Exhibit 99.1
STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of April 29, 2004 (this "Agreement"), by
and among GVC Venture Corp., a Delaware corporation (the "Company"), Xxxxxxx
Xxxxxxxxx & Company, Inc. a Connecticut corporation ("Xxxxxxxxx Company"),
Xxxxxx Industries, Inc., a Florida corporation ("Xxxxxx Industries"), and Xxxxxx
Xxxxx ("Banks" and collectively with Xxxxxxxxx Company and Xxxxxx Industries,
the "Investors").
WHEREAS, the Company is proposing to sell shares of its common stock in
order to provide capital for a period of time in order to enable the Company to
pay certain of its liabilities and continue to file periodic reports with the
Securities and Exchange Commission (the "SEC") while the Company seeks a
suitable business combination; and
WHEREAS, the Investors are willing to purchase shares of the Company's
common stock, on the terms and conditions herein set forth, to provide such
funds to the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, covenants and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Investors hereby agree as follows:
1. Sale and Purchase of Shares. Subject to the terms and conditions set
forth in this Agreement, at the Closing (as defined in Section 3), the Company
agrees to sell to the Investors the number of shares (the "Shares") of the
common stock, $.01 par value per share (after giving effect to the reduction in
the par value of such common stock as contemplated in Section 6 below), of the
Company (the "Common Stock") set forth below the respective Investor's name on
the signature page of this Agreement at a price of $.01 per share. The Shares
being purchased by Xxxxxxxxx Company and Banks shall be paid for by checks,
subject to collection, in the amounts of $63,000 and $13,000, respectively, and
the Shares being purchased by the Xxxxxx Industries shall be paid for by the
release of the Company's $13,000 obligation to it for an advance made by Xxxxxx
X. Xxxxxx to the Company in November 2003 and assigned by Xx. Xxxxxx to Xxxxxx
Industries (the "Advance") and any accrued interest on the Advance. Concurrently
with delivering an executed original of this Agreement to the Company, the
Investors and certain other persons are also executing a Stockholders Agreement
(the "Stockholders Agreement") and Xxxxxxxxx Company is granting to Xxxxxx
Industries an option to purchase 1,300,000 of the 6,300,000 shares being
purchased by Xxxxxxxxx Company hereunder (the "Option"). The obligations
hereunder of each Investor are several and not joint and several.
2. Agreement to Grant Option. Subject to and conditioned upon the closing
of the sale and purchase contemplated hereunder, Xxxxxxxxx Company is
contemporaneously herewith granting to Xxxxxx Industries an irrevocable option
to purchase 1,300,000 shares of the 6,300,000 shares being purchased by
Xxxxxxxxx Company hereunder, exercisable at an
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exercise price of $.01 per share, pursuant to an Option Agreement being entered
into contemporaneously herewith between Xxxxxxxxx Company and Xxxxxx Industries,
a copy of which is attached to this Agreement as Exhibit A (the "Option").
3. Closing. The sale and purchase of the Shares shall take place at a
closing (the "Closing") to be held promptly following the filing of a
Certificate of Amendment (the "Amendment") to the Company's Restated Certificate
of Incorporation, as amended (without giving effect to the Amendment, the
"Existing Certificate of Incorporation"), to reduce the par value of the
Company's Common Stock to $.01, at the offices of Jenkens & Xxxxxxxxx Xxxxxx
Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on such date (the
"Closing Date") and at such time as the Company shall specify by notice to each
Investor promptly following the filing of the Amendment and at least two
business days prior to the Closing or at such other date, place and time as the
Company and the Investors may agree.
At the Closing, the Company will deliver to each Investor the Shares
to be purchased by the Investor against payment of the purchase price therefor
by check subject to collection.
4. Representations and Warranties of the Company. The Company represents
and warrants to each Investor as follows:
(a) Organization, Good Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is not required to be qualified to do business in any
other jurisdiction. The Company does not own or control, directly or indirectly,
any other corporation, association or business organization, except for the
subsidiaries set forth on Exhibit B, each of which subsidiaries is inactive and
has little, if any, assets or liabilities.
