Exhibit 10.6
COMMON STOCK PURCHASE AGREEMENT
BETWEEN
PONCA ACQUISITION CORPORATION.
AND
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__________________________, PRINCIPAL SHAREHOLDER
DATE: __________________, 2002
COMMON STOCK
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PURCHASE AGREEMENT
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This Common Stock Purchase Agreement (this "Agreement") is made as of
the ________ day of ___________, 2002, between PONCA ACQUISITION CORPORATION, a
Nevada corporation ("Buyer") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Seller").
RECITALS:
A. Seller owns such number of shares of common stock, par value, $1.00
per share (the "Common Stock") of the outstanding stock of International
Wholesale Tile, Inc., a corporation organized under the laws of the State of
Florida (the "Company") as is set forth on Exhibit A, attached to and
incorporated into this Agreement ("Exhibit A"). The Common Stock owned by Seller
represents such percentage of the capital stock issued and outstanding of the
Company as is set forth on Exhibit "A".
B. Seller wishes to sell, and Buyer wishes to purchase, the Common
Stock for such number of shares of the common stock of Buyer (the "Buyer
Shares") as is set forth on Exhibit "A".
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is acknowledged, it is hereby agreed as
follows:
1. Purchase and Sale of the Common Stock
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1.1 Sale of the Common Stock. In consideration of the issuance and sale
of the Buyer Shares and in reliance on the representations, warranties and
undertakings of Buyer herein, Seller shall sell and transfer to Buyer on the
Closing Date, and Buyer shall purchase from Seller, the Common Stock, free and
clear of all liens, claims, pledges, charges, agreements, and encumbrances of
any kind whatsoever ("Liens"). In consideration of the transfer and sale of the
Common Stock to Buyer and in reliance on the representations, warranties and
undertakings of Seller herein contained, Buyer shall sell and issue to Seller,
on the Closing Date, and Seller shall purchase from Buyer, the Buyer Shares free
and clear of all Liens.
1.2 Closing. Subject to the conditions set forth below, the purchase
and sale of the Common Stock shall take place at the offices of Buyer, on or
before sixty (60) days after the execution of this Agreement, or at such other
time and place as Buyer and Seller mutually agree upon in writing (which time
and place are designated as the "Closing" and the "Closing Date"). If the
Closing does not occur within sixty (60) days after the execution of this
Agreement, either party may terminate this Agreement by providing the other
party written notice of such termination. At the Closing, Buyer shall deliver to
Seller, a stock certificate in the name of Seller representing the Buyer Shares
(which shall have endorsed thereon the legend referred to in Section 2.5 hereof.
At the Closing, Seller shall deliver to Buyer a stock certificate in the name of
Buyer representing the Common Stock owned by Seller free of any legends (except
for the legend described in Section 2.5 hereof) or Liens of any kind, together
with stock powers executed by him with the signatures thereon guaranteed by a
member of the New York Stock Exchange or a national bank in the United States.
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2. Representations and Warranties of the Seller. The Seller represents
and warrants to the Buyer that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2)
with respect to himself, except as set forth in Schedule 2.
2.1 Organization of the Seller. The Seller is an individual.
2.2 Authorization of Transaction. The Seller has full right, power and
authority (including, if the Seller is a corporation, full corporate power and
authority) to execute and deliver this Agreement and to perform the Seller's
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
2.3 Noncontravention. Except as set forth on Part 2.3 of Schedule 2,
neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Seller is subject or, if the Seller is a corporation, any provision of its
charter or bylaws, or other governing instruments, (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, indebtedness, encumbrance, commitment, contract,
lease, license, instrument, or other arrangement to which the Seller is a party
or by which he or it is bound or to which any of his or its assets is subject,
or (C) impose any security interest on any Company Common Stock held by the
Seller.
2.4 Brokers' Fees. The Seller has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
2.5 Security Matters.
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(a) Seller receives the Buyer Shares for investment purposes
for his own account, and not with the view to, or for resale in connection with,
any distribution thereof. Seller understands that the Buyer Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under the securities laws of various states, by reason of a specified
exemption from the registration provisions thereunder.
(b) Seller acknowledges that the Buyer Shares must be held
indefinitely unless they are subsequently registered under the Securities Act
and under applicable state securities laws or an exemption from such
registration is available. Seller has been advised or is aware of the provisions
of Rule 144 promulgated under the Securities Act which permits limited resale of
the securities purchased in a private placement subject to the satisfaction of
certain conditions including, among other things, the availability of certain
current public information about Buyer and compliance with applicable
requirements regarding the holding period and the amount of securities to be
sold and the manner of sale. Notwithstanding the foregoing, Seller shall enter
into a Lock-Up Agreement attached as Exhibit B with the Company whereby Seller
agrees not to sell his/her/its Shares for a period of time specified in the
Lock-Up Agreement.
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(c) Seller is a sophisticated investor with knowledge and
experience in business and financial matters and is able to bear the economic
risk and lack of liquidity inherent in owning the Buyer Shares.
(d) Seller has received and carefully reviewed all Buyer's
filings with Securities and Exchange Commission.
(e) Seller is aware that no federal or state or other agency
has passed upon or made any finding or determination concerning the fairness of
the transactions contemplated by this Agreement or the adequacy of the
disclosure of the exhibits and schedules hereto.
(f) Seller understands and acknowledges that neither the
Internal Revenue Service nor any other tax authority has been asked to rule on
nor has it ruled on the tax consequences of the transactions contemplated
hereby.
(g) Seller represents and covenants that he is an "Accredited
Investor" as the term is defined in Rule 501(a) of Regulation D under the
Securities Act.
(h) Seller understands that all certificates for Buyer Shares
shall bear a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION OR
THE DELIVERY TO THE ISSUER OF AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER,
THAT SUCH DISPOSITION WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS."
2.6 Target Shares. Except as set forth on Part 2.6 of Schedule 2, the
Seller holds of record and owns beneficially the number of Target Shares set
forth on Exhibit A, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), taxes,
security interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. Except as set forth on Part 2.6 of Schedule 2,
the Seller is not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than this
Agreement). Except as set forth on Part 2.6 of Schedule 2, the Seller is not a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Company.
3. Representations, Warranties and Agreements of Seller as to the
Company. The Seller represents and warrants to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3 with respect to the Seller, except as set
forth on Schedule 3, as follows:
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3.1 Organization, Good Standing and Qualification. The Company, is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida. The Company has all requisite power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify could have a material adverse
effect on its business, properties, operations, earnings, assets, liabilities,
condition (financial or otherwise) (collectively, "Condition").
3.2 Capitalization. The authorized capital stock of the Company
consists of and upon the consummation of the Closing shall consist of 1,500
shares of common stock, $1.00 par value per share, of which 1,500 are issued and
outstanding. All the outstanding shares have been duly and validly issued, are
fully paid and non-assessable. Except as set forth in Part 3.2 of Schedule 3,
the Company does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock. There are no agreements among
the shareholders of the Company with respect to the voting or transfer of the
capital stock or to change control of the Company and none of its shareholders
has preemptive rights. Schedule 3 hereto includes a complete and correct list as
of immediately prior to the Closing, of the name of each of the Company
shareholders and the number of shares of stock owned by such shareholder. Seller
is the record and beneficial owner of the Common Stock, which are free and
clear, and which will be at the Closing free and clear, from any Liens. Except
as set forth in Part 3.2 of Schedule 3, there is not outstanding any security,
option, warrant, right, agreement, understanding or commitment of any kind
entitling any person or entity to acquire any of the Common Stock. The Common
Stock has not been registered with the SEC or any state regulatory authority and
no such registration is required.
