Master Light Enterprises Ltd.
5/F, Xxxxx Xxx Industrial Building Securities
000 Xxxxxxxx Xxxx Xxxx, 0xx Xxxxx
Xxxx Xxxx
August 20, 2001
Cosmo Communications Corporation
c/o Xx. Xxxxx Xxxxxxxx
00 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xx. Xxxxxxx Xxxxxx Xxxxxx
Xx. Xxxxxxx X. Xxxxxx
Mr. Xxxxxx Xxxxxx
Xx. Xxxxx Xxxxx
Xx. Xxxxxxx Xxxxx
00000 X.X. 00xx Xxxxxxx
Xxxxx, XX 00000
Re: Cosmo Communications Corporation
Gentlemen:
Reference is made to that certain Stock Purchase Agreement
dated April 28, 2000 (the "Stock Purchase Agreement") by and
among Cosmo Communications Corporation (the "Company"),
Xxxxxxx Xxxxxx Xxxxxx ("XX Xxxxxx"), Xxxxxx Xxxxxx ("Xxxxxx),
Xxxxxxx X. Xxxxxx ("XX Xxxxxx" and collectively with XX Xxxxxx
and Xxxxxx, the "Stockholders") and Master Light
Enterprises Ltd., as assignee of Starlight Marketing
Development Ltd. ("Master Light"),
and the related letter agreements supplementing and
modifying the terms of the Stock Purchase Agreement among
the Stockholders, Xxxxx Xxxxx ("X. Xxxxx") and/or
Xxxxxxx Xxxxx ("X. Xxxxx") and Master Light dated
April 19, 2000, July 13, 2000, July 27, 2000 and
November 20, 2000 (the "Letter Agreements").
Terms used but not otherwise defined in this letter
shall have the definition set forth in the Stock
Purchase Agreement.
Pursuant to the terms of the Letter Agreements, on
January 23, 2001, Master Light acquired an aggregate
of 1,347,420 shares (the "Phase I Shares") of the Common
Stock of the Company from the Stockholders
(the "Phase I Purchase") for an aggregate of $50,843
(the "Purchase Price"), which Purchase Price is being
held in escrow by Xxxxxxxx, August & Xxxxxxxxx, LLP,
as escrow agent (the "Escrow Agent"),
pursuant to an Escrow Agreement dated as of December 1, 2000
among the Company, the Stockholders, Master Light and the
Escrow Agent. The number of shares purchased from the
Stockholders, the purchase price paid and the number of
shares currently owned
by the Stockholders is as follows:
Stockholder Shares Sold Purchase Price Shares Owned
XX Xxxxxx 828,124 $31,248.10 235,136
Xxxxxx 259,648 $9,797.45 73,686
XX Xxxxxx 259,648 $9,797.45 73,686
On June 19, 2001, at a special meeting of stockholders
of the Company, the stockholders of the Company approved
an increase in the number of authorized shares of
Common Stock of the Company from 4,000,000 to 50,000,000 and,
on August 9, 2001, the amendment to the articles of
incorporation of the Company were duly amended. Accordingly,
the Company, the Stockholders and Master Light are
prepared to consummate the transactions contemplated
by the Stock Purchase Agreement and the Letter Agreements
(the "Closing").
In this regard, the Company, the Stockholders and
Master Light desire to enter into this letter agreement
in order to rescind the Phase I Purchase and clarify the
rights and obligations of the Company, the Stockholders
and Master Light under the Stock Purchase Agreement and
the Letter Agreements.
In this regard, the parties agree as follows:
1.Each of the Stockholders and Master Light agree to
rescind the Phase I Purchase and, in lieu thereof and in
consideration of the matters set forth in this letter,
each of the Stockholders agree to surrender the Phase I
Shares to the Company where they shall have the status of
unissued treasury shares. Each of the Stockholders hereby
agrees to deliver to the Company one or more certificates
representing the shares to be surrendered, duly endorsed
in a form sufficient for transfer. In the event that the
Stockholders are not able to locate the certificates
representing the shares transferred, the Stockholders shall,
at their sole cost and expense, take any steps required by
the transfer agent to effectuate the surrender of the shares,
including executing an Affidavit of Loss or posting any
required bond.
