STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered in
to a of the 28th day of April, 2000, by and among COSMO COMMUNICATION
S CORPORATION, a corporation organized and existing under the laws of
the State of Florida, (hereinafter referred to as the "Company"),
XX. XXXXXXX XXXXXX XXXXXX, an adult individual residing in the County
of Dade, State of Florida, MR. XXXXXX XXXXXX, an adult individual
residing in the County of Dade, State of Florida, and XX. XXXXXXX X.
XXXXXX, an adult individual residing in the County of Dade, State of
Florida, (each of whom is colletively referred to herein as the
"Principal Shareholders"), and STARLIGHT MARKETING DEVELOPMENT LTD.,
a corporation organized and existing under the laws of Hong Kong, or
its designee (hereinafter referred to as the "Investor").
WHEREAS, the Company has authorized thirty thousand (30,000)
shares of Convertible Cumulative Preferred Stock and nine million nine
hundred seventy thousand (9,970,000) shares of Preferred Stock, of
which no shares have been issued, and four million (4,000,000) shares
of Common Stock (the "Common Stock"), of which two million six hundred
forty-two thousand (2,642,000) shares are issued and outstanding as of
the date hereof; and
WHEREAS, the Investor has received from the Company an option
(the "Company Option") to purchase twenty-six million five hundred
eighty-five thousand eight (26,585,008) shares of Common Stock for One
Million Dollars ($1,000,000) in the aggregate; and
WHEREAS, subject to the terms and conditions contained herein, the
Investor desires to exercise the Company Option, and to purchase, and
the Company desires to sell, twenty-six million five hundred eighty-
five thousand eight (26,585,008) shares of Common Stock, representing
eighty-four and eighty-nine hundredths percent (84.89%) of the total
issued and outstanding shares thereof on a fully-diluted basis as of
the date of issuance thereof, for the aggregate purchase price of One
Million Dollars ($1,000,000), or $0.037615 per share; and
WHEREAS, the Investor has entered into that certain Letter
Agreement with the Principal Shareholders (the "Letter Agreement"),
whereby the Company (post-acquisition) and the Principal Shareholders
shall each acquire the respective amounts of Common Stock set forth
in such Letter Agreement, a copy of which is attached as Exhibit A to
this Agreement; and
WHEREAS, subject to the terms and conditions contained herein, the
Investor and the Principal Shareholders each desire to exercise,
implement and otherwise consummate the several transactions set forth
in the Letter Agreement; and
WHEREAS, the Investor has provided interim financing to the Company
in the amount of Four Hundred Thousand Dollars ($400,000), as
evidenced by that certain Promissory Note dated as of January 26,
2000 (the "Bridge Note"), and the Investor elects to forgive said
indebtedness of the Company in consideration of the Investor receiving
a credit at the Closing (as defined below), dollar for dollar, against
the Purchase Price for the full amount of said Bridge Note plus any
interest accrued thereon, but not yet paid, as of the Closing date.
NOW, THEREFORE, in consideration of the foregoing premises, and the
covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.01 Purchase and Sale. Subject to the terms and conditions
hereof, at the Closing, the Investor agrees to purchase from the
Company, and the Company agrees to issue and sell to the Investor,
twenty-six million five hundred eighty-five thousand eight (26,585,008)
shares of the Company's Common Stock (the "Company Shares"). The
parties acknowledge and agree that, as of the date hereof, the Company
has an insufficient amount of shares of Common Stock authorized to meet
the requirements of this Section 1.01(a), and it shall be a condition
precedent to the obligations of the Investor to proceed to Closing that
the Company shall have amended its Articles of Incorporation to provide
for the increased authorization of shares of Common Stock to consummate
this transaction. Such Company Shares, once so authorized and
delivered to the Investor as set forth herein, shall be validly issued,
fully-paid and non-assessable, and shall represent not less than eighty-
four and eighty-nine hundredths percent (84.89%) of the total number of
issued and outstanding shares of Common Stock, on a fully-diluted basis,
as of their date of issuance.
1.02 Consideration for and Issuance of the Shares. As considera-
tion for the Company Shares, the Investor shall pay to the Company the
aggregate sum of One Million Dollars ($1,000,000), or Three point Seven
Six One Five Cents ($0.037615) per share (the "Purchase Price"), which
shall be paid as follows:
(i) [Six Hundred Thousand Dollars ($600,000) minus any unpaid
interest on the Bridge Note] shall be paid to the Company in
immediately available funds by check or by federal wire transfer
deposited into an account designated by the Company; and
(ii) the sum of [Four Hundred Thousand Dollars ($400,000) plus
any unpaid interest on the Bridge Note] shall be credited
against the Company Purchase Price in exchange for the full
discharge and cancellation of the Company's obligations under
the Bridge Note. Upon receipt of the funds, the Company shall
cause the Investor to be issued a stock certificate in the
manner set forth above, evidencing the Investor's ownership of
the Company Shares.
1.03 Agreement with Respect to the Future Sale of Shares. The
Investor and the Principal Shareholders each hereby agree that,
regardless of whatever other rights or restrictions may be imposed
upon the Shares by reason of the federal and state securities laws or
otherwise, each of them hereby voluntarily agrees that, in each of the
three (3) years following the Closing, (except to the extent set
forth below or as otherwise agreed upon herein) they shall not sell or
transfer any of their Shares to any other person if such sale or
transfer would result in the disposition of more than one-third (1/3)
of the total number of Shares owned by such person beneficially or of
record within any given year during such three year period. Notwith
standing the foregoing, if the Investor does wish to dispose of Shares
in excess of the limitations imposed by the preceding sentence, then
it may do so provided that (1) it gives written notice of such fact to
eachof the other parties hereto, stating the amount of such additional
Shares which it desires to dispose of; and (2) each other party hereto
shall have the right to sell or transfer such additional number of
Shares in the year in which such notice is received, as is equal to the
same percentage of Shares as the Investor desires to sell or transfer
of its total number of Shares owned.
1.04 Conversion Transactions. At the Closing, each of the
Principal Shareholders shall consummate and complete with the Company
the several secured loan and debt conversion transactions set forth in
the Letter Agreement attached as Exhibit A to this Agreement
(collectively, the debt conversion and related transactions together
with the Excluded Transactions discussed in Section 1.05 below are
sometimes referred to herein as the "Principal Shareholder Transac-
tions"). All indebtedness to be converted into shares of Common Stock
thereunder shall represent true indebtedness of the party claiming the
same, and all shares of Common Stock into which such indebtedness is
being converted shall be validly-issued, fully-paid and non-assessable
upon the full and complete discharge of such indebtedness as contem-
plated therein.
1.05 Excluded Transactions. At the Closing, the parties agree
that they shall also enter into certain transactions for the assignment
of certain assets (the "Excluded Assets") from the Company, all of
which shall be deemed to have occurred prior to the purchase and sale
of the Shares by the Investor. The specific Excluded Assets are as set
forth on Exhibit B attached to this Agreement.
ARTICLE II
CLOSING
2.01 The Closing. The closing of the purchase and sale of the
Private Shares and the Company Shares (the "Closing") shall be held at
the offices of Xxxxxxxx, August & Xxxxxxxxx, located at 000 Xxxxx
Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx at 10:00 a.m. on the
first business day following the ability of all parties to satisfy
their respective Closing conditions hereunder, or at such other time
and place as the Company, the Principal Shareholders and the Investor
shall mutually agree. At the Closing, the Company shall deliver the
Company Shares to the Investor upon delivery to the Company of the
Company Purchase Price by check or wire transfer of funds in the amount
of the Purchase Price. The Company Shares to be delivered to the
Investor will be evidenced by a single certificate registered in the
Investor's name. If the Closing fails to occur by May 30, 2000, or by
such later date to which this Agreement may be extended as provided
herein, this Agreement shall automatically terminate, all parties shall
pay their own expenses incurred in connection herewith, and no party
hereto shall have any further obligations hereunder; provided, however,
that no such termination shall constitute a waiver by any party (or
parties) which is (are) not in default of any of its (or their respec-
tive) representations, warranties or covenants if any other party or
parties is (are) in default of any of its (or their respective) repre-
sentations, warranties or covenants under this Agreement.
2.02 Capitalization. Immediately prior to the Closing, the
authorized capital of the Company will consist of:
(a) Common Stock. Fifty million (50,000) shares of Common Stock,
having a par value of One-Tenth of One Cent ($0.001) per share, of
which two million six hundred forty-two thousand (2,642,000) shares
are duly and validly issued (including, without limitation, issued in
compliance with applicable federal and state securities laws), fully-
paid, non-assessable, and outstanding as of the date hereof.
(b) Preferred Stock. Thirty thousand (30,000) shares of
Convertible Cumulative Preferred Stock, and nine million nine hundred
seventy thousand (9,970,000) shares of Preferred Stock, of which no
shares have been issued or are outstanding.
(c) Other Securities. Except as set forth on Schedule 2.02(c)
attached hereto, and other than the Company Option, the Company has
not issued or created, and has not entered into any Contract (as
hereinafter defined) to issue or create, any security which is con-
vertible into or exercisable or exchangeable for, or which confers
any rights in respect of, the Common Stock of the Company.
ARTICLE III
REPRESENTATIONS OF THE COMPANY
Each of the Company and the Principal Shareholders, hereby represent
and warrant to the Investor, jointly and severally, the represen-
tations and warranties set forth below, provided, however, that (a)
as to any representation pertaining to the operations of the Company
or any subsidiary thereof other than Cosmo Communications Canada,
Inc., an Ontario corporation ("Cosmo Canada"), only Messrs. X.X.
Xxxxxx, Xxxxxx and X.X. Xxxxxx shall be deemed to be making such
representations, (b) as to any representation pertaining to Cosmo
Canada, only Messrs. X. Xxxxx and X. Xxxxx shall be deemed to be
making such representation, and (c) no Principal Shareholder shall
be deemed to make any representation as to the nature, condition or
property of any other Principal Shareholder (it being acknowledged
that the Investor is entering into this Agreement in material
reliance upon each of the following representations and warranties,
and that the truth and accuracy of each, as evidenced by their
signature set forth on the signature page, constitutes a condition
precedent to the obligations of the Investor hereunder):
3.01 Ownership and Issuance of the Shares. The Principal Share-
holders are the lawful owners of the Private Shares to be transferred
to the Investor hereunder, free and clear of all preemptive or similar
rights and any and all charges, claims, demands, judicial orders,
pledges, security interests, obligations or other encumbrances
(referred to herein collectively as "Liens"). The Company has duly is
sued the Company Shares to be delivered hereunder, each of which is be
ing delivered free and clear of any preemptive or similar rights and
other Liens. The delivery to the Investor of the Company Shares pur-
suant to the provisions of this Agreement will transfer to and vest in
the Investor valid title thereto, free and clear of all Liens of every
kind and description. All of the Company Shares have been duly-
authorized and validly-issued, and are fully-paid and non-assessable.
As of the Closing, the Company Shares purchased by the Investor here-
under will reprsent eighty-four and eighty-nine hundredths percent
(84.89%) of the total issued and outstanding shares of the Company on
a fully-diluted basis.