(b) Capital Stock. The authorized capitalization of the Company
consists of 50,000,000 shares of Common Stock, par value $.10 per share, of
which there are 5,294,516 shares issued and outstanding, all of which are or
will be (after giving effect to the capitalization of certain obligations of the
Company to Xxxxxxx Xxxxx and Palisade Investors LLC ("Palisade") and certain
payments by them) validly issued, fully paid and non-assessable, with no
personal liability attached to the ownership thereof, and 1,000,000 shares of
Preferred Stock, no par value, none of which are issued or outstanding. There
are no outstanding securities convertible into or exchangeable for capital stock
of the Company or any subsidiary of the Company or rights, options, warrants to
purchase capital stock of the Company or any subsidiary of the Company, except
options to purchase an aggregate of 35,000 shares of Common Stock granted to
Xxxx X. Xxxxxxx under the Company's 1987 Executive Incentive Plan. No further
options may be granted under such plan. The Company has obtained an agreement of
Mr. Hanover to terminate such option contemporaneously with the Closing. The
Company is not a party to, and is not aware of (whether or not it is a party
thereto) any stockholders agreement, voting agreement, voting trust or other
agreement or understanding with respect to the voting or disposition of any
shares of capital stock of the Company, except that Palisade has the right to
nominate two directors and Xxxxxxx Xxxxx has agreed to vote in favor of the
election of such nominees (the "Existing Voting Arrangement"), which the parties
thereto have agreed to terminate
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contemporaneously with the Closing, and the Stockholders Agreement entered among
the Investors contemporaneously with the execution of this Agreement.
(c) The Status of the Shares. The Shares will, when issued in
accordance with this Agreement, be validly issued, fully paid and
non-assessable, with no personal liability attached to the ownership thereof.
(d) Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement and the issuance and sale of the Shares pursuant
hereto has been authorized by all necessary corporate action on the part of the
Company. The Company's entire Board of Directors have unanimously adopted a
resolution proposing, declaring advisable and recommending that the Company's
stockholders authorize the Amendment. Neither the execution nor delivery of this
Agreement nor the consummation of the transaction contemplated hereby will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract or agreement to which the Company is
a party or is subject, nor, subject to obtaining stockholder authorization of
the Amendment, the Restated Certificate of Incorporation or the By-laws of the
Company. True and correct copies of the Existing Certificate of Incorporation
and By-laws of the Company, each as amended to date and certified by the
President and the Secretary of the Company, have been delivered to the Investors
herewith. No authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization or stock exchange or market is
required to be obtained by the Company for the issuance and sale of the Shares
to the Investors as contemplated by this Agreement.
(e) Financial Statements, Indebtedness, Etc. The audited consolidated
financial statements of the Company as contained in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 2003 (the "10-KSB Report") and the
unaudited consolidated financial statements of the Company to be contained in
the Company's Quarterly Report on Form 10-QSB for the nine months ended March
31, 2004 (the "10-QSB Reports") have been or, in the case of the 10-QSB, will be
prepared in accordance with generally accepted accounting principles and are or,
in the case of the 10-QSB, will be correct, complete and fairly present the
financial position of the Company as of the dates of the balance sheets
contained therein and the results of operations and cash flows of the Company
for the periods presented therein. Such financial statements make or, in the
case of the 10-QSB, will make full and adequate provision for and disclosure of
all obligations, liabilities and commitments (fixed and contingent) of the
Company and its subsidiaries required to be contained or referred to therein in
accordance with generally accepted accounting principles prevailing in the
United States ("GAAP") as of the dates thereof.
(f) The Company has duly and timely filed all tax returns required to
be filed by it and has duly and timely paid all taxes and other charges (whether
or not shown on any tax return) due or claimed to be due from it by federal,
state or local taxing authorities or has set up an adequate reserve for all
taxes payable by it. All such tax returns were true and complete in all material
respects. There are no tax liens upon any properties or assets of the Company
and there are no pending or, to the Company's knowledge, threatened audits or
examinations relating to, or claims asserted for, taxes or assessments against
the Company and the Company is not aware of any substantial basis for any such
claims.
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(g) No Undisclosed Liabilities. Neither the Company nor any subsidiary
of the Company has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet
(including the notes thereto) of the Company or any subsidiary in conformity
with GAAP that is not disclosed in the 10-KSB Report or the 10-QSB Report for
the nine months ended March 31, 2004, other than those incurred in the ordinary
course of business since March 31, 2004.
