ADVANCE FUNDING AND RELEASE AGREEMENT
This Agreement is deemed to have been made and entered into at
Scottsdale, Maricopa County, Arizona on ______day of ________, 1999, by and
among SC&T International, Inc. an Arizona corporation ("SC&T"), having its
principal place of business at 0000 Xxxx Xxxxxxxx Xxxx, #000, Xxxxxxxxxx,
Xxxxxxx 00000, Xxxxx X. Xxxxxxx, a resident of Maricopa County, Arizona
("Xxxxxxx"); and Xxxxx Fund, Ltd., a corporation ("Xxxxx"), Star High Yield
Management Fund, ("Star") and Xxxx Xxxxx; ("Xxxxx"). Xxxxx, Star and Xxxxx shall
be hereinafter collectively refereed to as the "Investors".
RECITALS
The Investors and SC&T have had prior business dealings, as the result
of which SC&T has agreed to issue and deliver to Investors an aggregate of Three
Hundred Thousand (300,000) shares of SC&T Common Stock, par value $.01 per
share, CUSIP No. 783975.105 ("First Shares"). To the extent supported by an
opinion of counsel (a dully licensed member of the New York Bar) to be provided
by the Investors, all of the Certificates issued as the First Shares shall be
dated as of November 20, 1997, being the date that said First Shares were paid
for in full, otherwise the First Shares shall be dated currently.
The Investors are desirous of purchasing in the aggregate an additional
Six Hundred Thousand (600,000) shares of SC&T's Common Stock, par value $.01 per
share (the "Second Shares"), for a total cash consideration of Five Hundred
Thousand Dollars ($500,000) to be paid in cash or cash equivalents at the
Closing hereinafter defined.
The First Shares and the Second Shares shall collectively be called the
"Total Shares", and the Total Shares shall be issued and delivered to the
Investors as "restricted securities" subject to Rule 144, under the Securities
Act of 1993, each investor to receive respectively one-third (1/3) of the First
Shares and one-third (1/3) of the Second Shares in separate certificates in the
names respectively of each of the Investors in the amounts indicated below.
SC&T warrants that it will promptly file its next required Form 10-K
with the Securities and Exchange Commission ("SEC") in a timely manner pursuant
to the Securities Exchange Act of 1934, and that on or before September 30,
1999, SC&T will file an appropriate registration statement with the SEC thereby
registering for sale to the public all of said Total Shares offered by the
Investors as the "Selling Shareholders," all at the sole cost and expense of
SC&T, except that the Selling Shareholders shall pay normal brokerage
commissions incident to the sale of said Total Shares.
To guarantee the issuance, delivery and timely registration of the
Total Shares with the SEC, and the filling of appropriate documents to "blue
sky" all of the Total Shares with not to exceed ten (10) states to be chose by
the Investors, including without limitation, California, New York, Arizona,
Illinois and Texas, Xxxxx Xxxxxxx, as General Partner of Xxxxxx investments
Limited Partnership, an Arizona Limited Partnership, (the "LP") shall cause the
LP to deliver to Arizona Escrow and Financial Corporation, Phoenix, Arizona, as
the duly appointed Escrow Holder, Certificate No. 721, issued in the name of the
LP, representing Fourteen Million Nine Hundred and Forty Thousand (14,940,000)
Shares of SC&T Common Stock (the "Xxxxxxx Shares"), together with a duly
executed Stock Power Separate from Certificate executed by the said General
Partner with signature duly "Guaranteed" by a Bank of Member of the New York
Stock Exchange, together with the Irrevocable Letter of Instructions dually
signed by Xxxxxxx as the General Partner of said LP and as President of SC&T in
the form attached hereto as Exhibit "A".
Each of the Investors expressly warrants that he or it respectively is
an "accredited investor" as that term is defined in Rule 144.
Upon the due execution of this Agreement by all parties whose
signatures appear below, it is the desire of the parties to settle all of their
various claim against the other arising out of or in connection with all prior
business dealings and transactions and more particularly the purchase and sale
and issuance off SC&T Shares of Common Stock.