3.02 Authority to Execute and Perform this Agreement. Each of
the Company and each Principal Shareholder has the full legal right
and power and all authority and approval required to enter into,
execute and deliver this Agreement, and to issue, sell, assign, trans-
fer and convey the Company Shares and the Private Shares, as
applicable, and to perform fully their respective obligations here-
under. This Agreement has been duly executed and delivered by each
such party and, assuming due execution and delivery by, and enforce-
ability against, the Investor, this Agreement constitutes the valid
and binding obligation of each Principal Shareholder and of the
Company, enforceable against him and it in accordance with its terms,
subject to the qualifications that enforcement of the rights and
remedies created hereby is subject to (i) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors, and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law). No approval or
consent of, or filing with, any governmental or regulatory body, and
no approval or consent of, or filing with, any other person is
required to be obtained by the Company, or by any Principal Share-
holder, or in connection with the execution and delivery by the
Company any Principal Shareholder of this Agreement, or the consum-
mation and performance by each of them of the transactions contem-
plated hereby, other than the approval of the Board of Directors of
the Company with respect to the Company. Each person signing this
Agreement on behalf of the Company is the duly elected officer of
the Company holding the position indicated by such person's name on
the Signature Page hereof, and each such person has full corporate
authority to execute and deliver to the Investor, and to cause the
entry into and performance of, this Agreement which, once so
executed and delivered, will constitute the legally binding agree-
ment of the Company, enforceable against it in accordance with its
terms.
The execution, delivery and performance of this Agreement by the
Company and each Principal Shareholder, and the consummation by
each of them of the transactions contemplated hereby in accordance
with the terms and conditions hereof, will not:
(a) violate, conflict with or result in the breach of any of
the terms of, or constitute (or with notice or lapse of time or
both would constitute) a default under, any contract, lease,
agreement or other instrument or obligation to which the Company
or any Principal Shareholder is a party or by or to which any of
the properties and assets of the Company or any Principal Share-
holder may be bound or subject;
(b) violate any order, judgment, injunction, award or decree
of any court, arbitrator, governmental or regulatory body, by which
the Company or any Principal Shareholder, or the securities, assets,
properties or business of any of them is bound; or
(c) violate any applicable statute, law or regulation, or any
charter document or bylaws of the Company or any Subsidiary (as
such term is hereinafter defined) thereof.
3.03 Existence and Good Standing. The Company is a corpora-
tion duly organized, validly existing and in good standing under
the laws of the State of Florida. The Company has the power to
own or lease its properties and assets and to carry on its
business as now being conducted. The Company is duly qualified
to do business and is in good standing in the jurisdictions set
forth on Schedule 3.03, which are the only jurisdictions in which
the character or location of the properties owned or leased by the
Company, or the nature of the business conducted by it, makes such
qualification necessary.
3.04 Capital Stock. The description of the Company's
capitalization set forth in Section 2.02 is true, complete and
correct in all respects as of the date hereof. No shares of
Common Stock or any other securities are held in the Company's
treasury. All such outstanding shares have been duly authorized
and validly issued and are fully paid and non-assessable. Except
as set forth on Schedule 2.02, there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements, commitments or arrangements
of any character providing for the purchase, subscription,
issuance or sale of any shares of the capital stock of the Company,
or any other security of the type described in Section 2.02(c).
All of the options, warrants and other rights identified on
Schedule 2.02 shall be valid and fully enforceable against each
of the parties thereto subject to the purchase and sale of the
Company's Shares in the same manner and with the same force and
effect as prior to such Share purchase.
3.05 Financial Statements and No Material Changes. Schedule 3.05
contins: (i) the unaudited consolidated financial statements of the
Company and each Subsidiary (hereafter referred to as the "Cosmo
Group") as of December 31, 1999 (the "Unaudited Annual Statement");
and (ii) the unaudited financial statements of the Company for the
fiscal quarter ended March 31, 2000 (the "Unaudited Quarterly
Statement" and, together with the Unaudited Annual Statement, the
"Financial Statements").
The Financial Statements were carefully prepared from the books and
record of the Company, and present fairly the financial position,
assets and liabilities of the Company and the results of its
operations for the respective periods indicated, and reflect all
necessary accruals, all in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis.
Since March 31, 2000 (the "Quarterly Financial Statement Date") there
has een: (i) no material adverse change in the assets or liabilities,
or in the business or condition, financial or otherwise, or in the
results of operations or prospects of the Company, whether as a result
of any legislative or regulatory change, revocation of any license or
rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation or act of God or
other national force or otherwise; and (ii) no material adverse change
in the assets or liabilities, or in the business or condiion,
financial or otherwise, or in the results of operations or prospects
of the Company, and to the best knowledge, information and belief of
the Company and its Principal Shareholders, no fact or condition
exists or is contemplated or threatened which might cause such a
change in the future.
3.06 Books and Records. The corporate minute books of the
Company an each Subsidiary, contain accurate records of all meetings
of, and corporate action taken by (including action taken by written
consent) the shareholders and Board of Directors of the Company and
each Subsidiary, as applicable. Except as set forth on Schedule 3.06
attached hereto, the Company does not have any of its respective
records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon
or held by any means (including any electronic, mechanical or photo-
graphic process, whether computerized or not) which (including all
means of access thereto and therefrom) are not under the exclusive
ownership and direct control of the Company.
3.07 Subsidiaries. Schedule 3.07 attached hereto is a true and
complete listing of each corporation, partnership, limited partnership,
limited liability company, joint venture or other form of business
organization or association (including, without limitation, by
contract in which the Company, directly or indirectly, owns ten
percent (10%) or more of the total equity interests of such business
organization or association (a "Subsidiary"). Except as set forth on
Schedule 3.07, the Company has no other Subsidiaries and does not
control, directly or indirectly, any other corporation, association,
or business organization.
3.08 Title to Properties.
(a) Except as set forth on Schedule 3.08 attached hereto, the
Company and each Subsidiary has good, valid and marketable title to
(a) all of its respective properties and assets (real and personal,
tangible and intangible), including, without limitation, all of the
properties and assets reflected in the balance sheet included as part
of the Financial Statements, except as indicated in any Schedule
hereto; and (b) all of the properties and assets purchased by the
Company and each such Subsidiary since the Quarterly Financial State-
ment Date, all of which purchases have been made in the rdinary course
of its respective business (except as set forth on Schedule 3.07
attached hereto); in each case subject to no Lien, of any kind or
character, except for (i) Liens reflected in the balance sheet
included as part of the Financial Statements; (ii) Liens consisting
of zoning or planning restrictions, easements, permits and other
restrictins or limitations on the use of real property or irregulari-
ties in title thereto, which do not materially detract from the value
of, or impair the use of, such property by the Company in the opera-
tion of its business; (iii) Liens for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent;
(iv) Liens inurin to carriers, materialmen, warehousemen, mechanics or
other inchoate liens created by the Company in the ordinary cause of
its business; and (v) Liens expressly set forth on Schedule 3.07
attached hereto.
(b) The rights, properties and other assets presently owned,
leased, or licensed by the Company and each Subsidiary reflected on
the balance sheet included in the Financial Statements or acquired
since the Quarterly Financial Statement Date include all rights,
properties and other assets necessary to permit the Company and each
Subsidiary to conduct its respective business in the same manner as
its business has heretofore been conducted. All such properties and
assets owned or leased by the Company and each Subsidiary are in
satisfactory condition and repair, other than ordinary wear and tear
or as otherwise does not and will not cause or create a material
averse effect upon the business, assets, operations, financial cond
ition or future prospects of the Company and/or any Subsidiary
(herein after referred to as a "Materially Adverse Condition").
No structure or improvement on the real property leased by the
Company or ay Subsidiary, whether now existing or intended to be
constructed pursuant to existing plans and specifications, violates,
or if completed would violate, any applicable zoning or building
regulations or ordinances or similar federal, state or municipal law.
3.09 Leases. Schedule 3.09 attached hereto, contains a true and
compete list and description of the material terms of all leases to
which the Company and each Subsidiary is a party, (either as Principal
or sub-lessee or lessor (the "Leases"). Each lease set forth on
Schedule 3.09 is in full force and effect; all rents and additional
rents due to date on each such lease have been paid; in each case, the
lessee has been in peaceable possession since the commencement of the
original term of such lease and is not in default thereunder and no
waiver, indulgence or postponement of the lessee's obligations there-
under has been granted by the lessor; and there exists no event of
default or event, occurrence, condition or act (including the consum-
mation of the transactions contemplated hereby) which, with the giving
of notice, the lapse of time or the happening of any further event or
condition, would become a default under such Lease. Neither the
Company nor any Subsdiary has violated any of the material terms or
conditions under any such Lease in any material respect, and, to the
best knowledge, information and belief of the Company and the
Principal Shareholders, all of the covenants to be performed by any
other party under any such Lease have been fully performed. All
property governed by any such Lease is i a state of good maintenance
and repair and is adequate and suitable for the purposes for which it
is presently being used.
3.10 Material Contracts. Schedule 3.10 attached hereto sets forth
a tre and complete list of each contract, agreement, arrangement,
undertaking or understanding, whether written or oral (a "Contract")
meeting any of the following criteria and by which the Company, any
Subsidiary or their respective properties or assets are bound (a
"Material Contract"):
(a) any Contract relating to the employment of any person, or
any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit
plan, except to the extent that such Contract is cancelable at the
option of the Company or any Subsidiary without penalty or premium
upon not more than fifteen (15) days' prior notice.
(b) any Contract which contains restrictions with respect to
payment of dividends or any other distribution in respect of its
capital stock;
(c) any Contract evidencing, making or committing to make any
loan oradvance to, or investment in, any individual, partnership,
joint venture, corporation, trust, unincorporated organization,
government or other entity (each a "Person");
(d) any Contract creating or committing to any guarantee or
other contngent liability in respect of any indebtedness or obligation
of any Person (other than the endorsement of negotiable instruments
for collection in the ordinary course of business);
(e) any management service, consulting or any other similar type
Contract;
(f) any Contract limiting the freedom of the Company or any
Subsidiary to engage in any line of business or to compete
with any Person;
(g) any Contract not entered into in the ordinary course of
business which involves payment or receipt of at least Fifty
Thousand Dollars ($50,000), singly or in installments, and is
not cancelable without penalty or premium within thirty (30)
days;
(h) any Contract which might reasonably be expected to have a
Materially Adverse Effect upon the Company or any Subsidiary;
and
(i) any Contract not expressly disclosed in the Financial
Statements and under which the Company or any Subsidiary is
obligated to make cash payments of, or deliver products or
render services with a value of, Fifty Thousand Dollars
($50,000) or more, individually or in the aggregate, and any
other Contract which is material to the conduct of the
business of the Company or any Subsidiary.
3.11 Restrictive Documents. Except as set forth on Schedule 3.11
attached hereto, neither the Company, nor any Subsidiary is
subject to, or a party to, any charter, bylaw, mortgage, Lien,
Lease, license, permit, Contract, instrument, law, rule,
ordinance, regulation, order, judgment or decree, or any
other restriction of any kind or character, which has or
could reasonably be expected to produce a Materially Adverse
Effect upon the Company, any Subsidiary or any of their
respective assets or properties (the "Cosmo Group Property"),
or which would prevent consummation of the transactions con-
templated by this Agreement, compliance by any party with the
terms, conditions and provisions hereof, or the continued
operation of the Cosmo Group Business (as hereinafter defined)
after the date hereof or the Closing Date on substantially
the same basis as heretofore operated, or which would
restrict the ability of the Company or any Subsidiary to
conduct its business in any area.
3.12 Litigation. Except as set forth on Schedule 3.12 attached
hereto there is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by
or before any governmental or other instrumentality or agency
pending or, to the best knowledge of the Company and the
Principal Shareholders after due investigation and inquiry,
threatened against, or affecting the Company or any Subsidiary,
or any of the Cosmo Group Property, or against the Principal
Shareholders, or any officer, director or employee of the
Company or any Subsidiary, other than such items which are
insignificant and immaterial and which do not adversely affect
(i) the right or ability of the Company or any Subsidiary to
carry on its business as now conducted;
(ii) the condition, whether financial or otherwise, of any
Cosmo Group Property; or
(iii) the consummation of the transactions contemplated hereby.