(h) SEC Filings. None of the Company's filings with the Securities and
Exchange Commission have contained, at the time they were filed, any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements made therein in light of the circumstances under which they
were made, not misleading. The Company has filed all requisite forms, reports
and exhibits thereto with the Securities and Exchange Commission.
5. Representations and Warranties of the Investors. The Investors,
severally represent and warrant to the Company as follows:
(a) Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement by the Investor has been authorized by all
necessary action on the part of the Investor. Neither the execution nor delivery
of this Agreement nor the consummation of the transaction contemplated hereby
will conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract or agreement to which the
Investor is a party or is subject, nor, in the case of Xxxxxxxxx Company, its
organizational documents. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization or stock
exchange or market is required to be obtained by the Investor for the Investor's
consummation of the transactions contemplated by this Agreement.
(b) Accredited Investor Status. The Investor is an "accredited
investor," within the meaning of Rule 501 of Regulations D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), a copy of which definition is annexed hereto as Exhibit
C.
(c) Investor Qualification; Risk. The Investor (i) recognizes that the
Investor's investment in the Company involves a high degree of risk; (ii) is
able to bear the economic risks of the investment in the Company being made
pursuant to this Agreement and is able to hold the Shares for an indefinite
period of time; (iii) has a sufficient net worth to sustain a loss of the
Investor's entire investment in the Company in the event such a loss should
occur; and (iv) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Company.
(d) Independent Investigation. In making the Investor's decision to
purchase the Shares, the Investor (i) has relied solely upon documents provided
by the Company to such Investor and the Investor's independent investigation,
and such due diligence made by the Investor as the Investor considered
appropriate, regarding the Company and an investment in the Shares, (ii) is not
relying upon any representations or warranties made by or on behalf of the
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Company other than those made in Section 4 of this Agreement and (iii)
acknowledges that the Investor has had an opportunity to consult with the
Investor's own attorney regarding legal matters concerning the Company and an
investment in the Shares and to consult with the Investor's tax advisor
regarding the tax consequences of an investment in the Shares.
(e) Investment for Own Account. The Investor, subject, in the case of
Xxxxxxxxx Company, to the option being granted by it to Xxxxxx Industries, (i)
is acquiring the Shares for the Investor's own account, and not with a view to
any resale or distribution of the Shares, in whole or in part, in violation of
the Securities Act or any applicable securities laws and (ii) has not offered or
sold any of the Shares and has no present intention or agreement to divide the
Shares with others for purposes of selling, offering, distributing or otherwise
disposing of any of the Shares.
(f) No Registration Under the Securities Act. The Investor understands
that (i) the offer and sale of the Shares is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2) and Regulation
D promulgated under the Securities Act; (ii) the Shares have not been, and may
never be, registered under the Securities Act; (iii) the Shares cannot be sold,
transferred, assigned, pledged or hypothecated unless they are first registered
under the Securities Act and such state and other securities laws as may be
applicable or, in the opinion of counsel for the Company, an exemption from
registration under the Securities Act is available (and then the Shares may be
sold, transferred, assigned, pledged or hypothecated only in compliance with
such exemption and all applicable state and other securities laws). The
following legends will be placed upon the certificates for the Shares:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be offered for sale, sold or otherwise transferred,
pledged or hypothecated, in the absence of an effective registration
statement under the Securities Act or a written opinion of counsel for
the Company or the holder hereof that such offer, sale, transfer,
pledge or hypothecation is exempt from the registration provisions of
the Securities Act and such state and other securities laws as may be
applicable."
"The Shares represented by this certificate are subject to the terms
and conditions of a Shareholders Agreement dated as of April 29, 2004
by and among certain stockholders of the Company, a copy of which is
on file at the principal office of the Company."
(g) No Government Recommendation or Approval. The Investor understands
that no United States federal (including, without limitation, the Securities and
Exchange Commission) or any state agency or any similar agency of any other
country, has reviewed, approved, passed upon or made any recommendation or
endorsement regarding the Company or the purchase of the Shares.