3.3 Authority; Execution and Delivery; Requisite Consents,
Nonviolation. Seller has, and at the Closing will have, all requisite power and
authority to execute, deliver and perform this Agreement and each other document
or instrument executed by him, in connection herewith or therewith or pursuant
hereto or thereto and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary action on the part of Seller. This
Agreement is duly executed and delivered by Seller and is the legal, valid and
binding obligation of Seller, enforceable against him in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the enforceability of
creditors' rights in general or by general principles of equity. As to the
Company and Seller, the execution, delivery and performance of this Agreement,
the consummation by Seller of the transactions contemplated hereby and thereby
(including, without limitation, the offer, sale and delivery by Seller of the
Common Stock) will not (a) except as set forth in Part 3.3 of Schedule 3,
require the consent, license, permit, waiver, approval, authorization or other
action of, by or with respect to, or registration, declaration or filing with,
any court or governmental authority, department, commission, board, bureau,
agency or instrumentality, domestic or foreign ("Governmental Authority") or any
other individual, partnership, corporation, unincorporated organization or
association, limited liability company, trust or other entity (collectively, a
"Person"); (b) contravene (i) any requirement of law to which the Company or
Seller is subject, including without limitation the securities laws of any
domestic or foreign jurisdiction or the rules or regulations of any governmental
entity or self regulatory body nor (ii) any judgment, decree, franchise, order
or demand applicable to him or the Company; (c) conflict or be inconsistent with
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or result in any breach of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of his or the Company's
properties or assets pursuant to the terms of any indenture, mortgage, deed of
trust agreement or other instrument to which the Company or Seller is a party or
bound or to which the Company or Seller may be subject or violate any provision
of the Company's organization documents. Neither the Company nor Seller is in
default with respect to any applicable statute, rules, writ, injunction, decree,
order or regulation of any Governmental Authority having jurisdiction over any
of them which is likely to adversely affect their ability to perform their
obligations hereunder and entering into this Agreement will not violate any of
them.
3.4 Subsidiaries. Part 3.4 of Schedule 3 sets forth (i) the name of
each corporation of which the Company owns, directly or indirectly, shares of
capital stock (collectively, Subsidiaries and individually, Subsidiary) (ii) the
name of each corporation, partnership, joint venture or other entity (other than
the Subsidiaries) in which the Company has, or pursuant to any agreement has the
right to acquire at any time by any means, directly or indirectly, an equity
interest or investment; (iii) in the case of each of such corporations described
in clauses (i) and (ii) above, (A) the jurisdiction of incorporation, (B) the
capitalization thereof and the percentage of each class of capital voting stock
owned by the Company, (C) a description of any contractual limitations to vote
or alienate such securities, (D) a description of any outstanding options or
other rights to acquire securities of or interest in such corporation, and (E) a
description of any other contractual obligation or impediment which would
materially limit or impair the Company's, ownership of such entity or interest
or its ability effectively to exercise the full rights of ownership of such
entity or interest; and (iv) in the case of each of such unincorporated
entities, information substantially equivalent to that provided pursuant to
clause (iii) above with regard to corporate entities.
Each Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and assets and to
conduct its business as now conducted. Each Subsidiary is duly qualified to do
business as a foreign corporation in every jurisdiction in which the character
of the properties owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except where such failure would not
have a material adverse effect on the Subsidiary's financial condition, results
of operation or business. Each Subsidiary is duly qualified to do business in
good standing in each jurisdiction where the nature of the business conducted by
the Company or the ownership or leasing of their respective properties makes
such qualification and being in good standing necessary, except where the
failure to be so qualified and in good standing will not have a material adverse
effect on the business, operations, properties, assets, condition or results of
operation of the Company. All the outstanding shares of capital stock of each
Subsidiary owned by the Company have been duly authorized and validly issued,
are fully paid and non-assessable, and are owned of record and beneficially,
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directly or indirectly, by the Company, free and clear of any Liens, or other
legal or equitable encumbrances, limitations or restrictions. Except as set
forth in Section 3.4 of Schedule 3, there are no outstanding options, warrants,
agreements, conversion rights, preemptive rights or other rights to subscribe
for, purchase or otherwise acquire any issued or unissued shares of capital
stock of any Subsidiary.
3.5 Financial Information.
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(a) Financial Statements. Attached hereto as Part 3.5 of
Schedule 3 (the "Financial Statements") for the Company, are (a) reviewed
balance sheets at December 31, 2001, December 31, 2000 and December 31, 1999 and
related statements of income, changes in stockholders' equity, and cash flows
for the same periods (the "Reviewed Financial Statements") and (b) unaudited
balance sheets of the Company and related unaudited statements of operations,
stockholders equity and cash flows for the period ended March 31, 2002 (the
"Unaudited Financial Statements") and together with the Reviewed Financial
Statements, (the "Historical Financial Statements"). Except as described in
Schedule 3 , the Historical Financial Statements were prepared in accordance
with generally accepted accounting principles ("US GAAP") applied on a
consistent basis with prior periods and, present fairly, in all material
aspects, the financial position, results of operations and changes in financial
position of the Company as of such dates.
(b) There is no Indebtedness (as defined below) or other
liabilities or obligations of the Company, whether absolute, accrued, contingent
or otherwise, that are required in accordance with US GAAP to be, but are not,
fully reflected or reserved against in the Historical Financial Statements or in
notes thereto, except for liabilities that may have arisen in the ordinary and
usual course of business and consistent with past practices or which are
disclosed in Part 3.5 of Schedule 3 . For this purpose, Indebtedness is defined
as any contract, commitment or agreement under which it has outstanding
Indebtedness or for the deferred purchase price of property in excess of
US$10,000 or has the right or obligation to incur any such Indebtedness or
obligation, or made any loan or advance to any person other than advances to
employees for business expenses not exceeding US$10,000 in the aggregate.
Indebtedness shall also mean, all obligations with respect to borrowed money,
contingent and otherwise, which, in accordance with US GAAP, should be
classified on the obligor's balance sheet as liabilities, or to which reference
should be made by footnotes thereto, including without limitation, in any event
and whether or not so classified (i) all debt and similar monetary obligations,
whether direct or indirect; (ii) all liabilities secured by any mortgage,
pledge, security interest, lien, charge or other encumbrance existing on
property owned or acquired subject thereto, whether or not the liability secured
thereby shall have been assumed; (iii) all guaranties, endorsements and other
contingent obligations whether direct or indirect in respect of Indebtedness or
performance of others, including any obligation to supply funds to or in any
manner to invest in, directly or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or otherwise;
and (iv) obligations to reimburse issuers of any letters of credit.
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3.6 Certain Changes or Events. Since March 31, 2002, (i) there has been
no change in the Condition of the Company, except for changes which have not
been, in the aggregate, materially adverse to the Company; (ii) there has been
no change of Laws (as defined in Section 3.12 hereof), no revocation or change
in any Contract (as defined in Section 3.8 hereof) or Permit (as defined in
Section 3.12 hereof) or right to do business, and no other event or occurrence
of any character, whether or not insured against, which has resulted, or could
reasonably be expected to result, in a material adverse change in the Condition
of the Company; (iii) the Company has not authorized or made any distributions,
or declared or paid any dividends, upon or with respect to any of its capital
stock, or other equity interests, nor has the Company redeemed, purchased or
otherwise acquired, or issued or sold, any of its capital stock or other equity
interests; (iv) Except as set forth in Part 3.6 of Schedule 3, the Company has
not entered into any material transaction, other than in the ordinary course of
business and consistent with past practice; (v) except as set forth in Schedule
3 the Company has not incurred any Indebtedness for borrowed money or made any
loans or advances to any Person; (vi) there has been no waiver by the Company of
a material right or of a material debt owed to it; (vii) the Company has not
failed to satisfy or discharge any Lien, except in the ordinary course of
business and which is not material to the Condition of the Company (as such
business is presently conducted and as it is proposed to be conducted); and
(viii) there has been no material change in any compensation, arrangement or
agreement with any employee, director, shareholders or Affiliate (as defined
below). "Affiliate" of a specified Person shall mean a Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified and, as to any Person that is
an individual, such individual's spouse, parents, grandparents, siblings and
lineal descendants.
3.7 Title to Assets. The Company has good and marketable title to all
of its assets and properties, free and clear of any Liens. With respect to any
assets or properties the Company leases, the Company holds a valid and
subsisting leasehold interest therein, free and clear of any Liens, is in
compliance, in all material respects, with the terms of the applicable lease,
and enjoys peaceful and undisturbed possession under such lease. All of the
assets and properties of the Company that are necessary for the conduct of its
business as presently conducted or as proposed to be conducted by the Company
are in good operating condition and repair, subject to ordinary wear and tear.