This Agreement shall be effective ("Effective Date") as of the date
indicated beside the last signature of the parties hereto, as and when affixed
below.
I. Each of the Investors represents that he or it, directly or through
counsel has conducted independent due diligence, and has received all
appropriate information from SC&T prior to making this investment, including the
most recent annual and quarterly reports, and has had an opportunity to ask
additional questions and has had all questions answered by SC&T to the extent
information is available to SC&T to answer said questions. Investors understand
that the securities to be issued hereunder are to be issued pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act of
1933 and accordingly they will be "restricted securities" until registered.
Now therefore in consideration of the mutual promise of the parties and
other valuable consideration it is agreed as follows:
1. RECITALS. All the above Recitals are acknowledged by all parties as
being true and correct and are hereby incorporated into this Agreement.
2. RELEASE. In consideration for the promises made in this Agreement,
SC&T, for and on behalf of itself, its officers and directors ("SC&T et al"),
hereby fully and forever releases and discharges the Investors, an their
respective officers, directors, and personal representatives as may be
applicable ("Investors et al") and the Investors et al, jointly and severally
hereby fully and forever release and discharge SC&T et al from any and all
claims, demands, actions, causes of action, obligations, costs, expenses
damages, losses, and liabilities of whatever kind or nature, whether arising of
law, in equity or otherwise, whether known or unknown, which either party now
has or may have against any other party. This release shall extend to and
include any claims on the part of any person or entity that becomes a signatory
to this Agreement.
3. CONSIDERATION
(a) In exchange and in consideration for the Total Shares to be
delivered to the Investors, and subsequently registered, the issuance of Common
Stock Purchase Warrants and the mutual release of the parties hereto, the
Investors jointly shall wire to SC&T at BNF Bank, Bank of America, account
number 235576266, ABA number 0122101706, Phoenix, Arizona, attention: Xxxxxxxx
Xxxxxxxx (000) 000-0000, the sum of Five Hundred Thousand Dollars ($500,000) in
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cash or cash equivalents within twenty-four (24) hours after this Agreement, the
Xxxxxxx letter with Instructions to the Transfer Agent, and the Escrow
Instructions in the form of attached hereto as Exhibit "B" have been signed by
all parties, and the Xxxxxxx Shares have been delivered in good form to the
Escrow Holder together with a duly executed Stock Power Separate from
Certificate, and in this connection the said Stock Power, in good form, with
signature "Guaranteed" shall be sent by Xxxxxxx (from San Francisco, California)
by facsimile transmission and the original thereof shall be hand delivered to
attorney Xxxx Xxxxx on or before 12:00 o'clock noon (Phoenix time) on Tuesday,
April 20 or 27, 1999, and failure to do so will result in a material default
under this Agreement, and the Xxxxxxx Shares shall be transferred to the
Investors pursuant to this Agreement and the Escrow Instructions.
As additional consideration to Investors for the purchase of shares,
SC&T does hereby grant to Investors an aggregate of One Million (1,000,000)
Common Stock Purchase Warrants, enabling them to purchase One Million
(1,000,000) Shares of SC&T's Common Stock (the "Warrants") as follows: (i) Six
Hundred Thousand (600,000) Warrants are exercisable within 30 days from the date
of this agreement at an exercise price of $1.50 per share; and (ii) Two Hundred
Thousand (200,000) Warrants are exercisable within 60 days of the date of this
Agreement at an exercise price of $3.00 per share, and (iii) Two Hundred
Thousand (200,000) Warrants are exercisable within 120 days of the date of this
Agreement at an exercise price of $5.00 per share. Warrants not exercised will
expire on the last day of the applicable exercise period. All shares purchased
upon exercise of the outstanding Warrants will be registered together with the
Total Shares herinabove described on the same terms and conditions described in
Recital D above with respect to the Total Shares.