6. Conditions to the Obligations of the Investors. The Investors'
obligation to purchase and pay for the Shares to be delivered to the Investors
at the Closing are subject to the satisfaction of the following conditions on or
before the Closing Date:
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(i) The Company shall have delivered certificates evidencing the
Shares;
(ii) The Company shall have delivered to the Investors a
certificate issued by the Secretary of State of the State of Delaware that the
Company is in good standing and has paid all of its franchise taxes and
reflecting the filing of the Existing Certificate of Incorporation and the
Amendment.
(iii) A certificate of the Secretary of the Company certifying
the resolutions adopted by (x) the Company's Board of Directors approving the
transactions contemplated hereby and authorizing, declaring advisable and
recommending to the Company's stockholders the Amendment and the other
amendments to the Company's Existing Certificate of Incorporation authorized on
April 9, 2004 by the Company's Board of Directors for filing with the Secretary
of State of the State of Delaware (subject to stockholder authorization), and
(y) the Company's stockholders authorizing the Amendment and such other
amendments to the Company's Existing Certificate of Incorporation.
(iv) The representations and warranties of the Company set forth
in Section 4 shall be true in all material respects at and as of the Closing
Date, after giving effect to the transactions contemplated by this Agreement, as
if made on and as of such date;
(v) The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in this
Agreement which are required to be performed or complied with by the Company on
or before the Closing Date;
(vi) The Company shall have authorized, by all requisite
corporate action of its Board of Directors and stockholders the filing of, and
there shall have been filed with the Secretary of State of the State of
Delaware, the Amendment;
(vii) Xxxxxxx Xxxxx and Palisade shall have cancelled and
capitalized the Company's obligation to pay all principal ($50,000 to each) with
respect to loans made by them to the Company as follows: in the case of Xxxxxxx
Xxxxx, $8,000 on or about March 15, 2002 and $42,000 on or about June 15, 2003
and, in the case of Palisade, $25,000 on each of approximately September 15,
2002 and April 15, 2003, and all accrued interest on such obligations;
(viii) Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP shall agree to defer
the Company's obligations of all indebtedness owed it for services rendered
prior to January 1, 2004 (an aggregate of approximately $61,000) and in
connection with the transactions contemplated in this Agreement on a
non-interest basis until the earlier of December 31, 2010, the liquidation of
the Company or the Company's merger with, or sale of substantially all of its
assets to, or another change in control transaction with, another entity that is
approved by the Company's Board of Directors (other than the change in control
contemplated by this Agreement), following which transaction or series of
transactions the stockholders of the Company immediately preceding the
effectiveness of the first of such transactions do not own more than 50% of the
outstanding voting power of the resulting entity immediately following the
effectiveness of the last of such transactions;
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(ix) All outstanding stock options granted by the Company to
purchase capital stock of the Company (including, without limitation, the stock
options held by Xxxx X. Xxxxxxx) shall have been terminated;
(x) The Existing Voting Arrangement shall have been terminated;
and
(xi) No provision of any applicable law or regulation, and no
judgment, injunction or decree shall prohibit the consummation of the sale and
purchase of the Shares contemplated hereby.
7. Conditions to Obligations of the Company. The Company's obligation to
sell and issue the Shares to be delivered at the Closing are subject to the
satisfaction of the following conditions on or before the Closing Date:
(i) Xxxxxxxxx Company and Banks shall have delivered to the
Company payment of the purchase price by check subject to collection and in the
amounts and in the manner provided for in Section 1 of this Agreement and Xxxxxx
Industries shall have delivered to the Company an instrument reasonably
satisfactory to the Company confirming that it has released, the Company from
the Company's obligation to repay the Advance;
(ii) The representations and warranties of the applicable
Investor set forth in Section 5 shall be true in all material respects at and as
of the Closing Date, after giving effect to the transactions contemplated by
this Agreement, as if made on and as of such date;
(iii) The applicable Investor shall have performed and complied
in all material respects with all agreements, covenants and conditions contained
in this Agreement which are required to be performed or complied with by the
Investor on or before the Closing Date;
(iv) The Company's stockholders shall have authorized the
Amendment; and
(v) No provision of any applicable law or regulation, and no
judgment, injunction or decree shall prohibit the consummation of the sale and
purchase of the Shares contemplated hereby.