3.8 Contracts. The Company is not a party to, nor is either of its
assets or properties bound by, or subject to, any contracts, agreements, notes,
instruments, franchises, leases, licenses, commitments, arrangements or
understandings, written or oral (collectively, "Contracts") of the following
types, except for those (the "Scheduled Contracts") listed in Part 3.8 of
Schedule 3 hereto:
(a) any Contracts pursuant to which the Company, or another
party thereto, is obligated to pay in excess of $10,000;
(b) any Contracts pursuant to which the Company acquired the
right to use any Intellectual Property (as defined in Section 3.9 hereof) or
information that is material to or necessary in the business of the Company, or
pursuant to which the Company has granted to others the right to use, or which
otherwise relates to, its Intellectual Property;
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(c) any Contracts (other than advances of expenses to
employees in the ordinary course of business) involving loans, loan agreements,
debt securities, mortgages, deeds of trust, security agreements, suretyships or
guarantees;
(d) any Contracts between the Company, on the one hand, and
any of their respective officers, directors, employees or Persons that
beneficially own in excess of 5% of the outstanding equity interest of the
Company (each a "Principal Owner"), or any Affiliate or relative, or Affiliate
of a relative, of any of the foregoing, on the other;
(e) any deferred compensation agreements, bonus, pension,
profit sharing, stock option and incentive plans or arrangements,
hospitalization, medical and insurance plans, agreements and policies,
retirement and severance plans and other employee compensation policies and
agreements affecting employees of the Company;
(f) any Contracts with any labor union affecting employees of
the Company;
(g) any Contracts which restrict the Company from freely
engaging in business or competing anywhere; or
(h) any Contracts which otherwise are material to the
Condition of the Company.
All of the Scheduled Contracts are in full force and effect and
constitute legal, valid and binding obligations of the Company and shall be as
of the Closing performed in all material respects all obligations required to be
performed by it on or before the date hereof under the Scheduled Contracts, and
no violation exists in respect thereof on the part of the Company or, any other
party thereto; none of the Scheduled Contracts is currently being renegotiated;
and the validity, effectiveness and continuation of all Scheduled Contracts will
not be materially adversely affected by the transactions contemplated by this
Agreement.
3.9 Intellectual Property.
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(a) The Company owns all of the Intellectual Property (as
defined below) and has all the Intellectual Property necessary to currently
conduct its business and its properties. Part 3.9 of Schedule 3 hereto is a
true, correct and complete list of (i) all inventions (whether patent able or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (iii) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection therewith, (v) all trade
secrets and confidential business information (including ideas, research and
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development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (vi) all computer software (including data and
related documentation), (vii) all other proprietary rights, and (viii) all
copies and tangible embodiments thereof (in whatever form or medium)
(collectively, the "Intellectual Property") of any kind in which the Company or
any of its Affiliates or Subsidiaries have an interest or which is otherwise
used in, or relates to the business of the Company or ay of its Affiliates or
Subsidiaries. Part 3.9 of Schedule 3 hereto contains a true, correct and
complete list of all licenses or agreements that in any way affect the rights of
the Company to any of the Intellectual Property or any trade secret material of
the Company (the "Intellectual Property Licenses").
(b) The Company is the sole and exclusive owner, free and
clear of all Liens, and has all right, title and interest in all of the
Intellectual Property listed in Part 3.9 of Schedule 3 hereto. With respect to
any Intellectual Property or trade secret necessary to conduct its business, the
Company or any of its Affiliates or Subsidiaries own or have the exclusive right
to use such Intellectual Property or trade secret in its business. The Company
or any of its Affiliates or Subsidiaries own or possess sufficient licenses or
other rights to use all Intellectual Property covered by its patents that are
necessary to conduct the business of the Company or any of its Affiliates or
Subsidiaries as now being conducted and as proposed to be conducted by the
Company or any of its Affiliates or Subsidiaries.
(c) Each of the Intellectual Property Licenses is in full
force and effect and constitutes a legal, valid, binding and enforceable
obligation in accordance with its terms against the Company or any of its
Affiliates or Subsidiaries. The Company or any of its Affiliates or Subsidiaries
has performed all obligations imposed upon it under each of the Intellectual
Property Licenses to which it is a party. Neither the Company nor any of its
Affiliates or Subsidiaries, is in default thereunder or is there any event that
with notice or lapse of time, or both, would constitute a default thereunder.
The Company or any of its Affiliates or Subsidiaries have not received any
notice that any other party to any of the Intellectual Property Licenses intends
to cancel, terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder. No licenses, sublicenses,
covenants or agreements have been granted or entered into by the Company or any
of its Affiliates or Subsidiaries in respect of any of the Intellectual Property
or any trade secret material of the Company, except the Intellectual Property
Licenses. No director, officer, shareholder, employee or other Affiliate of the
Company or any of its Affiliates or Subsidiaries owns, directly or indirectly,
in whole or in part, any of the Intellectual Property or any trade secret
material of the Company or any of its Affiliates or Subsidiaries. None of the
officers, employees, consultants, distributors, agents, representatives or
advisors of the Company or any of its Affiliates or Subsidiaries have entered
into any agreement relating to the Company's business regarding know-how, trade
secrets, assignment of rights in inventions, or prohibition or restriction of
competition or solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person other than the
Company.
(d) The consummation of the transactions contemplated hereby
will not alter or impair the rights of the Company or any of its Affiliates or
Subsidiaries to any of the Intellectual Property, any trade secret material to
the Company or any of its Affiliates or Subsidiaries, or under any of the
Intellectual Property Licenses and each item of Intellectual Property owned or
used by the Company immediately prior to the Closing hereunder will be owned or
available for use by Buyer on identical terms and conditions immediately
subsequent to the Closing.
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(e) Neither the Company nor Seller, nor any Affiliates,
officers, shareholders, directors or employees of each of them has disclosed any
proprietary information relating to the Intellectual Property or the
Intellectual Property Licenses to any person other than Buyer and the employees,
consultants, accountants, lawyers and other advisors of the Company. Each of the
Company, Seller and any Affiliates, officers, shareholders, directors or
employees of each of them has at all times maintained reasonable procedures to
protect and have enforced all trade secrets of the Company. Each of the Company,
Seller and any Affiliates, officers, shareholders, directors or employees of
each of them has disclosed trade secrets to other Persons solely as required for
the conduct of the Company's business and solely under nondisclosure agreements
that are enforceable by the Company. The Company or any of its Affiliates or
Subsidiaries is not under any contractual or other obligation to disclose any
proprietary information relating to the Intellectual Property, any trade secret
material of the Company or the Intellectual Property Licenses, nor is any other
party to the Intellectual Property Licenses under any such obligation to
disclose proprietary information included in or relating to Intellectual
Property, any trade secret material to the Company or the Intellectual Property
Licenses to any Person, and no event has taken place, including the execution
and delivery of this Agreement and the transactions contemplated hereby or any
related change in the business activities of the Company, that would give rise
to such obligation.
(f) Neither the Company nor Seller has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Seller, the directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party).
(g) With respect to each item of Intellectual Property
required identified on Part 3.9 of Schedule 3: (i) the item is not subject to
any outstanding injunction, judgment, order, decree, ruling, or charge; (ii) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and (iii) the Company has never
agreed to indemnify any person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(h) No claim with respect to the Intellectual Property, any
trade secret material to the Company, or any Intellectual Property License which
would adversely affect the ability of the Company to conduct its business as
presently conducted and as proposed to be conducted is currently pending has
been asserted, or overtly threatened by any Person, nor does Seller know of any
grounds for any claim against the Company, (A) to the effect that any operation
or activity of the Company presently occurring or contemplated, including, inter
alia, the manufacture, use or sale of any product, device, instrument, or other
material made or used according to the patents or patent applications included
in the Intellectual Property or Intellectual Property Licenses, infringes or
misappropriates any United States or foreign copyright, patent, trademark,
service ▇▇▇▇ or trade secret; (B) to the effect that any other Person infringes
on the Intellectual Property or misappropriates any trade secret or know-how or
other proprietary rights material to the Company; (C) challenging the ownership,
validity or effectiveness of any of the Intellectual Property or trade secret
material of the Company; or (D) challenging the license of the Company or other
legally enforceable right under, any Intellectual Property or the Intellectual
Property Licenses.
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(i) Seller is not aware of any presently existing United
States or foreign patents or any patent applications, which if issued as patents
would be infringed by any activity contemplated by the Company.
(j) All the patents and patent applications of the Company or
any of its Affiliates or Subsidiaries (the "Patents and Applications") have been
properly prepared and filed on behalf of the Company or any of its Affiliates or
Subsidiaries and are being diligently pursued by the Company or any of its
Affiliates or Subsidiaries. The inventions described in the Patents and
Applications are assigned or licensed to the Company or any of its Affiliates or
Subsidiaries and no other entity or individual has any right or claim in any of
the inventions, Patents and Applications or any patents to be issued therefrom.
Seller is not aware of any material defects in any of the Patents and
Applications which would cause any of them to be held invalid or unenforceable.
There is no objection or proceeding, pending or threatened, that would affect
the validity of any patent issued pursuant thereto.
