1
EXHIBIT 10
REPURCHASE AGREEMENT
THIS REPURCHASE AGREEMENT (this "Agreement") is made and entered into and
is effective as of March 17, 1998, by and between NEW DIRECTIONS MANUFACTURING,
INC., a Nevada corporation (the "Company") and the individuals listed in Exhibit
A hereto (collectively, the "Shareholders").
R E C I T A L S:
A. The Shareholders are the record and beneficial owner of the shares of
Stock (as such term is defined below) of the Company set forth adjacent to each
Shareholders name in Exhibit A hereto.
B. Simultaneous with the execution of this Agreement, the Company is
acquiring a life insurance policy on each shareholder in the amount set forth in
Exhibit A.
C. In consideration for issuing the Stock to the Shareholders, the Company
is retaining a right to repurchase the Stock upon the terms and conditions set
forth herein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. DEFINITIONS. Words or phrases used herein are defined as follows:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "FREE TRADING SHARES" shall mean any and all shares which are
freely saleable on the public markets, even if subject to the quantity
limitations of Rule 144(e) of the Securities Act of 1933.
(c) "REPRESENTATIVE" shall include a trustee of a trust holding
Stock and the personal and/or legal representative of the Shareholder after such
Shareholder's demise.
(d) "REPURCHASE EVENT" shall mean termination of the Shareholder's
employment with the Company as a result of the death of the Shareholder.
(e) "REPURCHASE REQUIREMENT" shall refer to the obligation of the
Company, upon the death of the Shareholder, to repurchase as many of the
Shareholder's Shares as possible using the proceeds of the Shareholder's life
insurance policy purchased by the Company.
(f) "REPURCHASE RIGHT" shall refer to the right of the remaining
Shareholders or the Company, upon the death of another Shareholder, to
repurchase any and all shares of the Shareholder remaining after the Company
exercises its Repurchase Requirement upon the death of the Shareholder.
(g) "RESTRICTED SHARES" shall mean any and all Shares which are
not freely saleable on the public markets pursuant to a Rule 144 restriction or
otherwise. For example, a
1
2
stock option for unregistered shares of common stock would be restricted; stock
subject to a lock-up agreement would be restricted; and stock which is subject
to the Rule 144 holding period would be restricted.
(h) "SHAREHOLDERS" shall mean those persons and entities set forth
in Exhibit A hereto.
(i) "STOCK" or "SHARES" shall mean all the issued and outstanding
shares of Common Stock of the Company and any Stock issued as the result of a
stock dividend, stock split or recapitulation, reorganization, option, warrant,
convertible security, merger, or consolidation of the Company.
2. SCOPE OF THIS AGREEMENT. All Shares, whether currently owned of
record by the Shareholder or subsequently acquired by them or any entity or
person, are subject at all times to the terms and conditions of this Agreement.
3. REPURCHASE REQUIREMENT.
3.1 REPURCHASE REQUIREMENT. The Company is hereby obligated (the
"Repurchase Requirement"), at any time during the sixty (60) day period
following the occurrence of a Repurchase Event, to repurchase as many of the
Shares as possible using the entire proceeds of the life insurance policy in the
amount set forth in Exhibit A. The Company shall repurchase all Free Trading
Shares of the Shareholder before it repurchases any Restricted Shares of the
Shareholder. Example: The Shareholder had 100,000 Free Trading Shares for which
the repurchase price equaled $400,000 and 100,000 Restricted Shares for which
the repurchase price equaled $240,000. The Company had the proceeds of the life
insurance policy on the Shareholder of $510,000. Obviously, the Company does not
have enough money to buy all of the Stock of the Shareholder. Therefore, the
Company must first use $400,000 of the life insurance proceeds to repurchase the
100,000 Free Trading Shares and, second, use the remaining $110,000 of the life
insurance proceeds to repurchase as many Restricted Shares as possible with that
amount of money (in this case, the Company would repurchase 45,833 of the
Restricted Shares, leaving the Shareholder's estate with 54,167 Restricted
Shares subject to the Repurchase Right set forth in Section 4 below).
3.2 REPURCHASE PRICE. The repurchase price of the Shares which the
Company must purchase pursuant to the Repurchase Requirement (the "Repurchase
Price") shall be (i) for Free Trading Shares, the average closing bid price for
the stock over the last sixty (60) trading days; or (ii) for Restricted Shares,
the average closing bid price for the stock over the last sixty (60) trading
days with a forty percent (40%) discount. As Restricted Shares are not freely
saleable on the public market, they are subject to a discount off of the public
market price. In any event, the total Repurchase Price cannot exceed the amount
of the proceeds of the life insurance policy as set forth in Exhibit A.
3.3 EXERCISE OF REPURCHASE REQUIREMENT. The Repurchase Requirement
shall be exercisable by written notice deliverable to the Representative (the
"Company Notice") prior to the expiration of the sixty (60) day period specified
in Section 3.1 above. The Company
2
3
Notice shall indicate the number of Shares to be repurchased which must be the
maximum number subject to repurchase.
