governments and other persons
required to be obtained in order to permit consummation by Xxxxx and the
Controlling Xxxxx Stockholders of the transactions contemplated by this
Agreement shall have been obtained.
(e) DIRECTOR RESIGNATION. Prior to the Closing, all of the
directors and officers of Xxxxx shall have submitted their contingent
resignations to Loeb & Loeb to be held in escrow and to become effective at the
Closing. All resignations shall contain a statement that each of such directors
and officers has no, and shall have no, claim whatsoever against Xxxxx. Before
the resignation of Xx. Xxxxxx shall take effect, Xx. Xxxxxx shall appoint Xx.
Xxxxx the sole director of Xxxxx.
(f) INFORMATION STATEMENT. At least ten (10) days prior to the
Closing, an information statement, in accordance with SEC Rule 14f-1, shall have
been prepared by Xxxxx, filed with the SEC, and distributed to Xxxxx'x
stockholders.
(g) REGULATION S LEGAL OPINION. Loeb & Loeb LLP shall have
delivered a legal opinion to Xxxxx to the effect that the sale of the New Shares
to OHL shall be exempt from the registration requirements under the Act, and
such New Shares shall be eligible for resale in markets outside the United
States to non-U.S. Persons pursuant to the provisions of Regulation S.
(h) XXXXX FILINGS. Xxxxx shall have made all delinquent XXXXX
filings relating to periodic and other reporting requirements imposed on Xxxxx,
under the Securities Exchange Act of 1934 or otherwise, via the XXXXX facility
prior to Closing, as required by the Letter of Intent.
(i) CONSENTS OF PRIOR ACCOUNTANTS. Xxxxx shall have delivered
to OHL the written consents of both (i) Xxxxxx Xxxxxxxxxxxx, CPA, and (ii) Xxxxx
Xxxxxxx & Company, P.C., CPAs, to the reliance by subsequent accountants for
Xxxxx upon prior financial statements prepared by each of the above, and to the
inclusion of such financial statements in any and all future filings by Xxxxx
with the SEC.
7.2. CONDITIONS TO OBLIGATIONS OF XXXXX AND THE CONTROLLING XXXXX
STOCKHOLDERS. The obligations of Xxxxx and the Controlling Xxxxx Stockholders
under this Agreement shall be subject to the following conditions:
13
(a) REPRESENTATIONS AND WARRANTIES OF OHL AND XX. XXXXX TO BE
TRUE. The representations and warranties of OHL and Xx. Xxxxx herein contained
shall be true in all material respects as of the time of the Closing. OHL and
Xx. Xxxxx shall have performed in all material respects all obligations and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed or complied with by them at or prior to the
Closing and Xxxxx and the Controlling Xxxxx Stockholders shall be furnished with
a certificate of Xx. Xxxxx, on his behalf and for OHL, dated the day of the
Closing, certifying to the truth of such representations and warranties as of
the Closing and to the fulfillment of such covenants and conditions.
(b) AGREEMENTS. All agreements and certificates referred to in
this Agreement, including the Escrow Agreement, the Put Agreement and any
investment certificates shall have been executed and delivered.
(c) NO LEGAL PROCEEDINGS. No injunction or restraining order
shall be in effect, and no action or proceeding shall have been instituted and
remain pending before the court to restrain or prohibit the transactions
contemplated by this Agreement.
(d) STATUTORY REQUIREMENTS. All statutory requirements for the
valid consummation by OHL and Xx. Xxxxx of the transactions contemplated by this
Agreement shall have been fulfilled. All authorizations, consents and approvals
of all governments and other persons required to be obtained in order to permit
consummation by OHL and Xx. Xxxxx of the transactions contemplated by this
Agreement shall have been obtained.
(e) XX. XXXXX'X CONSENT TO SERVE AS XXXXX DIRECTOR. Xx. Xxxxx
shall have consented in writing to his appointment as director of Xxxxx.
(f) DELIVERY OF LEGAL OPINION. Loeb & Loeb LLP, counsel for Xx.
Xxxxx and XXX, shall have delivered to Xxxxx the legal opinion referred to in
Section 7.1(g).
8. INDEMNIFICATION
8.1. (a) Xx. Xxxxx and XXX agree to indemnify, hold harmless,
reimburse and defend Xxxxx and Controlling Xxxxx Stockholders against any claim,
costs, expense, liability, obligation, loss or damage (including legal fees) of
any nature, incurred by or imposed upon Xxxxx and the Controlling Xxxxx
Stockholders which results, arises out of or is based upon (a) any
misrepresentation by Xx. Xxxxx and OHL or breach of any warranty by Xx. Xxxxx
and XXX in this Agreement or in any Exhibits or Schedules attached hereto; or
(b) any breach or default in performance by Xx. Xxxxx and OHL of any covenant or
undertaking to be performed by Xx. Xxxxx and XXX hereunder.
14
(b) In the event the Closing does not occur, Xxxxx and the
Controlling Xxxxx Stockholders agree to indemnify, hold harmless, reimburse and
defend Xx. Xxxxx and OHL against any claim, costs, expense, liability,
obligation, loss or damage (including legal fees) of any nature, incurred by or
imposed upon Xx. Xxxxx and XXX which results, arises out of or is based upon (a)
any misrepresentation by Xxxxx and Controlling Xxxxx Stockholders or breach of
any warranty by Xxxxx and Controlling Xxxxx Stockholders in this Agreement or in
any Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Xxxxx and Controlling Xxxxx Stockholders of any covenant or
undertaking to be performed by Xxxxx and Controlling Xxxxx Stockholders
hereunder.
(c) In the event the closing does occur, the Controlling Xxxxx
Stockholders agree to indemnify, hold harmless, reimburse and defend Xx. Xxxxx
and XXX against any claim, costs, expense, liability, obligation, loss or damage
(including legal fees) of any nature, incurred by or imposed upon Xx. Xxxxx and
OHL which results, arises out of or is based upon (a) any misrepresentation by
Xxxxx and Controlling Xxxxx Stockholders or breach of any warranty by Xxxxx and
Controlling Xxxxx Stockholders in this Agreement or in any Exhibits or Schedules
attached hereto; or (b) any breach or default in performance by Xxxxx and
Controlling Xxxxx Stockholders of any covenant or undertaking to be performed by
Xxxxx and Controlling Xxxxx Stockholders hereunder.