Each of the Stockholders, Master Light and the Company
hereby direct Xxxxxxxx, August & Xxxxxxxxx, LLP, as
escrow agent, to deliver all funds held by it in escrow
to Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP and, upon such
delivery, the Escrow Agreement dated as of December 1,
2000 among the Company, the Stockholders, Master Light
and the Escrow Agent shall terminate.
2.Pursuant to the Stock Purchase Agreement, the Company
and the Stockholders represented that the net asset value as
of the Closing Date would not be less than negative $499,000.
The parties agree that for purposes of this letter,
the Net Asset Value shall be deemed to be negative $902,968.
To satisfy this shortfall of $403,968.11,
effective as of the Closing:
i. Each of X. Xxxxx and X. Xxxxx agree to waive and
release the Company and/or its subsidiaries and affiliates
from and against the Company's obligation to pay $79,425
owed to each of them, or an aggregate of $158,850, and
shall surrender to the Company an aggregate of 20,000
shares which are being issued pursuant to paragraph 3
below where they shall have the status of unissued
treasury shares.
ii. The Stockholders shall pay to the Company an
aggregate of $35,628.81, which amount shall be satisfied
by the surrender to the Company by each of the Stockholders
of the following number of shares of the Company's
Common Stock (at an assumed value of $0.037615 per share),
or an aggregate of 947,147 shares:
XX Xxxxxx 582,117
XX Xxxxxx 365,030
iii. The balance of the shortfall, aggregating $208,737,
shall be paid to the Company by each of the Stockholders in
accordance with a Non-Recourse Note, in the form of
Exhibit A hereto (the "Note"),
in the following principal amounts:
XX Xxxxxx $166,572
Xxxxxx 42,165
3. Effective as of the Closing, each of Messrs.
AV Suarez, Ortega, XX Xxxxxx, X. Xxxxx and X. Xxxxx agree
to waive and release the Company and its subsidiaries and
affiliates from and against any and all other liabilities or obligations
that they may have to any of them in consideration for the
issuance
by the Company of an aggregate of 2,090,000 shares of the
Company's Common Stock as follows:
XX Xxxxxx 1,137,342
Xxxxxx 117,658
XX Xxxxxx 300,000
X. Xxxxx and X. Xxxxx 535,000, of which 20,000
will be surrendered.
4. At the closing, in order to secure the obligations
of the Stockholders under the Note and the
indemnification
obligations of Stockholders under the Stock Purchase
Agreement (collectively, the "Continuing Obligations"),
the Stockholders,
the Company and Master Light shall enter into a Pledge
and Escrow Agreement, in the form of Exhibit B hereto
(the "Pledge Agreement"), with
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx, LLP as escrow agent,
pursuant to which all of the shares of the Company's
Common Stock owned by the Stockholders (the "Pledged Shares")
shall be pledged to the
Company and Master Light and shall be held in escrow.
In the event that the Continuing Obligations
are fulfilled by the date which is two (2) years from the
date of the Second Closing, then the escrow agent shall
release the Pledged Shares to the Stockholders.
In the event that the Continuing Obligations are not
fulfilled by the date which is two (2) years from
the date of the Second Closing, then the collateral
shall be maintained and disbursed as set forth in the
Pledge Agreement. Neither the Company nor Master Light
shall have any recourse under the Note except for the value
of the Pledged Shares at the time of the release of the
Pledged Shares.