Pursuant to the foregoing Paragraph A of the Recitals, on or before
thirty (30) days after the Effective Date, SC&T will issue and deliver to Xxxx
Xxxxx, 0000 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, three (3) SC&T Common Stock
Certificates in the respective names of Xxxxx, Star and Xxxx, each representing
100,000 shares of SC&T Common Stock, each, to the extent supported by an opinion
of counsel by the Investors, bearing an issuance date of November 20, 1997.
Pursuant to the foregoing Paragraph B of the Recitals, on or before
thirty (30) days after the Effective Date, SC&T will issue and deliver to Xxxx
Xxxxx, 0000 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, three (3) SC&T Common Stock
Certificates in the respective names of Xxxxx, Star and Xxxx, each representing
200,000 shares of SC&T Common Stock, each bearing a current date of issuance.
All of said Total Shares an all of said Warrants when issued and
delivered to the Investors, shall have been lawfully issued pursuant to
appropriate resolutions of the Board of Directors of SC&T, fully paid, non-
assessable except for the Warrant exercise price, and the Shares and Warrants as
well as shares to be issued upon exercise of Warrants shall be "restricted
securities" subject to Rule 144 under the Securities Act of 1933.
All of the Total Shares issued under this Agreement shall be issued and
delivered post any intended reverse split by SC&T, an shall not be diminished in
number by any reverse stock split actually effected by SC&T whether prior to or
following the Execution of this Agreement in that SC&T has disclosed its
intention to effect a 1:18 reverse split prior to or immediately after the
Closing of this transaction. It is the express intention of the parties to this
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Agreement that Investors will receive an aggregate of 900,000 shares (as Total
Shares) of the post split issued and outstanding of SC&T Common Stock, based
upon the foregoing representations.
Until and unless each of the Investors has divested itself or himself
(by sale or otherwise) of all of the Common Stock issued to each of them as a
part of the Total Shares and/or all of the shares issued to them upon exercise
of their Warrants, all of which have been issued pursuant to this Agreement,
SC&T shall refrain from making any private or public sales of its Common Stock,
at a price less than Ninety Cents ($.90) per share except in compliance with
subparagraph 3(h) below. This restriction shall not exceed beyond this ________
day of ___________, ____.
In the event that SC&T shall violate the provisions of subparagraph 3
(f) above, then SC&T shall issue and deliver to the Investors, additional shares
of SC&T Common Stock adhering to the following formula: (i) the difference
between the selling price of SC&T shares sold by SC&T in violation of this
Agreement and the sum of $.90 per shall first be calculated; (ii) the amount
found to be the difference shall be multiplied by the number of shares sold in
violation of this Agreement and shall be expressed as a dollar amount
("Differential"); (iii) the average bid price for SC&T Common Stock quoted on
any national quotation service or OTC or Bulletin Board (whichever may be
applicable) for the ten trading days prior to the date of the sale of shares in
violation of this agreement shall be calculated ("AVP"); and, (iv) the
Differential shall be divided by the AVP to calculate the number of SC&T shares
to be promptly delivered to the Investors, all of which shares shall be
"restricted securities" subject to Rule 144, and all of said shares shall be
likewise registered together with the Total Shares pursuant to Recital D above.
XXXXXXX SHARES
Pursuant to the Escrow Instructions, in the form attached to this
Agreement, Arizona Escrow & Financial Corporation, Phoenix, Arizona, is hereby
appointed Escrow Holder, subject to its written Acceptance, and all of the
Xxxxxxx Shares shall be delivered to said Escrow Holder at the time of Closing.
If Arizona Escrow shall refuse to act hereunder, then Xxxx Xxxxx and Xxxx Good
are hereby empowered and authorized and directed to choose a mutually suitable
Escrow Holder.
