EXHIBIT 10.7
SPIN-OFF AGREEMENT
THIS SPIN-OFF AGREEMENT is made this _________ day of January, 1999,
by and between NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with its
principal place of business at 00 Xxxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxx, XX 00000
("NBM") and FRAGRANCE EXPRESS, INC., a Florida corporation, with its registered
office at 0000 Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, XX 00000, ("FEF").:
WHEREAS the parties wish to enter into a Spin-Off Agreement with the
intention of modifying the relationship between NBM (the parent) and FEF (the
subsidiary) such that FEF will no longer be a subsidiary of NBM; and
WHEREAS FEF hereby represents and warrants that it has free and clear
title to a parcel of real estate located in Athens, Georgia subject only to a
first and second mortgage in the estimated amount of $585,000 total (the
"Property");
NOW THEREFORE, in consideration of the mutual promises herein
contained herein, as well as other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
SPIN-OFF
NBM shall return all issued and outstanding stock of FEF to FEF for
deposit in its treasury, such that FEF shall no longer be a wholly-owned
subsidiary of NBM at such time that FEF shall conduct a share exchange with
Telenetworx, Inc., a Florida corporation ("TI"), such that FEF shall become a
wholly-owned subsidiary of TI. Should FEF fail to complete the transaction
described in this paragraph, this entire agreement shall be voidable in the sole
discretion of NBM. As a part of this transaction, NBM shall be issued 15% of all
of the issued and outstanding stock of TI calculated immediately after
consummation of the share exchange between FEF and TI. The estimated capital
structure of TI after consummation of the share exchange with FEF is as follows:
1. 5,000,000 common shares issued and outstanding
2. 600,000 preferred shares issued and outstanding
A. Preferred shares to be convertible to common shares 10 for 1
B. Preferred shares to be convertible to common shares 1 year from
the date of execution of the share exchange between FEF and TI
C. Preferred shares to have full voting rights as if converted (10
for 1) form date of issuance
Should the capital structure of TI comply with the figures above
(subsequent to the share exchange between FEF and TI), NBM shall accept
certificate representing 165,000 preferred shares of TI as 15% of the issued and
outstanding stock of TI.
ARTICLE 2
PIGGYBACK REGISTRATION
At any time that FEF or TI proposes to file a registration statement,
the Company shall cause to be included in such registration statement any
securities issued or subject to issuance to NBM in this transaction.
ARTICLE 3
NOTE
FEF shall immediately upon execution of this agreement cause a demand
note in the amount of $700,000 to be executed in favor of NBM. The Note shall
accrue interest as of the date of execution of this agreement at a rate of 10%
per annum and shall be secured by a third mortgage on the Property.
ARTICLE 4
PAYMENT OF NOTE
Payment of the Note is contemplated in one (1) of the following three
(3) ways:
3. Cash
4. Common Stock of TI which is free of any restrictive
legend (Free-Trading) 5. Refinance of the Property.
ARTICLE 5
IRREVOCABLE AGREEMENT TO REFINANCE THE PROPERTY
FEF, by execution of the signature page affixed hereto, hereby
irrevocably for a period of sixty (60) days from the date of execution of this
agreement empowers NBM, in NBM's sole discretion, to refinance the Property in
the minimum amount of $2 million which accrues interest at a maximum rate of 12%
per annum. It is understood by FEF that FEF shall not have the right to refuse
any refinancing deal presented to it by NBM which conforms to the above terms.
FEF shall have no right to transfer title to such property for sixty (60) days
from execution of this agreement unless FEF has obtained the prior express
written consent of NBM. FEF shall be solely responsible for repayment of the
refinanced amount.