(k) Except in connection with the prosecution of the patent
applications listed on Part 3.9 of Schedule 3 hereto, there are no pending
judicial or governmental proceedings, including but not limited to interferences
and oppositions, relating to any of the Patents and Applications or any other
proprietary information to which the Company is a party or by which any property
(such term "property" specifically to include rights pursuant to licenses or
options or other rights to acquire licenses) of the Company are subject, and no
such proceedings are threatened or contemplated by Governmental Authorities or
other Persons.
(l) Seller has no knowledge of any new products, inventions,
procedures, or methods of manufacturing or processing that any competitors or
other third parties have developed which reasonably could be expected to
supersede or make obsolete any product or process of any of the Company.
3.10 Labor Relations; Employees.
--------------------------
(a) Part 3.10 of Schedule 3 hereto (i) sets forth the name,
date of employment, job title, the monthly compensation, and any bonuses of each
regular, full-time and part-time employee of the Company as of the date hereof;
(ii) lists all employment, managerial, advisory, and consulting agreements,
employee confidentiality or other agreements protecting proprietary processes,
formulae, or information to which the Company is a party, and any employee
handbook(s) published by the Company; (iii) lists every employee of the Company
on authorized leaves of absence who has a right to return to employment, every
contract employee or temporary employee; and (iv) sets forth the name, office
and years of service for each officer and each director of the Company.
(b) To Seller's best knowledge, the Company is not in
violation of any federal, state or other applicable Law respecting employment,
social security or employment practices relating to its own employees or to the
employees of any of its subcontractors.
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(c) To Seller's best knowledge, the Company is not delinquent
in payments to any of its employees for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed by them to the
date hereof or amounts required to be reimbursed to such employees, (ii) there
is no unfair labor practice complaint against the Company pending before any
Governmental Authority, (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving the Company, (iv)
the Company is not a party to or bound by any collective bargaining agreement
and neither any grievance nor any arbitration proceeding arising out of or under
a collective bargaining agreement is pending and no such claim has been
asserted, (v) no labor union currently represents the employees of the Company
and no labor union has taken any action with respect to organizing the employees
of the Company, (vi) no key employee has informed the Company that such employee
will or may terminate his or her employment or engagement with the Company and
(vii) except as otherwise described in this Agreement, there are no payments of
benefits to the employees of the Company above or different from the statutory
benefits corresponding under the applicable labor law.
(d) To Seller's best knowledge, the Company has filed or
caused to be filed all social security returns required under the statutes,
rules or regulations of the jurisdiction of its incorporation and all other
applicable jurisdictions. All amounts shown in said returns to be due and all
additional demands received prior to the date hereof have been paid in due time
and all withholdings required to be made prior to the date hereof have been duly
made and paid in due time. The amounts set up as accruals for social security
contributions in the Financial Statements are sufficient for the payment of all
accrued and not yet paid amounts.
3.11 Litigation. Except as set forth in Part. 3.11 of Schedule 3 (i),
there is no action, suit, proceeding, investigation or governmental approval
process (collectively, "Actions") pending or, to the best knowledge of Seller,
threatened or which could be threatened against the Company, or affecting any of
the properties or assets of the Company (including, without limitation, any of
its Permits) which individually or in the aggregate could have a material
adverse effect on the Condition of the Company, nor is there any basis for any
such Action; and (ii) there is no Action against any director, officer or
employee of the Company in connection with the business of such Company which,
in the event of an adverse judgment against any such Person, could have a
material adverse effect on the Condition of the Company, nor is there any basis
for any such Action. The foregoing includes, without limitation, any Action
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any employees of the Company, their use in connection with
the business of the Company of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. To the best knowledge of Seller, neither the
Company nor any of its respective assets or properties, nor, in connection with
its business, any shareholder, director, officer or employee of the Company, is
subject to any order, judgment, writ, injunction, compliance agreement, decree,
ruling or decision (collectively, an "Order") of any Governmental Authority
which is material to the Condition of the Company. There is no Action by the
Company currently pending or which the Company intends to initiate, which is
material to the Condition of the Company.
3.12 Compliance with Laws; Permits. To the best knowledge of Seller,
the Company has not violated or failed to comply with, in any material respect,
any law, statute, treaty, ordinance, rule, regulation or policy, domestic or
foreign, of any Governmental Authority (collectively, "Laws") to which it or any
13
of its properties or assets is subject. The Company has all federal, state,
local and foreign government licenses, permits, orders, certificates
authorizations and approvals of any Governmental Authority (collectively, the
"Permits") that are necessary for the conduct of its business as presently
conducted except to the extent the failure to have any such Permit would not
materially adversely affect the Condition of the Company; all such Permits are,
and as of the Closing will be, in full force and effect; no violations or
notices of failure to comply have been issued or recorded in respect of any such
Permits; there are no proceedings pending, threatened, to revoke, suspend or
limit any such Permit, nor is there any reasonable basis therefor. All
applications, reports, notices and other documents required to be filed by the
Company with all Governmental Authorities on or before the date hereof have been
timely filed and are complete and correct in all material respects as filed or
as amended prior to the date hereof, except to the extent the failure to timely
make such filings or the incompletion of such filing would not materially
adversely affect the Condition of the Company. With respect to any required
Permits, applications for which are either pending or contemplated to be made
pursuant to the business strategy of the Company, none of Seller or the Company
knows of any reason why such Permits should not be approved and granted by the
appropriate Governmental Authority. Neither the Company nor any of its officers
or agents has made any illegal or improper payments to, or provided any illegal
or improper inducement for, any governmental official or other Person in an
attempt to influence any such Person to take or to refrain from taking any
action relating to the Company. Part 3.12 of Schedule 3 lists all Permits of the
Company that are required for the conduct of its business.
3.13 Taxes. Except as set forth on Part 3.13 of Schedule 3 and to the
best knowledge of Seller (i) all foreign and domestic federal, state, city,
county, local and foreign income, franchise, sales, use and value added tax
returns and reports, and all other tax returns, reports and statements required
to be filed by the Company in those or in any other foreign or domestic
jurisdiction (collectively, "Returns") have been timely filed; (ii) all such
Returns are true, correct and complete in all material respects; (iii) all
taxes, assessments, fees, interest, penalties and other charges of kind
whatsoever (collectively, "Taxes") due or claimed to be due from the Company
have been paid except to the extent properly reserved against on the Financial
Statements; and (iv) no income tax return of the Company has been audited by any
Governmental Authority, and there are in effect no waivers of the applicable
statute of limitations for Taxes in any jurisdiction for the Company for any
period.
3.14 Books and Records. The books of account, ledgers and records of
the Company accurately and completely reflect in all material respects all
information relating to its business, the nature, acquisition, maintenance,
location and collection of its assets, and the nature of all transactions giving
rise to its obligations or accounts receivable. The minute books of the Company
fully set forth all action taken by the Board of Directors, shareholders and, if
any, executive board (or other committee thereof) of the Company.
3.15 Transactions with Affiliates. Except as set forth in Part 3.15 of
Schedule 3, the Company does not have any obligation to or claim against any
past or present Principal Owner of the Company, or any of such Principal Owner's
Affiliates, associates or relatives, and no such Person has any obligation to or
claim against the Company. All products, services or benefits provided to the
Company by any such Person, or provided by the Company to any such Person, are
set forth on Part 3.15 of Schedule 3 and are provided at a charge equal to the
fair market value of such products, services or benefits. No past or present
Principal Owner of the Company, nor any of such Principal Owner's Affiliates,
associates or relatives, has any direct or indirect interest of any kind in any
business or entity, which is competitive with the Company.
14
3.16 Brokers or Finders. Seller has not entered into or will not enter
into any agreement pursuant to which any of Buyer or the Company will be liable,
as a result of the transactions contemplated by this Agreement, for any claim of
any person for any commission, fee or other compensation as finder or broker.
3.17 Employment of Officers, Employees and Consultants. No third party
has any valid claim against the Company, Buyer or any Designated Person (as
hereinafter defined) with respect to (a) the continued employment by, or
association with, the Company, of any of the present officers or employees of or
consultants to the Company (collectively, the "Designated Persons") or (b) the
use, in connection with the business of the Company as presently conducted or
proposed to be conducted by the Company or any of the Designated Persons of any
information which the Company or any of the Designated Persons would be
prohibited from using under any prior agreements or arrangements or any legal
considerations applicable to unfair competition, trade secrets or proprietary
information. Each employee and consultant of the Company has executed an
agreement with the Company (in form and substance satisfactory to Buyer)
agreeing to maintain the confidentiality of proprietary information and agreeing
to assign certain inventions to the Company.