There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, governmental or regulatory
body or arbitration tribunal by which either the Company or
any Subsidiary, or any officer, director or employee of the
Company or any Subsidiary, or the respective securities,
assets, properties or businesses of any of them, is bound other
than any such items which are insignificant and immaterial and
which do not and will not adversely affect
(i) the right of the Company or any Subsidiary to carry on its
business as now conducted and as proposed to be conducted by
the Investor after the consummation of the transactions
contemplated by this Agreement;
(ii) the condition, whether financial or otherwise, of any
Cosmo Group Property; or
(iii) the consummation of the transactions contemplated hereby.
3.13 Taxes. Except as set forth on Schedule 3.13 attached hereto,
the Company and each Subsidiary has filed or caused to be filed,
within the times and within the manner prescribed by law, all
federal, state, local and foreign tax returns and tax reports
which are required to be filed by, or with respect to, the
Company and/or such Subsidiary. Such returns and reports
reflect accurately all liability for taxes of the Company for
the periods covered thereby. Except as set forth on Schedule
3.13, all federal, state, local and foreign income, profits,
franchise, employment, sales, use, occupancy, excise and other
taxes and assessments, stock and transfer taxes (including
interest and penalties) payable by, or due from, the Company
and any Subsidiary have been fully-paid and fully-provided for
in the books and financial statements of the Company and/or
such Subsidiary. No examination of any tax return of the
Company or any Subsidiary is currently in progress. There are
no outstanding agreements or waivers extending the statutory
period of limitations applicable to any tax return of the
Company and/or any Subsidiary. Schedule 3.13 attached hereto
lists all tax sharing Contracts to which the Company and/or any
Subsidiary is a party and all such Contracts have been
terminated prior to the Closing Date with no continuing
liability, obligation or commitment to or of the Company and/or
any Subsidiary.
3.14 Liabilities. Except as set forth on Schedule 3.14, the Cosmo
Group has no outstanding claims, liabilities or indebtedness,
contingent or otherwise, which are not properly reflected in
the Financial Statements in a manner consistent with past
practice, other than liabilities incurred subsequent to
December 31, 1999 in the ordinary course of its business and
not exceeding Fifty Thousand Dollars ($50,000) individually or
One Hundred Thousand Dollars ($100,000) in the aggregate; the
reserves reflected in the Financial Statements are adequate,
appropriate and reasonable. Neither the Company nor any
Subsidiary is in default in respect of the terms or conditions
of any indebtedness.
3.15 Insurance. Schedule 3.15 attached hereto sets forth a brief
description of insurance policies (specifying the insurer, the
policy number or coverage note number with respect to binders
and the amount of any deductible, with description of the
pending claims if such claims exceed the applicable policy
limits, setting forth the aggregate amount paid out by the
insurer under each policy through the date hereof and the
aggregate limit, if any, of the insurer's liability thereunder)
which the Company and each Subsidiary maintains with respect to
its respective businesses, properties or employees. Such
policies are valid, binding and enforceable in accordance with
their terms and are in full force and effect and are free from
any right of termination on the part of the insurance carriers.
Such policies, with respect to their amounts and types of
coverage, are reasonably adequate to insure fully against risks
to which the Company and any member of its consolidated group
and their respective property and assets are normally exposed
in the operation of their businesses. Neither the Company nor
any Subsidiary is in default with respect to any material
provision of any such policy or binder, or has failed to give
any notice or present any claim under any such policy or binder
in due and timely fashion, and neither the Company nor any
Subsidiary has received any notice of cancellation or non-
renewal with respect to any such policy or binder. Except
for claims set forth on Schedule 3.15, there are no outstanding
unpaid claims under any such policy or binder which have gone
unpaid for more than forty-five (45) days or as to which the
carrier has disclaimed liability.
3.16 Intellectual Property. The operation of the business of the
Cosmo Group requires no rights under Intellectual Property (as
hereinafter defined), other than rights under Intellectual
Property listed on Schedule 3.16 attached hereto and rights
granted to the Cosmo Group pursuant to Contracts listed on
Schedule 3.16. Within the three (3) year period immediately
prior to the date of this Agreement, neither the Company nor
any of its Subsidiaries used any type of Intellectual Property
other than those rights set forth on Schedule 3.16 and rights
granted to the Company or its Subsidiaries pursuant to agree-
ments listed on Schedule 3.16. Except as otherwise set forth
on Schedule 3.16, the Company and each Subsidiary owns all
right, title and interest in and to the Intellectual Property
listed on Schedule 3.16 as applicable, including, without
limitation, the exclusive rights to use and license the same.
Each item of Intellectual Property listed on Schedule 3.16
has been duly registered with, filed in, or issued by the
appropriate domestic or foreign governmental agency, to the
extent required, and each such registration, filing and
issuance remains in full force and effect. Except as set forth
on Schedule 3.16, no claim adverse to the interests of the
Company or its Subsidiaries in the Intellectual Property
listed on Schedule 3.16 has been made or, to the best
knowledge of the Principal Shareholders after due investiga-
tion, threatened or asserted against the Company or any
Subsidiary. No basis exists for any such claim, and no Person
has infringed or otherwise violated the rights of the Company
or any member of its subsidiaries in any of the Intellectual
Property listed on Schedule 3.16. Except as set forth on
Schedule 3.16, no litigation is pending wherein the Company or
of its Subsidiaries is accused of infringing or otherwise
violating the Intellectual Property rights of another party,
or of breaching a contract conveying certain rights under
Intellectual Property and, to the best knowledge of the
Principal Shareholders, no such claim has been asserted or
threatened against the Company or any of its Subsidiaries,
nor are there any facts that would give rise to such a claim.
For purposes of this Section 3.16, the term "Intellectual
Property" means any domestic and foreign patents, patent
applications, registered and unregistered trade marks and
service marks, trade names, fictitious names, registered and
unregistered copyrights, computer programs, databases, trade
secrets and other proprietary and confidential information.
The Principal Shareholders shall transfer any Intellectual
Property owned by any of them and used by the Company or any
of its Subsidiaries to the Investor.
3.17 Compliance with Laws. Neither the Principal Shareholders,
the Company nor any of the Cosmo Group is in violation of any
applicable order, judgment, injunction, award or decree,
related to, arising out of or affecting the business or
operations of the Company or any of the Subsidiaries.
Neither the Principal Shareholders, nor the Cosmo Group is
in violation of any federal, state, local or foreign law,
ordinance, regulation or any other requirement of any
governmental or regulatory body, court or arbitrator
(including, without limitation, laws relating to the environ-
ment and OSHA and the Americans with Disabilities Act) other
than insignificant or immaterial violations which do not and
will not adversely affect (i) the Cosmo Group Business or the
Property; (ii) the business proposed to be conducted by the
Investor after the consummation of the transactions contem-
plated by this Agreement; or (iii) the consummation of the
transactions contemplated by this Agreement. Each permit,
license, order or approval of any governmental or regulatory
body or other applicable authority (the "Permits") that is
material to the conduct of the Cosmo Group Business is in
full force and effect, no violations are or have been
recorded in respect of any permit and no proceeding is
pending or, to the knowledge of the Principal Shareholders or
the Cosmo Group, threatened, to revoke or limit any Permit,
which revocation or limitation could have a material adverse
effect on any Cosmo Group Business or any Cosmo Group
Property or the business to be conducted by the Investor
after the consummation of the transactions contemplated by
this Agreement. Schedule 3.17 attached hereto contains a
list of all Permits. Except as set forth on Schedule 3.17,
no approval or consent of any Person is needed to ensure that
the Permits shall continue in full force and effect following
the consummation of the transactions contemplated by this
Agreement.
3.18 Employment Relations.
(a) The Company and each of its Subsidiaries is in
compliance with all federal, state or other applicable laws,
domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and has not and is not engaged in any unfair labor
practice;
(b) No unfair labor practice complaint against the
Company or any of its Subsidiaries is currently pending
before the National Labor Relations Board or other applicable
court in the jurisdiction of the Subsidiaries, nor has such a
complaint been pending in the last two (2) years;
(c) There is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving
the Company or any Subsidiary nor has one existed during the
last two (2) years;
(d) No representation question exists regarding the
employees of the Company or any of its Subsidiaries;
(e) No labor grievance exists which might have an
adverse effect upon the Company or any Subsidiary or the
conduct of the Cosmo Group Business, no arbitration
proceeding arising out of or under any collective bargaining
agreement is pending, and no claim therefore has been asserted;
(f) Neither the Company nor any of its Subsidiaries is a
party to, nor does there otherwise exist, any union,
collective bargaining agreement or similar agreement with
respect to the employees of the Company or any of its
Subsidiaries and no collective bargaining agreement or similar
agreement is currently being negotiated by the Company or any
of its Subsidiaries; and
(g) Neither the Company nor any of its Subsidiaries has
experienced any labor difficulty during the last two (2)
years. There has not been, and to the best knowledge,
information and belief of the Principal Shareholders, there
will not be, any adverse change in relations with employees
of the Company or any of its Subsidiaries as a result of any
announcement of the transactions contemplated by this
Agreement.
3.19 Employee Benefit Plans.
(a) Schedule 3.19 contains a complete list, as of the
date hereof, of all employees, including their names, birth-
dates, job titles, base salaries and dates of hire. Schedule
3.19 contains a true and complete list and accurate descrip-
tion of each employee welfare benefit plan (an "Employee
Welfare Plan"), as defined in Section 3(l) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained currently or at any time by the Cosmo Group or
any other organization which as of the Closing is a member
of a controlled group of organizations within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986, as amended, ("Code"), of which the Cosmo Group is a
member (an "ERISA Affiliate"), or to which the Cosmo Group
or any ERISA Affiliate contributes or is required to
contribute or contributed or was required to contribute at
any time. Schedule 3.19 contains a true and complete list
and accurate description of each employee pension benefit
plan, as defined in Section 3(2) of ERISA ("Employee Pension
Plan"), maintained currently or at any time by the Cosmo
Group or any ERISA Affiliate or to which the Cosmo Group or
any ERISA Affiliate contributes or is required to contribute
or contributed or was required to contribute at any time.
The Employee Welfare Plans, the Employee Pension Plans and
the other plans listed on Schedule 3.19 are collectively
referred to herein as the "Plans." Neither the Cosmo Group
nor any ERISA Affiliate has maintained at any time, nor
does it contribute to or has it contributed to or is or
was required to contribute to:
(i) any multi-employer plan (as defined in Section 3(37) of
ERISA); or
(ii) any funded or unfunded medical, health or life
insurance plans or arrangements for current or future
retirees or terminated employees.
(b) With respect to each current Plan, the Investor
has been provided heretofore with true and complete copies
of:
(i) all Plan documents and all documents or instruments
establishing or constituting any related trust, annuity
contract or other funding instrument, and any amendments
thereto;
(ii) the most recent determination letter received from the
IRS;
(iii) the most recent financial statements;
(iv) the most recent IRS Form 5500; and (v) written
descriptions of all non-written agreements relating to the
Plans. All current Plans, all Plan documents and all
documents or instruments establishing or constituting any
related trust, annuity contract or other funding instrument,
and any amendments thereto, comply in all material respects
with the provisions of ERISA and the Code and applicable
laws, rules and regulations. All necessary governmental
approvals for all current Plans have been obtained and
favorable determinations as to the qualification under the
Code of each of the current Plans, and for any Code Section
501(c)(9) trust maintained in connection with any current
Employee Welfare Plan, and each amendment thereto, have
been made by the IRS, or have been applied for and no event
has occurred and no facts or circumstances exist that may
cause the loss of any such qualification or may cause any
such application to be denied.