8. Miscellaneous
(a) Notices. All notices, requests, demands and other communications
which are required to be or which may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person,
the scheduled business day of delivery if sent by Express Mail, Federal Express,
other overnight delivery service or five business days after mailed if mailed by
certified or registered first class mail return receipt requested, in any such
case with delivery charges prepaid, to the party to whom the same is so given or
made, at the following addresses (or such other address as shall be provided by
notice given in accordance with this Section 8(a) by the party whose address is
to be changed):
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If to Banks:
Xxxxxx Xxxxx
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
With a copy by e-mail to:
xxxxxx@xxxxxxxxxxxxx.xxx
and
xxxxxxxx@xxxxxxxxxxxxx.xxx
If to Xxxxxx Industries:
Xxxxxx Industries, Inc.
c/o Palisade Investors LLC
0 Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
If to Xxxxxxxxx Company:
Xxxxxxx Xxxxxxxxx & Company, Inc.
c/o Xxxxxxx Xxxxxxxxx
00 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
(b) Amendments. This Agreement and any term hereof may not be amended,
changed, waived, discharged or terminated except by an instrument in writing
signed by all of the parties hereto.
(c) Waivers. The failure of a party to insist upon strict adherence to
any term or provision of this Agreement on any occasion shall not be considered
a waiver, or deprive the party of the right thereafter to insist upon strict
adherence to that term or provision or any other term or provision of this
Agreement. Any waiver must be in writing and be duly executed by the party to be
charged.
(d) Assignment. This Agreement may not be assigned by any Investor
without the prior written consent of the Company. This Agreement may be assigned
by the Company to any person or entity which purchases all or substantially all
of the stock or assets of the Company or is the successor to the Company by
merger or consolidation.
(e) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns of the Company and the successors, heirs, estate, personal
representatives and permitted assigns of the Investor.
(f) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the state of Delaware, without regard to the
conflict of laws
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principles thereof that would defer to the laws of another jurisdiction or the
actual domiciles of the parties hereto.
(g) Counterparts. This Agreement may be executed in two or more
counterparts and by the different parties hereto on separate counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(h) Headings. The headings in this Agreement are for purposes of
reference only and shall not be considered in construing this Agreement.
(i) Entire Agreement. This Agreement contains the entire understanding
of the parties hereto, and supersedes all prior discussions and understandings
of the parties hereto, respecting the subject matter hereof.
(j) Severability. If any provision of this Agreement or the
application of any provision to any person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of that provision
to persons or circumstances other than those which it is held invalid, shall not
be affected thereby.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement.
GVC VENTURE CORP.
By: /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx, President
XXXXXXX XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxxxxx, President
Number of Shares: 6,300,000
XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, Vice President
Number of Shares: 1,300,000
/s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
Number of Shares: 1,300,000
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EXHIBIT A
OPTION AGREEMENT
OPTION AGREEMENT made as of April 29, 2004, by and between
Xxxxxxx Xxxxxxxxx & Company, Inc., a Connecticut corporation (the "Grantor"),
and Xxxxxx Industries, Inc., a Florida corporation ("the Optionee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
1. Option Grant. The Grantor hereby grants to the Optionee, subject to the
terms and conditions set forth in this Option, the absolute and irrevocable
right and option (this "Option") to purchase from the Grantor, and to require
the Grantor to sell to the Optionee, for $.01 per share (the "Exercise Price")
up to and including 1,300,000 shares of Common Stock, which immediately prior to
the consummation of the Stock Purchase Agreement (as defined below) shall have a
par value of $.01 par value (the "Shares"), of GVC Venture Corp., a Delaware
corporation (the "Company"), which shares the Grantor proposes to acquire from
the Company pursuant to that certain Stock Purchase Agreement of even date
herewith among the Grantor, the Optionee, Xxxxxx Xxxxx and the Company (the
"Stock Purchase Agreement"); provided, however, that the grant of this Option is
subject to:
(a) the purchase by the Grantor of the Shares pursuant to the
Stock Purchase Agreement; and
(b) the payment to the Grantor by the Optionee of an aggregate of
$100 by check subject to collection within five (5) Business Days (as defined
below) after the Optionee is advised, in writing, by the Grantor that the
Grantor's purchase of the Shares under the Stock Purchase Agreement has been
consummated.