3.18 Insurance. The Company presently maintains and has maintained in
effect since its formation all the insurance policies required by applicable law
or reasonably appropriate in connection with the operation of its business as
presently conducted.
3.19 Absence of Undisclosed Liabilities. The Company does not have any
obligation, indebtedness, commitment, guaranty, and other item constituting a
liability under US GAAP, whether direct or indirect, absolute, accrued,
contingent, or otherwise, and whether due or to become due (each, a "Liability")
of any nature whatsoever except for (a) Liabilities reflected or reserved
against in the balance sheet as of May 31, 2002 (the "Balance Sheet"), or (b)
Liabilities and obligations incurred by the Company and not required by US GAAP
to be set forth in the Balance Sheet for the appropriate period, or (c)
Liabilities incurred in the ordinary course of business and consistent with past
practice after the date of the Balance Sheet.
3.20 Disclosure. In connection with the purchase of the Common Stock by
Buyer as contemplated hereby, the Company and Seller have disclosed to Buyer all
material facts and information concerning the Company, its Condition and the
Common Stock, and have not made any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
contained herein not misleading. There is no fact or circumstance which has, or
is reasonably likely to have, an adverse effect on the Company which has not
been disclosed herein.
4. Representations, Warranties and Agreements of Buyer. Buyer, hereby
represents and warrants to, and agrees with Seller, except as set forth on the
Schedule of Exceptions furnished to Seller and attached hereto as Schedule 4,
specifically identifying the relevant subsection hereof, which exceptions shall
be deemed to be representations and warranties as if made hereunder, as follows:
15
4.1 Organization, Good Standing and Qualification. Buyer, is a
corporation duly organized, validly existing and in good standing under the laws
of the State of ___________. Buyer has all requisite power and authority to
carry on its business as now conducted and as proposed to be conducted. Buyer
has all requisite power and authority to enter into and perform this Agreement
and the transactions contemplated hereby. Buyer is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify could have a material adverse effect on its Condition.
4.2 Capitalization. The authorized capital stock of Buyer consists of
and upon the consummation of the Closing shall consist of 100,000,000 shares of
common stock, $.001 par value per share, of which currently 1,800,000 are issued
and outstanding. All of the issued shares are fully paid and non-assessable.
Except as set forth in Part 4.2 of Schedule 4, Buyer does not have outstanding
any securities convertible into or exchangeable for its capital stock or
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock. There are no agreements among the shareholders of Buyer with
respect to the voting or transfer of the capital stock or to change control of
Buyer and none of its shareholders has preemptive rights. Schedule 4 hereto
includes a complete and correct list as of immediately prior to the Closing, of
the name of each of Buyer's shareholders and the number of shares of stock owned
by such shareholder. The Buyer Shares are, and at the Closing will be, free and
clear, from any Liens. Except as set forth in part 3.2 of Schedule 4, there is
not outstanding any security, option, warrant, right, agreement, understanding
or commitment of any kind entitling any person or entity to acquire any of the
Buyer Shares. The Buyer Shares have not been registered with the SEC or any
state regulatory authority and no such registration is required.
4.3 Authority; Execution and Delivery; Requisite Consents,
Nonviolation. Buyer has, and at the Closing will have, all requisite power and
authority to execute, deliver and perform this Agreement and each other document
or instrument executed by it, or any of its officers, in connection herewith or
therewith or pursuant hereto or thereto and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action on the
part of Buyer. This Agreement is duly executed and delivered by Buyer and is the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting the
enforceability of creditors' rights in general or by general principles of
equity. The execution, delivery and performance of this Agreement, the
consummation by Buyer of the transactions contemplated hereby and thereby
(including, without limitation, the offer, sale and delivery by Buyer of the
Buyer Shares) will not (a) require the consent, license, permit, waiver,
approval, authorization or other action of, by or with respect to, or
registration, declaration or filing with, any Governmental Authority or any
other Person; (b) contravene (i) any requirement of law to which it is subject,
16
including the securities laws of any jurisdiction or the rules or regulations of
any governmental entity or self regulatory body nor (ii) any judgment, decree,
franchise, order or demand applicable to it (c) conflict or be inconsistent with
or result in any breach of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of its properties or assets
pursuant to the terms of any indenture, mortgage, deed of trust agreement or
other instrument to which it is a party or bound or to which it may be subject
or violate any provision of its organization documents. Buyer is not in default
with respect to any applicable statute, rules, writ, injunction, decree, order
or regulation of any governmental authority having jurisdiction over it which is
likely to adversely affect its ability to perform its obligations hereunder and
entering into this Agreement will not violate any of them.
4.4 SEC Filings. Financial Statements. Buyer has filed for the last
twelve (12) months all reports required to be filed by it with the SEC
(collectively, the "Buyer SEC Reports"). As of the respective dates they became
effective, Buyer SEC Reports which were filed pursuant to the Securities Act and
as of the respective dates of filing of the last applicable amendment thereto,
Buyer SEC Reports which were filed pursuant to the Securities Exchange Act of
1934 (the "Exchange Act") did not contain any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. To the
best knowledge of Buyer, the financial statements of Buyer included in Buyer SEC
Reports complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise noted
therein) and fairly present the consolidated financial position of Buyer as at
the dates thereof and the results of operations and cash flows for the periods
then ended, except that in the case of the unaudited financial statements
included in any form 10-Q, the presentation and disclosure conform with the
applicable rules of the Exchange Act and are subject to year-end adjustments.
4.5 No Brokers or Finders. Buyer has not and will not enter into any
agreement pursuant to which the Company or Seller will be liable, as a result of
the transactions contemplated by this Agreement, for any claim of any person for
any commission, fee or other compensation as finder or broker.
Nothing contained in this Section 4 shall in any respect limit or
modify the representations, warranties and agreements of Seller in Section 3 of
this Agreement or the right of Buyer to rely thereon.
5. Conditions of Buyer's Obligations at Closing.
--------------------------------------------
The obligation of Buyer to purchase the Common Stock to be purchased by
it at the Closing is subject to the fulfillment, to Buyer's satisfaction, prior
to or at the Closing, of each of the following conditions:
5.1 Representations and Warranties. The representations and warranties
of Seller contained in this Agreement shall be true and correct in all material
respects on the date hereof and on and as of the Closing Date as if made on and
as of such date.
17
5.2 Performance. Seller shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by him prior to or at the Closing.
5.3 Stock Certificates, Etc. At the Closing, Seller shall have tendered
to Buyer a certificate representing the Common Stock, together with a stock
power, in accordance with Section 1 hereof. The certificate delivered by Seller
shall be in form and substance satisfactory to Buyer and sufficient to transfer
to and vest in Buyer good and valid title to the Common Stock, free and clear of
any Lien.
5.4 No Material Adverse Change. There shall not have occurred any
material adverse change in the Condition of the Company since the date hereof.
5.5 Consents. Seller shall have obtained all consents, approvals or
waivers from Governmental Authorities and third Persons necessary for the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby and thereby, all without material cost or other adverse
consequences to the Company.
5.6 No Actions. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or authority or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated by this Agreement.
5.7 Compliance Certificate. Buyer shall have received certificates
dated as of the day of the Closing certifying that the conditions specified in
Section 5 have been fulfilled.
5.8 Proceedings and Documents. All proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions, including but not limited to the Schedules and Exhibits to
this Agreement, shall be satisfactory in substance and form to Buyer and its
counsel, and Buyer shall have received all such counterpart originals or
certified or other copies of such documents as Buyer may reasonably request.
5.9 Employment Agreements. If elected by Buyer, any person providing
consulting services or being employed by the Company as described in Part 3.10
of Schedule 2 shall have executed employment agreements containing, without
limitation, provisions with regard to non-competition, non-solicitation, and
inventions, in each case in form and substance satisfactory to Buyer.
5.10 Due Dilligence Review. Buyer shall have completed, satisfactory to
Buyer, due diligence of the Company.
5.11 Stock Re-Purchase Agreement. Buyer shall have entered into a share
re-purchase agreement, the form of which is attached as Exhibit B.
6. Conditions of Seller's Obligations at Closing. The obligations of
Seller to Buyer under this Agreement are subject to the fulfillment, to Seller
's satisfaction, prior to or at the Closing, of each of the following
conditions:
18
6.1 Representations and Warranties. The representations and warranties
of Buyer contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date.