3.4 CLOSING OF THE PURCHASE. Following exercise of the Repurchase
Requirement, the Closing shall occur at the principal offices of the Company
within thirty (30) days following the determination of the Repurchase Price or
at such other time and place as the parties shall mutually agree. At that time,
the Representative shall deliver to the Company the certificate(s) representing
the Shares, duly endorsed in blank or accompanied by stock assignment(s)
separate from certificate duly executed in blank, and the Company shall deliver
to the Representative the Repurchase Price.
3.5 TERMS OF PAYMENT. The Repurchase Price shall be paid in
accordance with the provisions of Section 5 hereof.
4. REPURCHASE RIGHT.
4.1 REPURCHASE RIGHT. After exercise by the Company of its
Repurchase Requirement, if there are any Shares remaining which the Company did
not purchase due to the exhaustion of the proceeds of the life insurance policy,
the other Shareholders listed on Exhibit A and the Company, collectively are
hereby granted the right (the "Repurchase Right"), but not the obligation,
exercisable at any time during the sixty (60) day period following the exercise
of the Company's Repurchase Requirement, to repurchase all or any portion of the
remaining Shares.
4.2 REPURCHASE PRICE. The repurchase price of the Shares which the
Shareholders and/or the Company elect to purchase pursuant to the Repurchase
Right (the "Repurchase Price") shall be (i) for Free Trading Shares, the average
closing bid price for the stock over the last sixty (60) trading days; or (ii)
for Restricted Shares, the average closing bid price for the stock over the last
sixty (60) trading days with a forty percent (40%) discount. As Restricted
Shares are not freely saleable on the public market, they are subject to a
discount off of the public market price.
4.3 EXERCISE OF RIGHT. The Repurchase Right shall be exercisable
by written notice deliverable to the Representative (the "Shareholder Notice")
prior to the expiration of the sixty (60) day period specified in Section 5.1
above. The Shareholder Notice shall indicate the number of Shares to be
repurchased (which may be less than the maximum number subject to repurchase).
4.4 CLOSING OF THE PURCHASE. Following exercise of the Repurchase
Right, the Closing shall occur at the principal offices of the Company within
thirty (30) days following the determination of the Repurchase Price or at such
other time and place as the parties shall mutually agree. At that time, the
Representative shall deliver to the Company the certificate(s) representing the
Shares, duly endorsed in blank or accompanied by stock assignment(s) separate
from certificate duly executed in blank, and the Shareholders and/or the Company
shall deliver to the Representative the Repurchase Price.
3
4
4.5 TERMS OF PAYMENT. The Repurchase Price shall be paid in
accordance with the provisions of Section 5 hereof.
5. PAYMENT OF THE REPURCHASE PRICE. The Repurchase Price for any Shares to
be repurchased under any provisions of this Agreement shall be in cash or a
cashier's check, or by cancellation of indebtedness owed by the Shareholder to
Company or another Shareholder (including purchase money indebtedness), or by
any combination of the foregoing.
6. TRADING RESTRICTION. After the exercise of the Company's Repurchase
Requirement and after the expiration of the sixty day period provided for the
Repurchase Right of the Shareholders and the Company, if any Shares remain in
the estate of the Shareholder, the Representative may transfer or sell their
shares in their discretion subject to the following trading limitation: The
Representative may sell every three months an amount of securities not to exceed
the greater of: (i) one percent of the shares outstanding as shown by the most
recent report or statement published by the Company; or (ii) the average weekly
reported volume of trading in such securities on all national exchanges and/or
reported through the automated quotation system of a registered securities
associate during the four calendar weeks preceding the date of the sale.
7. LEGEND ON CERTIFICATES. Any and all certificates evidencing ownership of
the Stock now or hereafter issued to the Shareholder shall have endorsed upon
them, in addition to such other legends as may be required by applicable federal
or state securities laws, a legend in the following form:
"Ownership of this certificate and the Shares evidenced hereby may be
sold, assigned, encumbered, hypothecated, pledged or otherwise
transferred or alienated only under and subject to a Repurchase
Agreement dated as of March 17, 1998, a copy of which is on file at
this corporation's principal office."
8. RECLASSIFICATION, REORGANIZATION, ETC. In the event of the
reclassification of the Shares, or any reorganization, recapitalization, stock
split, stock dividend, combination of Shares, consolidation or any change in the
capital structure of the Company, all shares of capital stock obtained as a
result thereof by a Shareholder in addition to, in exchange for or in respect of
the Shares subject to this Agreement, shall also be subject hereto as fully and
to the same extent as originally provided herein. Appropriate adjustments shall
be made to the number of Shares (including the number of Vested Shares and the
number of Unvested Shares) and to the Repurchase Price to reflect the effect of
any such transaction upon the Company's capital structure and upon the
Repurchase Right; provided, however, that the aggregate Repurchase Price in
effect immediately prior to such transaction shall not be affected by such
transaction.