(c) Except as set forth on Schedule 3.19, the
administration of all Plans has been consistent with, and
in compliance in all material respects with, applicable
requirements of the Code and ERISA, including, without
limitation, compliance on a timely basis with all
requirements for reporting, disclosure and any requirements
for the continuation of group health insurance. Neither
the Cosmo Group, any ERISA Affiliate nor any Plan fiduciary
(as defined in Section 3(21) of ERISA), with respect to any
Plan, has engaged in any transaction or acted or failed to
act in any manner that violates Section 404 or 406 of ERISA
or engaged in any prohibited transaction (as defined in
Section 4975(c)(1) of the Code) for which there exists
neither a statutory nor regulatory exemption or for which
an exemption has not been obtained. All obligations
required to be performed by the Cosmo Group or any ERISA
Affiliate under each Plan have been performed, and the
Cosmo Group is not in violation of the terms of any Plan,
nor does the Cosmo Group or the Principal Shareholders have
any knowledge of any existing violation by any other party
of any term or requirement of or applicable to any current
Plan. All contributions required by law to have been made
under any Plan, or to any trusts or funds established
thereunder or in connection therewith, have been made by
the due dates thereof (including any valid extensions).
(d) No claims, suits or other proceedings are pending
or threatened, and no facts or circumstances exist that
could provide a basis for any such claim, suit or other
proceeding, by any of the Cosmo Group or any ERISA
Affiliate's current or former employees, any participant
(as defined in Section 3(7) of ERISA) to any Plan
maintained at any time by the Cosmo Group or any ERISA
Affiliate to which the Cosmo Group contributes or has
contributed or is or was required to contribute, any
fiduciary of any Plan, any beneficiary (as defined in
Section 3(8) of ERISA) of any such person or by any govern-
mental body, agency or instrumentality thereof relating to
or affecting any Plan, other than usual and ordinary claims
for benefits by eligible persons. Neither the execution
and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will constitute:
(i) a termination of employment or other event entitling
any person to any additional or other benefits, or that
would otherwise modify any benefits or the vesting of any
benefits, under any Plan maintained at any time by the
Cosmo Group or any ERISA affiliate, or to which the Cosmo
Group or any ERISA Affiliate contributes or has contributed
or is or was required to contribute; or (ii) a violation of
Section 404 or 406 of ERISA or a prohibited transaction
(as defined in Section 4975(c)(1) of the Code) for which
there exists neither a statutory nor regulatory exemption
or for which an exemption has not been obtained.
(e) Neither the Cosmo Group nor any ERISA Affiliate
maintains any Plans that are subject to the requirements
of Section 412 of the Code.
3.20 Environmental Laws and Regulations.
(a) Neither the Cosmo Group nor any of its
Subsidiaries has generated, transported or disposed
of any hazardous material (defined below) during the
past three (3) years; and
(b) Neither the Cosmo Group nor any of its
Subsidiaries has Hazardous Materials at any site or
facility owned or operated presently or at any
previous time by the Company or any of its
Subsidiaries.
The Company and its Subsidiaries are in compliance
in all material respects with all applicable federal,
state and local laws and regulations relating to
product registration, pollution control and environ-
mental contamination including, but not limited to,
all laws and regulations governing the generation,
use, collection, discharge, or disposal of Hazardous
Materials and all laws and regulations with regard
to record keeping, notification and reporting require-
ments respecting Hazardous Materials. Neither the
Company nor any of its Subsidiaries has been alleged
to be in violation of, and has not been subject to any
administrative or judicial proceeding pursuant to,
such laws or regulations either now or any time during
the past three (3) years. There are no facts or
circumstances which the Cosmo Group or the Principal
Shareholders reasonably expects could form the basis
for the assertion of any Environmental Claim (as
defined below) against the Company or any of its
Subsidiaries relating to environmental matters
including, but not limited to, any Environmental
Claim arising from past or present environmental
practices asserted under CERCLA (as defined below) and
RCRA (as defined below), or any other federal, state
or local environmental statute, which the Cosmo Group
or the Principal Shareholders believes might have an
adverse effect on the business, results of operations,
financial condition or prospects of the Company and
its Subsidiaries taken as a whole.
For purposes of this Section 3.20, the following terms
shall have the following meanings: (A) "Hazardous
Materials" shall mean materials defined as "hazardous
substances", "hazardous wastes" or "solid wastes" in
(i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.
Sections 9601--5657, and any amendments thereto
("CERCLA"); (ii) the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901-6987 and
any amendments thereto ("RCRA"); and (iii) any similar
federal, state or local environmental statute; and
(B) "Environmental Claim" shall mean any and all
claims, demands, causes of actions, suits, proceedings,
administrative proceedings, losses, judgments, decrees,
debts, damages, liabilities, court costs, attorneys'
fees and any other expenses incurred, assessed or
sustained by or against the Cosmo Group.
3.21 Interests in Clients, Suppliers, Etc.
At the Closing, except as set forth on Schedule 3.21
attached hereto, as of the date of the Closing, no
officer or director of the Company or any of its
Subsidiaries possesses, directly or indirectly, any
financial interest in, or is a director, officer or
employee of, any corporation, firm, association or
business organization which is a client, supplier,
customer, lessor, lessee, or competitor or potential
competitor of the Cosmo Group. (Ownership of
securities of a company whose securities are
registered under the Securities Exchange Act of 1934,
as amended, not in excess of one percent (1%) of any
class of such securities, shall not be deemed to be
a financial interest for purposes of this Section
3.21.)
3.22 Bank Accounts, Powers of Attorney and
Compensation of Employees. Schedule 3.22 attached
hereto is an accurate and complete list showing
(a) the name and address of each bank in which the
Company or any of its Subsidiaries has an account
or safe deposit box, the number of any such account
or any such box and the names of all persons
authorized to draw thereon or to have access thereto;
(b) the names of all persons, if any, holding powers
of attorney from the Company or any of its
Subsidiaries and a summary statement of the terms
thereof; and (c) the names and current salaries,
including bonus and fringe benefits (other than
those described on Schedule 3.19 hereto) of all
officers and of all persons whose compensation from
the Company or any of its Subsidiaries for the
calendar year ended on the Quarterly Financial
Statement Date exceeded an annualized rate of Two
Hundred Fifty Thousand Dollars ($250,000), together
with a statement of the full amount paid or payable
to each such person for services rendered during
such fiscal year.
3.23 No Changes Since Quarterly Financial
Statement Date. Since the Quarterly Financial
Statement Date, the Principal Shareholders, the
Company or any of its Subsidiaries have not on a
consolidated basis:
(a) incurred any liability or obligation of any
nature (whether accrued, absolute, contingent or
otherwise), except liabilities and obligations in the
ordinary course of business and consistent with past
practice, resulting in an increase for the liabilities
shown on the Unaudited Statements of more than One
Hundred Thousand Dollars ($100,000) in the aggregate;
(b) permitted any of its assets to be subjected
to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind (other
than Permitted Liens);
(c) sold, transferred or otherwise disposed of
any assets except inventory sold in the ordinary
course of business and consistent with past practice;
(d) made any single capital expenditure or
commitment therefor, in excess of Fifty Thousand
Dollars ($50,000) or made aggregate capital
expenditures and commitments therefor in excess of
Two Hundred Fifty Thousand Dollars ($250,000);
(e) declared or paid any dividend or made any
distribution on any shares of its capital stock, or
redeemed, purchased or otherwise acquired any shares
of its capital stock or any option, warrant or other
right to purchase or acquire any such shares;
(f) made any bonus or profit sharing distribu-
tion or payment of any kind;
(g) increased its indebtedness for borrowed
money, or made any loan to any Person;
(h) written off as uncollectible any notes or
accounts receivable, except immaterial write-downs
or write-offs in the ordinary course of business
and consistent with past practice which do not
exceed One Hundred Thousand Dollars ($100,000) in
the aggregate charged to applicable reserves, and
none of which individually or in the aggregate is
material to the Cosmo Group on a consolidated basis;
(i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration or benefits
of any executive employee or other employees or
consultants, and no such increase is customary on
a periodic basis or required by agreement or under-
standing except as set forth on Schedule 3.18;
(j) canceled or waived any claims or rights of
substantial value;
(k) made any change in any method of accounting
or auditing practice;
(l) otherwise conducted its business or entered
into any transaction, except in the usual and
ordinary manner and in the ordinary course of
business and consistent with past practices;
(m) paid, discharged or satisfied any claims,
liabilities or obligations (absolute, accrued,
contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of
business and consistent with past practice of
liabilities and obligations reflected and reserved
against in the Financial Statements or incurred in
the ordinary course of business and consistent with
past practice since the Quarterly Financial
Statement Date;
(n) paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets
(real, personal or mixed, tangible or intangible to,
or entered into any agreement or arrangement of any
kind with, any of its officers, directors or share-
holders or any affiliate or associate of its officers,
directors or shareholders, except compensation to
officers at rates not exceeding the rate of compen-
sation in
effect as of the Quarterly Financial Statement Date;
(o) suffered any material adverse changes in
its working capital, financial condition, assets,
liabilities (absolute, accrued, contingent or other-
wise), reserves, business operations or prospects; or
(p) agreed, whether or not in writing, to do any
of the foregoing.
3.24 Certain Business Practices. To the best
knowledge of the Cosmo Group and the Principal Share-
holders, no officer, director, shareholder, employee,
agent or other representative of the Company or any
of its Subsidiaries, or any person acting on behalf
of the Cosmo Group, has directly or indirectly,
within the past two (2) years, given or agreed to
give any illegal, unethical or improper gift or
similar benefit to any customer, supplier, govern-
mental employee or other person who is or may be in
a position to help or hinder the Company or any of
its Subsidiaries in connection with an actual or
proposed transaction.
3.25 Disclosure. To the best of each Principal
Shareholder's knowledge and belief, neither this
Agreement, nor the Audited Statements referred to in
Section 3.5 hereof, any Schedule, Exhibit or cer-
tificate attached hereto or delivered in accordance
with the terms hereof, or any document or statement
in writing which has been supplied by or on behalf
of any of the Principal Shareholders or by or on
behalf of any of the Cosmo Group's directors or
officers in connection with the transactions contem-
plated by this Agreement contains any untrue
statement of material fact, or omits any statement
of material fact necessary in order to make the
statements contained herein or therein not misleading.
There is no fact known to any of the Principal Share-
holders or the Company and its Subsidiaries which
could materially and adversely affect the business,
prospects or financial condition of the Company or
any of its Subsidiaries or their respective properties
or assets, which has not been set forth in this
Agreement, the Financial Statements referred to in
Section 3.5 hereof (including the footnotes thereto)
, any Schedule, Exhibit or certificate attached
hereto or delivered in accordance with the terms
hereof or any document or statement in writing which
has been supplied by or on behalf of the Principal
Shareholders or by or on behalf of any of the Cosmo
Group's directors or officers in connection with the
transactions contemplated by this Agreement.
3.26 Broker's Or Finder's Fees. No agent,
broker, person or firm acting on behalf of the
Principal Shareholders or the Company and its
Subsidiaries is, or will be, entitled to any
commission or broker's or finder's fees from any
of the parties hereto, or from any Person controlling,
controlled by or under common control with any of
the parties hereto, in connection with any of the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS OF CLOSING
The obligations of the parties to consummate the
transactions contemplated herein on the Closing Date
are conditioned upon satisfaction, on or prior to
such date, of the following conditions:
4.01 Representations and Warranties. The
representations and warranties of the Principal
Shareholders, the Company and its Subsidiaries
contained in Article III of this Agreement shall
be true on and as of the Closing with the same
effect as though such representations and
warranties had been made on and as of the Closing
Date.
