EXHIBIT 10.2
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STOCK AGREEMENT
BY AND AMONG
THE ACQUIRERS NAMED HEREIN
AND
COLLEGE OAK INVESTMENTS, INC.,
XXXXXX XXXXXX
AND
XXXX XXXXXX
JANUARY 16, 2006
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STOCK AGREEMENT
THIS STOCK AGREEMENT dated as of the 16th day of January, 2006 (the
"Agreement"), is made and entered into by and among College Oak Investments,
Inc., a Nevada corporation (the "Company"), Xxxxxx Xxxxxx, an individual
residing in the State of Connecticut ("Damson"), Xxxx Xxxxxx, an individual
residing in the State of Connecticut ("Xxxxxx") and those individuals listed as
"Acquirers" on the signature pages hereof.
RECITALS:
The Company and Xxx Energy Royalties Limited Partnership, a Delaware
limited partnership ("Xxx Royalties"), PennTex Resources, L.P. a Texas limited
partnership ("PennTex Resources"), PennTex Resources Illinois, Inc., a Delaware
corporation ("PennTex Illinois"), Xxxxxxx Oil & Gas Limited Partnership, a
Delaware limited partnership ("Xxxxxxx O&G"), Xxxxxxx Xxxxxxxxxxxx Limited
Partnership, a Delaware limited partnership ("Xxxxxxx Xxxxxxxxxxxx"), Midland
Exploration Limited Partnership a Delaware limited partnership ("Midland"), Xxx
Energy Operating Corp., a Delaware corporation ("Xxx Energy") and Xxx Energy
Wabash, LLC, a Delaware limited liability company ("Xxx Wabash") on the one hand
(Xxx Royalties, PennTex Resources, PennTex Illinois, Xxxxxxx O&G, Xxxxxxx
Xxxxxxxxxxxx, Midland, Xxx Energy and Xxx Wabash being referred to hereinafter
collectively as "Sellers"), are entering into that certain Purchase Agreement
(the "Purchase Agreement") contemporaneously herewith, whereby substantially all
of the assets and the liabilities of the Sellers are being conveyed to and
assumed by the Company.
Capitalized terms used herein that are not defined herein shall have the
respective meanings assigned thereto in the Purchase Agreement.
The Company and the Acquirers have agreed, in accordance with and subject
to the terms and conditions set forth in this Agreement, that (i)
contemporaneously herewith, the Company will issue, transfer and convey to the
Acquirers listed on Exhibit A (which is attached hereto and made a part hereof)
(the "Management Acquirers"), an aggregate of 12,069,250 shares of the Company's
common stock, $0.001 par value (the "Common Stock"), subject to the Company's
right of first refusal set forth in Section 1.3 below, and (ii) concurrently
with the closing of the equity financing with respect to the Closing under the
Purchase Agreement, the Company will issue, transfer and convey to the Acquirers
listed on Exhibit B (which is attached hereto and made a part hereof) (the
"Subsequent Acquirers") shares of Common Stock, and such Subsequent Acquirers
will purchase such shares of Common Stock, at the same prices and on the same
terms as the other investors participating in such financing.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements contained herein, and the receipt of such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
THE STAGE I TRANSFERS
1.1 Issuance of Common Stock on Date of this Agreement. Contemporaneously
with the execution and delivery of this Agreement, but subject in all respects
to the terms and conditions hereof, the Company has issued, conveyed and
transferred, and by these presents does hereby issue, convey and transfer, to
the Management Acquirers as listed on Exhibit A, an aggregate of 12,069,250
shares of the Company's Common Stock in the respective amounts as set forth in
Exhibit A. The Company and the Management Acquirers each acknowledge that the
shares of Common Stock issued, conveyed and transferred pursuant to this Section
1.1 are issued, conveyed and transferred by the Company as additional
consideration for Xxx Energy and the Acquirers' entering into the transactions
contemplated by the Purchase Agreement and this Agreement. The Management
Acquirers further acknowledge that the Management Acquirers are not entitled to
any rights regarding the registration under the Securities Act of 1933, as
amended (the "Securities Act"), of the shares of Common Stock issued, conveyed
and transferred pursuant to this Section 1.1.