9. TERMINATION. This Agreement shall terminate, and the certificates
representing the Shares subject to this Agreement shall be released from the
terms of this Agreement, on the occurrence of any of the following events:
(i) Authorization by the Board of a sale or assignment of all
or substantially all of the operating assets of the Company, which has the
effect of causing the Company to suspend the carrying on of its usual business;
4
5
(ii) Adoption by the Board of a plan of liquidation or of
dissolution of the Company;
(iii) Consummation of a duly authorized and approved plan of
merger or consolidation with any other corporation;
(iv) The mutual agreement of Shareholder(s) and the Company; or
(v) The bankruptcy or receivership of the Company.
10. AMENDMENTS. This Agreement shall not be modified or amended except by a
writing signed by each of the parties hereto.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the respective heirs, successors, Legal Representatives and
assigns of the parties hereto.
12. GOVERNING LAW. This Agreement shall be construed and enforced under the
laws of the State of Nevada.
13. NOTICES. Any notice, request, instruction, or other document required
by the terms of this Agreement, or deemed by any of the Parties hereto to be
desirable, to be given to any other Party hereto shall be in writing and shall
be given by facsimile, personal delivery, overnight delivery, or mailed by
registered or certified mail, postage prepaid, with return receipt requested, to
the following addresses:
TO COMPANY: New Directions Manufacturing, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
WITH A COPY TO: ▇▇▇▇▇▇▇ & Beam
Two ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid. If notice is given by facsimile, personal
delivery, or overnight delivery in accordance with the provisions of this
Section, said notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the provisions of this
Section, such notice shall be conclusively deemed given seven business days
after deposit thereof in the United States mail.
14. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which
5
6
together shall constitute one and the same instrument. The Parties agree that
facsimile signatures of this Agreement shall be deemed a valid and binding
execution of this Agreement.
15. JURISDICTION. Any dispute, claim, or any other legal proceedings in
relation to this Agreement shall be heard in the County of Maricopa, State of
Arizona.
16. PROFESSIONAL FEES. In the event either party hereto shall commence
legal proceedings against the other to enforce the terms hereof, or to declare
rights hereunder, as the result of a breach of any covenant or condition of this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover from the losing party its costs of suit, including reasonable attorneys'
fees, accountants' fees, and experts' fees.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and is the
final, complete and exclusive expression of the terms and conditions hereof. All
prior or contemporaneous agreements, representations, negotiations and
understandings of the parties hereto, express or implied, are hereby superseded
and merged herein.
18. SECTION HEADINGS. Introductory headings at the beginning of each
numbered Section of this Agreement are solely for the convenience of the parties
and shall not be deemed to be a limitation upon or descriptive of the contents
of any such Section.
19. GENDER AND NUMBER. The use of the masculine, feminine and neuter
genders and the singular and plural number shall include the others whenever the
context so requires.
20. FILING OF AGREEMENT. A copy of this Agreement, as amended from time
to time, shall be filed with the Secretary and shall be available for inspection
by any prospective transferee of the Shares.
21. SEVERABILITY. If any provision of this Agreement shall be adjudged
by a court of competent jurisdiction to be void or unenforceable, the same shall
in no way affect (to the maximum extent permissible by law) any other provision
of this Agreement, or the validity or enforceability of this Agreement as a
whole.
22. ADVICE OF COUNSEL. Shareholder acknowledges that he has the right
to consult with his own counsel and represents and agreed that (i) to the extent
he desired he has consulted with such counsel, (ii) he has carefully read and
fully understands all the provisions of this Agreement, and (iii) he is
voluntarily executing this Agreement.
6
7
IN WITNESS WHEREOF, the parties hereto have duly executed this
repurchase Agreement as of the date first above written.
THE COMPANY
NEW DIRECTIONS MANUFACTURING, INC.
a Nevada corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
THE SHAREHOLDERS
[as set forth in Exhibit A]
7
8
EXHIBIT A
SHAREHOLDERS
------------------------------------------ ----------------------------------------- ------------------------------
SHAREHOLDER NAME SHAREHOLDER SIGNATURE AMOUNT OF
LIFE INSURANCE POLICY
------------------------------------------ ----------------------------------------- ------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $510,000
SPOUSAL CONSENT:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------ ----------------------------------------- ------------------------------
▇▇▇▇ ▇▇▇▇▇▇, ▇▇. /s/ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. $510,000
SPOUSAL CONSENT:
▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------ ----------------------------------------- ------------------------------
▇▇▇▇ ▇. ▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇ $1,410,000
SPOUSAL CONSENT:
▇▇▇ Family Limited Partnership /s/▇▇▇ Family Limited Partnership
------------------------------------------ ----------------------------------------- ------------------------------
8