(d) Promptly after receipt by an indemnified party of notice of
any claim, loss, damage, liability, cost, expense or the commencement of any
action involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said indemnity provisions,
promptly notify the indemnifying party thereof within thirty (30) days of the
indemnified party's receipt of such notice; but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under said indemnity provisions and shall
not relieve the indemnifying party from liability under said indemnity
provisions unless such indemnifying party is materially prejudiced by such
omission. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall assume and control the defense thereof, with counsel chosen by
indemnifying party but reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there is a conflict of interest which would prevent counsel for
the indemnifying party from assuming the defense on behalf of the indemnified
party, such indemnified parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to such indemnified party
of the indemnifying party's assumption of the defense thereof, the indemnifying
party will not be liable to such indemnified party pursuant to the provisions of
said indemnity provisions for any legal or other expense subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of
15
investigation, unless (A) the indemnified party shall have employed counsel as a
result of such conflict of interest, or (B) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. If the indemnifying party assumes such defense, the
indemnified party shall have the right, at its expense and with counsel of its
choice, to participate in such defense and in all events the indemnified party
shall cooperate fully with the indemnifying party. Neither party will
compromise or settle any such suit, proceeding, claim or demand without prior
written consent of the other, provided that in the event that the indemnifying
party proposes a monetary settlement the acceptance of which would release the
indemnified party from all claims asserted in such action, suit, proceeding or
demand and if the indemnified party withholds its consent to such settlement,
then the liability of the indemnifying party shall be limited to the total sum
representing the amount of the proposed compromise or settlement and the amount
of reasonable attorneys' fees incurred by the indemnified party up to the time
such approval is withheld.
(e) In the event the procedural requirements of Section 8.1(d)
are complied with, Xx. Xxxxx and XXX, pursuant to Section 8.1(c) may, at Xx.
Xxxxx'x option, be indemnified pursuant to a compromise or settlement comprised
of additional shares of the Common Stock of Xxxxx in lieu of cash compensation
for such damages. For the purposes of this Section 8.1(e), the parties hereto
agree that the value of a share of Xxxxx Common Stock shall be $.8797, which
value shall be adjusted to give effect to stock splits, stock dividends,
recapitalizations, capital distributions, and similar events.
(f) The parties hereto understand and acknowledge the inherent
uncertainties in the process surrounding the registration and issuance of
patents, and also recognize that the patents listed on SCHEDULE 1 hereto may be
challenged by third parties, and that the patent applications listed on SCHEDULE
1 hereto may never result in the issuance of a patent registration covering the
invention relating thereto. In the event that there is a successful challenge
to any patent contained in the Patent Rights, or if one or more of the patent
applications contained in the Patent Rights fails to result in the issuance of a
patent registration, or in the event that all of the Patent Rights and
Intangibles are not transferred to Xxxxx in the time period provided in
Section 1.3 hereof, to the extent that any Founding Stockholder exercises the
Put with respect to his Xxxxx Common Stock, such exercise shall be the sole
remedy available to such Founding Stockholder with respect to any occurrence
outlined in this Section 8.1(f), and the Founding Stockholders shall not be
entitled to assert any other claim or receive any other damages with respect
thereto.
8.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF XXXXX
AND THE CONTROLLING XXXXX STOCKHOLDERS. Each representation, warranty, covenant
and agreement of Xxxxx and the Controlling Xxxxx Stockholders contained herein
or in any document, instrument or agreement delivered in connection herewith,
shall survive the
16
execution and delivery of this Agreement and the Closing for a period of
eighteen (18) months following the Closing.
8.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF OHL AND
XX. XXXXX. Each representation, warranty, covenant and agreement of OHL and Xx.
Xxxxx contained herein or in any document, instrument or agreement delivered in
connection herewith, shall survive the execution and delivery of this Agreement
and the Closing for a period of eighteen (18) months following the Closing.
9. MISCELLANEOUS
9.1. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each of the parties hereto will
execute and deliver to the others such documents and take such action as such
other parties may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
9.2. EXPENSES OF SALE. Except as otherwise provided herein, each
party hereto shall bear its own direct and indirect expenses incurred in
connection with the negotiation and preparation of this Agreement, and the
consummation and performance of the transactions contemplated herein. Without
limitation, such expenses shall include the fees and expenses of all attorneys,
brokers, investment bankers, accountants, agents and finders and other
professionals incurred in connection herewith, acting on behalf of such party.
9.3. USE AND CONFIDENTIALITY. All of the information, records, books,
and data to which the parties hereto are given access as set forth herein shall
be used by such parties solely for the purpose of confirming the representations
and warranties set forth herein. Subject to any obligation to comply with
(i) any law, (ii) any rule or regulation of any authority or securities
exchange, or (iii) any subpoena or other legal process to make information
available to the persons entitled thereto, and whether or not the transactions
contemplated herein shall be concluded, all information obtained by any party
about the others, and all of the terms and conditions of this Agreement, shall
be kept in confidence by each party, and each party shall cause its
shareholders, directors, trustees, officers, employees, agents and attorneys to
hold such information confidential. Such confidential information shall be
maintained to the same degree as each party maintains its own confidential
information, and shall be maintained until such time, if any, as any such data
or information either is, or becomes, published or a matter of public knowledge;
provided, however, that the foregoing shall not apply to any information
obtained by either party through its own independent investigations of the other
party or received by such party from a third party not under any obligation to
keep such information confidential, nor to any information obtained by such
party which is generally known to others engaged in the trade or business; and
provided, further, that from and after the Closing, OHL and Xx. Xxxxx shall be
under no obligation to maintain confidential any information concerning Xxxxx or
either Controlling Xxxxx Stockholder (as such information relates to such
Controlling Xxxxx Stockholder's activities in connection with Xxxxx). If this
Agreement
17
shall be terminated for any reason, each party shall return or cause to be
returned to the other all written data, information, files, records and copies
of documents, worksheets and other materials obtained by such party in
connection with the transactions contemplated herein.
9.4. NOTICES. All notices, requests and other communications
thereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or professional messenger service), or sent by telex or telecopy or
mailed first class, postage prepaid, by certified mail, return receipt
requested, or by Federal Express or other reputable overnight delivery service,
in all cases, addressed to:
TO OHL AND XX. XXXXX:
Xx. Xxxxxx Xxxxx
Le Columbia Palace
00, xxxxxx Xxxxxxxxx Xxxxx
Xxxxx Xxxxx
XX-00000, Xxxxxx
Tel: 000-000-00-00-0000
Fax: 000-000-00-00-0000
WITH A COPY TO:
Xxxxx X. Xxxxxxxx, Esq.
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
TO EITHER CONTROLLING XXXXX STOCKHOLDER:
c/o Xx. Xxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
18
WITH A COPY TO:
Xxxxxx X. Xxxxxxx, Esq.