6.2 Performance. Buyer shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing.
6.3 Payment of the Common Stock. At the Closing, Buyer shall have
tendered to Seller a certificate representing the Buyer Shares in accordance
with Section 1 hereof. The certificate delivered by Buyer shall be in form and
substance satisfactory to Seller and sufficient to transfer to and to vest in
Seller good and valid title to the Buyer Shares, free and clear of any Lien.
6.4 No Material Adverse Change. There shall not have occurred any
material adverse change in the Condition of Buyer since the date hereof.
6.5 No Actions. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or authority or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated by this Agreement.
6.6 Proceedings and Documents. All proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions shall be satisfactory in substance and form to Seller and
their counsel, and Seller shall have received all such counterpart originals or
certified or other copies of such documents as he may reasonably request.
6.7 Compliance Certificate. Seller shall have received certificates
dated as of the day of the Closing executed by Buyer certifying that the
conditions specified in Sections 6.1, 6.2, 6.4 and 6.5 have been fulfilled.
6.8 Private Equity Facility. Buyer shall have signed agreements for the
provision of a private equity financing facility in the amount of $30,000,000
from Prima Capital Growth Fund LLC (the "Private Equity Line").
7. Registration Rights.
-------------------
7.1 Request for Registration.
------------------------
(a) If at any time after the earlier of (i) the one year
anniversary of the Closing Date or, (ii) the six month anniversary of a
Qualified Offering as defined below (the "Qualified Offering"), Buyer shall
receive a written request (the "Request") sent by Seller that Buyer files a
registration statement under the Securities Act to effect any registration,
qualification or compliance with respect to all or part of the Buyer Shares (the
"Registrable Securities") representing not less than 5% of the outstanding stock
of Buyer on a fully diluted basis and provided that at such time the Request is
made (A) Buyer has raised $75,000,000 of equity in addition to the $30,000,000
available under the Private Equity Line and (B) Buyer has a market
capitalization of at least $200,000,000, then Buyer shall, as expeditiously as
practicable, and in any event within one hundred and twenty (120) days of the
receipt of such Request, use its best efforts to effect a registration statement
under the Securities Act with respect to all Registrable Securities which Seller
request to be registered. For purpose of this Agreement, a Qualified Offering
shall mean an underwritten public offering of shares of Buyer's common stock, in
which the net proceeds to Buyer are not less than $75,000,000.
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(b) If Seller intends to distribute the Registrable Securities
covered by his request by means of an underwriting, Seller shall so advise Buyer
as a part of his Request. Buyer shall select the managing underwriter or
underwriters in such underwriting. Seller proposes to distribute his securities
through such underwriting and shall (together with Buyer as provided herein)
enter into an underwriting agreement in customary form with the underwriter or
underwriters so selected for such underwriting. If the underwriter advises that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares of Registrable Securities that may be
included in the underwriting shall be reduced as advised by the underwriters.
(c) Buyer shall be obligated to effect only two (2)
registrations pursuant to a Request under this Section 7.1 (an offering which is
not consummated shall not be counted for this purpose); provided that (i) Buyer
shall not be obligated to effect the second registration Request if it is done
within 180 days or less from the first requested offering; (ii) Buyer shall not
be obligated to effect any registration which is requested within 180 days or
less from a registration made by Buyer as described in Section 7.2.
(d) Notwithstanding the foregoing, if Buyer shall furnish to
Seller a certificate signed by the President or Chief Executive Officer of Buyer
stating that in the good faith judgment of the Board of Directors of Buyer, it
would be seriously detrimental to Buyer for such registration statement to be
filed by reason of a material pending transaction and it is therefore essential
to defer the filing of such registration statement, Buyer shall have the right
to defer such filing for a period of not more than one (1) year after receipt of
the Request
7.2 Buyer Registration. If (but without any obligation to do so) Buyer
proposes to register any of its stock or other securities under the Securities
Act in connection with the public offering of such securities solely for cash
other than a registration on Form S-8 (or similar or successor form) relating
solely to the sale of securities to participants in a Buyer stock plan or to
other compensatory arrangements to the extent includable on Form S-8 (or similar
or successor form), or a registration on Form S-4 (or similar or successor form)
except for shares registered under the Private Equity Line, Buyer shall, at such
time, promptly give Seller written notice of such registration. Upon the written
request of Seller given within twenty (20) days after mailing of such notice by
Buyer, Buyer shall, subject to the provisions of Section 7.5, use its best
efforts to cause to be registered under the Securities Act all Buyer Shares that
Seller has requested to be registered. Buyer shall have no obligation under this
Section 7.2 to make any offering of its securities, or to complete an offering
of its securities that it proposes to make. Seller may exercise the rights
described in this Section 7.2 an unlimited number of times.
7.3 Conditions Precedent. It shall be a condition precedent to the
obligations of Buyer to take any action pursuant to this Agreement with respect
to this Section that Seller furnishes to Buyer such information regarding
20
himself, the Registrable Securities held by him, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Seller's Registrable Securities. If any registration statement or
comparable statement under the Securities Act refers to Seller, by name or
otherwise, as the holder of any securities of Buyer then, unless counsel to
Buyer advises Buyer that the Securities Act requires that such reference be
included in any such statement, Seller shall have the right to require the
deletion of such reference to himself.
7.4 Expenses of Registration. All expenses incurred in connection with
registrations, filings or qualifications pursuant to Sections 7.1 and 7.2,
including without limitation all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for Buyer, and
the reasonable fees and disbursements of one counsel (selected by the Initiating
Holder) shall be borne by Seller.
7.5 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by Buyer, Buyer shall not be
required under Section 7.2 to include any Seller's securities in such
underwriting unless Seller accepts the terms of the underwriting as agreed upon
between Buyer and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, exceed the largest
number of securities requested to be included in such offering which can be sold
without having an adverse effect on such offering by Buyer. If the total number
of securities, including Registrable Securities, requested by Seller to be
included in such offering (or in any other offering in which Seller shall have
the right to include Registrable Securities pursuant to this Section 7) exceeds
the largest number of securities that the underwriters reasonably believe can be
sold without having an adverse effect on such offering, then Buyer shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters believe will not have
an adverse effect on such offering, and the number of shares that may be
included in the underwriting shall be allocated as follows: (i) first, that
number of shares sought to be registered by Buyer, and (ii) second, that number
of shares sought to be registered by Seller, in proportion (as nearly as
practicable) to the amount of the Registrable Securities held by Seller.
7.6 "Market Stand-Off" Agreement. Seller hereby agrees that, during the
period of ninety (90) days following the effective date of a registration
statement of Buyer filed under the Securities Act in connection with an
underwritten offering, he shall not, if requested by Buyer and such underwriter,
sell or otherwise transfer or dispose of (other than to donees, affiliates or
partners who agree to be similarly bound) any Buyer Shares held by him except
Buyer Shares included in such registration.
7.7 Indemnification.
---------------
In the event any Registrable Securities are included in a registration
statement under this Section 7:
(a) Buyer will indemnify and hold harmless Seller, legal
counsel and accountants for Seller, any underwriter (as defined in the
Securities Act) for Seller and each person, if any, who controls such
underwriter within the meaning of the Securities Act or the Exchange Act,
21
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by Buyer of the Securities Act, the Exchange Act,
any state securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities laws; and Buyer will
reimburse Seller, the underwriter or its controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 7.7 (a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of Buyer (which
consent shall not be unreasonably withheld), nor shall Buyer be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation that occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by Seller, the underwriter or the controlling
person; provided further, however, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any of
Seller or underwriter, or any person controlling such underwriter, from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as then amended or
supplemented if Buyer shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of Seller or the underwriter to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.
(b) Seller will indemnify and hold harmless Buyer, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls Buyer within the meaning of the Securities Act,
legal counsel and accountants for Buyer, any underwriter and any controlling
person of such underwriter, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Securities Act, the Exchange Act or any state securities laws, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by Seller expressly for use in
connection with such registration; and Seller will reimburse any person intended
to be indemnified pursuant to this subsection, for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 7.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Seller (which consent
shall not be unreasonably withheld).