5. In order to effectuate the stock issuances,
surrenders and pledges contemplated by this Agreement, the
following actions shall take place:
i. Subject to receipt of lost certificate affidavits
from the Stockholders and their affiliates, the Company
shall cause
the transfer agent to issue replacement certificates as
follows:
XX Xxxxxx 1,053,260
AV and Xxxxx Xxxxxx 10,000
Xxxxxx 250,992
Xxxxxx 82,342
XX Xxxxxx 333,334
ii. The Company shall cause the transfer agent to issue
one or more certificates to each of AV Suarez, Ortega,
XX Xxxxxx, X. Xxxxx and X. Xxxxx in the accordance
with paragraph 3 in the following amounts:
XX Xxxxxx 790,361
XX Xxxxxx 346,981
XX Xxxxxx 300,000
Xxxxxx 117,658
iii. XX Xxxxxx shall (A) execute stock powers transferring
an aggregate of 1,410,241 shares owned by him to the Company's
treasury in accordance with Paragraphs 1 and 2(ii) and (B)
deliver a stock certificate representing 790,361 shares,
together with a stock power duly endorsed in blank to the
Escrow Agent.
iv.XX Xxxxxx shall execute a stock power transferring
all 633,334 shares owned by him to the Company's treasury
in accordance with Paragraphs 1 and 2(ii).
x. Xxxxxx shall (A) execute a stock power transferring
250,992 shares owned by him to the Company's treasury in
accordance with Paragraph 1 and (B) deliver stock
certificates representing 200,000 shares, together with
stock powers
duly endorsed in blank to the
Escrow Agent in accordance with paragraph 4.
vi. Each of X. Xxxxx and X. Xxxxx shall execute a
stock power transferring 10,000 shares owned by him to
the Company's treasury in accordance with Paragraph 2(i)
above.
6. At the Closing and after giving effect to the
transactions described above, Master Light shall purchase
from
the Company and the Company shall sell to Master Light, an
aggregate of 26,585,008 shares of the Company's Common Stock
for an aggregate purchase price of $1,000,000, or $.037615
per share. In partial satisfaction of its obligation to pay
the purchase price,
Master Light shall credit the principal balance and accrued
interest against the purchase price for the shares.
The balance of the purchase price shall be paid in cash,
of which the funds held by Xxxxx Xxxxxxx Xxxxxxx & Xxxxx
LLP in escrow shall be applied against the purchase
price and Xxxxx Xxxxxxx Xxxxxxx & Xxxxx shall disburse
the funds as directed by the Company.
7. At the Closing, in consideration for the matter
set forth in this agreement, the Company shall
(i) surrender to the treasury of Cosmo Telecom Corp
the 1000 shares of the stock of Cosmo Telecom Corp.
where they shall have the status of unissued treasury
shares and (ii) transfer to each of XX Xxxxxx and
XX Xxxxxx 000 shares of stock of CSE Technologies,
representing all of the
issued and outstanding capital stock of these corporations.
8. After giving effect to all of the transactions
contemplated above, the post closing capitalization of
the Company shall be as set forth on Exhibit C hereto.
9. On or promptly after the Closing, the Company
shall discharge the loans payable to Congress
Financial Corp. and Ocean Bank to the extent that
such loans are not Excluded Liabilities.
In the event of any conflict between the terms of
this letter agreement and the Stock Purchase Agreement and
the Letter Agreement, the terms of this letter agreement
shall control.
This letter agreement may be amended, modified, superseded,
cancelled, renewed or extended and the term or covenants
hereof may be waived, only by a written instrument executed
by the party to be charged therewith.
This letter agreement shall be governed by the laws of the
state of Florida.
[Signature Page Follows]
This letter agreement may be executed in counterparts.
Very truly yours,
Master Light Enterprises Ltd.
By: /s/ Xxxxxx Xxx
Xxxxxx Xxx
ACCEPTED AND AGREED TO:
COSMO COMMUNICATIONS CORPORATION
By /s/ Xxxxxx Xxx
Xxxxxx Xxx
/s/ Xxxxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
??
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Cosmo Communications Corporation
August 20, 2001
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