1.2 Deliveries. No later than five (5) Business Days following the
execution of this Agreement, the Company shall cause its transfer agent to
deliver to the Management Acquirers stock certificates evidencing an aggregate
of 12,069,250 duly authorized and issued shares of Common Stock, free and clear
of any liens and encumbrances of any nature whatsoever (except for the
restrictions set forth in Sections 1.3 and 1.4 below), registered in the names
of the respective Management Acquirers and in the respective denominations as
set forth in Exhibit A and imprinted with the legends set forth in Section 6.1
of this Agreement.
1.3 Right of First Refusal.
(a) Subject to the terms of this Section 1.3, no Management Acquirer
will sell or transfer for consideration, or offer to sell or transfer for
consideration, in one transaction or a series of related transactions, any
Subject Shares (as defined below) to any Person, without first offering such
Subject Shares to the Company on the terms and conditions set forth herein.
(b) Upon any of the Management Acquirers proposing or receiving a
bona fide offer that is subject to Section 1.3(a) above, such Management
Acquirer shall promptly provide the Company with written notice thereof. If,
during the ten (10) Business Day period immediately following the date that the
Company receives such notice from a Management Acquirer, (i) the Company
notifies such Management Acquirer that it declines to accept such offer to
purchase such Subject Shares or (ii) the Company fails to notify the Management
Acquirer that it wishes to so purchase such Subject Shares, then such Management
Acquirer may thereafter sell such Subject Shares on the same terms and
conditions as had been provided to the Company, at any time on or before that
date which is 180 days after the expiration of such 10 Business Day period. If
such Subject Shares are not so sold during such 180-day period, the terms and
conditions of this Section 1.3 shall be deemed to automatically re-apply to such
Subject Shares immediately following such 180-day period.
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(c) If (i) the Company notifies the Management Acquirer that it
intends to purchase the offered Subject Shares and (ii) the Company is then
legally permitted to purchase the Subject Shares so offered in accordance with
the laws of its state of incorporation, the Company shall deliver full payment
in cash for such Subject Shares to such Management Acquirer against delivery of
the stock certificates for such Subject Shares within five (5) Business Days
following its giving of such notice of acceptance to such Management Acquirer.
The purchase price per Subject Share to be paid by the Company in payment
therefor will be equal to (x) the price per Subject Share offered to the
Management Acquirer by such third party, minus (y) $1.00 (the "First Refusal
Discount Amount"). In the event the shares of Common Stock of the Company are
subdivided into a greater number of shares of Common Stock, the First Refusal
Discount Amount in effect on the day upon which such subdivision becomes
effective shall be proportionately decreased, and conversely, in the event the
shares of Common Stock of the Company shall be combined into a smaller number of
shares of Common Stock, the First Refusal Discount Amount in effect on the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately upon the effectiveness of such subdivision or combination.
(d) For the purposes of this Agreement, (i) "Subject Shares" shall
mean the 12,069,250 shares of Common Stock acquired by the Management Acquirers
pursuant to this Article 1, plus any shares of Common Stock, other capital stock
or any other security or securities issued with respect thereto or in exchange
therefor, in connection with any stock dividend, stock split, reverse split,
recapitalization or similar corporate event involving the Common Stock, and (ii)
"Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banks are authorized or required to be closed in State College,
Pennsylvania.
(e) Notwithstanding the provisions of Section 1.3(a) hereof, if the
Management Acquirers are selling such shares pursuant to an underwritten
offering of securities, such underwritten offering and sale shall be deemed to
comply with the requirements set forth therein. In addition, nothing contained
in this Section 1.3 shall be deemed to prohibit or restrict any transfer or
assignment of any of the Subject Shares (i) to the Company, (ii) by way of gift,
donation, bequest, descent or distribution or any other transfer to a trust,
limited partnership or pursuant to a will or any other estate planning or estate
administration process (provided that as a condition to any such permitted
transfer, the assignee of such Subject Shares must expressly agree in writing to
assume the restrictions against transfer and the obligations of his or its
assignor set forth in this Section 1.3 to the same extent as such assignor), or
(iii) by operation of law, court order or judicial process. The restrictions
contained in this Section 1.3 shall apply only to the Subject Shares and shall
not apply to any other shares of Common Stock or any other securities of the
Company that are held or beneficially owned by any of the Management Acquirers
whatsoever, whether now owned, hereafter acquired or otherwise.