22
(c) Promptly after receipt by an indemnified party under this
Section 7.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 7.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
complete and full release from all liability in respect of such claim or
litigation. No indemnified party shall consent to entry of any judgment or enter
into any settlement of any such action the defense of which has been assumed by
an indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in this Section 7.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything to the contrary in this Section 7.7,
no indemnified party shall be required, pursuant to this Section 7.7, to
contribute any amount in excess of the net proceeds received by such
indemnifying party from the sale of securities in the offering to which the
losses, claims, damages, liabilities or expenses of the indemnified party relate
(f) The obligations of Buyer and Seller under this Section 6.7
shall survive (i) the completion of any offering of Registrable Securities in a
registration statement under this Section 7.7, (ii) any investigation made by or
on behalf of any indemnified party or by or on behalf of Buyer, and (iii) the
consummation of the sale or successive resale of the Registrable Securities.
23
8. Miscellaneous.
-------------
8.1 Indemnification
(a) Indemnification by Seller. From and after the Closing,
Seller agrees to indemnify, defend and save Buyer, and each of its officers,
directors, employees, agents, affiliates and subsidiaries (each, a "Buyer
Indemnified Party"), harmless from and against, and to promptly pay to an Buyer
Indemnified Party or reimburse an Buyer Indemnified Party for, any and all
liabilities, losses, costs, expenses, interest and fines (including reasonable
fees and expenses of attorneys, accountants and other experts incurred by any
Buyer Indemnified Party in any action or proceeding between such indemnified
party and the indemnitor or between any indemnified party and any third party or
otherwise) (individually a "Loss" and collectively, the "Losses") sustained or
incurred by any Buyer Indemnified Party relating to, resulting from, arising out
of or otherwise by virtue of any breach of a representation or warranty made
herein by Seller or breach or failure to observe or perform any of the covenants
or agreements made by him and contained in this Agreement.
(b) Indemnification by Buyer. From and after the Closing,
Buyer agrees to indemnify, defend and save Seller harmless from and against, and
to promptly pay to Seller or reimburse him for, any and all Losses sustained or
incurred by Seller relating to, resulting from, arising out of or otherwise by
virtue of any breach of a representation or warranty made herein by Buyer or the
covenants or agreements of Buyer contained in this Agreement.
(c) Procedure for Indemnification. The following procedure
shall apply to the foregoing agreements to indemnify and hold harmless:
(i) The party who is seeking indemnification (the
"Claimant") shall give written notice to the party from whom indemnification is
sought (the "Indemnitor") promptly after the Claimant learns of the claim or
proceeding, provided that the failure to give such notice shall not relieve the
Indemnitor of its obligations hereunder except to the extent it is actually
damaged thereby.
(ii) With respect to any third-party claims or
proceedings as to which the Claimant is entitled to indemnification after
satisfaction of any applicable Basket, as defined below, the Indemnitor shall
have the right to select and employ counsel of its own choosing to defend
against any such claim or proceeding, to assume control of the defense of such
claim or proceeding, and to compromise, settle or otherwise dispose of the same,
if the Indemnitor deems it advisable to do so, all at the expense of the
Indemnitor. No settlement, compromise or disposition shall be made without the
prior consent of the Claimant, which consent shall not be unreasonably withheld;
provided, however, no consent need be given if there is not a general release
given to the Claimant or if any injunctive relief is imposed on the Claimant.
The parties will fully cooperate in any such action, and shall make available to
each other any books or records useful for the defense of any such claim or
proceeding. The Claimant may elect to participate in the defense of any such
third party claim, and may, at its sole expense, retain separate counsel in
connection therewith. Subject to the foregoing the Claimant shall not settle or
compromise any such third party claim without the prior consent of the
Indemnitor, which consent shall not be unreasonably withheld.
24
(d) Limitation on Indemnification Rights.
------------------------------------
i. It is understood and agreed that no claim for
recovery of indemnifiable damages may be asserted based on a representation,
warranty or applicable portion thereof set forth in this Agreement after it has
been extinguished in accordance with Section 8.1 (d) (2) hereof, except as to
any matters with respect to which a bona fide written claim shall have been made
or an action at law or in equity shall have commenced before such date, in which
event survival shall continue (but only with respect to and to the extent of,
such claim or action) until the final resolution of such claim or action,
including all applicable periods of appeal.
ii. Notwithstanding any other provision of this
Agreement, neither party shall be entitled to indemnification from the other
under the provisions of this Section 7.1 until the aggregate of any and all
Losses suffered by Buyer Indemnified Parties or by Seller exceeds the sum of
$50,000 (the "Basket"), whereupon the Buyer Indemnified Parties or Seller shall
thereafter be entitled to indemnification for all Losses suffered by them which
arise under the provisions of Section 7.1 (a) on a dollar-for-dollar basis
(other than the above-described one-time $50,000 deductible) as they occur;
provided that such requirement of an aggregate of $50,000 of Losses shall not
apply to Losses in the case of fraud or for breach of the representations in
Section 2, Sections 3.1, 3.2, 3.3, 3.4, 3.9, 3.13, 3.20 and Sections 4.1, 4.2
and 4.3.
(e) Remedy for Damages. The indemnification obligations of the
parties set forth in this Section 8.1 shall not constitute the sole and
exclusive remedies of the parties for the recovery of money damages with respect
to any and all matters arising out of this Agreement. Notwithstanding the
foregoing, the terms of this Section 8.1 shall not be construed as limiting in
any way whatsoever any remedy to which any party may be entitled other than the
recovery of money damages, including but not limited to equitable remedies,
specific performance, injunctive relief and rescission.
8.2 Survival. All representations, warranties, covenants and agreements
contained in or made pursuant to this Agreement or contained in any certificate
delivered pursuant to this Agreement, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any party
hereto, and shall survive the transfer and payment for the Common Stock and the
consummation of the transactions contemplated hereby for a period of 12 months,
unless a claim is made prior thereto.
8.3 Assignment. This Agreement and all the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Any assignees or successors shall take any
such assignment(s) subject to all obligations of the assigning or original party
and subject to any and all defenses. Nothing herein shall relieve an assigning
party of its obligations under this Agreement.
8.4 Amendment; Waiver. Any term, covenant, agreement or condition of
this Agreement may be amended, and compliance therewith may be waived (either
generally or in a particular circumstance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by Seller and Buyer. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each of Seller and Buyer.
25
8.5 Governing Law. This agreement shall be governed by and construed
and enforced in accordance with, the laws of the State of Florida, without
regard to conflicts of law principles. Any disputes with respect to the
interpretation of this Agreement or the rights and obligations of the parties
hereto shall be exclusively brought in the South Palm Beach Court for Florida or
if such court lacks subject matter jurisdiction, in the U. S. District Court for
the Southern District of Florida. Each of the parties waives any right to object
to the jurisdiction or venue of either of such Courts or to claim that such
Courts are an inconvenient forum.
8.6 Exchange of Buyer Shares. It is intended that after the effect of
the transactions described herein which Buyer intends to enter into with the
Company's shareholders (collectively with Seller, the "Group"), the Group will,
in the aggregate, own 83% of the equity interest of Buyer and the current
shareholders of Buyer will own the remaining 17% of the equity interest of
Buyer; provided that such capital structure is subject to dilution by reason of
the issuance of warrants to purchase 551,765 shares of registered common stock
at $3.50 per share. The total capital stock issued and outstanding of Buyer
would be approximately 10,800,000 shares and warrants to purchase an additional
551,765 capital shares after all the Company shares are exchanged.
8.7 Amendment; Waiver. Any term, covenant, agreement or condition of
this Agreement may be amended, and compliance therewith may be waived (either
generally or in a particular circumstance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by Seller and Buyer. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each of Seller and Buyer.
8.8 Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given (x) on
the date of delivery, if delivered personally or by telecopier, receipt
confirmed, (y) on the second following business day, if delivered by a
recognized overnight courier service, or (z) seven days after mailing, if sent
by registered or certified mail, return receipt requested, postage prepaid, in
each case, to the party to whom it is directed at the following address (or at
such other address as any party hereto shall hereafter specify by notice in
writing to the other parties hereto):
(i) If to Buyer, to it at the following address:
Ponca Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
(ii) If to Seller, to them at the following address:
8.9 Integration, Exhibits. This Agreement and the documents referred to
herein or delivered pursuant hereto or pursuant to such documents, including all
exhibits and schedules, contain the entire understanding of the parties with
respect to their subject matter and supersede all prior agreements and
understandings between the parties with respect to their subject matter. It is
26
understood that the Schedules and Exhibits referred in this Agreement are not
attached to this Agreement concurrently with its signature thereof, and as
provided in Section 4.8 hereof, it is a condition for Buyer to close the
transactions described in this Agreement to have received the Schedules and
Exhibits in a satisfactory form for Buyer.