Grushko & Xxxxxxx
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgment or
other evidence of actual receipt or delivery to the address noted above. In
case of service by telecopy, a copy of such notice shall be personally delivered
or sent by registered or certified mail, in the manner set forth above, within
three (3) business days thereafter. Either party hereto may from time to time
by notice in writing served as set forth above designate a different address or
a different or additional person to which all such notices or communications
thereafter are to be given.
9.5. PARTIES IN INTEREST. Except as otherwise expressly provided
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective heirs,
beneficiaries, personal and legal representatives, successors and assigns of the
parties hereto.
9.6. ENTIRE AGREEMENT, AMENDMENTS. This Agreement, including the
Schedules and other documents and writings referred to herein or delivered
pursuant hereto, which form a part hereof, contains the entire understanding of
the parties with respect to the subject matter hereof. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior and contemporaneous agreements and understandings, express or implied,
oral or written, between the parties with respect to the subject matter hereof,
including, without limitation, the Letter of Intent. This Agreement may be
amended only by a written instrument duly executed by the parties or their
respective successors or assigns.
9.7. BROKERS. OHL, Xx. Xxxxx, Xxxxx and the Controlling Xxxxx
Stockholders have not directly or indirectly dealt with anyone acting as a
broker, finder or in a similar capacity, and have not incurred any obligation
for any brokerage, finders' or similar fee or commission in connection with this
Agreement or any of the transactions contemplated hereby, except for Xxxx Xxxxxx
and Bristol Xxxxxxxx & Co. The parties do hereby indemnify each other and hold
each other harmless from any other brokerage, finders' or similar fee or
commission claims arising out of their own actions. Xxxxx is responsible for
and prior to Closing will pay Bristol Xxxxxxxx & Co. the commission earned
pursuant to an engagement letter between Xxxxx and Bristol Xxxxxxxx & Co.
19
9.8. HEADINGS, ETC. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretations of this Agreement.
9.9. PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
9.10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.11. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York. New York State shall be the exclusive venue for any
dispute or controversy arising under or in connection with this Agreement.
9.12. SUBMISSION TO JURISDICTION; SERVICE OF PROCESS. Each of OHL,
Zeron, each Controlling Xxxxx Stockholder and Xx. Xxxxx irrevocably consents to
the exclusive jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or proceeding
arising out of or relating to this Agreement, any document or instrument
delivered pursuant to, in connection with or simultaneously with this Agreement,
or a breach of this Agreement or any such document or instrument. In any such
action or proceeding, each of OHL, Zeron, each Controlling Xxxxx Stockholder and
Xx. Xxxxx hereby waives personal service of any summons, complaint or other
process and agrees that service thereof may be made in accordance with this
Agreement.
20
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the date first above written.
Xxxxx Acquisitions II, Inc., a Nevada
corporation
By:/s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
Title: President
/s/ Xxxx Xxxxxx
------------------------------------
Xx. Xxxx Xxxxxx
/s/ XXXXXXX XXXXXX
------------------------------------
Xx. Xxxxxxx Xxxxxx
Xxxxxxx Holdings Limited, a Turks and
Caicos Islands corporation
By:/s/ XXXXXX XXXXX
---------------------------------
Name: Xxxxxx Xxxxx
Title: Attorney-in-Fact
/s/ XXXXXX XXXXX
------------------------------------
Xx. Xxxxxx Xxxxx
21
SCHEDULE 1
PATENT RIGHTS TO BE SOLD BY XX. XXXXX AND/OR ENTITIES
OWNED OR CONTROLLED BY XX. XXXXX
TO XXXXX ACQUISITIONS II, INC.
PATENT OR DATE
APPLICATION REGISTERED OR
JURISDICTION NUMBER DESCRIPTION APPLIED FOR
*Europe 0333773 Anti-Perspirant Patch 1987
Worldwide PCT/EP87/00724 Anti-Perspirant Patch 1987
U.S.A. S.N. 363512 Anti-Perspirant Patch 0000
Xxxxx 63-501129 Anti-Perspirant Patch 0000
Xxxxxxx P 4007 275.4 Herbal Scarf 0000
Xxxxxxx P 4000 920.3-26 Emollient Cloth 1990
Worldwide PCT/EP90/02303 Emollient Cloth 1990
Europe 91900807.8-2314 Emollient Cloth 0000
Xxxxxxx P 43 18 141.4 Impregnated Scarf 0000
Xxxxxxx 196 32 312.6-26 Glove/Mitten 1996
Germany 196 00 076.9 Glove/Mitten 1996
Europe EP 0782 869 A-1 Glove/Mitten 1996
U.S.A. 08/773 822 Micro-Capsule Coated 1996
Flexible Carrier Material
__________________
*Patent now owned by Deotexis AG, a Swiss corporation 100% owned by Xx.
Xxxxx. This European patent consists of several country-specific sub-patents,
as described on ANNEX A to SCHEDULE 1.