1.4 Agreement to Lock-Up Subject Shares. In the event that a Closing of
the Acquired Assets fails to occur as a result of (i) a material breach by any
of the Sellers of a representation or covenant contained in the Purchase
Agreement, (ii) the failure by the Sellers to satisfy a required condition to
Closing as set forth in the Purchase Agreement or (iii) the termination of the
Purchase Agreement by the Company by virtue of a discrepancy in excess of 15%
between Buyer's Report and the NS Reports, then the Management Acquirers agree
that all Subject Shares shall immediately, without the necessity of any further
action by the Company, be subject to a three (3) year "Lock-Up" period, pursuant
to which each Management Acquirer agrees that he will not sell, transfer or
dispose, nor attempt to sell, transfer or dispose of his Subject Shares for a
period of three (3) years from the date of the occurrence set forth in clauses
(i), (ii) or (iii) of this Section 1.4. The "Lock-Up" provisions contained in
this Section 1.4 shall not prevent any transfer of the Subject Shares by the
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Management Acquirers (i) by way of gift, donation, bequest, descent or
distribution or any other transfer to a trust, limited partnership or pursuant
to a will or any other estate planning or estate administration process
(provided that as a condition to any such permitted transfer, the assignee of
such Subject Shares must expressly agree in writing to assume the restrictions
against transfer and the obligations of his or its assignor set forth in this
Section 1.4 to the same extent as such assignor), or (iii) by operation of law,
court order or judicial process.
1.5 Cancellation of Stock Options.
(a) Damson and Xxxxxx each agree that, upon the Effective Option
Cancellation Date (as defined below), each of them shall cancel such number of
shares underlying their respective stock options, such that on the Effective
Option Cancellation Date, each of Xxxxxx and Damson shall beneficially own no
more than 9.99% of the Common Stock of the Company on a fully-diluted basis. In
connection with the foregoing, each of Damson and Xxxxxx have surrendered to the
Company's counsel, to be held in escrow, all copies of their respective
agreements evidencing the stock options previously granted to them, all as
listed on Exhibit C which is attached hereto and made a part hereof. On the
Effective Option Cancellation Date, the Company shall, if necessary, reduce the
number of shares underlying the stock options previously granted to Damson and
Xxxxxx, and deliver to each of them, modified option certificates, exercisable
for such lesser number of shares of the Company's Common Stock, as provided in
this Section 1.5. The Company shall make all necessary and appropriate notations
in its books and records to duly record the reduction, if necessary, of all such
stock options and related stock option agreements. Prior to the Effective Option
Cancellation Date, neither Damson nor Xxxxxx, nor any of their respective
Affiliates or "associates" (as that term is defined in Rule 405 under the
Securities Act), will exercise any of their respective stock options and the
Company will not grant additional stock options to Damson or Xxxxxx (or any of
their respective Affiliates or associates) or amend or modify in any respect the
terms of any stock options previously granted thereto, without the prior written
consent of the Acquirers.
(b) For purposes of this Agreement, "Effective Option Cancellation
Date" shall mean the earlier to occur of (i) the Closing Date or (ii) June 30,
2006, if the Closing shall not have occurred as a result of the Company's breach
of a material provision of the Purchase Agreement.
(c) Notwithstanding the foregoing, in the event the Closing has not
occurred by June 30, 2006 other than as a result of the Company's breach of a
material provision of the Purchase Agreement, then the Company's counsel shall
release to each of Damson and Xxxxxx, their existing stock option agreements
with no changes or modifications.