The Xxxxxxx Shares are being delivered to the Escrow Holder (i) to
ensure the issuance and delivery of the Total Shares to Investors pursuant to
this Agreement; (ii) to further ensure that the Total Shares are duly registered
pursuant to this Agreement; and, (iii) to further ensure that the Warrants are
issued and delivered, and the SC&T shares issued thereunder upon exercise of the
Warrants are likewise duly registered pursuant to this Agreement.
In the event that SC&T shall fail or refuse to fully perform any of its
obligations pursuant to this Agreement, Xxxxxxx Shares shall be transferred to
the Investors without diminishing the Investor's lawful right to proceed against
any or all-defaulting parties.
The written Instructions from Xxxxxxx to the Transfer Agent, pursuant
to this Agreement, shall be self-executing an shall require no further
authorizations or consents from Xxxxxxx and SC&T.
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Both SC&T and Xxxxxxx, expressly warrant that neither of them will take
any action to interfere with or delay the Transfer Agent from issuing the Total
Shares to the Investors pursuant to this Agreement, and both SC&T and Xxxxxxx,
expressly agree that the Investors may apply to any court of competent
jurisdiction for relief including an injunction to restrain SC&T and Xxxxxxx, or
either of them, from taking any action to restrain the Transfer Agent from
issuing and delivering the Total Shares to the Investors as provided for in this
Agreement, and SC&T and Xxxxxxx both acknowledge and agree that the damages to
the Investors will be difficult to ascertain, and injunction shall therefore be
a proper remedy without the requirement of providing a bond therefore.
An and when Investors have received all of the Total Shares and all of
the Warrants, and if said Warrants are exercised, all of the SC&T shares to be
issued thereunder, (whether received from SC&T or from the Xxxxxxx Shares), and
when all such shares have been duly registered with the SEC and under
appropriate blue sky laws, then Investors shall have no further rights to
receive any further SC&T shares or any rights or other consideration arising out
of or in connection with this Agreement.
Subject to the provisions of the Escrow Instructions, none of the
items/documents/securities delivered to the Escrow Holder shall be released or
redelivered to Xxxxxxx and/or SC&T except in conformance with the Escrow
Instructions, and in no event until the Investors have received the Total Shares
and Common Stock Purchase Warrants to which they are entitled.
5. AUTHORITY. Each of the parties where signatures appear below
represents and warrants it or they have full power to make the release and
agreements contained herein.
6. HEIRS AND ASSIGNS. This compromise and release is binding on and for
the benefit of the parties hereto and as may be applicable, their respective
officers, directors, agents, employees, members, shareholders, representatives,
affiliates, heirs or personal representatives.
7. LEGAL REPRESENTATION. The parties enter into this negotiated
Agreement freely and voluntarily with full and complete knowledge of the meaning
and legal significance of the terms of this Agreement and have had the
opportunity to discuss, and did discuss, each provision of this Agreement with
independent legal counsel an the terms are fully understood and voluntarily
accepted by each of them.
MISCELLANEOUS
Except to the extent inconsistent with the express language of the
foregoing provisions of this Agreement, the following provisions shall govern
the interpretation, application, construction and enforcement of this Agreement:
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
warranties contained in this Agreement are true in all material respects on and
as of the date so made, will be true in all material respects on and as of the
date on which the transaction contemplated hereby is closed, and will survive
such closing regardless of any investigations made by or on behalf of any party.
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NOTICES. Any notice to any party under this Agreement shall be in
writing, shall be effective on the earlier or (i) the date when received by such
party, or (ii) the date which is three days after mailing, postage prepaid, by
certified or registered mail, return receipt requested, to the address of such
party set forth as follows:
To: SC&T International, Inc.
0000 X. Xxxxxxxx Xxxx #000
Xxxxxxxxxx, Xxxxxxx 00000
To: Xxxxx Fund, Ltd.
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To: Star High Yeild Management Fund
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To: Xxxx Xxxxx
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And if to Xxxxx, Star or Xxxx with a copy to:
Xxxx Xxxxx, Esq.