ANNEX A
TO SCHEDULE 1
Specific Country Sub-Patents Under
European Patent No. 0333773
PATENT DATE
JURISDICTION NUMBER DESCRIPTION OF GRANT
Germany 37 80 470 Anti-Perspirant Patch 0000
Xxxxxxx E 78 136 Anti-Perspirant Patch 0000
Xxxxxxxxxxx EP 0 333 773 Anti-Perspirant Patch 0000
Xxxxxx EP 0 333 773 Anti-Perspirant Patch 0000
Xxxxxxx EP 0 333 773 Anti-Perspirant Patch 1996
United Kingdom EP 0 333 773 Anti-Perspirant Patch 1996
The Netherlands EP 0 333 773 Anti-Perspirant Patch 0000
Xxxxx EP 0 333 773 Anti-Perspirant Patch 0000
Xxxxxx EP 0 333 773 Anti-Perspirant Patch 1996
SCHEDULE 2
FOUNDING STOCKHOLDERS
NUMBER
NAME OF BENEFICIAL HOLDER OF SHARES
1. Xxxxxxxx, Xxxxxx - Custodian for Xxxxxx Xxxxx; UGMA 25
2. Xxxxxxxx, Xxxxxx - Custodian for Xxxx Xxxxx* 25
3. Xxxxxxxx, Xxxxxx - Custodian for Xxxxxx Xxxxx* 25
4. Xxxxxxxx, Xxxxxx - Custodian for Xxxxxx Xxxxx; UGMA 25
5. Xxxxxxxx, Xxxxxx - Custodian for Xxxx Xxxxx* 25
6. Xxxxxxxx, Xxxxxx - Custodian for Xxxxxx Xxxxx* 25
7. Xxxx Capital Investments Ltd.* 52,302
8. Xxxxxxx, Xxxxx 100
9. Xxxxx Xxxxxx & Co., for Orix Corporation 49,677
10. Xxxxxxx, Xxxxxx 16
11. Xxxxxxx, Xxxxxx, Trustee FBO Ezra Xxxxxx Xxxxxxx 16
12. Xxxxxxx, Xxxxxx, Trustee FBO Xxx Xxxxxxx 16
13. Xxxxx, Xxxxx 100
14. Xxx, Xxx 16
15. Xxx, Xxxx 8
16. Xxx, Can-Xxxx 16
17. Xxx, Xxxx 8
18. Xxxxxxxxx, Xxxxx 6,250
19. LJT Capital Corp.* 300
20. Xxxxxx, Xxxxxxx* 100
21. Xxxxxx, Xxxxxxx 80,000
22. One World Asset Management* 9,125
23. Xxxxxxx, Xxxxxx X. - Custodian for Xxxxxxxx Xxxxxxx 100
24. Xxxxx, Xxx* 25
25. Xxxxx, Xxx - Custodian for Xxxxxx Xxxxx 25
26. Xxxxx, Xxx - Custodian for Xxxx Xxxxx* 25
27. Xxxxx, Xxx - Custodian for Xxxxxx Xxxxx* 25
28. Xxxxx, Xxxxxx Xxxxxxxx* 6,250
29. Takata, Xxxxxx Xxxxx* 34,100
30. Xxxx, Xxxxxx* 40,000
------
TOTAL: 278,750
-------
-------
________________
*Shares held in street name by Cede & Co., registered holder
SCHEDULE 3
THE SECURITIES EVIDENCED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), OR UNDER THE LAWS OF ANY
STATE OR OTHER JURISDICTION, (B) ARE BEING OFFERED AND SOLD IN RELIANCE ON AN
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PURSUANT TO REGULATION S, AND (C)
MAY NOT BE OFFERED OR SOLD BY ANY PERSON IN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF ANY U.S. PERSON (AS THOSE TERMS ARE DEFINED IN REGULATION
S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE 1933 ACT AND UNDER THE LAWS OF
THE STATES WHERE EACH SALE IS TO BE MADE, OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT IS AVAILABLE.
EXHIBIT A
FORM OF PUT AGREEMENT
EXHIBIT A
P-____
THE PUT OPTION EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING ISSUED IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH LAWS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THIS PUT OPTION IS
NON-TRANSFERABLE
THIS PUT OPTION IS NOT EXERCISABLE
UNLESS THE "TRIGGERING EVENT"
AS DESCRIBED HEREIN
OCCURS OR IS DEEMED TO HAVE OCCURRED
PURSUANT TO THE PROVISIONS HEREOF
Put Option to Cause the Purchase of Shares of
Common Stock of Xxxxx Acquisitions
II, Inc., a Nevada corporation
(the "Company")
1. THIS CERTIFIES that, upon the terms and conditions set forth
herein, at any time following the Triggering Event (defined below) and before
5:00 P.M. on October 9, 1998 New York time (the "Exercise Period"), the holder
listed on the signature page hereof (the "Holder"), is entitled to cause the
purchase by Xx. Xxxxxx Xxxxx of the amount of shares of Common Stock, par value
$.001 per share of the Company (the "Put Shares"), set forth on the signature
page hereof, at a price of $3.00 per Put Share (the "Exercise Price"), for the
total amount set forth on the signature page hereof (the "Purchase Price"), such
Put Shares and Exercise Price subject to adjustment as provided for herein.
This Put Option, and any of the rights granted herein, may not be sold,
transferred, assigned or hypothecated, and any such sale, transfer, assignment
or hypothecation will void this Put Option; PROVIDED, HOWEVER, that a transfer
of the Put Shares to which this Put Option relates that does not result in the
Put Shares being owned by a different beneficial owner will not void this Put
Option.
2. This Put Option shall be deemed effective if the Company's Common
Stock does not close at or above a daily average closing bid price of $3.00 per
share, which price shall be adjusted to give effect to stock splits, stock
dividends, recapitalizations, capital distributions and similar events, for 20
consecutive trading days during the six month period following the Closing of
that certain Stock Purchase Agreement, dated September 30, 1997 ("Stock Purchase
Agreement") by and between, on the one hand, Xx. Xxxxx and Xxxxxxx Holdings
Limited, a Turks and Caicos Islands corporation, and on the other hand, Xx. Xxxx
Xxxxxx, Xx. Xxxxxxx Xxxxxx and the Company (such failure to close at or above
the price specified above, for the amount of time provided for above, during the
time period referred to above, shall be referred to herein as the "Triggering
Event"). Notwithstanding the foregoing, for the purposes of this Put Option, in
the event that the transfer of the Patent Rights to the Company referred to in
Section 1.3 of the Stock Purchase Agreement is not completed in the time period
provided for therein, the Triggering Event will be deemed to have occurred.
3. Upon the occurrence of the Triggering Event, this Put Option may
be exercised during the Exercise Period, as to the total or any lesser number of
Put Shares, by giving written notice, in the form of the Election to Exercise
attached to this Put Option, to Loeb & Loeb LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, the Escrow Agent (the "Escrow Agent") under that certain Escrow
Agreement, dated October 10, 1997, between Xx. Xxxxx, Xx. Xxxx Xxxxxx, as the
designated representative of the Holder of this Put Option under the Escrow
Agreement for the purposes described therein, and the Escrow Agent (the "Escrow
Agreement"), or at such other place as is designated in writing by Xx. Xxxxx
(which other address shall be a New York State address), together with tender to
the Escrow Agent of the stock certificate representing the number of Put Shares
for which this Put Option is being exercised, properly endorsed in blank, and
tender to the Escrow Agent of this Put Option.
4. In the event that this Put Option is exercised by the Holder
hereof for less than his or its total number of Put Shares, upon Xx. Xxxxx'x
agreement that the Holder is entitled to receive the Purchase Price for the Put
Shares being so exercised, the Holder shall receive from the Escrow Agent, (a)
the Purchase Price for the Put Shares being so exercised, and (b) this Put
Option, with the number of Put Shares shown on the signature page hereof
adjusted to reflect the Holder's remaining Put Shares with respect to which this
Put Option has not been exercised. In the event that the Holder tenders to the
Escrow Agent a stock certificate representing a greater number of Put Shares
than the number of Put Shares with respect to which the Holder wishes to
exercise this Put Option, upon Xx. Xxxxx'x agreement that the Holder is entitled
to the Purchase Price for the Put Shares being so exercised, in addition to the
deliveries from the Escrow Agent referred to above, the Holder shall also
receive from the Company a stock certificate for the Company's Common Stock in
an amount of shares equal to the number of Put Shares reflected on the stock
certificate tendered to the Escrow Agent at the time of exercise,
2
less the number of Put Shares with respect to which this Put Option has been
exercised by the Holder hereof.