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ARTICLE 2
SUBSEQUENT ACQUISITION OF COMMON STOCK
2.1 Sales of Common Stock to Subsequent Acquirers. Following the execution
of this Agreement, it is contemplated that the Company will offer shares of its
Common Stock for sale to accredited investors, in private offerings as follows:
(i) up to $10 million to fund the LLC's obligations under the Aurora Purchase
Agreement, including money for drilling and working capital (the "First Equity
Round") and (ii) approximately $40 million to fund the Company's purchase of the
Acquired Assets (the "Second Equity Round"). With respect to the Second Equity
Round, the Subsequent Acquirers identified on Exhibit B have agreed to invest,
in the aggregate, but subject in all respects to the terms and conditions
contained herein and in the Purchase Agreement, an amount equal to ten percent
(10%) of the gross proceeds raised by the Company (inclusive of their
investment). By way of example, if the Company accepts total subscriptions of
$40 million in the Second Equity Round, then the Subsequent Acquirers shall be
required to invest $4 million in the Second Equity Round. The pro rata
investment percentage of each Subsequent Acquirer for the Second Equity Round is
set forth opposite his respective name on Exhibit B. The Subsequent Acquirers
shall be entitled to (i) assign and delegate all or any portion of their
obligations to invest in the Second Equity Round to any Affiliate of such
Subsequent Acquirer or to any other Acquirer and/or (ii) revise the percentages
of participation in the Second Equity Round of all or any of the Subsequent
Acquires as set forth on Exhibit B; provided, however, that no such revision
will affect the obligations of the Subsequent Acquirers (combined with their
designated assignees, as the case may be) to invest, in the aggregate, an amount
equal to ten percent (10%) of the gross proceeds raised by the Company as
required by this Section 2.1. For purposes of this Agreement, the term
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
2.2 Stock Closings. Upon the terms but subject in all respects to the
conditions of this Agreement, at the closing for the Second Equity Round (the
"Stock Closing"), on the date for such closing (herein the "Stock Closing
Date"), the Company shall issue and sell to the Subsequent Acquirers (or their
designated Affiliate(s) and assignees), and the Subsequent Acquirers (or their
designated Affiliate(s) and assignees) will purchase from the Company, such
number of shares of Common Stock as determined in accordance with Section 2.1
above, at the same prices and upon the same terms as other investors
participating in the Second Equity Round (including, without limitation, any and
all registration rights granted to other investors participating in the Second
Equity Round). No later than three (3) Business Days prior to the Stock Closing
Date, the Subsequent Acquirers (or their respective assignees, as the case may
be) shall deliver to the Company (or to the Company's placement agent or the
escrow agent for the offering), their required investments as determined in
accordance with Section 2.1 above, by wire transfer of immediately available
funds.
2.3 Deliveries. No later than five (5) Business Days following the Stock
Closing, the Company shall cause its transfer agent to deliver to the Subsequent
Acquirers, stock certificates evidencing the shares of Common Stock so purchased
at the Stock Closing, free and clear of any liens and encumbrances of any nature
whatsoever, registered in the respective Subsequent Acquirers' names as shown on
Exhibit B.
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ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF THE ACQUIRERS
To induce the Company to enter into this Agreement, the Acquirers each
represent and warrant to the Company that the statements contained in this
Article 3 are true, correct and complete as of the date of this Agreement, and
will be true, correct and complete (as to each then-purchasing Subsequent
Acquirer with respect to the Stock Closing) as of the Stock Closing Date (as
though made then and as though the Stock Closing Date were substituted for the
date of this Agreement throughout this Article 3), except as set forth in the
Acquirers' disclosure schedule accompanying this Agreement and initialed by the
parties hereto (the "Acquirers' Disclosure Schedule"). The Acquirers' Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered Articles, Sections, sub-sections and paragraphs contained in this
Article 3.
3.1 Authority; Execution and Delivery.
(a) The execution, delivery and performance by the Acquirers of
their respective obligations under this Agreement and the consummation of the
transactions contemplated hereby, for each of the Acquirers that are limited
partnerships, (x) are within such Acquirer's partnership power and authority and
have been duly authorized by all necessary partnership action on the part of
such Acquirer and (y) do not conflict with or contravene the terms of such
Acquirer's certificate of formation, limited partnership agreement, or any
amendment thereof. The Acquirers that are not limited partnerships each have the
requisite legal capacity and power and authority to enter into this Agreement
and to consummate each of the transactions and perform each of the obligations
contemplated hereby. To the Knowledge of each Acquirer, the execution, delivery
and performance by the Acquirers of their respective obligations under this
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate, conflict with or result in any material breach or contravention of
conflict with or result in a violation or breach of or default under any
agreement, indenture or other instrument under which such Acquirer is bound,
other than such conflicts, breaches, violations or defaults that would not have
a material adverse effect on the financial condition of such Acquirer or on the
ability of the parties hereto to consummate the transactions contemplated by
this Agreement, or (ii) violate or conflict with any law, rule or regulation
applicable to such Acquirer except where such violation or conflict would not
have a material adverse effect on the financial condition of the Acquirer or on
the ability of the parties hereto to consummate the transactions contemplated by
this Agreement.
(b) The Acquirers have each duly executed and delivered this
Agreement. This Agreement constitutes the legal, valid and binding obligation of
the Acquirers, enforceable against each of the Acquirers (as same may be
applicable to such Acquirer) in accordance with its terms, except to the extent
that such enforceability is subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application with
respect to creditors, (ii) general principles of equity and (iii) the power of a
court to deny enforcement of remedies generally based upon public policy.
