STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT is made as of this 26th day of December
1996, by and among Master Xxxxxxx'x Karate International, Inc., a Delaware
corporation ("Master Xxxxxxx"), and Xxxx Xxxxxxx, Fair Xxxx, LLC, Xxxxxxxx
Xxxxx, Euro Translation Group and CRC Partners, Ltd. (collectively, the
"Preferred Stockholders").
WHEREAS, the Preferred Stockholders own all of the issued and
outstanding shares of Series A Preferred Stock, par value $1.20 per share
(collectively, the "Preferred Shares"), of Master Xxxxxxx; and
WHEREAS, the Preferred Stockholders are willing to sell and exchange
all of the Preferred Shares for an aggregate of 5,000,000 shares (the "Common
Shares") of common stock of Master Xxxxxxx, par value $.0001 per share (the
"Common Stock"), and 10,000,000 Options each exercisable to purchase one (1)
share of Common Stock, a form of which is attached hereto as Exhibit A (the
"Options") as provided herein, and Master Xxxxxxx is willing to purchase the
Preferred Shares and, in consideration therefor, to issue and deliver the
Common Shares and the Options in exchange for the Preferred Shares as provided
herein.
NOW, THEREFORE, in consideration of the premises and of the terms,
covenants and conditions hereinafter contained, the parties hereto agree as
follows:
1. Sale and Exchange of the Preferred Shares, Common Shares and
Options.
1.1 Subject to and on the terms and conditions hereof, in reliance on
the representations and warranties of Master Xxxxxxx and in consideration of
the issuance to the Preferred Stockholders of the Common Shares and the
Options, the Preferred Stockholders agree to sell to Master Xxxxxxx 750,000
Preferred Shares, and in consideration therefor, to receive from Master Xxxxxxx
the Common Shares and the Options and to deliver to Master Xxxxxxx certificates
representing the Preferred Shares at the Closing (as hereinafter defined).
1.2 The Preferred Shares sold to and exchanged hereunder with Master
Xxxxxxx shall be fully paid and non-assessable and shall be free and clear of
any and all contracts, commitments, agreements, liens, claims, charges, pledges
or encumbrances of any kind or nature whatsoever whether or not of record
(collectively, "Liens").
2. Issuance and Delivery of the Common Shares and the Options
2.1 Subject to and on the terms and conditions hereof, in reliance on
the representations and warranties of the Preferred Stockholders and in
consideration of the sale and transfer to Master Xxxxxxx by each Preferred
Stockholder of the number of Preferred Shares set opposite the name of the
Preferred Stockholder in the table set forth below, Master Xxxxxxx agrees to
purchase
the Preferred Shares and, in consideration therefor, shall issue and deliver to
the Preferred Stockholders, at the Closing, the number of Preferred Shares set
forth opposite the name of the Preferred Stockholder in the table set forth
below:
Name of Stockholder Number of Number of Shares Number of
------------------- Preferred Shares of Common Stock Options to Purchase
---------------- ---------------- Common Stock
-------------------
Xxxx Xxxxxxx 400,000 2,666,667 5,333,334
Fair Lane, LLC 225,000 1,500,000 3,000,000
Xxxxxxxx Xxxxx 25,000 166,667 333,334
Euro Translation Group 50,000 333,333 666,666
CRC Partners, Ltd. 50,000 333,333 666,666
---------- ---------- ----------
Total 750,000 5,000,000 10,000,000
2.2 The Common Shares and the Options issued hereunder to the
Preferred Stockholders when issued and delivered hereunder shall be duly
authorized, validly issued, fully paid and non-assessable and shall be free and
clear of any and all Liens.
3. Closing.
3.1 The closing of the transactions provided for herein (the
"Closing"), shall be held on the date hereof at the offices of Xxxxxxxxx &
Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx.
3.2 At the Closing:
(a) the Preferred Stockholders shall deliver to Master
Xxxxxxx certificates evidencing the Preferred Shares.
(b) Master Xxxxxxx shall deliver to the Preferred
Stockholders certificates evidencing the Common Shares and the
Options.