4.02 Officer's Certificate. The Company shall
have delivered to the Investor a certificate dated
as of the Closing, executed by the chief executive
officer of the Company and in a form reasonably
acceptable to the Investor, certifying that the
conditions set forth in this Article IV have been
satisfied and that there has been no material
adverse change in the assets, properties, prospects,
condition, affairs, operations or business of the
Cosmo Group, as now conducted or as proposed to be
conducted, since the date of this Agreement; and
shall specifically certify the following as of the
Closing Date:
(a) the Company is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Florida, and the Company has the
requisite corporate power and authority to own its
properties and to conduct its business;
(b) Cosmo Canada, Inc., a subsidiary of the
Company, is a corporation duly organized and
existing under the laws of the Province of Ontario,
Country of Canada;
(c) the Company has the requisite corporate
power and authority to execute, deliver and perform
this Agreement on behalf of the Cosmo Group. This
Agreement has been duly and validly authorized by
the Cosmo Group, duly executed and delivered by an
authorized officer of the Cosmo Group and consti-
tutes a legal, valid and binding obligation of the
Cosmo Group enforceable in accordance with its terms,
except as enforceability may be limited by law
affecting the rights of creditors generally;
(d) the capitalization of the Cosmo Group is
true and correct as set forth in this Agreement;
(e) the certificates representing the Private
Shares and the Company Shares are in due and proper
form and have been duly and validly executed by the
officers of the Cosmo Group named thereon;
(f) the execution, delivery, performance and
compliance with the terms of this Agreement do not
violate any provision of any of the Cosmo Group's
Articles of Incorporation or Bylaws and, to the best
of such counsel's knowledge, do not conflict with or
constitute a default under the provisions of any
judgment, writ, decree, order or agreement to which
the Cosmo Group is a party or by which it is bound,
which conflict or default would be materially
adverse to the Cosmo Group;
(g) all consents, approvals, orders or
authorizations of, and all qualifications,
registrations, designations, declarations, or
filings with, any federal, Florida or foreign
governmental authority required to be made prior
to the Closing in connection with the consummation
of the transactions contemplated by this Agreement
have been obtained, and are effective, as of the
date of the Closing and there are no proceedings,
or threat thereof, which question the validity
thereof;
(h) based in part upon the representations of
the Investor set forth in this Agreement, the offer
and sale of the Company Shares pursuant to the
terms of this Agreement are exempt from the
registration requirements of Section 5 of the
Securities Act and from any domestic or foreign
state qualification requirements of the Company's
state of incorporation and principal place of
business;
(i) such person is not aware of any action,
proceeding or investigation pending against
the Cosmo Group or any of its officers, directors,
or employees, or that any of the foregoing has
received any threat thereof, which questions the
validity of this Agreement, or the right of the
Cosmo Group or its officers or directors to enter
into this Agreement or which might result, either
individually or in the aggregate, in any material
adverse change in the assets, conditions, affairs,
or prospects of the Cosmo Group nor is such counsel
aware of any litigation pending against the Cosmo
Group or any of its officers, directors or employees,
or that any of the foregoing has received any threat
thereof, by reason of the proposed activities of the
Cosmo Group, the past employment relationships of
its officers, directors or employees, or negotiations
by
the Cosmo Group or any of its officers, directors or
employees with possible investors in the Cosmo Group
or its business; and
(j) the Company Shares have been duly and
validly authorized and issued (including, without
limitation, issued in compliance with applicable
federal and state securities laws), fully paid and
non-assessable and not subject to any preemptive
rights, liens, claims or encumbrances, or other
restriction on transfer, except as set forth in this
Agreement.
4.03 Proceedings and Documents. All corporate
and other proceedings taken by the Cosmo Group in
connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the
Investor, and the Investor shall have received all
such documents as it may have reasonably requested.
4.04 Evidence of the Converted Indebtedness;
Consummation of Principal Shareholder Transactions.
At the Closing, the Principal Shareholders shall each
have delivered to the Investor such evidence in
writing of the indebtedness upon which their
respective Principal Shareholder Transactions are
based as the Investor may reasonably require, and the
Principal Shareholder Transactions shall be effected
as contemplated herein.
4.05 Payment of Purchase Price. The Investor
shall at the Closing pay the Purchase Price, less a
credit against the Purchase Price in the amount of
the indebtedness represented by the Bridge Note, upon
delivery by the Cosmo Group of a certificate
representing the Company Shares and the Private Shares.
4.06 Employment Agreements. The Investor shall
have accepted Employment Agreements in the form of
Schedule 4.06 attached hereto and executed by Xxxxx
Xxxxx and Xxxxxxx Xxxxx.
4.07 Good Standing Certificates. The Cosmo Group
shall have delivered to the Investor:
(a) copies of the Certificate of Incorporation of
the Company, including all amendments thereto,
certified by the Secretary of State of the State of
Florida;
(b) certificates from the Secretary of State of
the State of Florida to the effect that the Company is
in good standing in such State and listing all charter
documents, including all amendments thereto, of the
Company on file; and
(c) certification from the Province of Ontario to
the effect that Cosmo Canada, Inc. is in good standing
in such province.
4.08 Truth of Representations and Warranties.
The representations and warranties of the Cosmo Group
contained in this Agreement (including, without
limitation, all Schedules and Exhibits hereto) shall
be true and correct on and as of the Closing Date with
the same effect as though such representations and
warranties had been made on and as of such date, and
the Cosmo Group shall have delivered to Investor a
certificate, dated the Closing Date, to such effect.
4.09 Governmental Approvals. All governmental
consents and approvals, if any, necessary to permit
the consummation of the transactions contemplated by
this Agreement shall have been received.
4.10 Performance of Agreements. All of the
agreements of the Cosmo Group to be performed on
or before the Closing Date pursuant to the terms
hereof shall have been duly performed, and the
Company shall have delivered to the Investor a
certificate by the President of the Company, dated
the Closing Date, to such effect.
4.11 Guaranty of Indemnities. The Principal
Shareholders shall have each entered into and
delivered to the Investor at the Closing individual
Guarantees of their respective obligations under
Section 6.02(b) of this Agreement, as well as
individual Stock Pledge Agreements by which their
Guarantees shall be secured by the pledge of such
Principal Shareholders' remaining shares of stock
of the Company.
4.12 Corporate Reserve Policy. The Cosmo Group
shall have established and implemented a corporate
reserve policy sufficient to cover the amount of
product returns and other applicable product
warranty costs which the Cosmo Group reasonably
expects to incur during the first year following
the Closing. The Cosmo Group's liability for
returns of all products currently under warranty
will not exceed One Hundred Forty-Four Thousand
Dollars ($144,000), and as of the Closing the Cosmo
Group will not have liability for returns of all
products currently under warranty greater than such
amount. The Company shall have delivered to
Investor a certificate by the President of the
Company, dated the Closing Date, to such effect.
4.13 SEC Filings. The Cosmo Group shall have
filed, as of the Closing Date, all SEC filings,
including without limitation, Form 10-K, Form 10-Q
or Form 8-K, required to be filed by the Cosmo
Group as of such date, all of which shall be true
and correct and shall not contain any statement
which is materially misleading in light of the
facts and circumstances surrounding such statement.
4.14 Blue Sky Compliance. The Company shall
have complied with all applicable state securities
laws as necessary to offer and sell the Company
Shares and the Private Shares to the Investor.
ARTICLE V
POST-CLOSING COVENANTS OF THE COMPANY
5.01 Open Communication. The Cosmo Group shall
permit the Investor at reasonable times to discuss
the Cosmo Group's affairs, finances and accounts with
the Cosmo Group's officers.
5.02 Insurance. The Cosmo Group shall maintain
insurance coverage covering risks associated with its
business in such amounts as are customary in the
industry.
5.03 Private Offering. Neither the Cosmo Group
nor anyone acting on its behalf will offer any
securities of the Cosmo Group for issuance or sale
to, or solicit any offer to acquire any of the same
from, any person or entity so as to make the issuance
and sale of the Company Shares and the Private Shares
subject to the registration requirements of Section 5
of the Securities Act.
5.04 Invention and Secrecy Agreements. Each
employee and consultant of the Cosmo Group who may
have access to the Cosmo Group's and the Investor's
proprietary information shall execute an appropriate
confidentiality agreement.
5.05 Payment of Documentary, Stamp and Similar
Taxes. The Cosmo Group shall pay any and all
documentary, stamp, transfer or other taxes which
may become due or payable with respect to or as a
result of the issuance and delivery of the Private
Shares and the Company Shares.
5.06 Reports Under Securities Exchange Act Of
1934. With a view to making available to the Investor
the benefits of SEC Rule 144 and any other rule or
regulation of the SEC that may at any time permit the
Investor to sell securities of the Company to the
public without registration or pursuant to a
registration on SEC Form S-3, the Company agrees to:
(a) make and keep public information available,
as those terms are defined in SEC Rule 144, at all
times after ninety (90) days after the effective date
of the first registration statement filed by the Cosmo
Group for the offering of its securities to the general
public;
(b) take such action, which may, but shall not
be required to, include the voluntary registration of
its securities under Section 12 of the Securities
Exchange Act of 1934, as amended ("1934 Act"), as is
necessary to enable the Investor to utilize SEC Form
S-3 for the sale of the Private Shares and the Company
Shares, such action to be taken, as required under the
1934 Act, after the end of the fiscal year in which
the first registration statement filed by the Cosmo
Group for the offering of its securities to the general
public is declared effective;
(c) file with the SEC in a timely manner all
reports and other documents required of the Cosmo Group
under the Securities Act and the 1934 Act; and
(d) furnish to the Investor, so long as the
Investor owns the Company Shares, upon request
(i) a written statement by the Cosmo Group that it has
complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective
date of the first registration statement filed by the
Cosmo Group), the Securities Act and the 1934 Act (at
any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to SEC Form S-3
(at any time after it so qualifies),
(ii) a copy of the most recent annual or quarterly
report of the Cosmo Group and such other reports and
documents so filed by the Cosmo Group, and
(iii) such other information as may be reasonably
requested in availing the Investor of any rule or
regulation of the SEC which permits the selling of any
such securities without registration or pursuant to
such plan.
5.07 Termination of Covenants. The covenants
contained in Sections 5.02 and 5.06 shall terminate
upon an underwritten public offering by the Cosmo
Group of its securities.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
6.01 Survival of Covenants and Agreements. The
respective representations, warranties, covenants and
agreements of the Principal Shareholders, the Investor
and the Cosmo Group contained in this Agreement, or
any Schedule attached hereto or any agreement or
document delivered pursuant to this Agreement shall
survive for a period of one (1) year from the
consummation of the transactions contemplated hereby;
provided, however, that the representations,
warranties and agreements made with regard to taxes
and ERISA matters shall survive until the applicable
statutes of limitations have expired; and provided
further, however, that with respect to any covenant,
term or provision to be performed hereunder or in any
of the Schedules hereto or any documents or agreements
delivered hereunder, the right of indemnification
under this Article VI shall survive until such
covenant, term or provision has been fully paid,
performed or discharged.
6.02 Indemnification.
(a) The Cosmo Group agrees to indemnify and hold
harmless the Investor and each of their respective
officers, directors, shareholders, employees,
affiliates and agents from and against, any and all
obligation, liability, loss, cost, charge, damage or
expense, including without limitation, attorneys' fees
and costs and any tax liabilities of whatever type or
nature, that results from or arises out of any action
taken or omitted by the Cosmo Group prior to the
Closing Date.