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3.2 No Brokers or Finders. No agent, broker, finder or investment or
commercial banker, or other person or firm engaged by or acting on behalf of the
Acquirers in connection with the negotiation, execution or performance of this
Agreement is or will be entitled to any brokerage or finder's or similar fee or
other commission as a result of this Agreement.
3.3 Investment Intent. The Common Stock will be acquired by the Acquirers
for their own account for investment purposes and with no intention of
distributing or reselling such shares of Common Stock or any part thereof or
interest therein in any transaction which would be in violation of the
securities laws of the United States of America or any applicable state or any
foreign country or jurisdiction.
3.4 Status. The Subsequent Acquirers represent and warrant to the Company
that at the date hereof, they are accredited investors as defined in Rule 501(a)
under the Securities Act, and have such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the Company
and an investment in the shares of Common Stock, and are able to bear the
economic risk of such investment.
3.5 Access to Information. The Acquirers represent and acknowledge that
they (a) have had access to and the opportunity to review the Company's
properties, assets, financial statements, contracts and other books and records
and has made such investigation with respect thereto as it deems necessary to
enter into the transactions contemplated hereby, (b) have been afforded the
opportunity to ask appropriate representatives of the Company questions
concerning the business, assets, financial condition and prospects of the
company and (c) have been solely responsible for their own due diligence
investigation of the Company and its business, for their own analysis of the
merits and risks of an investment in the shares of Common Stock and for their
own analysis of the terms of the investment in the shares of Common Stock.
3.6 No Other Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of the Company that
the Acquirers are not making any representation or warranty whatsoever, express
or implied, other than those representations and warranties of the Acquirers
expressly set forth in this Agreement.
ARTICLE 4
REPRESENTATIONS AND
WARRANTIES OF THE
COMPANY
To induce Xxx Energy to enter into the Purchase Agreement and each of the
Acquirers to enter into this Agreement, the Company hereby incorporates by
reference into this Agreement, each and all of its representations and
warranties (as the "Buyer" therein) contained in Article 4 of the Purchase
Agreement, and hereby represents and warrants to each of the Acquirers that such
representations and warranties of the Company as contained in Article 4 of the
Purchase Agreement are true, correct and complete as of the date of this
Agreement and will be true, correct and complete as of the Stock Closing Date
(as though made then and as though the Stock Closing Date were substituted for
the date of this Agreement throughout this Article 4), and that the Acquirers
shall be entitled to rely on such representations and warranties to the same
extent as the "Sellers" under the Purchase Agreement, including, to the extent
such representations and warranties are qualified as set forth in the Buyer's
Disclosure Schedules.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF DAMSON AND XXXXXX
To induce Xxx Energy and each of the Acquirers to enter into this
Agreement, Damson and Xxxxxx each represent and warrant to the Acquirers that
the statements contained in this Article 5 are true, correct and complete as of
the date of this Agreement, and will be true, correct and complete (as to each
then-purchasing Subsequent Acquirer with respect to the Stock Closing) as of the
Stock Closing Date (as though made then and as though the Stock Closing Date
were substituted for the date of this Agreement throughout this Article 5),
5.1 Execution and Delivery. Damson and Xxxxxx have each duly executed and
delivered this Agreement. This Agreement constitutes the legal, valid and
binding obligation of Damson and Xxxxxx, enforceable against each of them in
accordance with its terms, except to the extent that such enforceability is
subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general application with respect to creditors, (ii)
general principles of equity and (iii) the power of a court to deny enforcement
of remedies generally based upon public policy.
5.2 Ownership of Stock Options. Except as set forth on Exhibit C, neither
Damson nor Xxxxxx owns any other options, warrants or rights to acquire
additional shares of the Company's Common Stock, and with respect to the options
identified on Exhibit C, neither Damson nor Xxxxxx has pledged, sold,
transferred or otherwise disposed of their interests therein.
5.3 No Brokers or Finders. No agent, broker, finder or investment or
commercial banker, or other person or firm engaged by or acting on behalf of
Damson or Xxxxxx in connection with the negotiation, execution or performance of
this Agreement is or will be entitled to any brokerage or finder's or similar
fee or other commission as a result of this Agreement.