5. Xx. Xxxxxx shall be the designated representative of the Holder
under this Put Option, for the purposes described in the Escrow Agreement, and
the Holder hereby consents to such designation as a condition to the acceptance
of the Escrow Agreement, this Put Option and any exercise of the rights provided
hereby. The Holder may change his or its address as shown on the signature page
hereof by notifying Xx. Xxxxxx in writing at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000.
6. As soon as practicable after the Escrow Agent receives written
notification from the Holder, in the form of the Election to Exercise, of the
exercise of this Put Option, and the Holder's right to payment of the Purchase
Price for such Put Shares has been established pursuant to the provisions of
Section 3.1(b) of the Escrow Agreement and the Election to Exercise, the Escrow
Agent shall deliver to the Holder payment representing the Purchase Price. Such
payment shall be made out of escrow funds on deposit with the Escrow Agent
pursuant to the Escrow Agreement (such funds, the "Put Support Funds"). Upon
the exercise of the Holder's right to cause the purchase of Put Shares, and the
receipt by the Holder of payment out of the Put Support Funds for the Put
Shares, Xx. Xxxxx shall be deemed to be the holder of record of the Put Shares
transferred upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Put Shares shall
not then have been actually delivered to Xx. Xxxxx.
7. This Put shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
8. Each of the Holder and Xx. Xxxxx irrevocably consents to the
exclusive jurisdiction of the courts of the State of New York and of any federal
court located in such State in connection with any action or proceeding arising
out of or relating to this Put Option, any document or instrument delivered
pursuant to, in connection with or simultaneously with this Put Option, or a
breach of this Put Option or any such document or instrument. In any such
action or proceeding, each of the Holder and Xx. Xxxxx waives personal service
of any summons, complaint or other process and agrees that service thereof may
be made in accordance with the Stock Purchase Agreement.
9. In the event that the Put Shares tendered to the Escrow Agent
pursuant to this Put Option are beneficially owned by a person other than the
record owner of such Put Shares on the books of the Company (I.E., are held in
"street name"), the tender of such Put Shares by the record owner thereof
pursuant to this Put Option shall serve as a certification by such record owner
to the Escrow Agent and Xx. Xxxxx
3
that the beneficial owner of such Put Shares has not changed on the books of the
record owner since the date of the Closing of the Stock Purchase Agreement.
10. All capitalized terms used herein without definition shall
have the meanings provided therefor in the Stock Purchase Agreement.
11. Each Put Option issued to a Holder in the form hereof shall
be consecutively numbered, e.g., "P-1", "P-2", etc.
Dated: October 10, 1997
PURCHASER:
________________________
Xx. Xxxxxx Xxxxx
Name of Holder:___________________________
Address:__________________________________
__________________________________________
__________________________________________
Number of Put Shares:_____________
Total Purchase Price:________________
(Number of Put Shares
@ $3.00 per Put Share)
4
To: Loeb & Loeb LLP, as Escrow Agent
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to cause the
purchase of _______ Put Shares covered by the within Put Option and tenders the
stock certificate representing ______ shares of Common Stock of the Company,
$.001 par value, and request that the Purchase Price be delivered to:
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)*
If such number of Put Shares shall not be all the Put Shares covered by the Put
Option, a new stock certificate for the balance of the Put Shares covered by the
Put Option shall be registered in the name of, and delivered to, the undersigned
at the address stated below, and the within Put Option shall be tendered by the
Holder to the Escrow Agent, to be amended on the signature page thereof to
reflect the appropriate number of Put Shares remaining after such partial
exercise.
The undersigned is entitled to exercise this Put Option with respect
to the Put Shares referred to above because (check appropriate space):
____ six months have elapsed since the Closing under the Stock
Purchase Agreement, and the "Triggering Event" referred to in this Put
Option has occurred; or
____ six months have elapsed since the Closing under the Stock
Purchase Agreement, and the transfer of the Patent Rights and
Intangibles to the Company has not been completed.
Dated:______________________ Name_________________________
(Print)
______________
*If SSN or TIN is not provided, amounts may be withheld from payment under
applicable laws and regulations of the Internal Revenue Service.
5
Address:___________________________________________________
___________________________
(Signature)
6
EXHIBIT B
ESCROW AGREEMENT
EXHIBIT B
ESCROW AGREEMENT
This Agreement (this "AGREEMENT") dated as of the 10th day of October,
1997, among XXXXXX XXXXX, the stockholders of XXXXX ACQUISITIONS II, INC., a
Nevada corporation ("XXXXX"), just prior to the closing of the transactions
described below (such stockholders, excluding Xx. Xxxx Xxxxxx, the "FOUNDING
STOCKHOLDERS"), and LOEB & LOEB LLP (the "ESCROW AGENT"):
W I T N E S S E T H:
WHEREAS, Xx. Xxxxx has entered into a Stock Purchase Agreement dated as of
September 30, 1997 (the "STOCK PURCHASE AGREEMENT"), between, on the one hand,
Xx. Xxxxx and Xxxxxxx Holdings Limited, a Turks and Caicos Islands corporation
controlled by Xx. Xxxxx ("OHL"), and, on the other hand, Xxxxx, Xx. Xxxx Xxxxxx
and Xx. Xxxxxxx Xxxxxx, majority stockholders of Xxxxx and also Xxxxx'x sole
directors and officers, which Stock Purchase Agreement provides for the purchase
of 4,183,125 new shares of Xxxxx Common Stock by OHL from Xxxxx for $4,000,000
cash (the "NEW SHARES"), and the sale to Xxxxx by Xx. Xxxxx of rights to certain
patents and patent applications as additional consideration for the New Shares;
WHEREAS, pursuant to Section 2 of the Stock Purchase Agreement, Xx. Xxxxx
will, simultaneously with the Closing of the Stock Purchase Agreement, execute a
Put Agreement (the "PUT AGREEMENT"), in the form of Exhibit A attached to the
Stock Purchase Agreement, pursuant to which Xx. Xxxxx will, under certain
circumstances, purchase from the Founding Stockholders some or all of their
Xxxxx Common Stock, all on the terms and subject to the conditions set forth in
the Put Agreement;
WHEREAS, pursuant to the requirements of Section 3 of the Stock Purchase
Agreement, upon the Closing of the Stock Purchase Agreement and upon the
execution and delivery of the Put Agreement, Xx. Xxxxx is to establish an escrow
fund with the Escrow Agent, to provide liquidity for his obligation to purchase
the Xxxxx Common Stock of the Founding Stockholders under the Put Agreement;
WHEREAS, the Founding Stockholders have agreed that Xx. Xxxx Xxxxxx shall
be the designated representative of the Founding Stockholders for the purposes
of giving and receiving all notices concerning the Founding Stockholders' rights
under this Agreement and the Put Agreement;
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the following respective meanings:
(a) "AGREEMENT" means this Agreement and all amendments made hereto.