(b) The Principal Shareholders agree, jointly
and severally, to indemnify and hold harmless the
Investor and each of its respective officers,
directors, shareholders, employees, affiliates and
agents from and against, any and all obligation,
liability, loss, cost, charge, damage or expense,
including without limitation, attorneys' fees and
costs and any tax liabilities of whatever type or
nature, that results from or arises out of any action
taken or omitted by the Cosmo Group prior to the
Closing Date. Notwithstanding the foregoing, Xxxxx
Xxxxx and Xxxxxxx Xxxxx shall not guarantee any
representations and warranties of the Cosmo Group
for the time period prior to the date of the Bridge
Note, but shall guarantee all representations and
warranties of the Cosmo Group for all periods
subsequent to such date.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 Entire Agreement. This Agreement (together
with any attachments or exhibits) constitutes the
entire agreement among the Company, the Subsidiaries,
the Principal Shareholders and the Investor relating
to the subject matter hereof, and no party shall be
liable or bound to the other in any manner by any
warranties, representations or covenants except as
specifically set forth herein.
7.02 Successors and Assigns. The terms and
conditions of this Agreement shall inure to the
benefit of and be binding upon the respective
successors and assigns of the parties. Except as
expressly provided in this Agreement, nothing in
this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto
or their respective successors and assigns, any
rights, remedies, obligations or liabilities under
or by reason of this Agreement. This Agreement may
not be assigned by any party without the prior
written consent of the other parties hereto,
provided, however, that the Investor shall be
entitled to assign all of its rights and obligations
hereunder to any designee of the Investor.
7.03 Governing Law; Venue. This Agreement shall
be governed by and construed in accordance with the
internal laws of the State of Florida applicable to
the performance and enforcement of contracts made
within such state, without giving effect to the law
of conflicts of laws applied thereby. In the event
that any dispute shall occur between the parties
arising out of or resulting from the construction,
interpretation, enforcement or any other aspect of
this Agreement, the parties hereby agree to accept
the exclusive jurisdiction of the US Federal Courts
sitting in and for the County of Dade, State of
Florida. In the event either party shall be forced
to bring any legal action to protect or defend its
rights hereunder, then the prevailing party in such
proceeding shall be entitled to reimbursement from
the non-prevailing party of all fees, costs and
other expenses (including, without limitation, the
reasonable expenses of its attorneys) in bringing
or defending against such action.
7.04 Counterparts. This Agreement may be
executed in one or more counterparts, each of which
shall be deemed an original, but all of which
together shall constitute one and the same
instrument.
7.05 Headings. The headings used in this
Agreement are for convenience and shall not by
themselves be considered in construing or
interpreting this Agreement.
7.06 Notices. Any notice required or permitted
hereunder shall be given in writing and shall be
conclusively deemed effectively given upon either
(a) personal delivery; (b) one day after facsimile
transmission to the facsimile number indicated below
and evidenced by a written record of completed
transmission to such number; or (c) five days after
deposit in the United States mail, by registered or
certified mail, postage prepaid, addressed to the
following address, or to such other address as the
party may designate by ten (10) days' advance written
notice to the other party:
If to the Investor:
Starlight Development Marketing, Ltd.
5/F. Xxxxx Xxx
Industrial Building
000 Xxxxxxxx Xxxx Xxxx
Xxxx Xxxx
With a copy (which shall
not constitute notice) to:
Feldhake, August & Xxxxxxxxx
Newport Gateway Tower 2
00000 XxxXxxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. August, Esq.
Partner
If to the Company:
Cosmo Communications Corporation
00000 XX 00xx Xxxxx
Xxxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxx
President
If to Principle Shareholders:
Xxxxxxx Xxxxxx Xxxxxx
00000 X.X. 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Xxxxxx Xxxxxx
00000 XX 00xx Xxxxx
Xxxxx, XX 00000
Xxxxxxx X. Xxxxxx
00000 XX 00xx Xxxxx
Xxxxx, XX 00000
7.07 Survival of Warranties. The warranties,
representations and covenants of the parties
contained in or made pursuant to this Agreement
shall survive the execution and deliver of this
Agreement and the Closing and shall in no way be
affected by any investigation of the subject
matter thereof by or on behalf of the investor;
provided, however, that such representations and
warranties need only be accurate as of the date
of such execution and delivery and as of the
Closing.
7.08 Finder's Fees. Each party agrees to
indemnify and hold harmless the other party from
and against any liability for any commission or
compensation in the nature of investment banking
or finder's fees in connection with the
transactions contemplated by this Agreement
(and the costs and expenses of defending against
such liability or asserted liability) for which
the indemnifying party or any of its officers,
employees or representatives is responsible.
7.09 Expenses. Irrespective of whether the
Closing is effected, the Company and the
Subsidiaries, the Principal Shareholders and the
Investor will all pay their respective legal and
other fees and expenses in connection with the
negotiation, execution, delivery and performance
of this Agreement.
7.10 Amendments and Waivers. Except as
expressly provided in this Agreement, any
provision of this Agreement may be amended only
by the mutual written agreement of the parties
and the observance of any term of this Agreement
may be waived (either generally or in a particular
instance and either retroactively or prospectively)
only in a written document executed by the waiving
party.
7.11 Schedules and Exhibits. All Schedules
and Exhibits attached to this Agreement are hereby
incorporated by reference as an integral part of
this Agreement, as fully and with the same force
and effect as if such Schedule or Exhibit had been
recited within the text of this Agreement in its
entirety.
7.11 Severability. If one or more provisions
of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded
from this Agreement and the balance of this
Agreement shall be interpreted as if such provision
were so excluded and shall be enforceable in
accordance with its terms.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF the parties have executed this Agreement
effective as of the day and year first above written.
THE COMPANY:
COSMO COMMUNICATIONS CORPORATION ATTEST:
By: XXXXXX XXXXXX By: /s/
------------------- -------------
XXXXXX XXXXXX -------------
President Secretary
THE PRINCIPAL SHAREHOLDERS:
By: /s/ XXXXXXX XXXXXX XXXXXX WITNESS: By: /s/
--------------------- -------------
XXXXXXX XXXXXX XXXXXX
By: /s/ XXXXXXX X. XXXXXX WITNESS: By: /s/
------------------ -------------
XXXXXXX X. XXXXXX
By: /s/ XXXXXX XXXXXX WITNESS: By: /s/
------------- -------------
XXXXXX XXXXXX
THE INVESTOR:
STARLIGHT MARKETING AND ATTEST:
DEVELOPMENT LIMITED
By: /s/ By: /s/
-------------------- -------------
********
SCHEDULES TO STOCK PURCHASE AGREEMENT
SCHEDULE 2.02(c)
OTHER SECURITIES
None.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.03
EXISTENCE AND GOOD STANDING
The State of Florida.
The Province of Ontario, Canada.
Hong Kong
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.5
FINANCIAL STATEMENTS AND NO MATERIAL CHANGES
Audited Financial Statements are attached hereto.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.6
BOOKS AND RECORDS
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.07
SUBSIDIARIES
COSMO Plastic Manufacturing, Ltd.
COSMO Communications Manufactory, Ltd.
COSMO Time Corporation
COSMO Communication Canada, Inc.
COSMO Electronics, Inc.
COSMO Communications (H.K.) Limited
COSMO Telecom, Corporation (See Exhibit B)
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.08
TITLES TO PROPERTIES: ENCUMBRANCES
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.09
LEASES
1. None in United States.
2. Real Property Lease for 000/000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
$118,878.60 Canadian per annum
3. Postage Meter: Pitney Xxxxx
$532.00 Canadian per annum
4. Photocopier: Xerox
$1,821.12 Canadian per annum
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.10
MATERIAL CONTRACTS
a) 1990 Employee Stock Option Plan.
b) None.
c) (Loans - waiting for confirmation)
d) None.
e) None.
f) None.
g) None.
h) None.
i) None.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.11
RESTRICTIVE DOCUMENTS
1. Indebtedness incurred by the Company pursuant to that certain
revolving credit facility which provides for borrowings up to
$7,500,000, between the Company and Congress Financial
Corporation ("Congress") of which $1,001,000 was outstanding
as of December 31, 1999.
2. Indebtedness incurred by the Company pursuant to that certain
credit facility in the amount of $750,000 between the Company
and Ocean Bank of which the full amount is outstanding
(See Exhibit B).
3. Indebtedness incurred by the Company pursuant to that certain
credit facility in the amount of $422,254 between the Company
and Banco Portugues De Atlantico S.A. as of December 31, 1991
of which $61,000 is still outstanding.
4. Indebtedness incurred by the Company pursuant to that certain
credit facility in the amount of $800,000 between the Company
and Ocean Bank of which $799,000 is still outstanding.
(See Exhibit B)
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.12
LITIGATION
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.13
TAXES
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.14
LIABILITIES
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.15
INSURANCE
Cosmo Communications Corporation has no insurance policies in force
as of the date of this Agreement. There are no pending claims against
the Company or its prior insurance carrier.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.16
INTELLECTUAL PROPERTIES
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.17
COMPLIANCE WITH LAWS
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.18
CHANGE IN COMPENSATION OF EMPLOYEES OR CONSULTANTS
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.19
LIST OF EMPLOYEES
NAME GROSS START DATE OF JOB
ANNUAL SALARY DATE BIRTH DESCRIPTION
(Canadian currency)
Xxxxx Xxxxx 200,000.00 Oct-79 19-May-39 President
Xxxx Xxxxx 200,000.00 May-79 03-Feb-59 Vice President
Xxxxxxx Xxxxx 75,000.00 Apr-99 27-Mar-66 National Sales Manager
Xxxxxxxxx Xxxxxx 40,000.00 Nov-93 07-Oct-48 Office Manager
Xxxxxxx Xxxxxx 44,000.00 Sep-99 19-May-58 Controller
Xxxx Xxxxxxxx 23,100.00 Apr-99 31-Jan-68 Customer Service
Xxxxxxx Xxxxxxxx 34,000.00 Nov-95 04-Mar-56 Warehouse Supervisor
Xxxxx Xxxxxx 25,000.00 Dec-98 05-Oct-70 Reception, Billing
Xxxxx Xxxxxxxx 22,000.00 Feb-98 07-Oct-59 Warehouse
Xxxxxx Xxxxxxxx 20,000.00 Dec-99 18-Apr-71 Data Entry
Arjun Perera 35,000.00 Dec-96 31-Oct-62 Warehouse Supervisor
Xxxxx Xxx Xxxxx 29,000.00 Jul-90 03-Jun-36 Technician
Ki-So Kam 25,500.00 Nov-93 08-May-47 Technician
Xxxxxxxx Xxxxxx 22,000.00 Jul-97 12-Nov-65 Warehouse
Acctg/Cust. Serv. 24,000.00
Xxxxxxxxx Xxxxxx 25,000.00 Apr-00 28-Nov-72 Customer Service
Xxxxxx Xxxxxx 22,500.00 Dec-99 27-Jan-64 Warehouse
Overtime 42,690.00
Temp 45,000.00
TOTAL 953,790.00
EMPLOYEE BENEFIT PLANS:
None
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.21
INTERESTS IN CLIENTS, SUPPLIERS, ETC.
NONE.
Initials: /s/ Initials: /s/ Initials: /s/
SCHEDULE 3.22
BANK ACCOUNTS, POWERS OF ATTORNEY AND COMPENSATION OF
EMPLOYEES
1. C.I.B.C
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Acct.# 057020102603519
1. Authorized signers: Xxxxx Xxxxx & Xxxxxxx Xxxxx
2. Powers of Attorney: NONE.
3. Other Employees: NONE.
Initials: /s/ Initials: /s/ Initials: /s/
********
EXHIBIT A TO THE STOCK PURCHASE AGREEMENT
Starlight Marketing Development Limited
5/F., Xxxxx Xxx Industrial Building
000 Xxxxxxxx Xxxx Xxxx, Xxxx Xxxx
April 19, 2000
Cosmo Communications Corporation
00000 X.X. 00xx Xxxxx
Xxxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxx
President
Ref: Acquisition of Shares of Cosmo Communications Corporation.