5.4 Involvement in Legal Proceedings. Neither Damson nor Xxxxxx: (i) have
been convicted in a criminal proceeding, or are the subject of a criminal
proceeding which is presently pending, involving the violation of any federal or
state securities laws or federal commodities laws, (ii) were the subject of any
order, judgment or decree of any court (not subsequently reversed, suspended or
vacated by any court) permanently or temporarily enjoining either of them (A)
from acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity Futures Trading Commission
("CFTC"), or an associated person of any of the foregoing; or an investment
advisor, underwriter, broker or dealer in securities; or as an affiliated
person, director or employee of any investment company, bank, savings and loan
association or insurance company; or from engaging in or continuing any conduct
or practice in connection with such activity; or (B) from engaging in any type
of business practice; or (C) from engaging in any activity in connection with
the purchase and sale of any security or commodity or in connection with any
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violation of federal or state securities laws or federal commodities laws, (iii)
were the subject of any order, judgment or decree of any federal or state
authority barring, suspending or otherwise limiting for more than sixty (60)
days, their respective right to engage in any activity described in Subsection
5.4(ii) above, or to be associated with persons engaged in any such activity or
(iv) has had any court, the Securities Exchange Commission, CFTC, New York Stock
Exchange, American Stock Exchange or National Association of Securities Dealers
or any commodity exchange or Nasdaq impose a sanction against them or found them
to have violated any federal or state securities or commodities laws.
5.5 No Other Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of the Acquirers
that Damson and Xxxxxx are not making any representation or warranty whatsoever,
express or implied, other than those representations and warranties of Xxxxxx
and Damson expressly set forth in this Agreement.
ARTICLE 6
SECURITIES LAWS PROVISIONS;
INDEMNIFICATION
6.1 Transfer Restrictions. If the Acquirers should decide to dispose of
any of their shares of Common Stock, the Acquirers understand and agree that
they may do so only pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act, and that certain transfers of certain shares of Common Stock are
subject to the restrictions set forth in Sections 1.3 and 1.4 hereof. In
connection with any offer, resale, pledge or other transfer (individually and
collectively, a "Transfer") of shares of Common Stock acquired hereunder (other
than pursuant to an effective registration statement), the Company may require
that the transferor of such shares of Common Stock provide to the Company an
opinion of counsel (which opinion and counsel shall be reasonably satisfactory
to the Company), to the effect that such Transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable state or foreign
securities laws. The Acquirers agree to the imprinting, so long as appropriate,
of substantially the following legend on the certificates representing shares of
Common Stock:
THE SECURITIES (THE "SECURITIES") EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT
IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER (INDIVIDUALLY AND
COLLECTIVELY, A "TRANSFER") THE SECURITIES EVIDENCED HEREBY, EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN PURSUANT TO CLAUSE
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(A) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY
AND THE TRANSFER AGENT (IF ANY) SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY
STATE OR FOREIGN SECURITIES LAW.
The legend set forth above may be removed if and when the shares of Common
Stock, as the case may be, are disposed of pursuant to an effective registration
statement under the Securities Act or the opinion of counsel referred to above
has been provided to the Company. The certificates representing the Common Stock
shall also bear any additional legends required by applicable federal, state or
foreign securities laws, which legends may be removed when, in the opinion of
counsel to the Company, the same are no longer required under the applicable
requirements of such securities laws. The Acquirers each agree that, in
connection with any Transfer of the shares of Common Stock by any of them
pursuant to an effective registration statement under the Securities Act, they
will comply with all prospectus delivery requirements of the Securities Act.
In addition, the Management Acquirers agree to the imprinting, as
appropriate, of substantially the following legend on the certificates
representing the Subject Shares, until the restrictions set forth in Sections
1.3 and 1.4 hereof are terminated.
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE PROVISIONS OF THAT
CERTAIN STOCK AGREEMENT DATED AS OF JANUARY 16, 2006. ANY PROPOSED OFFER,
SALE OR TRANSFER OF SUCH SECURITIES IS SUBJECT TO (I) THE TERMS OF A RIGHT
OF FIRST REFUSAL IN FAVOR OF THE COMPANY AND (II) CERTAIN "LOCK-UP"
PROVISIONS THAT MAY ARISE AS SET FORTH THEREIN. A COPY OF SUCH AGREEMENT
MAY BE MADE AVAILABLE UPON WRITTEN REQUEST BY THE HOLDER TO THE SECRETARY
OF THE COMPANY. THE HOLDER OF THE SECURITIES EVIDENCED HEREBY MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE IN ACCORDANCE WITH THE TERMS OF
SUCH AGREEMENT.