(c) Notwithstanding the foregoing, this Option shall terminate at
the time of termination of the Stock Purchase Agreement (including by virtue of
a failure of a condition precedent to be fulfilled and not be waived) if the
Optionee shall not acquire the Shares pursuant thereto.
2. Legend on the Shares. The stock certificates evidencing the Shares held
by Xxxxxxxxx Company shall, so long as this Option pertains thereto, bear the
following legend:
"The shares represented by this certificate are subject to the
terms and conditions of an Option Agreement dated as of April 29,
2004 by and between Xxxxxxx Xxxxxxxxx & Company, Inc. and Xxxxxx
Industries, Inc., a copy of which is on file at the principal
office of the Company."
Exhibit A-1
3. Term of Option. The right granted to the Optionee under this Option may
be exercised in whole or in part, at any time but on one occasion only, until
June 30, 2005 (the "Expiration Date").
4. Exercise Notice. (a) As a condition to the exercise of the rights
granted to the Optionee under this Option, the Optionee shall give the Grantor
written notice of the Optionee's election to exercise this Option, which notice
shall be given not more than 30 days and not less than 10 days prior to the
Closing Date (as defined below), which notice shall be accompanied by a letter
confirming that at the time of exercise of this Option:
(i) The Optionee is an "accredited investor," within the meaning
of Rule 501 of Regulations D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), a copy of which definition is annexed hereto as
Exhibit A.
(ii) The Optionee (A) recognizes that the Optionee's investment
in the Shares involves a high degree of risk; (B) is able to bear the
economic risks of the investment in the Shares and is able to hold the
Shares for an indefinite period of time; (C) has a sufficient net
worth to sustain a loss of the Optionee's entire investment in the
event such a loss should occur; and (D) has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of the investment.
(iii) In making the Optionee's decision to purchase the Shares,
the Optionee (A) has relied solely upon documents filed by the Company
with the Securities and Exchange Commission, and such due diligence
made by the Optionee as the Optionee considered appropriate, regarding
the Company and an investment in the Shares, (B) is not relying upon
any representations or warranties made by or on behalf of the Grantor
and (C) acknowledges that the Optionee has had an opportunity to
consult with the Optionee's own attorney regarding legal matters
concerning the Company and an investment in the Shares and to consult
with the Optionee's tax advisor regarding the tax consequences of an
investment in the Shares.
(iv) The Optionee (A) is acquiring the Shares for the Optionee's
own account, and not with a view to any resale or distribution of the
Shares, in whole or in part, in violation of the Securities Act or any
applicable securities laws and (B) has not offered or sold any of the
Shares and has no present intention or agreement to divide the Shares
with others for purposes of selling, offering, distributing or
otherwise disposing of any of the Shares.
(v) The Optionee understands that (A) the offer and sale of the
Shares upon exercise of this Option is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(1) under
the Securities Act; (B) the Shares have not been, and may never be,
registered under the Securities Act; (C) the Shares cannot be sold,
transferred, assigned, pledged or hypothecated unless they
Exhibit A-2
are first registered under the Securities Act and such state and other
securities laws as may be applicable or, in the opinion of counsel for
the Company or the holder of the Shares, an exemption from
registration under the Securities Act is available (and then the
Shares may be sold, transferred, assigned, pledged or hypothecated
only in compliance with such exemption and all applicable state and
other securities laws). The following legends will be placed upon the
certificates for the Shares:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered for sale, sold or
otherwise transferred, pledged or hypothecated, in the absence of
an effective registration statement under the Securities Act or a
written opinion of counsel for the Company or the holder hereof
that such offer, sale, transfer, pledge or hypothecation is
exempt from the registration provisions of the Securities Act and
such state and other securities laws as may be applicable."
"The Shares represented by this certificate are subject to the
terms and conditions of a Shareholders Agreement dated as of
April 29, 2004 by and among certain stockholders of the Company,
a copy of which is on file at the principal office of the
Company."
(vi) The Optionee understands that no United States federal
(including, without limitation, the Securities and Exchange
Commission) or any state agency or any similar agency of any other
country, has reviewed, approved, passed upon or made any
recommendation or endorsement regarding the Company or the purchase of
the Shares.
