Exhibit 99.5
STANDSTILL AGREEMENT
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This STANDSTILL AGREEMENT, dated as of September 8, 2002 (this
"Agreement"), is made and entered into by and between ONTRO, INC., a California
corporation ("Ontro" or the "Company"), on the one hand, and AURA (PVT.) LTD., a
Pakistani corporation ("Aura"), on the other hand.
WHEREAS, the Company is a California corporation with 10,940,268 shares
of common stock, no par value, issued and outstanding as of the date hereof (the
"Common Stock"); and
WHEREAS, as of the date hereof, the Common Stock is listed on the
Nasdaq SmallCap Market (the "SmallCap Market") under the symbol "ONTR"; and
WHEREAS, Aura is a Pakistani corporation with its principal address and
offices located in Lahore, Pakistan and with the principal business including
trade, operation of certain businesses in Pakistan, and investment in property,
business and securities; and
WHEREAS, as of July 1, 2002, Aura beneficially owns approximately
3,110,210 shares of the Common Stock (the "Aura Shares") and certain unexercised
warrants and options to purchase additional 1,150,080 shares of the Common Stock
(the "Warrants"), respectively (collectively with the "Aura Shares" is referred
to hereinafter as the "Shares"); and
WHEREAS, in the event that Aura exercises the Warrants, Aura will
beneficially own approximately 4,260,290 shares, or 35% of the Common Stock,
thus being the single largest shareholder of the Common Stock; and
WHEREAS, Aura supports the execution of the Agreement by the Company
and any other transactions that the Company's Board of Directors may deem
necessary in connection with the Company's efforts to regain its compliance with
the Nasdaq SmallCap Market and desires to assist the Company in its efforts to
regain its listing compliance with the SmallCap Market; and
WHEREAS, Aura has been informed that the Company is considering the
recapitalization and reorganization of the Company and its debt and equity
structure, raising significant amounts of capital (which efforts, if taken, may
or may not be successful) and reincorporating the Company in Delaware; and
WHEREAS, Aura is willing to agree to certain restrictions regarding the
Shares it will continue to own following the consummation of the transactions
contemplated hereby.
NOW THEREFORE, in consideration of the above premises and the promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Aura and the Company hereby agree
as follows:
1. Standstill Agreement.
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1.1 Aura hereby covenants and agrees that, from and after the date
hereof and at all times through and including September 12, 2002, unless this
Agreement shall be earlier terminated in accordance with the provisions of
Paragraph 6 hereof, Aura will not, nor will it permit its respective Affiliates
(as the term is defined hereinbelow):
(i) to, directly or indirectly, in any manner, acquire, or agree to
acquire, any beneficial interest in any equity securities of the Company,
(ii) to make or in any way participate in any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the United States
Securities and Exchange Commission (the "SEC")) to vote any voting securities of
the Company (the "Company Voting Stock") in connection with the election of the
directors of the Company or otherwise seek to alter the composition of the
Company's Board of Directors,
(iii) to make or in any way participate in any way in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
SEC) to vote Company Voting Stock, with respect to any matter, other than the
election of directors of the Company, which matter may be submitted to a vote of
the stockholders of the Company,
(iv) to seek to advise, encourage or influence any person with respect
to the voting of any securities of the Company, or induce, attempt to induce or
in any manner assist any other person in initiating any stockholder proposal or
tender or exchange offer for securities of the Company or any change of control
of the Company, or for the purpose of convening a stockholders' meeting of the
Company,
(v) to acquire or agree to acquire, by purchase or otherwise, more than
5% of any class of equity securities of any entity which, prior to the time Aura
acquires more than 5% of such class, is publicly disclosed (by filing with the
SEC or otherwise), or is otherwise known to Aura, to be the beneficial owner of
more than 5% of the Company's outstanding Common Stock;
(vi) to make any public announcement regarding any possibility,
intention, plan or arrangement relating to a tender or exchange offer for
securities of the Company or a business combination (or other similar
transaction that would result in a change of control), sale of assets,
liquidation or other extraordinary corporate transaction between Aura and the
Company, or take any action that could reasonably be expected to require the
Company to make a public announcement regarding any of the foregoing;
(vii) to deposit any securities of the Company in a voting trust or
subject any securities of the Company to any arrangement or agreement with
respect to the voting of securities of the Company, except as specifically
provided in this Agreement;
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(viii) to take any action to transfer the beneficial ownership of any
of the Shares except as provided in Section 3 of this Agreement, unless (a) the
proposed transferee proposes to accept the subject Shares as a gift (and not for
the payment of consideration), (b) Aura and the proposed transferee shall so
notify the Company in writing fourteen (14) days in advance of the proposed
transfer, and (c) the proposed transferee executes a binding agreement,
acceptable in form to the Company, between it and the Company in advance of such
transfer, committing the proposed transferee to be bound by all of the material
terms of this Agreement; or
(ix) to form, join or in any way participate in a partnership, limited
partnership, syndicate association or other group or otherwise act in concert
with any other person for the purpose of (A) acquiring, holding, or voting of
the Company Voting Stock, or (B) taking any other actions restricted or
prohibited under clauses (i) through (ix) of this Section 1, or announcing an
intention to do, or entering into any arrangement or understanding with others
to do, any of the actions restricted or prohibited under clauses (i) through
(ix) of this Section 1.