(b) "ESCROW DEPOSIT" shall mean the Escrowed Payment, Xx. Xxxxxx'x
Escrow Document and Xx. Xxxxx'x Escrow Documents.
(c) "ESCROWED PAYMENT" means the sum of $836,250 described in
Section 3.1 of the Stock Purchase Agreement to be deposited by Xx. Xxxxx with
the Escrow Agent, which sum is to be held in escrow by the Escrow Agent pursuant
to the terms and subject to the conditions hereof.
(d) "XX. XXXXXX'X ESCROW DOCUMENT" shall mean a Consent (the
"CONSENT") satisfactory to Xx. Xxxxx and the Escrow Agent, signed by Xx. Xxxxxx,
evidencing his consent to his designation as the representative of each of the
Founding Stockholders for the purposes of the giving and receiving of all
notices under this Agreement. Xx. Xxxxxx shall have the right to designate a
substitute, satisfactory to Xx. Xxxxx and the Escrow Agent, to serve as the
representative of the Founding Stockholders hereunder, and such substitute
individual shall execute a consent identical to the Consent at the time of his
or her appointment, which Consent shall be deposited with the Escrow Agent and
shall constitute part of the Escrow Deposit. If no separate Consent is executed
by Xx. Xxxxxx in connection with the execution and delivery of this Agreement,
then Xx. Xxxxxx'x signature on the signature page hereof on behalf of the
Founding Stockholders shall constitute his consent to his designation as the
representative of each of the Founding Stockholders.
(e) "XX. XXXXX'X ESCROW DOCUMENTS" shall mean original Put
Agreements, bearing original signatures on behalf of Xx. Xxxxx, for each of the
Founding Stockholders.
(f) All capitalized terms used herein without definition shall have
the meanings provided therefor in the Stock Purchase Agreement.
1.2 ENTIRE AGREEMENT. This Agreement, the Put Agreement and the Stock
Purchase Agreement constitute the entire agreement between the parties hereto
pertaining to the Escrow Deposit and supersede all prior agreements,
understandings, negotiations and discussions between the parties, whether oral
or written. There are no warranties,
2
representations and other agreements made by the parties in connection with the
subject matter hereof except as specifically set forth in this Agreement.
1.3 EXTENDED MEANINGS. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in the
case of a waiver, by the party waiving compliance. Except as expressly stated
herein, no delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder preclude any
other or future exercise of any other right, power or privilege hereunder.
1.5 HEADINGS. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
1.7 CONSENTS TO SERVICE OF PROCESS. Xx. Xxxxx and the Founding
Stockholders hereby irrevocably consent to the exclusive jurisdiction of the
courts of the State of New York and of any Federal Court located in the State of
New York, each as may have competent jurisdiction, in connection with any
action, suit or other proceeding arising out of or relating to this Agreement or
any action taken or omitted hereunder, and waive personal service of any
summons, complaint or other process and agree that the service thereof may be
made by certified or registered mail directed to such party at such party's
address for purpose of notice hereunder.
1.8 DESIGNATION OF FOUNDING STOCKHOLDERS' REPRESENTATIVE; CONSENT. Xx.
Xxxxxx is hereby designated the representative of each Founding Stockholder
under this Agreement, for the purposes described herein, and each Founding
Stockholder hereby consents to such designation as a condition to the acceptance
of the benefits conferred on each of them hereby, and as a condition to the
acceptance of such Founding Stockholder's Put Agreement and any exercise of the
rights provided thereby.
3
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1 XX. XXXXX'X DELIVERIES. Xx. Xxxxx has delivered to the Escrow Agent,
on the date hereof, the Escrowed Payment and Xx. Xxxxx'x Escrow Documents.
2.2 XX. XXXXXX'X DELIVERIES. Xx. Xxxxxx has delivered to the Escrow
Agent, on the date hereof, Xx. Xxxxxx'x Escrow Document.
2.3 INTENTION TO CREATE ESCROW OVER ESCROW DEPOSIT. The Founding
Stockholders and Xx. Xxxxx intend that the Escrow Deposit shall be held in
escrow by the Escrow Agent pursuant to this Agreement for the benefit of the
Founding Stockholders and Xx. Xxxxx, as set forth herein.
2.4 ESCROW AGENT TO HOLD ESCROW DEPOSIT. The Escrow Agent hereby
acknowledges receipt of and hereby agrees to hold and release the Escrow Deposit
only in accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROW DEPOSIT
3.1 RELEASE OF ESCROW. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrow Deposit as follows:
(a) Upon receipt by the Escrow Agent of all components of the Escrow
Deposit, the Escrow Agent will simultaneously release a copy of Xx. Xxxxxx'x
Escrow Document to Xx. Xxxxx and Xx. Xxxxx'x Escrow Documents to Xx. Xxxxxx, and
Xx. Xxxxxx shall distribute an original of the appropriate Put Agreement to each
of the Founding Stockholders.