4. Representations and Warranties of Stockholders. As an inducement to
Master Xxxxxxx to enter into this Agreement and to consummate the transactions
contemplated hereby:
4.1 With respect to the Preferred Shares, the Preferred Stockholders
represent and warrant to Master Xxxxxxx that the following are true and correct
as at the date hereof and as of the date of the Closing:
(a) Ownership of Preferred Shares. The Preferred Stockholders
are the sole
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owners of, and have good and marketable title to, the Preferred
Shares, free and clear of any and all Liens, whether or not of record
and have the absolute and unrestricted right and power, authority and
capacity to exchange the Preferred Shares as provided herein.
(b) Authority; No Conflicts. The Preferred Stockholders have
full power and authority to execute, deliver and perform this
Agreement, the Preferred Stockholders are not a party to any
agreement, contract or understanding pursuant to which all or any of
the Preferred Stockholders are or may be obligated to sell the
Preferred Shares, or any part thereof, to any person or entity other
than Master Xxxxxxx pursuant to the provisions hereof, and none of the
terms, conditions and provisions hereof conflict with, result in a
breach of the terms, conditions or provisions of, or constitute a
default, an event of default or an event creating rights of
acceleration, termination or cancellation of any agreement, corporate
charter or by-law to which all or any of the Preferred Stockholders
are a party.
(c) No Conflict. The execution and delivery of this Agreement
by the Preferred Stockholders, the consummation of the transactions
contemplated herein and the compliance by the Preferred Stockholders
with any of the provisions hereof, will not:
(i) result in the creation of any encumbrance of any
kind or nature whatsoever upon the Preferred Shares;
(ii) constitute a breach of or a default (with or
without the giving of notice or lapse of time or both) under
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement or any
other instrument or obligation to which any of the Preferred
Stockholders is a party or by which all or any of the
Preferred Stockholders or the Preferred Shares may be bound
or affected; or
(iii) violate any law or regulation applicable to
all or any of the Preferred Stockholders.
(d) Neither this Agreement nor any documents, certificates or
statements furnished to Master Xxxxxxx by or on behalf of the
Preferred Stockholders in connection herewith contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein
not misleading. There is no fact known to any of the Preferred
Stockholders which materially adversely affects, or in the future may
materially adversely affect, the business, properties, assets,
prospects or financial condition of the Preferred Stockholders which
has not been set forth in this Agreement and the Exhibits hereto.
5. Voting Agreement. Upon receipt of the Common Shares, the Preferred
Stockholders agree to vote such shares at any meeting of stockholders of Master
Xxxxxxx (or any written consent executed in lieu thereof) in favor of all
proposals recommended by management,
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including without limitation, the sale of the Company's assets outside the
ordinary course of business.
6. Post-Closing Representations, Covenants and Agreements of the
Preferred Stockholders.
6.1 Legend. The Preferred Stockholders confirm their understanding,
and agree, that:
(a) Certificates for the Common Shares, and the Options to be
issued and delivered to them hereunder will bear substantially the
following legend:
The securities represented by this Certificate have been
acquired without registration under the Securities Act of
1933, as amended. No transfer, sale or distribution of these
securities or any interest therein may be made except under
an effective registration statement under said Act covering
such securities unless the Corporation has received an
opinion of counsel satisfactory to it that such transfer or
sale does not require registration under said Act.
(b) The Preferred Stockholders shall be bound by the terms of
the foregoing legend and agree that appropriate restrictions on
transfer will be noted on Master Xxxxxxx'x corporate records.
7. Nature and Survival of Representations and Warranties. All
statements contained in this Agreement or in any Exhibit or document delivered
in connection with this Agreement shall be deemed representations and
warranties by such party hereunder. All representations and warranties made in
this Agreement or pursuant hereto shall survive the Closing.
8. Entire Agreement. This Agreement and any document referred to
herein constitutes the entire Agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior written or oral
warranties, representations, inducements, understandings, commitments,
agreements or contracts. No amendment to or modification of the terms or
conditions hereof shall be binding unless it is in writing and signed by the
party against whom the amendment or modification is charged.
9. Benefit. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors in interest.
This Agreement may not be assigned by either party hereto without the prior
express written consent of the other party.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be given by personal delivery or by
depositing the same with the United
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States Post Office, by registered or certified mail, postage pre-paid, return
receipt requested, and addressed:
If to Master Xxxxxxx:
Master Xxxxxxx'x Karate International, Inc.