As used herein, the term "Affiliate" shall mean (i) any entity in which
Aura owns, directly or indirectly, a greater than 10% beneficial interest, (ii)
any person or entity which is controlled by, controlling or under common control
with Aura, (iii) any partnership in which Aura is a general partner or managing
member and (iv) any entity in which Xxxx X. Xxxx ("Khan") or any of his family
members (including but not limited to Khan's spouse, children, siblings, and
their respective family members) own, directly or indirectly, a greater than 10%
beneficial interest (other than through their ownership interest in Aura) or in
which Khan or any of his family members serves as an officer, director, general
partner or managing member, or (v) any person or entity which is controlled by,
controlling or under common control with Khan.
1.2 Notwithstanding anything to the contrary contained in Section
1.1(i) through 1.1(ix) hereof, nothing contained in this Agreement shall be
construed to prevent Aura or any of its respective Affiliates from making a
tender offer for all of the outstanding Common Stock so long as such tender
offer is made on an any and all basis.
2. Irrevocable Proxy Coupled with Interest.
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2.1 Aura hereby grants an irrevocable proxy coupled with interest (the
"Proxy") to the Chief Executive Officer of the Company, whosoever such person
shall be from time to time, as Aura's true and lawful proxy and
attorney-in-fact, with full power of substitution, to vote all of the Shares,
which Aura is entitled to vote, for and in the name, place and stead of Aura, at
any annual, special or other meeting of the stockholders of the Company, and at
any adjournments thereof or pursuant to any consent in lieu of a meeting or
otherwise, in connection with each vote on matters brought before the Company's
stockholders in the same manner and in the same proportion as the shares held by
all stockholders of the Company other than Aura are voted in connection with
each such vote. The Proxy shall terminate on September 5, 2012.
2.2 Aura further agrees that the Proxy is sufficient in law to support
an irrevocable power and shall not be terminated by any act of Aura, by lack of
appropriate power or authority or by the occurrence of any other event or
events.
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3. Future Resale of the Shares; Right of First Refusal.
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3.1 Aura hereby agrees not to sell any of the Shares in the open market
unless such sale is effected in compliance with the restrictions on volume,
manner of sale and any other applicable restrictions imposed pursuant to the
provisions of Rule 144 promulgated under the Securities Act of 1933, as amended
("Rule 144"), whether or not such sale is effected in reliance upon Rule 144 and
notwithstanding that the provisions of Rule 144(e) may be applicable to the
transaction.
3.2 Aura further represents, warrants and agrees that Aura will not
sell or transfer any of the Shares except as provided in Section 3.1 above
unless it first sends to the Company a written notice in accordance with the
provisions of Section 8 hereof fourteen (14) days in advance of the proposed
closing date of the intended sale (i) setting forth the identity of the
prospective purchaser of the Shares, and the material terms of the consideration
to be paid for the subject Shares, (ii) representing and warranting to the
Company that the intended sale is bona fide and was negotiated at arms length,
and that the intended purchaser is not affiliated with Aura or any of its
Affiliates, or its Affiliates' Affiliates, and (iii) affording the Company the
absolute and irrevocable right and opportunity for a period of forty-five (45)
days following the Company's receipt of Aura's written notice submitted in
accordance with this paragraph for the Company to purchase the subject Shares on
the same terms and conditions set forth in the written notice.
4. Representations and Warranties of the Company.
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The Company hereby represents and warrants to Aura as follows:
4.1 The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has all requisite
corporate power and corporate authority to enter into this Agreement, and to
consummate the transactions contemplated hereby.
4.2 The execution, delivery and performance by the Company of this
Agreement, and the consummation by the Company of the transactions contemplated
hereby, have been authorized by all necessary corporate action. This Agreement
has been duly executed and delivered by the Company. This Agreement constitutes
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms provided that this Agreement also constitutes a
valid and binding obligation upon Aura.
5. Representations and Warranties of Aura.
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Aura hereby represents and warrants to the Company as follows:
5.1 Aura is a corporation duly organized, validly existing and in good
standing under the laws of Pakistan, and has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby.
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5.2 The execution, delivery and performance by Aura of this Agreement,
and the consummation by Aura of the transactions contemplated hereby, have been
authorized by all necessary action, corporate or otherwise. This Agreement has
been duly executed and delivered by Aura and constitutes a valid and binding
obligation upon Aura, enforceable against Aura and its successors in interest,
assigns and legal representatives in accordance with its terms.
5.3 The execution and delivery by Aura of this Agreement do not, and
the consummation by Aura of the transactions contemplated hereby and compliance
by Aura with the terms hereof will not, conflict with, or result in any
violation of or default under, (i) any provision of Aura's organizational
documents, including but not limited to Aura's charter, by-laws or any other
similar organizational documents, (ii) any judgment, order, injunction, decree,
statute, law, ordinance, rule or regulation applicable to Aura or the property
or assets of Aura, or (iii) any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Aura is party or by
which Aura or any of Aura 's assets may be bound. No consent, approval, order or
authorization of, notice to, or registration, declaration or filing with any
court, administrative agency or commission or other governmental entity,
authority or instrumentality, domestic or foreign, is required to be obtained or
made by or with respect to Aura in connection with the execution and delivery of
this Agreement or the consummation by Aura of the transactions contemplated
hereby.