(b) Upon receipt by the Escrow Agent of a written notice from a
Founding Stockholder (an "EXERCISE NOTICE"), in the form of the Election to
Exercise attached to the Put Agreement, stating that such Founding Stockholder
desires to exercise his or its Put pursuant to the Put Agreement, stating the
number of Put Shares (as defined in the Put Agreement) with respect to which the
Founding Stockholder wishes to exercise such Put, and including evidence that
the Triggering Event (as defined in the Put Agreement) has occurred and
therefore the Founding Stockholder is entitled to receipt of that portion of the
Escrowed Payment representing the number of Put Shares multiplied by $3.00 per
share, in accordance with the provisions of the Put Agreement, and accompanied
by the Founding Stockholder's stock certificate representing such Put Shares,
properly endorsed in blank, and tender to the Escrow Agent of such Founding
4
Stockholders Put Agreement, the Escrow Agent shall promptly send a copy of such
Exercise Notice to Xx. Xxxxx. If the Escrow Agent does not receive within five
(5) business days from the date notice is given to Xx. Xxxxx, a notice (a
"NOTICE OF OBJECTION") signed by Xx. Xxxxx stating the reasons for such
objection, or if the Escrow Agent shall within such period receive a written
consent signed by Xx. Xxxxx, then the Escrow Agent shall deliver the requested
portion of Escrowed Payment to such Founding Stockholder in accordance with the
Exercise Notice. In the event that the Founding Stockholder elects to exercise
his or its put for less than the total number of shares subject to the put, upon
Xx. Xxxxx'x agreement that the Founding Stockholder is entitled to receive the
Purchase Price (as defined in the Put Agreement) for the shares being put
pursuant to the Exercise Notice, the Founding Stockholder shall receive from the
Escrow Agent, (i) the Purchase Price for the shares being put pursuant to the
Exercise Notice, and (ii) such Founding Stockholder's Put Agreement, with the
number of Put Shares (as defined in the Put Agreement) shown on the signature
page thereof adjusted to reflect the Founding Stockholder's remaining Put Shares
with respect to which the put has not been exercised. In the event that the
Founding Stockholder tenders to the Escrow Agent a stock certificate
representing a greater number of Put Shares than the number of Put Shares with
respect to which the Founding Stockholder wishes to exercise the put, upon Xx.
Xxxxx'x agreement that the Founding Stockholder is entitled to the Purchase
Price for the Put Shares being so exercised, in addition to the deliveries from
the Escrow Agent referred to above, the Founding Stockholder shall also receive
from Xxxxx a stock certificate for Xxxxx Common Stock in an amount of shares
equal to the number of Put Shares reflected on the stock certificate tendered to
the Escrow Agent at the time of exercise of the put, less the number of Put
Shares with respect to which the put has been exercised by the Founding
Stockholder. If the Escrow Agent receives a Notice of Objection from Xx. Xxxxx
within such five (5) day period stating the reason for the objection, then the
Escrow Agent shall continue to hold the Escrowed Payment until otherwise
authorized and directed to distribute the same pursuant to the provisions of
Sections 3.1(e) or 3.1(f).
(c) Any time prior to October 9, 1998, Xx. Xxxxx shall be entitled to
present to the Escrow Agent a written notice stating that the rights of the
Founding Stockholders under the Put Agreement have not and cannot become
effective due to the impossibility of the occurrence of the Triggering Event (as
defined in the Put Agreement), or that such rights have expired due to the
passage of time (the "NOTICE OF NONEFFECTIVENESS OR EXPIRATION"). Such Notice
of Noneffectiveness or Expiration shall be signed by Xx. Xxxxx, shall present
evidence demonstrating that the Triggering Event (as defined in the Put
Agreement) cannot occur or that the rights of the Founding Stockholders under
the Put Agreement have expired, and shall state that Xx. Xxxxx is entitled to
receipt of the Escrowed Payment or any portion thereof remaining on deposit with
the Escrow Agent, in accordance with the provisions of the Put Agreement. Upon
receipt of the Notice of Noneffectiveness or Expiration, the Escrow Agent shall
promptly send a copy of such Notice to Xx. Xxxxxx, on behalf of the Founding
Stockholders. If
5
the Escrow Agent does not receive within five (5) business days from the date
notice is given to Xx. Xxxxxx, a Notice of Objection signed by Xx. Xxxxxx, on
behalf of the Founding Stockholders, stating the reasons for such objection, or
if the Escrow Agent shall within such period receive a written consent signed by
Xx. Xxxxxx, on behalf of the Founding Stockholders, then the Escrow Agent shall
deliver the Escrowed Payment or such portion thereof remaining on deposit with
the Escrow Agent to Xx. Xxxxx in accordance with the Notice of Noneffectiveness
or Expiration. If the Escrow Agent receives a Notice of Objection from
Xx. Xxxxxx, on behalf of the Founding Stockholders, within such five (5) day
period stating the reason for the objection, then the Escrow Agent shall
continue to hold the Escrowed Payment until otherwise authorized and directed to
distribute the same pursuant to the provisions of Sections 3.1(e) or 3.1(f).
(d) On October 10, 1998, the Escrow Agent shall pay over to Xx. Xxxxx
all of the Escrowed Payment remaining on deposit and in its possession against
which a put has not yet been exercised, without the need for any notice to the
Escrow Agent by Xx. Xxxxx or the consent to such payment by Xx. Xxxxxx, on
behalf of the Founding Stockholders.
(e) Upon receipt by the Escrow Agent of joint written instructions
("JOINT INSTRUCTIONS") signed by Xx. Xxxxx and Xx. Xxxxxx, on behalf of the
Founding Stockholders, it shall deliver the Escrowed Payment in accordance with
the terms of the Joint Instructions.
(f) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "COURT
ORDER"), the Escrow Agent shall deliver the Escrowed Payment in accordance with
the Court Order. Any Court Order shall be accompanied by an opinion of counsel
for the party presenting the Court Order to the Escrow Agent (which opinion
shall be satisfactory to the Escrow Agent) to the effect that the court issuing
the Court Order has competent jurisdiction and that the Court Order is final and
non-appealable.
3.2 ACKNOWLEDGEMENT OF XX. XXXXX AND XX. XXXXXX; DISPUTES. Xx. Xxxxx and
Xx. Xxxxxx, on behalf of the Founding Stockholders, acknowledge that the only
terms and conditions upon which the Escrowed Payment is to be released are set
forth in Sections 3 and 4 of this Agreement. Xx. Xxxxx and Xx. Xxxxxx, on
behalf of the Founding Stockholders, reaffirm their agreement to abide by the
terms and conditions of this Agreement with respect to the release of the
Escrowed Payment. Any dispute with respect to the release of the Escrowed
Payment shall be resolved pursuant to Section 4.2 or by agreement between Xx.
Xxxxx, Xx. Xxxxxx, on behalf of the Founding Stockholders, and the Escrow Agent.