000 Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
If to the Preferred Stockholders:
Attention: Xxxxxx Xxxxxxxxxx
c/o Biltmore Securities, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Any notice mailed in accordance with the provisions of this Agreement
shall be deemed given or effective on the third day following the date of
mailing. Any party to this Agreement may change the address to which notices to
such party shall be given by giving a proper notice hereunder.
11. Severability. Whenever possible, each paragraph of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any paragraph of this Agreement shall be unenforceable or
invalid under applicable law, such paragraph shall be ineffective only to the
extent and duration of such unenforceability or invalidity and the remaining
substance of such paragraph and the remaining paragraphs of this Agreement
shall in such event continue to be binding and in full force and effect.
12. Waivers. No failure by any party to exercise any of such party's
rights hereunder or to insist upon strict compliance with respect to any
obligation hereunder, and no custom or practice of the parties at variance with
the terms hereof, shall constitute a waiver by any party to demand exact
compliance with the terms hereof. Waiver by any party of any particular default
by any other party shall not affect or impair such party's rights in respect of
any subsequent default of the same or of a different nature, nor shall any
delay or omission of any party to exercise any rights arising from any default
by any other party affect or impair such party's rights as to such default or
any subsequent default.
13. Governing Law. This Agreement shall be governed by and construed
and enforced in all respects in accordance with the laws of the State of
Delaware without reference to its conflicts of laws rules or principles.
14. Multiple Counterparts. This Agreement may be executed in one or
more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
15. Headings and Certain Terms. The headings of sections herein are
inserted for convenience of reference only and are not intended to be a part
hereof or to affect the meaning or interpretation of this Agreement, and the
plural and singular forms are used interchangeably.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Master Xxxxxxx'x Karate International,
Inc.
By: /s/ Xxxx Xxxxxxx
----------------------------------
Name: Xxxx Xxxxxxx
Title: President
/s/ Xxxx Xxxxxxx
--------------------------------------
Xxxx Xxxxxxx
Fair Lane, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxxx Xxxxx
--------------------------------------
Xxxxxxxx Xxxxx
Euro Translation Group
By: /s/ X.X. Xxxxxx
----------------------------------
Name: X.X. Xxxxxx
CRC Partners, Ltd.
By: /s/ Xxxxxx Xxxxxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxxxxx
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EXHIBIT A
FORM OF STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 26th day of December, 1996 (the "Grant
Date"), is made and entered into by and between Master Xxxxxxx'x Karate
International, Inc., a Delaware corporation with its principal offices located
at Piscataway Center, 000 Xxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 (the
"Company"), and ___________ whose address is _________________________________
________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has approved the
granting to the Optionee of the option to purchase certain shares of common
stock of the Company, par value $.0001 per share (the "Common Stock"); and
WHEREAS, the Optionee desires to accept the grant of such option,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and the Optionee hereby agree as follows:
Section 1. Grant of Option. Subject to the provisions of this
Agreement, the Company hereby grants to the Optionee ____ options (the
"Options"), each Option exercisable to purchase one (1) share of Common Stock
(the "Option Shares"), at an exercise price of $.0001 per share (the "Exercise
Price"), from the Company at any time during the two (2) year period commencing
on April 17, 1997 or such later date upon which the Company increases its number
of authorized shares of Common Stock to not less than thirty (30) million shares
(the "Exercise
Date").
Section 2. Termination of Options. To the extent not exercised, the
Option shall terminate on the Termination Date.
Section 3. Corporate Events. In the event of a proposed liquidation of
the Company, a proposed sale of all or substantially all of its assets or its
Common Stock, a proposed merger or consolidation, or a proposed separation or
reorganization, the Board of Directors may declare that the Option shall
terminate as of a date to be fixed by the Board of Directors; provided however,
that not less than thirty (30) days preceding the date of such termination, the
Optionee may exercise the Options in whole or in part. However, nothing set
forth herein shall (i) extend the term set for purchasing the Option Shares or
(ii) give the Optionee any rights or privileges as a stockholder of the Company
in relation to the Option Shares, prior to Optionee's exercise of any of the
Option Shares.
Section 4. Exercise of Option. The Options may be exercised in whole or
in part in accordance with the provisions of this Agreement by the Optionee's
tendering of the Exercise Price (or a proportionate part thereof if the Options
are partially exercised) in immediately available funds. The Company shall
cooperate to the extent reasonably possible with the Optionee in an exercise
pursuant to which all or part of the Option Shares will be sold simultaneously
with the exercise of the Options with the broker-dealer participating in such
sale being irrevocably instructed to remit the proceeds from the exercise of the
Options to the Company upon settlement of the sale of the underlying Option
Shares.