8.10 Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
8.11 Descriptive Headings. The section and other headings contained in
this Agreement are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.
8.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK
27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-------------------------------------------
PONCA ACQUISITION CORPORATION.
By: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇, ▇▇.
Title: President
SELLER:
--------------------------------------------
28
SCHEDULE LIST
-------------
Schedule 2 Schedule of Exceptions for Seller as to the Individual
Schedule 3 Schedule of Exception for the Company.
Schedule 4 Schedule of Exceptions for Buyer
EXHIBITS
A. Seller Information
B. Form of Share Re-Purchase Agreement.
29
SCHEDULE 4
----------
SCHEDULE OF EXCEPTIONS FOR SELLER
30
----------
NAMES OF SHAREHOLDERS AND HOLDERS OF SHARES
--------------------------------------------- ----------------------- ------------------- -------------------
Percentage of
Shareholder Cert. Number(s) # of Shares Total Shares
--------------------------------------------- ----------------------- ------------------- -------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 500 33.34
--------------------------------------------- ----------------------- ------------------- -------------------
▇▇▇▇▇▇▇ 500 33.33
--------------------------------------------- ----------------------- ------------------- -------------------
▇▇▇▇ 500 33.33
--------------------------------------------- ----------------------- ------------------- -------------------
--------------------------------------------- ----------------------- ------------------- -------------------
--------------------------------------------- ----------------------- ------------------- -------------------
--------------------------------------------- ----------------------- ------------------- -------------------
--------------------------------------------- ----------------------- ------------------- -------------------
--------------------------------------------- ----------------------- ------------------- -------------------
31
SCHEDULE 5
SCHEDULE OF EXCEPTIONS FOR BUYER
32
EXHIBIT A
Number of shares of Company common stock owned by Seller: 500
Percentage of shares outstanding of the Company owned by Seller: 33.33%
Number of shares of Buyer common stock to be received by the Seller: 3,000,000
33
EXHIBIT B.
SHARE RE-PURCHASE AGREEMENT.
34
REPURCHASE AGREEMENT
This Repurchase Agreement ("Agreement") his made and entered into this ________
of ______, 2002 by and ____________, an individual whose address is __________
("Shareholder") and Ponca Acquisition Corporation (the "Company"). (Individually
each a "Party" and together, the "Parties").
RECITALS
A. The Parties have entered into a Stock Purchase Agreement of even date.
B. The Parties wish to provide for a repurchase Company shares ("Shares") of
Common Stock from the Shareholder by the Company, pursuant to the terms and
conditions described in this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt of which each
hereby acknowledges, the Parties Agreement as follows:
1. Repurchase of Company Shares. Subject to the provisions of Sections 2, 3 and
4 of this Agreement, the Shareholder may, in his sole discretion, but provided
that such repurchase may occur only two (2) times in any one year period and
such repurchase rights are non-cumulative:
a. At any time commencing on _________, 2003 and continuing through
_____, 2004, sell up to the lesser of the (i) "Maximum Put Amount", as defined
in Section 4 below, and (ii) twenty five thousand (25,000) Company Shares to the
Company as the Repurchase Price defined in Section 3 below; and
b. At any time commencing on _________, 2004 and continuing through
_____, 2005, sell up to the lesser of (i) the Maximum Put Amount and (ii) fifty
thousand (50,000) Company Shares to the Company as the Repurchase Price defined
in Section 3 below; and
c. At any time commencing on _________, 2005 and continuing through
_____, 2006, sell up to the lesser of (i) the Maximum Put Amount and (ii)
seventy-five thousand (75,000) Company Shares to the Company as the Repurchase
Price defined in Section 3 below; and
2. Purchase Price. For purposes of this Agreement, the "Repurchase Price shall
mean: For each mean any day during which the New York Stock Exchange shall be
open for business ("Trading Day") during a Valuation Period (or such other date
on which the Repurchase Price is calculated in accordance with the terms and
conditions of this Agreement) the Repurchase Price shall be 87.5% of the shall
mean the daily volume weighted average price of the Common Stock on the market
or exchange on which the Company Shares are traded using the AQR function (the
"VWAP").
35
3. Conditions to Closing. The Company Shares shall be trading on the New York
Stock Exchange, the American Stock Exchange, the NASDAQ National Market System,
the NASDAQ SmallCap, the Over the Counter Bulletin Board or the "Pink Sheets"
(the "Principal Market")
4. Maximum Put Amount by Shareholder. Notwithstanding anything to the contrary
contained in this Agreement, the "Maximum Put Amount" shall mean the least of
(i) fifteen percent (15%) of the shall be the price based on the VWAP ("Average
Daily Price") for each of the twenty (20) Trading Days immediately preceding the
Repurchase Notice Date multiplied by the reported daily trading volume of the
Common Stock on the Principal Market for the twenty-two Trading Days immediately
preceding the Repurchase Notice Date, (ii) the maximum amount of Common Stock
that may be issued without the approval of the Company's Shareholders according
to the rules and regulations of the Principal Market.
5. Procedures to Closing.
a. The Shareholder may deliver a Repurchase Notice to the Company,
subject to the conditions in this Agreement, which shall state the
commencement date of the Valuation Period, which may not be prior to the
delivery of the Repurchase Notice.
b. An Optional Purchase Notice shall be deemed delivered on (i) the
Trading Day it is received by facsimile or otherwise by the Investor if such
notice is received prior to 12:00 noon New York time, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after 12:00
noon New York time on a Trading Day or at any time on a day which is not a
Trading Day. No Repurchase Notice may be deemed delivered on a day that is not
a Trading Day.
c. The Purchase Price shall be based on the Average Daily Price on each
separate Trading Day during the Valuation Period.
d. The closing for the sale of the Repurchase Shares shall occur on or
before five (5) business days following the Valuation Period.
6. Survival. All representations, warranties, covenants and agreements contained
in or made pursuant to this Agreement or contained in any certificate delivered
pursuant to this Agreement, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any party hereto, and
shall survive the transfer and payment for the Common Stock and the consummation
of the transactions contemplated hereby for a period of 12 months, unless a
claim is made prior thereto.
7. Assignment. This Agreement and all the provisions hereof shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Any assignees or successors shall take any such
assignment(s) subject to all obligations of the assigning or original party and
subject to any and all defenses. Nothing herein shall relieve an assigning party
of its obligations under this Agreement.
36
8. Amendment; Waiver. Any term, covenant, agreement or condition of this
Agreement may be amended, and compliance therewith may be waived (either
generally or in a particular circumstance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by Seller and Buyer. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each of Seller and Buyer.
9. Governing Law. This agreement shall be governed by and construed and enforced
in accordance with, the laws of the State of Florida, without regard to
conflicts of law principles. Any disputes with respect to the interpretation of
this Agreement or the rights and obligations of the parties hereto shall be
exclusively brought in the Southern U.S. District Court for Florida or if such
court lacks subject matter jurisdiction, in the Court for Palm Beach County.
Each of the parties waives any right to object to the jurisdiction or venue of
either of such Courts or to claim that such Courts are an inconvenient forum.
10. Notices. All notices and other communications provided for herein shall be
dated and in writing and shall be deemed to have been duly given (x) on the date
of delivery, if delivered personally or by telecopier, receipt confirmed, (y) on
the second following business day, if delivered by a recognized overnight
courier service, or (z) seven days after mailing, if sent by registered or
certified mail, return receipt requested, postage prepaid, in each case, to the
party to whom it is directed at the following address (or at such other address
as any party hereto shall hereafter specify by notice in writing to the other
parties hereto):
(i) If to Buyer, to it at the following address:
Ponca Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
(ii) If to Seller, to them at the following address:
11. Integration. Exhibits. This Agreement and the documents referred to herein
or delivered pursuant hereto or pursuant to such documents, including all
exhibits and schedules, contain the entire understanding of the parties with
respect to their subject matter and supersede all prior agreements and
understandings between the parties with respect to their subject matter. It is
understood that the Schedules and Exhibits referred in this Agreement are not
attached to this Agreement concurrently with its signature thereof, and as
provided in Section 4.8 hereof, it is a condition for Buyer to close the
transactions described in this Agreement to have received the Schedules and
Exhibits in a satisfactory form for Buyer.
37
12. Counterparts. This Agreement may be executed in two or more counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which together shall be deemed to be one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
-------------------------------------------
PONCA ACQUISITION CORPORATION.
By: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇, ▇▇.
Title: President
SELLER:
--------------------------------------------
38