6.2 Indemnification.
(a) The Company agrees to indemnify each of the Acquirers, each
Person (if any) who controls any Acquirer within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act and each Affiliate of
the Acquirers, and hold the Acquirers and each and every one of them harmless
from and against any and all liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, the reasonable fees and disbursements
of the Acquirers' counsel in connection with any investigative, administrative
10
or judicial proceeding), which may be incurred by the Acquirers (or any of them)
as a result of any claims made against the Acquirers by any person that relate
to or arise out of (i) any breach by the Company, Damson or Xxxxxx of any of its
representations, warranties or covenants contained in or incorporated by
reference into this Agreement, (ii) any litigation, investigation or proceeding
instituted by any person with respect to this Agreement, the Purchase Agreement
or the shares of Common Stock acquired hereunder (excluding, however, any such
litigation, investigation or proceeding which arises solely from the acts or
omissions of the Acquirers), (iii) any untrue or alleged untrue statement (oral
or otherwise) of a material fact made by the Company or any of its Affiliates or
representatives in connection with or relating to the Private Placement (as such
term is defined in the Purchase Agreement), or any omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iv) any violation or alleged violation
of federal or state securities law by the Company or any of its Affiliates or
its representatives in connection with or related to such Private Placement.
(b) Any Person that may be entitled to indemnification hereunder
(the "indemnified party") will (i) give prompt notice to the Company of any
claim with respect to which it seeks indemnification (but omission of such
notice shall not relieve the Company from liability hereunder except to the
extent that it is actually prejudiced by such failure to give notice) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
may exist between such indemnified party and the Company with respect to such
claim, permit the Company to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is not assumed
by the Company, the Company will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld). The Company will not consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of an
unconditional release from all liability in respect to such claim or litigation.
If the Company elects not to or is not entitled to assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified with respect to such claim, unless an actual
conflict of interest exists between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the Company will
be obligated to pay the fees and expenses of such additional counsel or
counsels.
(c) The indemnification remedies provided for in this Section 6.2
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to an indemnified party at law or in equity, hereunder, under this
Agreement or otherwise.
(d) The indemnity provisions contained in this Section 6.2 shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement or the Purchase Agreement, (ii) any investigation made by or
on behalf of any Acquirer, any Person controlling any Acquirer or any Affiliate
of any Acquirer or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) the sale of any shares of Common
Stock by any Acquirer.
11
ARTICLE 7
CERTAIN COVENANTS
OF THE PARTIES
With respect to the period between the execution and delivery of this
Agreement and the Stock Closing Date as contemplated hereunder, each of the
parties hereto will use his or its reasonable efforts to take all actions
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement. In connection with the foregoing,
the pre-closing covenants of the "Buyer" and the "Sellers" set forth in Section
5 of the Purchase Agreement are hereby expressly incorporated into this
Agreement. More particularly, the Company shall perform the covenants applicable
to the "Buyer" set forth in Section 5 of the Purchase Agreement and the
Acquirers are entitled to rely on the Company's obligations thereunder to the
same extent as the "Sellers" under the Purchase Agreement, and the Acquirers, to
the extent applicable thereto, shall use their respective reasonable efforts to
cause the "Sellers" to perform their respective obligations thereunder, but all
subject to the terms and conditions of the Purchase Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Nature of Certain Obligations. The covenants of each of the Subsequent
Acquirers in Section 2.1 of this Agreement concerning the purchases of Common
Stock and the representations and warranties of each of the Acquirers contained
in Article 3 are several obligations. This means that the particular Acquirer
making the representation, warranty or covenant will be solely responsible to
the extent provided in herein above for any actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses, that the Company may
suffer as a result of any breach thereof.
8.2 No Waiver; Modification in Writing. No failure or delay on the part of
the Company or of the Acquirers in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of the
Company and the Acquirers. Any amendment, supplement or modification of or to
any provision of this Agreement, or any waiver of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on any party hereto in any case shall
entitle the other party to any other or further notice or demand in similar or
other circumstances.
8.3 Fees and Expenses. Each party shall be responsible for its own
expenses and the expenses of its legal and other advisors in conjunction with
the negotiation, execution and performance of this Agreement.
12
8.4 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of applicable law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated herein are
consummated as originally contemplated to the fullest extent possible.