(vii) The Optionee acknowledges and agrees that the Shares will
be subject to the Stockholders Agreement as Shares held by the
"Palisades/Xxxxxx Stockholders."
(b) The Closing Date shall be on such day (other than a Saturday
or Sunday) on which commercial banks in New York City are generally open (a
"Business Day") as may be selected by the Optionee (the "Closing Date") in said
notice but no later than the Expiration Date). Said notice shall specify the
number of shares of Common Stock which the Optionee intends to purchase from the
Grantor under this Option, the Closing Date, and a time between 10:00 a.m. and
2:00 p.m. on the Closing Date at which the Closing hereunder (the "Closing") is
to occur and the place in the Borough of Manhattan in New York City where the
Closing is to occur. The parties hereto may mutually agree to any other place,
time and Closing Date for the Closing.
Exhibit A-3
5. Deliveries at the Closing. At the Closing:
(a) The Grantor shall deliver to the Optionee one or more stock
certificates (with stock powers for the transfer thereof to the Optionee, with
signature guaranteed by a national bank or trust company or by a member of the
New York Stock Exchange, and with all necessary documentary transfer tax stamps
affixed) representing the Shares being sold in accordance with the notice given
under Section 3, free and clear of all mortgages, liens, charges and other
encumbrances; and
(b) The Optionee shall pay to the Grantor, by cash or check
subject to collection, the full Exercise Price of the Shares being so
transferred and sold by the Grantor to the Optionee.
6. Dilution Protection. In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares or shall pay
a dividend in capital stock on the outstanding shares of Common Stock of the
Company, the Exercise Price in effect immediately prior to such subdivision or
dividend shall be reduced proportionately and the number of Shares to be
received by the Optionee on exercise of this Option shall be increased
proportionately. Conversely, in case the outstanding shares of Common Stock of
the Company shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such subdivision shall be increased
proportionately and the number of Shares to be received by the Optionee on
exercise of this Option shall be decreased proportionately.
If any capital reorganization or reclassification of the capital stock of
the Company, or consolidation or merger of the Company with another corporation,
or liquidation of the Company, shall be effected, then the Optionee shall have
the right to purchase, upon the exercise of this Option, and receive (upon the
basis and upon the terms and conditions specified in this Option and in lieu of
the Shares immediately theretofore purchasable under this Option), such shares
of stock, securities or assets as the Optionee would have been entitled to
receive if, immediately prior to such reorganization, reclassification,
consolidation, merger or liquidation, the Optionee had exercised this Option.
7. Effect of Expiration of Option. If the Optionee does not exercise in
full the right granted by this Option prior to the Expiration Date, this Option
shall expire and terminate and the Grantor shall be free and clear from all
remaining obligations under this Option.
8. Miscellaneous.
(a) Notices. All notices, requests, demands and other communications
which are required to be or which may be given under this Option shall be in
writing and shall be deemed to have been duly given when delivered in person,
the scheduled Business Day of delivery if sent by Express Mail, Federal Express,
other overnight delivery service or five Business Days after mailed if mailed by
certified or registered first class mail return receipt requested, in any such
case with delivery charges prepaid, to the party to whom the same is so
Exhibit A-4
given or made, at the following addresses (or such other address as shall be
provided by notice given in accordance with this Section 8(a) by the party whose
address is to be changed):
If to the Grantor:
Xxxxxxx Xxxxxxxxx & Company, Inc.
c/o Xxxxxxx Xxxxxxxxx
00 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
If to the Optionee:
Xxxxxx Industries, Inc.
c/o Palisade Investors LLC
0 Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
(b) Amendments. This Option and any term hereof may not be amended,
changed, waived, discharged or terminated except by an instrument in writing
signed by both of the parties hereto.
(c) Waivers. The failure of a party to insist upon strict adherence to
any term or provision of this Option on any occasion shall not be considered a
waiver, or deprive the party of the right thereafter to insist upon strict
adherence to that term or provision or any other term or provision of this
Option. Any waiver must be in writing and be duly executed by the party to be
charged.