6
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1 DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:
(a) Xx. Xxxxxx, on behalf of the Founding Stockholders, and Xx. Xxxxx
acknowledge and agree that the Escrow Agent (i) shall not be responsible for or
bound by, and shall not be required to inquire into whether the Founding
Stockholders or Xx. Xxxxx is entitled to receipt of the Escrowed Payment or any
portion thereof pursuant to any other agreement or otherwise; (ii) shall be
obligated only for the performance of such duties as are specifically assumed by
the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction, instrument, statement, request or document furnished to it
hereunder and believed by the Escrow Agent in good faith to be genuine and to
have been signed or presented by the proper person or party, without being
required to determine the authenticity or correctness of any fact stated therein
or the propriety or validity or the service thereof; (iv) may assume that any
person purporting to give notice or make any statement or execute any document
in connection with the provisions hereof has been duly authorized to do so; (v)
shall not be under any duty to give the property held by the Escrow Agent
hereunder any greater degree of care than given to the Escrow Agent's own
similar property; and (vi) may consult counsel satisfactory to the Escrow Agent
(and the Escrow Agent may serve as its own counsel), the opinion of such counsel
to be full and complete authorization and protection in respect of any action
taken, suffered or omitted by the Escrow Agent hereunder in good faith and in
accordance with the opinion of such counsel.
(b) Xx. Xxxxxx, on behalf of the Founding Stockholders, and Xx. Xxxxx
acknowledge that the Escrow Agent is acting solely as a stakeholder at their
request and that the Escrow Agent shall not be liable for any action taken by it
in good faith and believed by it to be authorized or within the rights or powers
conferred upon it by this Agreement. Xx. Xxxxxx, on behalf of the Founding
Stockholders, and Xx. Xxxxx, jointly and severally, agree to indemnify and hold
harmless the Escrow Agent and any of its partners, employees, agents and
representatives for any action taken or omitted to be taken by it or any of them
hereunder, including the fees of outside counsel and other costs and expenses of
defending itself against any claim or liability under this Agreement, except in
the case of gross negligence or willful misconduct on its part committed in its
capacity as Escrow Agent under this Agreement. The Escrow Agent shall owe a
duty only to the Founding Stockholders and Xx. Xxxxx under this Agreement and to
no other person.
7
(c) Xxxxx hereby agrees to reimburse the Escrow Agent for its
reasonable out-of-pocket expenses (including counsel fees) incurred in
connection with the performance of its duties and responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder
by giving five (5) days prior written notice of resignation to Xx. Xxxxxx, on
behalf of the Founding Stockholders, and Xx. Xxxxx. Prior to the effective date
of the resignation as specified in such notice, Xx. Xxxxxx, on behalf of the
Founding Stockholders, and Xx. Xxxxx will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Escrowed Payment to a substitute Escrow
Agent selected by Xx. Xxxxxx, on behalf of the Founding Stockholders, and Xx.
Xxxxx. If no successor Escrow Agent is named by Xx. Xxxxxx, on behalf of the
Founding Stockholders, and Xx. Xxxxx, the Escrow Agent may apply to a court of
competent jurisdiction in the State of New York for appointment of a successor
Escrow Agent, and to deposit the Escrowed Payment with the clerk of any such
court.
(e) The Escrow Agent does not have and will not have any interest in
the Escrow Deposit, but is serving only as escrow holder, having only possession
thereof. The Escrow Agent shall not be liable for any loss resulting from the
making or retention of any investment in accordance with this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of the Escrow
Agent with respect to any and all matters pertinent thereto and no implied
duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for Xx.
Xxxxx in any dispute as to the disbursement of the Escrowed Payment, in any
other dispute between Xx. Xxxxx, on the one hand, and any of the Founding
Stockholders or Xxxxx, on the other hand, whether the Escrow Agent is then
holding the Escrow Deposit or any of its components and continues to act as the
Escrow Agent hereunder, and the Escrow Agent shall be permitted, in any event,
to be retained to and/or continue to represent Xx. Xxxxx and any of his
affiliates with respect to any matter.
(h) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.
4.2 DISPUTE RESOLUTION: JUDGMENTS. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery,
ownership, right of possession or disposition of the Escrow Deposit, or if the
Escrow Agent shall in good faith be uncertain as to its duties or rights
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than
8
to continue to hold the Escrow Deposit pending receipt of a Joint Instruction
from Xx. Xxxxxx, on behalf of the Founding Stockholders, and Xx. Xxxxx, or (ii)
deposit the Escrow Deposit with any court of competent jurisdiction in the State
of New York, in which event the Escrow Agent shall give written notice thereof
to Xx. Xxxxxx, on behalf of the Founding Stockholders, and Xx. Xxxxx and shall
thereupon be relieved and discharged from all further obligations pursuant to
this Agreement. The Escrow Agent may, but shall be under no duty to, institute
or defend any legal proceedings which relate to the Escrow Deposit. The Escrow
Agent shall have the right to retain counsel or act as its own counsel if it
becomes involved in any disagreement, dispute or litigation on account of this
Agreement or otherwise determines that it is necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with
and obey any Court Order. In case the Escrow Agent obeys or complies with a
Court Order, the Escrow Agent shall not be liable to any Founding Stockholder or
Xx. Xxxxx or to any other person, firm, corporation or entity by reason of such
compliance.
ARTICLE V
GENERAL MATTERS
5.1 TERMINATION. This escrow shall terminate upon the release of the
Escrow Deposit or at any time upon the agreement in writing of Xx. Xxxxxx, on
behalf of the Founding Stockholders, and Xx. Xxxxx.
5.2 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier):
(a) If to Xx. Xxxxx, to:
Xx. Xxxxxx Xxxxx
c/o Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
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(b) If to Xxxxx, to:
Xxxxx Acquisitions II, Inc.
c/o Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
(c) If to any of the Founding Stockholders, to:
Xx. Xxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Grushko & Xxxxxxx
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
(d) If to the Escrow Agent, to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3 INTEREST. The Escrowed Payment shall be held in an interest-bearing
account, and all interest accruing on the Escrowed Payment shall be for the
account of and shall be payable to Xx. Xxxxx on or after October 10, 1998.
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5.4 ASSIGNMENT; BINDING AGREEMENT. Neither this Agreement nor any right
or obligation hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto. This Agreement shall enure
to the benefit of and be binding upon the parties hereto and their respective
legal representatives, successors and assigns.
5.5 INVALIDITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6 AGREEMENT. Each of the undersigned states that he has read the
foregoing Escrow Agreement and understands and agrees to it.
/s/ Xxxxxx Xxxxx
--------------------------------
XXXXXX XXXXX
FOUNDING STOCKHOLDERS,
by Xx. Xxxx Xxxxxx,
as their designated representative
/s/ Xxxx Xxxxxx
--------------------------------
XXXX XXXXXX
LOEB & LOEB LLP, as Escrow Agent
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
A Partner
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