Dear Xxxxxx:
As you are aware, on November 9, 1999 Starlight Marketing
Development Limied, a Hong Kong corporation (the "Purchaser") entered
into a Letter of Interest (the "LOI") with Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxx, XX Xxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxx and Cosmo
Communications Corporation, a Florida corporation (the "Company" and,
together with Messrs. Suarez, Ortega, Xxxxxx, Xxxxx and Xxxxx
sometimes referred to herein collectively as the "Sellers") whereby
the Purchaser was to purchase from the Sellers an aggregate number of
shares of common stock of the Company (the "Shares") equal to eighty-
four and eighty-nine hundredths percent (84.89%) of the total number
of issued and oustanding Shares of the Company as of the date such
purchase is consummated (the "Closing"). To further this share
purchase transaction, and as an accommodation to the Company and the
principal Sellers, the Purchaser entered into a Management Consulting
Agreement (the "Management Agreement") and an Intercreditor Agreement,
each dated as of January 7 2000, whereby the Purchaser became
entitled to, and it did, make certain loans to the Company totaling
USD Four Hundred Thousand Dollars ($400,000). Attached as exhibits
to the Management Agreement were option agreements providing options
to the Purchaser to purchase from each Seller his or its pro rata
portion of the Shares being acquired in the hare purchase transaction.
Each of the Management Agreement, the Option Agreements, the Inter-
creditor Agreement and all other documents and instruments entered
into between the parties in furtherance thereof are sometimes
referred to herein as the "Subsequent Documents".
Among the other terms and conditions of the LOI and the
Subsequent Documents, he Sellers represented and warranted that the
pro forma Net Asset Value of the Company (the "NAV") as of the Closing
Date would not be less than negative USD $499,000. Upon conclusion of
an audit of the Company by the Purchaser's independent auditors, the
Company's actual NAV is negative USD $994,000, calculated as set forth
on Schedule A attached to this Agreement (the "Additional Deficit").
By our respective signatures below, each of us hereby agrees, in
consideration of each party's continued agreement to proceed with the
share purchase in accordance with the terms of the LOI and the Sub-
sequent Documents, to cause the following actions to offset the amount
of the
Additional Deficit:
1. at the Closing, Messrs. Xxxxxx, Xxxxxx and Xxxxxx shall
deliver to the Company a Secured Promissory Note (the "Note"), which
Note shall have a term of two (2) years and bear simple interest at
the rate of twelve percent (12%) per annum; the Note shall be secured
by a pledge of their respective Shares, totaling 3,275,493 in the
aggregate; in the event of a default on payment under the Note, all
or any applicable portion of the Shares secured by the stock Pledge
will be foreclosed upon by the Company, at a valuation of $0.037615
per Share; upon any such foreclosure, the Shares may be, at the sole
election of the Company, either retired or sold by, and for the
benefit of, the Company;
2. the difference between the amount of the Note and the amount
of the Additional Deficit shall be set off at the Closing as follows:
(a) Messrs. Xxxxx and Xxxxx shall set off the amount of $79,425
against repayment of amounts owed by the Company to each of them for
loans extended to the Company prior to the Closing;
(b) to cover the remaining Additional Deficit amount of
$35,628.81, Messrs. Xxxxxx, Xxxxxx and Xxxxxx shall deliver to the
Company an aggregate of 947,147 Shares to be retired or sold by the
Company at its sole and exclusive election, at the rate of $0.037615
per Share;
3. upon the Closing, the Company shall issue the following persons
the number of restricted Shares set forth next to such persons names
below, in consideration of the forgiveness by such persons of certain
indebtedness and/or the obligations owed to such person by the Company.
This debt conversion is calculated at the rate of $0.037615 per Share,
against delivery at the Closing of evidence or corporate certification
of such debt or obligation.
Xxxxxxx X. Xxxxxx and 1,510,000 Shares
Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxx 45,000 Shares
Xxxxx Xxxxx and 535,000 Shares
Xxxxxxx Xxxxx
Total New Issuance Upon Debt Conversion 2,090,000 Shares
If the foregoing is acceptable to you , please so signify by signing
in the spaces provided below. Upon receipt of the signed Agreement,
we shall instruct our attorneys to finalize the definitive Share
Purchase Agreement and other documents necessary to reflect this
Agreement. We would like this Agreement signed by no later than the
close of business on Thursday, April 20, 2000, with a view toward
Closing effective as of May 1, 2000.
Very truly yours,
STARLIGHT MARKETING
DEVELOPMENT LTD.
By: /s/
-------------------
We hereby agree to all of the foregoing terms and conditions, in
consideration of your agreement to proceed with the Share purchase
as described herein, as of this 19th day of April, 2000.
THE COMPANY:
COSMO COMMUNICATIONS
CORPORATION ATTEST:
By: /s/ XXXXXX XXXXXX By: /s/
------------- -------------
XXXXXX XXXXXX
President Secretary
THE PRINCIPAL SHAREHOLDERS:
By: /s/ XXXXXXX XXXXXX XXXXXX By: /s/ XXXXXXX X. XXXXXX
--------------------- ------------------
XXXXXXX XXXXXX XXXXXX XXXXXXX X. XXXXXX
By: /s/ XXXXXX XXXXXX By: /s/ XXXXX XXXXX
------------- -----------
XXXXXX XXXXXX XXXXX XXXXX
By: /s/ XXXXXXX XXXXX
-------------
XXXXXXX XXXXX
SCHEDULE A
CALCULATION OF THE ADDITIONAL DEFICIT AMOUNT
Negative NAV as Determined by the Independent Auditors ($994,080)
Negative NAV as Represented by the Sellers in the LOI ($499,000)
Other Adjustments:
Auditor's Adjustment ($10,123)
Unrecorded Loan (Horaks) ($11,000)
Provisions Deducted (Walmart) ($15,183)
($36,306)
Add-back for Starlight Credit for Future Expected Profits $242,500
TOTAL ADDITIONAL DEFICIT AMOUNT: ($238,274)
Mr. Xxxxxx Xxxxxx
Cosmo Communications Corporation
April 19, 2000
********
ADDENDUM 1 EXHIBIT A, DATED APRIL 19, 2000
COSMO COMMUNICATIONS CORPORATION
Addendum to Letter Agreement
In addition to the terms and conditions of the Letter Agreement
entered into among the undersigned as of April 18, 2000, the
undersigned further agree that upon the Closing, the Company
shall issue the following persons the number of restricted
Shares set forth next to such persons names below, in consid-
eration of the forgiveness by such persons of certain indebted-
ness and/or the obligations owed to such person by the Company.
This debt conversion is calculated at the rate of $0.037615
per Share, against delivery at the Closing of evidence or
corporate certification of such debt or obligation.
Xxxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxx 1,510,000 Shares
Xxxxxx Xxxxxx 45,000 Shares
Xxxxx Xxxxx and 535,000 Shares
Xxxxxxx Xxxxx
Total New Issuance Upon Debt Conversion 2,090,000 Shares
The foregoing is agreed to and accepted as of this 19th of April, 2000,
STARLIGHT MARKETING DEVELOPMENT LTD.
By: /s/
-----------------
THE COMPANY:
COSMO COMMUNICATIONS CORPORATION ATTEST:
By: /s/ XXXXXX XXXXXX By: /s/
------------- ------------
XXXXXX XXXXXX
President Secretary
THE PRINCIPAL SHAREHOLDERS:
By: /s/ XXXXXXX XXXXXX XXXXXX By: /s/ XXXXXXX X. XXXXXX
--------------------- ------------------
XXXXXXX XXXXXX XXXXXX XXXXXXX X. XXXXXX
By: /s/ XXXXXX XXXXXX By: /s/ XXXXX XXXXX
------------- -----------
XXXXXX XXXXXX XXXXX XXXXX
By: /s/ XXXXXXX XXXXX
-------------
XXXXXXX XXXXX
********
ADDENDUM 2 TO EXHIBIT A, DATED JULY 13, 2000
STARLIGHT MARKETING DEVELOPMENT LIMITED
5/F., XXXXX XXX INDUSTRIAL BUILDING
000 XXXXXXXX XXXX XXXX
XXXX XXXX
July 13, 2000
Cosmo Communications Corporation
00000 X.X. 00xx Xxxxx
Xxxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxx
President
Ref: Initial Closing of Acquisition of Shares of
Cosmo Communications Corporation by Starlight Marketing
Development Limited.
Dear Xx. Xxxxxx:
Reference is made to that certain Letter Agreement, dated
April 19, 2000, pursuant to which Starlight Marketing
Development Limited ("Starlight") agreed to purchase up
to 84.89% of the total outstanding common stock of Cosmo
Communications Corporation (the "Company"), including
947,147 shares from the three principal shareholders of
the Company, namely yourself and Messrs. Xxxxxxx Xxxxxx
Xxxxxx and X.X. Xxxxxx (the "Principal Shareholders").
Through subsequent agreements, a series of conversions of
debt owed by the Company to the Principal Shareholders,
and other similar adjustments, were agreed upon between
Starlight and the Company.
Originally, it was contemplated by the parties that the
majority of the shares to be acquired by Starlight would
be issued by the Company. This will, as you know,
necessitate an increase in the amount of authorized
shares, as there are currently an insufficient amount
of shares authorized to cover the entire amount of the
shares which the Company is contractually bound to sell
to Starlight under its various agreements. The need to
have additional shares issued was not seen as a problem
by Starlight, since it is a matter of having the Company's
Articles of Incorporation amended by simple shareholder
vote. Unfortunately, as a result of the failure of the
Company to file its audited financial statement for FY1999
as part of its Annual Report on Form 10-K, the Company
cannot call for a shareholders' meeting and hold the
required shareholder votes, including for the
authorization of the additional shares necessary to
complete the Starlight acquisition as contemplated.
To keep the Starlight share purchase on track, since
it now appears that it may be September before the requisite
shareholders' meeting will be able to take place, we have
proposed that the acquisition be separated into two closings:
the initial closing will be a sale of the controlling interest
(51%) of the existing outstanding common stock by the Principal
Shareholders', which closing can occur immediately, and the
closing for the purchase of the remaining shares and completion
of the debt conversion and other transactions described in the
prior agreements between us will be consummated at such time as
the audit has been completed, the proxy requirements complied
with and the shareholder vote properly held approving the total
transaction.
According to the most recent information available, the
Company currently has 2,642,000 shares issued and outstanding.
In order to acquire 51% of the total current stock ownership,
it will be necessary for Starlight to purchase from the Principal
Shareholders 1,347,420 shares in the aggregate. Based upon
information contained in the public records, the Principal
Shareholders currently own, in the aggregate, 1,720,666 shares
of common stock (and after the first closing they would retain
the amount of 373,246 shares, together with such additional
shares as they are entitled to receive in connection with the
debt conversion and other similar transactions.
By signing in the spaces provided below, this letter will
confirm, and be a binding agreement to effect, the following
provisions:
1. the initial closing shall be completed by not later
than July 31, 2000, and shall result in the sale by the
Principal Shareholders, and the purchase by Starlight, of
1,347,420 shares in the aggregate, at a price of $0.037615
per share, representing not less than 51% of the total issued
an outstanding shares of the Company as of the date of the
closing;
2. the Principal Shareholders shall use their best efforts
to obtain the consents of its two lenders, Ocean Bank and
Congress Financial, to the two separate closings described
herein as soon as practicable after signing of this Agreement;
and
3. upon completion of the initial closing as contemplated
herein, and subject to the approval of the shareholders at the
upcoming shareholder meeting, the parties shall cause the holding
of a second closing, whereby Starlight shall purchase the
remaining shares from the Company necessary to equal a total
ownership interest of 84.89% of the Company, and shall cause the
debt conversions and other transactions contemplated in the
several agreements between us to occur, which obligation shall
be irrevocable and binding on all parties as set forth herein.