8.5 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of each party hereto and their respective successors, assigns, heirs
and legal representatives, provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of shares of Common Stock
otherwise restricted under the terms of this Agreement. The indemnification
obligations of the Company contained in Section 5.5 hereof are expressly made
for the benefit of each indemnified party entitled to the rights thereunder.
8.6 Amendment and Waiver. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Acquirers holding not
less than a majority of the shares of Common Stock then owned by them.
8.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile or
mailed by registered or certified mail (return receipt requested) or Federal
Express or another recognized overnight courier to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to the Acquirers, addressed to the particular Acquirer, at
the following address:
0000 Xxxxxx Xxxx
Xxxxx Xxxxxxx, Xxxxxxxxxxxx 00000
With copies to:
Xxxxxxxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxx
Xxxxx Xxxxxxx, Xxxxxxxxxxxx 00000
Telecopier: (000) 000-0000
13
(b) If to the Company, Damson or Xxxxxx, to:
College Oak Investments, Inc.
0 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, CFO
With copies to:
Xxxxxxx X. Xxxxx
Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if sent via facsimile telecopy
delivery, three (3) Business Days after the date of mailing, if mailed by
registered or certified mail, return receipt requested, and one business day
after the date of sending, if sent by Federal Express or other recognized
overnight courier.
8.8 Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
8.9 Entire Agreement. This Agreement (including the Exhibits hereto) and
the other documents contemplated herein constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, letters of intent and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof.
8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Commonwealth of Pennsylvania without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Pennsylvania or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Pennsylvania.
8.11 Public Announcements. The Company and the Acquirers shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby, except for statements required by law or by any listing agreements with
or the rules of any national securities exchange or national quotation service
or made in disclosures reasonably determined as required to be filed pursuant to
the applicable
14
8.12 Headings. The headings of this Agreement are for convenience of
reference only and are not part of the substance of this Agreement.
8.13 Consent to Jurisdiction. Each of the parties to this Agreement hereby
(a) consents to the jurisdiction of any United States District Court for the
Western District of Pennsylvania or, if such court does not have jurisdiction
over such matter, the Court of Common Pleas of the Commonwealth of Pennsylvania
of Centre County and (b) irrevocably agrees that all actions or proceedings
arising out of or relating to this Agreement shall be litigated in such court.
Each party accepts for itself and in connection with its properties, generally
and unconditionally, the exclusive jurisdiction and venue of the aforesaid
courts and waives any defense of forum nonconveniens or any similar defense, and
irrevocably agrees to be bound by any non-appealable judgment rendered thereby
in connection with this Agreement.
8.14 Construction. The parties to this Agreement have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All references in this
Agreement to an "Article," "Section," "subsection," "Exhibit" or "Schedule"
shall be to an Article, Section, subsection, Exhibit or Schedule of this
Agreement, as the case may be, unless the context requires otherwise. Unless the
context otherwise requires, the words "this Agreement," "hereof," "hereunder,"
"herein," "hereby," or words of similar import shall refer to this Agreement as
a whole and not to a particular Section, subsection, clause or other subdivision
hereof. Whenever the context requires, the words used herein shall include the
masculine, feminine and neuter gender, and the singular and the plural.
8.15 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[Signature Pages Follow]
15
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer as of the date first written
above.
COLLEGE OAK INVESTMENTS, INC.
By: /s/ Xxxxx X. Birmingham
-------------------------------
Name: Xxxxx X. Birmingham
Title: President
/s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
/s/ Xxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxx
16
ACQUIRERS:
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
SUBSEQUENT ACQUIRERS
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
17
EXHIBIT A
Management Acquirers
Name No. of Shares
---- -------------
Xxxxx X. Xxxxxx 4,827,700
Xxxxxxxx X. Xxxxxxx 2,896,620
Xxxxxx X. Xxxxxxx 2,896,620
Xxxxxxx X. Xxxxxxx 482,700
Xxxxxxxxxxx X. Xxxxxxx 482,700
Xxxxxx X. Xxxxxxx 482,700
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EXHIBIT B
Subsequent Acquirers
Name Pro Rata %
---- ----------
Xxxxx X. Xxxxxx 60%
Xxxxxxxx X. Xxxxxxx 20%
Xxxxxx X. Xxxxxxx 20%
19
Exhibit C
Damson & Xxxxxx Stock Options
Each has an Option for 6,000,000 shares exercisable at $.05
per share. Option was granted on April 29, 2005 and expires
April 29, 2010.
20