ARTICLE 6
USE OF PROCEEDS OF PROPERTY REFINANCING
The use of proceeds of the refinancing of the Property shall be as
follows:
1st: to pay off the existing 1st and 2nd mortgages (approximately $585,000)
2nd: to pay off the Note by FEF to NBM in the amount of $700,000 described
herein
3rd: the remainder of the proceeds shall be paid to FEF (or its designee)
ARTICLE 7
AGREEMENT FOR THE EXCHANGE OF STOCK
Paragraph 4 of the Agreement for the Exchange of Stock dated October
8, 1998 between NBM and FEF is hereby made null and void. The remaining
provisions of that Agreement remain in full force and effect.
ARTICLE 8
REMOVAL FROM THE BOARD OF DIRECTORS
Mr. Xxxxxx Xxxxxxxx and Xx Xxxxx Xxxxxxxx shall resign from the Board
of Directors of NBM effective immediately upon execution of this agreement.
ARTICLE 9
CONFIDENTIALITY
Neither party shall disclose any trade secrets of the other party to
persons other than those bound by the terms of this Agreement. Northing in the
foregoing sentence shall prohibit disclosure of any information which is
publicly known at or after the time of disclosure, which is already known to the
recipient, or which is required to be disclosed by law.
ARTICLE 10
AGREEMENT NOT TO COMPETE
A. FEF agrees that during the period commencing on the date of this
Agreement and continuing until the date three (3) years after this Agreement is
terminated, it will not directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
investor, or financier or in any other individual or representative capacity, or
otherwise, engage or participate in any business which competes with the
business of NBM or any company or individual supplying services or product to
NBM. FEF covenants that during the term referenced above, it will not, either
for itself or for any other person or entity, except as may be required by the
terms of this Agreement either directly or indirectly: (1) call on, solicit,
take away or hire any customers, employees, principals, lessors, distributors or
suppliers or other personnel or independent contractors, of NBM or any company
supplying services or product to NBM, (2) acquire or attempt to acquire rights
for providing any product or services in competition with NBM or any company
supplying services or product to NBM, or (3) engage in any act which would
interfere with or harm any business relationship with any customer, lessor,
employee, principal or supplier of NBM or any company supplying services or
product to NBM.
B. The parties agree that a breach of the covenants described int his
Section will result in substantial damages to NBM, which would be difficult, if
not impossible to ascertain. FEF agrees that in the event of such a breach or
threatened breach, NBM shall have the right to a Restraining Order and in
Injunction, without bond or other security (all of which is waived) both
temporary and permanent, enjoining and restraining any such breach or threatened
breach. Such injunctive relief shall be in addition to any other remedy
available to NBM at law or in equity. Nothing in this Agreement shall be
construed to prohibit or prevent NBM from initiating an action or otherwise
recovering any damages that may be sustained as a result of the breach or
threatened breach by FEF. FEF also agrees that NBM may pursue any remedy
available to it including voiding this agreement in its sole discretion, and the
pursuit of any one such remedy at any time will not be deemed an election of
remedies or waiver of right to pursue any other remedy.
C. Lotions which are used for beauty purposes only, but which have
no medicinal value and which do not compete with any NBM product, are
specifically excluded from this agreement.
ARTICLE 11
GENERAL PROVISIONS
Warranty
Each party represents and warrants to the other that it has the power
and authority to execute and deliver, and to perform its obligations under this
Agreement, and that neither the execution or delivery of this Agreement nor the
performance of its obligations hereunder will constitute a breach of the terms
or provisions of any contract or violate any law or the rights of any third
party.
Governing Law
This agreement shall be governed and construed in accordance with the
laws of Massachusetts and any dispute or litigation which arises out of this
agreement shall be settled by a court of competent jurisdiction in the state of
Massachusetts.
Entire Agreement
This Agreement sets forth the entire Agreement or any understanding
between the parties as to its subject matter and supersedes all other documents,
verbal commitments or understandings made before conclusion of this Agreement
except as provided for in Article 6, and none of the terms of this Agreement may
be amended or modified except in writing signed by both parties.