The Optionee may exercise part or all of the Options by tender to the
Company of a
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written notice of exercise together with advice of the delivery of an order to a
broker to sell part or all of the Option Shares, subject to such exercise notice
and an irrevocable order to such broker to deliver to the Company (or its
transfer agent) sufficient proceeds from the sale of such Option Shares to pay
the exercise price and any withholding taxes. All documentation and procedures
to be followed in connection with such a "cashless exercise" shall be approved
in advance by the Company, which approval shall be expeditiously provided and
not unreasonably withheld.
Section 5. Shares Certificates. Upon receipt of payment in full of the
Exercise Price, and after taking such steps as it deems necessary to satisfy any
withholding tax obligations imposed upon it by any level of government, the
Company will cause one or more stock certificates evidencing the Optionee's
ownership of the Option Shares so purchased by the Optionee to be issued to the
Optionee.
Section 6. Restrictions; The Options and the Option Shares have not
been registered under the Securities Act of 1933, as amended (the "Act"). All
Option Shares acquired upon the exercise of the Options shall be "restricted
securities" as that term is defined in Rule 144 promulgated under the Act. The
certificates representing the Option Shares shall bear an appropriate legend
restricting their transfer. Such Option Shares cannot be sold, transferred,
assigned or otherwise hypothecated without registration under the Act or unless
a valid exemption from registration is then available under applicable federal
and state securities laws and the Optionee has furnished the Company with an
opinion of counsel satisfactory in form and substance to the Company's counsel
that such registration is not required.
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Section 7. Default of Optionee. Should the Optionee at any time breach
any provision of this Agreement, the Options granted hereunder shall be null and
void. The provision shall be in addition and not in lieu of any other remedies
which the Company may have at law and/or in equity.
Section 8. Share Adjustments. If there is any change in the number of
shares of Common Stock on account of the declaration of stock dividends,
recapitalization resulting in stock splits, or combinations or exchanges of
shares of Common Stock, or otherwise, the number of Option Shares available for
purchase by the exercise of the Options, and the Exercise Price, shall be
proportionately adjusted by the Company.
Section 9. Miscellaneous Provisions.
(a) Notices. Unless otherwise specifically provided herein, all notices
to be given hereunder shall be in writing and sent to the parties by certified
mail, return receipt requested, which shall be addressed to each party's
respective address, as set forth in the first paragraph of this Agreement, or to
such other address as such party shall give to the other party hereto by a
notice given in accordance with this Section and, except as otherwise provided
in this Agreement, shall be effective when deposited in the United States mail
properly addressed and postage prepaid. If such notice is sent other than by the
United States mail, such notice shall be effective when actually received by the
party being noticed.
(b) Assignment. This Agreement and the rights granted hereunder may
not be assigned in whole or in part by Optionee except by will or the laws of
descent and distribution, and the Options are exercisable during Optionee's
lifetime only by the Optionee. This Agreement may
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be assigned by the Company without the consent of the Optionee.
(c) Further Assurances. Both parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
(d) Gender. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms and the
singular form of nouns and pronouns shall include the plural and vice versa.
(e) Captions. The captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit, extend or prescribe
the scope of this Agreement or the intent of any of the provisions hereof.
(f) Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the grant of stock options to the Optionee. This Agreement shall not terminated,
except in accordance with its terms, or amended in writing executed by all of
the parties hereto.
(g) Waiver. The waiver of a breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition.
(h) Severability. The invalidity or enforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause phrase or word or of any provision of this Agreement
shall not affect the validity or enforceability of the remaining
5
portions thereof.
(i) Construction. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
(j) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs, successors, estate and personal representatives of the
Optionee and upon the successors and assigns of the Company.
(k) Litigation-Attorney' Fees. In connection with any litigation
arising out of the enforcement of this Agreement or for its interpretation, the
prevailing party shall be entitled to recover its costs, including reasonable
attorneys' fees, at the trial and all appellate levels form the other party
hereto, who was an adverse party to such litigation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth in the first paragraph of this Agreement above.
ATTEST: MASTER XXXXXXX'X KARATE INTERNATIONAL, INC.
BY:
--------------------------
Name:
Title:
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