If the foregoing is acceptable, please so signify by signing in
the spaces provided below. Upon receipt of the signed Agreement,
we shall instruct our attorneys to finalize the closing documents
necessary to reflect this Agreement. We would like this
Agreement signed by no later than the close of business on
Tuesday, July 18, 2000, with a view toward Closing as soon
thereafter as possible, but in no event later than July 31, 2000.
Very truly yours,
STARLIGHT MARKETING
DEVELOPMENT LTD.
By:
We hereby agree to all of the foregoing terms and conditions,
in consideration of your agreement to proceed with the two
closings as described herein, as of this ___ day of July, 2000.
THE COMPANY:
COSMO COMMUNICATIONS CORPORATION ATTEST:
By: /s/ XXXXXX XXXXXX By: /s/
------------- -------------
XXXXXX XXXXXX
President Secretary
THE PRINCIPAL SHAREHOLDERS:
By: /s/ XXXXXXX XXXXXX XXXXXX By: /s/ XXXXXXX X. XXXXXX
--------------------- ------------------
XXXXXXX XXXXXX XXXXXX XXXXXXX X. XXXXXX
By: /s/ XXXXXX XXXXXX
-------------
XXXXXX XXXXXX
********
ADDENDUM 3 TO EXHIBIT A, DATED JULY 27, 2000
STARLIGHT MARKETING DEVELOPMENT LIMITED
5/F., XXXXX XXX INDUSTRIAL BUILDING
000 XXXXXXXX XXXX XXXX
XXXX XXXX
July 27, 2000
Cosmo Communications Corporation
00000 X.X. 00xx Xxxxx
Xxxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxx
President
Ref: Assignment of Agreements in connection with the Acquisition
of Shares of Cosmo Communications Corporation by Starlight Marketing
Development Limited.
Dear Xx. Xxxxxx:
Reference is made to those certain agreements wherein Starlight Market
ing evelopment Limited ("Starlight") has agreed to purchase up to 84.
89% of the total outstanding common stock of Cosmo Communications
Corporation (the "Company"), including 947,147 shares from the three
principal shareholders of the Company, namely yourself and Messrs.
Xxxxxxx Xxxxxx Xxxxxx and X.X. Xxxxxx (the "Principal Shareholders").
A series of agreements, including but not limited to a Share Purchase
Agreement, letter agreements regarding conversion of debt and dual
closings and other agreements to effect the above referenced
transaction have been entered into between Starlight and the Company
(the "Agreements").
Starlight hereby assigns, transfers, conveys, and delivers unto
Master Light Enterprises Limited, its successors and assigns, forever,
all of the rights and obligations and Master Light Enterprises
Limited hereby assumes all of the obligations of Starlight under and
in accordance with the Agreements. The provisions of each of the
Agreements are incorporated herein by this reference. Nothing
contained in this Assumption Agreement is intended to or will be
deemed to supersede, amend, limit, modify, augment, or obviate any
of the rights or obligations of Starlight, the Company, or the
Principal Shareholder under the Agreements.
By signing in the spaces provided below, this letter will
confirm, and be a binding agreement to effect, the following
provisions:
1. the initial closing shall be completed by not later than
August 4, 2000, and shall result in the sale by the Principal
Shareholders, and the purchase by Master Light Enterprises Limited
2. the Principal Shareholders shall use their best efforts to
obtain the consents of its two lenders, Ocean Bank and Congress
Financial, to the change in Purchasers described herein
as soon as practicable after signing of this Agreement; and
3. upon completion of the initial closing as contemplated
herein, and subject to the approval of the shareholders at the
upcoming shareholder meeting, the parties shall cause the holding
of a second closing, whereby Master Light Enterprises Limited
shall purchase the remaining shares from the Company necessary to
equal a total ownership interest of 84.89% of the Company, and
shall cause the debt conversions and other transactions
contemplated in the Agreements to occur, which obligations shall
be irrevocable and binding on all parties as set forth herein.
If the foregoing is acceptable, please so signify by signing in
the spaces provided below. Upon receipt of the signed a copy of
this letter, we shall instruct our attorneys to finalize the
closing documents. We would like this document signed by no later
than the close of business on Tuesday, August 1, 2000, with a view
toward Closing as soon thereafter as possible, but in no event
later than
August 4, 2000.
Very truly yours,
STARLIGHT MARKETING
DEVELOPMENT LTD.
By:
--------------------
MASTER LIGHT ENTERPRISES
LIMITED
By:
--------------------
We hereby agree to all of the foregoing terms and conditions.
THE COMPANY:
COSMO COMMUNICATIONS CORPORATION ATTEST:
By: /s/ XXXXXX XXXXXX By: /s/
------------- -------------
XXXXXX XXXXXX
President Secretary
THE PRINCIPAL SHAREHOLDERS:
By: /s/ XXXXXXX XXXXXX XXXXXX By: /s/ XXXXXXX X. XXXXXX
--------------------- ------------------
XXXXXXX XXXXXX XXXXXX XXXXXXX X. XXXXXX
By: /s/ XXXXXX XXXXXX
-------------
XXXXXX XXXXXX
********
ADDENDUM 4 TO EXHIBIT A, DATED NOVEMBER 20, 2000
Master Light Enterprises Limited
5/F., Xxxxx Xxx Industrial Building
000 Xxxxxxxx Xxxx Xxxx, Xxxx Xxxx
November 20, 2000
Cosmo Communications Corporation
00000 X.X. 00xx Xxxxx
Xxxxx, XX 00000
Attn: Mr. Xxxxxx Xxxxxx
President
Ref: Acquisition of Shares of Cosmo Communications Corporation.
Dear Xxxxxx:
Reference is made to the letter agreements pertaining to the above-
referened transaction dated April 19, 2000 and July 13, 2000 (the
"First Closing Agreements"), regarding the consummation of the closing
of the purchase of shares of Cosmo Communications Corporation (the
"Company") by Master Light Enterprises (the "Purchaser"), initially
from the principal shareholders described below (the "First Closing")
and subsequently from the Company directly (the "Second Closing").
As you and I have discussed recently, there have been some develop-
ments regarding the Company that have surfaced, and which are
contrary to the representations and warranties made in the Stock
Purchase Agreement entered into between the Company, its principal
stockholders named therein (the "Principal Shareholders") and
Starlight Marketing Development Ltd. (and subsequently assigned to
the Purchaser). Primarily, these items involve a larger net asset
value than originally agreed to between the parties and the commence-
ment of an anti-dumping lawsuit which may potentially result in
fines and other penalties being assessed against the Company.
In order to induce the Purchaser to continue with the acquisition
as planned, the principal shareholders have offered, and we have
agreed to accept, the following additional requirements beyond what
is already reflected in the First Closing Agreements. Specifically,
we have agreed as follows:
1. At the consummation of the First Closing, which shall occur
at the offices of Xxxxxxxx, August & Xxxxxxxxx, LLP upon the
execution of this letter and the Escrow Agreement described below
by both parties, the amount of $50,683.00 (representing the
"Purchase Price" for the purchase by the Purchaser of a total of
1,347,420 shares of the Company from the Principal Shareholders),
shall be pledged to the Purchaser to secure the respective
obligations of the Principal Shareholders to be performed at or
before the Second Closing as more specifically outlined in the First
Closing Agreements. To effect this pledge of cash, the Principal
Shareholders shall enter into and execute the Escrow Agreement with
our counsel, Xxxxxxxx, August & Xxxxxxxxx, LLP, to hold such funds
on our behalf pending the Second Closing.
2. At the consummation of the Second Closing, the Principal
Shareholders shall pledge certain items as security for the
continuing obligations of the Principal Shareholders subsequent to
the Second Closing, as set forth in the First Closing Documents, in
the Stock Purchase Agreement and in any other documents or instru-
ments entered into at the Second Closing in accordance with the
Stock Purchase Agreement (the "Continuing Obligations"). The
security to be pledged in respect of these Continuing Obligations
shall be the following:
(a) the Principal Shareholders shall renew the pledge of the
Purchase Price in accordance with the terms of the Escrow Agreement;
and
(b) the Principal Shareholders shall provide a stock pledge,
in favor of the Purchaser, with respect to 980,926 shares which
will be owned by the Principal Shareholders as of that date.
In addition, the Principal shareholders shall deliver to the
Company, to be held in its treasury subsequent to the Second
Closing, an aggregate of 947,147 shares of the Company now owned
by the Principal Shareholders.
3. Finally, the Principal Shareholders agree that the
collateral security pledged to secure the obligations of the Company
with respect tot he bridge loan extended by Starlight Marketing
Development Ltd., which amount shall be credited toward the
purchase price for the Company's shares at the time of the Second
Closing, shall continue to be held to secure the Continuing
Obligations of the Principal Shareholders as contemplated herein.
4. 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 as of the date such Continuing Obligations have been
fully satisfied, all pledges and other security interests granted
pursuant to this Letter shall be released and fully discharged.
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 as of such date all collateral pledged to the Purchaser
hereunder shall become the property of the Purchaser, without
further consideration, as will be specifically set forth in the
collateral documents to be entered into between the parties at the
Second Closing.
If the foregoing is acceptable to you as an accurate description
of our prior agreement, then please so signify by signing in the
spaces provided below. Upon receipt of the signed Agreement, we
shall instruct our attorneys to complete the First Closing and
proceed immediately to the Second Closing.
Very truly yours,
MASTER LIGHT ENTERPRISES LTD.
By: /s/
----------------
We hereby agree to all of the foregoing terms and conditions, in
consideration of your agreement to proceed with the Share purchase
as described herein, as of this 20th day of November, 2000.
THE COMPANY:
COSMO COMMUNICATIONS CORPORATION ATTEST:
By: /s/ XXXXXX XXXXXX By: /s/
------------- -------------
XXXXXX XXXXXX
President Secretary
THE PRINCIPAL SHAREHOLDERS:
By: /s/ XXXXXXX XXXXXX XXXXXX By: /s/ XXXXXXX X. XXXXXX
--------------------- ------------------
XXXXXXX XXXXXX XXXXXX XXXXXXX X. XXXXXX
By: /s/ XXXXXX XXXXXX
-------------
XXXXXX XXXXXX
********
EXHIBIT B TO THE STOCK PURCHASE AGREEMENT
EXHIBIT B
EXCLUDED ASSETS & LIABILITIES
Assets:
1000 shares of commons stock of Cosmo Telecom Corp.
60 shares of common stock of CSE Technologies, Inc.
600 shares of common stock of CSE Technologies, Inc.
Real property located at 00000 XX 00xx xxxxx, Xxxxx
Xxxxxxx 00000 Dade County, Florida. All of lots
11,12, and 13, block 00, XXXXXXXX XXXXX XXXXXXXXXX
XXXX SECTION TWO, Recorded in plat Book 78, page
58, of the public records of Dade County, Florida;
and a portion of Xxx 00, Xxxxx 00; xx xxxx
XXXXXXXX XXXXX XXXXXXXXXX XXXX SECTION TWO
Liabilities:
All obligations due under Promissory note and
mortgage deed dated December 16, 1996 in favor
of Ocean Bank recorded on Dec. 18, 96, Book
17464,page 2252
All obligations due under the terms of that
certain Commercial/Agricultural revolving or
draw note, variable rate, dated Aug. 29, 97 in
favor of Ocean Bank in principal amt. $800,000
All obligations due under the term of a
Promissory note dated May 21,99 in the amt
of $50,000 held by Xxxxxx Xxxxxxx.