0000 Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
To: Xxxxxxx
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SEVERABILITY. If any provision of this Agreement is declared void or
unenforcable, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect. The terms and conditions of
this Agreement shall not be more harshly construed against the party who drafted
same.
ADDITIONAL ACTS AND DOCUMENTS. Each party hereto agrees to do all such
things and take all such actions, and to make, execute and deliver such other
documents and instruments as shall be reasonably required to carry out the
provisions, intent and purpose of this Agreement.
AUTHORITY. Each of the parties hereto represents and warrants to each
other that this Agreement has been duly authorized by all necessary action, that
this Agreement constitutes and will constitute a binding obligation of each such
party, and that this Agreement has been (and each instrument delivered
hereunder, when so delivered, will have been) duly and validly executed on
behalf of such party.
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f) ATTORNEY'S FEES. In the event suit is brought or any attorney is
retained by any party to this Agreement to enforce the terms of this Agreement
or to collect any monies due hereunder, or to collect money damages for breach
hereof, the prevailing party shall be entitled to recover, in addition to any
other remedy, reimbursement for reasonable attorney's fees, court costs, costs
of investigation and other related expenses incurred in connection therewith.
g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors in
interest and assigns and personal representatives, as may be applicable.
h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts: all such counterparts shall be deemed to constitute one and the
same instrument, and each of said counterparts shall be deemed an original
hereof. Further, a facsimile ("fax") signature shall be as binding as an
original if the original is promptly delivered.
i) TIME. Time is of the essence of this Agreement and each and every
provision hereof. Any extension of time granted for the performance of any duty
under this Agreement shall not be considered an extension of time for the
performance of any other duty under this Agreement.
j) WAIVER. Failure of any party to exercise any right or option arising
out of breach of this Agreement shall not be deemed a waiver of any right or
option with respect to any subsequent or different breach, or the continuance of
nay existing breach.
k) GOVERNING LAW. This Agreement shall be governed by, the laws of the
State of Arizona. Each party hereby expressly and irrevocably consents to the
jurisdiction of the Arizona courts, and any action hereunder may be commenced
and tried only in a court of competent jurisdiction located in Maricopa County,
Arizona.
l) PRIOR REPRESENTATIONS. This Agreement represents and contains the
entire Agreement and an understanding between the parties with respect to the
subject matter of this Agreement, and supercedes any and all prior oral or
written agreements or understandings. No representation, warranty, condition,
understanding or agreement of any kind with respect to this subject matter shall
be relied upon by the parties unless incorporated herein.
m) FORCE MAJEURE. In the event that circumstances beyond the control of
the parties hereto cause one party or the other to become unable to execute some
or all of its obligations hereunder, that party shall be excused from said
obligations for only such time as is necessary to cure the force majeure.
n) USE OF FUNDS. SC&T has expressly represented that none of the
$500,000 paid by the Investors shall be used to pay executive salaries or
expenses of SC&T's officers or employees, except for the usual and customary
payments heretofore recorded according to SC&T's financial statements and its
book and records.
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o) INDEMNIFICATION. SC&T and Xxxxxxx, jointly and severally agree to
indemnify and hold harmless the Investors, jointly and severally, from and
against all third party claims arising out of and or in connection with the
issuance by SC&T of securities to the Investors pursuant to this Agreement, and
from all damages incurred by the Investors including, without limitation, their
reasonable attorney's fees to defend against all such claims and actions, unless
such claims and damages were caused by the Investors unlawful acts or failure to
act.
p) GRACE PERIOD. No default or breach hereunder shall become actionable
in court, under the Escrow Instructions, or in any way unless the non-breaching
party gives written notice of the breach and an opportunity to cure for at least
10 days to designate names and addresses in Paragraph 8 (b) above.
SC&T INTERNATIONAL, INC.
DATED: By:
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(Title)
INVESTORS:
XXXXX FUND, LTD.
DATED: By:
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(Title)
STAR HIGH YIELD MANAGEMENT
FUND, LTD.
DATED: By:
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(Title)