Assignment
This Agreement may not be assigned by either party without the prior
written consent of the other party except that any party may assign this
Agreement to any successor corporation (including the surviving corporation in
any consolidation or merger) or assignee of all or substantially all of its
business. In the event of such an assignment, the assigning party shall remain
jointly and severally liable with the assignee for the full and timely
performance by such assignee of the assigning party's obligations hereunder.
Notices
Any notice, consent or approval required or permitted under this
Agreement shall be in writing and shall be delivered to the following address
(i) personally by hand or (ii) by certified mail, postage prepaid with return
receipt requested:
If to the NBM: National Boston Medical, Inc.
00 Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
With a copy to: Mintmire & Associates
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
If to FEF: Fragrance Express, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
All notices shall be deemed effective upon the date delivered by hand
or if mailed, as of the date which is five (5) days after the date of mailing.
Either party may change its address for notice purposes by notifying the other
party of such changes of address in accordance with the foregoing.
Waivers
No waiver of any term or condition of this Agreement shall be valid
except when made by an instrument in writing expressly waiving such term or
condition signed by the waiving party. A waiver by any party of any term or
condition of this Agreement shall be cumulative and not in limitation of any
other remedy, right, obligation or agreement of any other party.
Severability
If any part of this Agreement is contrary to, prohibited by or deemed
invalid under the laws of any jurisdiction which laws govern the subject of this
agreement, such provision shall, as to such jurisdiction be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, without
invalidation or affecting the validity or enforceability of such provision in
any other jurisdiction.
Specific Performances
The parties acknowledge that there may be no adequate remedy at law
for any violation of sections of this Agreement, and that in addition to any
other remedies which might be available, such Sections shall be specifically
enforceable in accordance with their terms.
Headings
Headings contained in this Agreement are for convenience of reference
only and shall not affect the meaning or construction under the provisions of
this Agreement.
Voluntary Agreement
Each party warrants that before signing this Agreement such party has
been fully advised of its contents and meaning, has had independent legal
counsel explain the meaning and legal significance of each and every provision
therein, and executes this Agreement freely and voluntarily with full knowledge
and understanding of its contents.
Cumulative Remedies
No remedies or election hereunder shall be deemed exclusive, but
shall, whenever possible, be cumulative with all other remedies at law or in
equity.
Attorney Fees
In the event any action, proceeding or litigation, judicial or non-
judicial, arises out of the subject matter of this Agreement the prevailing
party shall be entitled to payment of all costs, expenses and attorney fees
incurred.
Successor/Assigns
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, personal representative
and assigns. The parties each agree to take such further action and deliver such
ancillary document as may be reasonable or necessary in order to carry out the
terms and provisions of this Agreement.
Authority
Each individual executing this Agreement in a representative capacity
warrants to the other party that such person has sufficient authority to bind
the party on behalf of whom they are executing this document.
Duplicate Originals
Any fully executed copy of this Agreement shall be deemed for all
purposes as a duplicate original. All originals and duplicate must be signed
before a notary or will be considered invalid.
EXECUTED by the parties effective as of the date first written above.
Fragrance Express, Inc.
By: /s/ Xxxxxx Xxxxxxxx, President
---------------------------------
Xxxxxx Xxxxxxxx, President
National Boston Medical, Inc.
By: /s/ Xxxxxx Xxxxx
---------------------------------
Xxxxxx Xxxxx, co-CEO and Chairman
STATE OF FLORIDA
COUNTY OF Broward
BEFORE ME, personally appeared Xxxxxx Xxxxxxxx, to me known to be the
person described in and who executed the foregoing Spin-Off Agreement and
acknowledged to and before me that he executed the said instrument for the
purposes therein expressed.
WITNESS my hand and official seal this 20 day of January, 1999.
/s/ Xxxxxxxx Xxxxxx
-----------------------------
[seal] Xxxxxxxx Xxxxxx Notary Public
My Commission # CC 730134 My Commission Expires:
Expires: April 2, 2002 (Notary Seal)
Bonded through Notary Public Underwriters