(d) Assignment. This Option may not be assigned by any party hereto
without the prior written consent of the other party, except that the Optionee
may assign its rights hereunder to members of the "immediate family" (as that
term is defined in Instruction 2 to Item 404(a) of Regulation S-K promulgated by
the Securities and Exchange Commission) of Xxxxxx X. Xxxxxx, and trusts
exclusively for the benefit of such persons; provided, however, that this Option
must be exercised by all such assignees and persons entitled to benefits
hereunder pursuant to Section 8(e) on one occasion only at the same time in
accordance with the terms of this Option.
(e) Binding Effect. This Option shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and the successors, heirs, estate, personal representatives of permitted
assigns.
(f) Governing Law. This Option shall be governed and interpreted in
accordance with the laws of the state of Delaware, without regard to the
conflict of laws principles thereof that would defer to the laws of another
jurisdiction or the actual domiciles of the parties hereto.
Exhibit A-5
(g) Counterparts. This Option may be executed in two or more
counterparts and each party hereto on a separate counterpart, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(h) Headings. The headings in this Option are for purposes of
reference only and shall not be considered in construing this Option.
(i) Entire Agreement. This Option contains the entire understanding of
the parties hereto, and supersedes all prior discussions and understandings of
the parties hereto, respecting the subject matter hereof.
(j) Severability. If any provision of this Option or the application
of any provision to any person or circumstance shall be held invalid, the
remainder of this Option, or the application of that provision to persons or
circumstances other than those which it is held invalid, shall not be affected
thereby.
IN WITNESS WHEREOF, the parties have executed and delivered this Option.
XXXXXXX XXXXXXXXX & COMPANY, INC.
By:
-----------------------------------------
Xxxxxxx Xxxxxxxxx, President
XXXXXX INDUSTRIES, INC.
By:
-----------------------------------------
Xxxxxx X. Xxxxxx, Vice President
Exhibit A-6
EXHIBIT B
List of Subsidiaries
Xxxxx Inc.
Enviro-Spray Systems Inc.
Themaljet Ltd.
Grow Food Processing Corp.
Exhibit B-1
EXHIBIT C
Definition of Accredited Investor
An "Accredited Investor" is any of the following:
(a) a bank as defined in Section 3(a)(2) of the Federal Act, a savings
and loan association or other institution as defined in Section 3(a)(5)(A) of
the Federal Act, whether acting in its individual or fiduciary capacity, a
broker-dealer registered pursuant to Section 15 of the Securities Exchange Act
of 1934, as amended, an insurance company as defined in Section 2(13) of the
Federal Act, an investment company registered under the Investment Company Act
of 1940, as amended (the "Investment Company Act"), or a business development
company as defined in Section 2(48) of that act, or a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958, as amended.
(b) a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees and such plan has total assets in
excess of $5,000,000.
(c) an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
either
(i) the decision to acquire LP Interests has been made by a plan
fiduciary, as defined in Section 3(21) of ERISA, and the plan fiduciary is a
bank, savings and loan association, insurance company or registered investment
adviser,
(ii) the employee benefit plan has total assets in excess of
$5,000,000, or
(iii) if the employee benefit plan is a self-directed plan,
investment decisions are made solely by persons that are "accredited investors."
(d) a private business development company as defined in Section
202(a)(22) of the Investment Company Act.
(e) any of the following: (i) a tax-exempt organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"),
(ii) a corporation, (iii) a Massachusetts or similar business trust or (iv) a
partnership, in any such case, which was not formed for the specific purpose of
acquiring shares pursuant to this Agreement and which has total assets in excess
of $5,000,000.
(f) a director or executive officer of the Company.
(g) a natural person whose individual net worth, or joint net worth
with the Investor's spouse, exceeds $1,000,000 on the date hereof.
Exhibit C-1
(h) a natural person whose individual income for each of the two most
recent years is in excess of $200,000, or whose joint income with the Investor's
spouse was in excess of $300,000 for each of the two most recent years, and, in
either case, the Investor has a reasonable expectation of reaching the same
income level in the current year.
(i) a trust with total assets in excess of $5,000,000 which was not
formed for the specific purpose of acquiring shares pursuant to this Agreement,
and the decision to purchase shares pursuant to this Agreement is directed by a
"sophisticated person" as defined in Rule 506(b)(2)(ii) under Regulation D.
(j) is an entity in which all of the equity owners are accredited
investors.
Exhibit C-2