5.4 Aura beneficially owns the Shares, and has good and valid title to
such Shares, free and clear of all Liens, and such Shares are the only
securities of the Company that Aura or any of its respective Affiliates own
beneficially or of record as of the date hereof.
6. Termination.
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This Agreement may be terminated at any time by mutual written
agreement of the Company and Aura.
7. Board Representation.
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Any and all existing agreements by and between the Company and Aura are
hereby terminated as of the date of this Agreement. Any and all rights that Aura
may have had pursuant to those agreements with the Company, including but not
limited to Aura's right to nominate or appoint any of its representatives to the
Board of Directors of the Company, are hereby revoked as of the date of this
Agreement.
8. Notices.
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All notices and other communications hereunder shall be in writing and
shall be deemed given on the day when delivered personally or by facsimile
transmission (with confirmation), on the next business day when delivered to a
nationally recognized overnight courier or five (5) business days after
deposited as registered or certified mail (return receipt requested), in each
case, postage prepaid, addressed to the recipient party at its address set forth
below (or at such other address or facsimile number for a party as shall be
specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
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(a) If to the Company, to:
Ontro, Inc.
00000 Xxxxx Xxxxxx,
Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, President, Chief Executive Officer
Facsimile: (000)000-0000
with a copy to:
Xxxxxx Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxx, Esquire
Fax: (000) 000-0000
(b) if to Aura, to:
Aura (Pvt.) Ltd.
65 C 1 Xxxxxxx 0
Xxxxxx, Xxxxxxxx
Attention: Xxxxxx Xxxxx
Facsimile: 011 92 42 571 3606
with a copy to:
Xxxxx & Lardner
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Atten: Mir Xxxxx Xxxxxxx
Fax: (000) 000-0000
9. Miscellaneous.
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9.1 Entire Agreement; Amendment. This Agreement constitutes the entire
agreement and supersedes all other prior or contemporaneous agreements and
understandings, both written and oral, among the parties hereto, or any of them,
with respect to the subject matter hereof. This Agreement may not be amended,
waived, changed, modified or discharged except by an instrument in writing
executed by or on behalf of the party against whom enforcement of any amendment,
waiver, change, modification or discharge is sought. No course of conduct or
dealing shall be construed to modify, amend or otherwise affect any of the
provisions hereof.
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9.2 Severability. The provisions of this Agreement are severable, and
in the event that any court of competent jurisdiction shall hold any one or more
terms or provisions or part of a term or provision of this Agreement, for any
reason, to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not in any way affect the validity,
legality or enforceability of the remaining provisions or part of provisions of
this Agreement, but this Agreement shall be reformed and construed as if such
invalid, illegal or unenforceable provision, or part of a provision, had never
been contained herein, and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent possible.
9.3 Governing Law. Except as herein otherwise provided, the laws of the
State of California shall govern the interpretation and application of all of
the provisions of this Agreement without regard to its conflict of law doctrine.
Each party hereto agrees that any claim relating to this Agreement shall be
brought solely in the State or Federal Court for such jurisdiction, and each
party hereto consents to the jurisdiction of such Court for purposes hereof.
9.4 Assignment. This Agreement shall not be assignable by either party
and shall be binding upon, and shall inure to the benefit of, the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties.
9.5 Waiver and Further Agreement. Any waiver of any breach of any terms
or conditions of this Agreement shall not operate as a waiver of any other
breach of such terms or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof. Each of the parties hereto agrees to execute all
such further instruments and documents and to take all such further action as
the other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.
9.6 No Third Party Beneficiaries. Unless specifically provided herein,
this Agreement is not intended to create, and shall not create, any rights in
any person or entity that is not a party to this Agreement.
9.7 Headings of No Effect. The paragraph headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.8 Construction; Plain Meaning. This Agreement has been prepared, and
negotiations in connection with it have been carried on, by the efforts of each
of the parties hereto, and this Agreement is to be construed fairly and in
accordance with its plain meaning, and not strictly against any particular
party, and no party hereto shall be deemed to be the draftsperson hereof.
9.9 Survival of Obligations. The representations and warranties set
forth in Sections 4 and 5 hereof shall survive indefinitely following the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
9.10 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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STANDSTILL AGREEMENT
SIGNATURE PAGE
SEPTEMBER 8, 2002
IN WITNESS WHEREOF, the undersigned parties have executed this
Standstill Agreement as of the date first above written.
ONTRO, INC.
By: /s/ Xxxxx X Xxxxxxx
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Name: Xxxxx X Xxxxxxx
Title: President
AURA (PVT.) LTD.
By: /s/ Xxxxxx Xxxxx
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Name: Xxxxxx Xxxxx
Title: Chief Executive Officer
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