EXHIBIT H-2 (Smyth) STANDSTILL AGREEMENT
EXHIBIT
H-2
(Xxxxx)
This
AGREEMENT (the "Agreement") is made as of the ___ day of April, 2005, by the
signatories
hereto (each a "Holder"), in connection with his ownership of equity of Energy
& Engine Technology Corporation, a Nevada corporation (the
"Company").
NOW,
THEREFORE, for good and valuable consideration, the sufficiency and receipt of
which consideration are hereby acknowledged, Holder agrees as
follows:
1. |
Background. |
a.
|
Holder
is the beneficial owner of the amount of shares of the Common Stock,
$0.001 par value, of the Company (“Common Stock”) designated on the
signature page hereto. |
x. |
Xxxxxx
acknowledges that the Company has entered into or will enter into an
agreement with each subscriber (“Subscription Agreement”) to the
Company’s
secured
convertible promissory notes and warrants
(the “Subscribers”), for the sale of an aggregate of up to $1,500,000 of
secured
convertible promissory notes and warrants to
the Subscribers (the “Offering”). Holder understands that, as a condition
to proceeding with the Offering, the Subscribers have required, and the
Company has agreed to provide an agreement from the Holder to refrain from
selling any securities of the Company for a period of twelve months from
the Actual Effective Date, as defined in the Subscription Agreement (the
"Restriction Period"). |
2. |
Share
Restriction. |
a. |
Holder
hereby agrees that during the Restriction Period, the Holder will not sell
or otherwise dispose of any shares of Common Stock or any options,
warrants or other rights to purchase shares of Common Stock or any other
security of the Company which Holder owns or has a right to acquire as of
the date hereof or hereafter, other than in connection with an offer made
to all shareholders of the Company or any merger, consolidation or similar
transaction involving the Company. Holder further agrees that the Company
is authorized to and the Company agrees to place "stop orders" on its
books to prevent any transfer of shares of Common Stock or other
securities of the Company held by Holder in violation of this
Agreement. |
b. |
Any
subsequent issuance to and/or acquisition of shares or the right to
acquire shares by Holder will be subject to the provisions of this
Agreement. |
c. |
The
foregoing restrictions notwithstanding the Holder may sell during the
Restriction Period, up to five percent (5%) of the amount of shares of
Common Stock actually owned by Holder on the Initial Closing Date (as
defined in the Subscription Agreement). In no event may more than one
percent (1%) of the amount of shares of Common Stock actually owned by the
Holder on the Initial Closing Date be sold during any thirty (30) day
period. |
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d.
|
Notwithstanding
the foregoing restrictions on transfer, the Holder may, at any time and
from time to time during the Restriction Period, transfer the Common Stock
(i) as bona fide gifts or transfers by will or intestacy, (ii) to any
trust for the direct or indirect benefit of the undersigned or the
immediate family of the Holder, provided that any such transfer shall not
involve a disposition for value, (iii) to a partnership or limited
liability company which is the general partner of a partnership or limited
liability company of which the Holder is a general partner or manager, as
the case may be, provided, that, in the case of any gift or transfer
described in clauses (i), (ii) or (iii), each donee or transferee agrees
in writing to be bound by the terms and conditions contained herein in the
same manner as such terms and conditions apply to the undersigned. For
purposes hereof, "immediate family" means any relationship by blood,
marriage or adoption, not more remote than first
cousin. |
3.
|
Bankruptcy
Standstill.
So
long as any of the notes or warrants referenced in paragraph 1.b. are
outstanding, Holder agrees that he will not initiate or cause to be
initiated on its behalf proceedings for the appointment of a trustee or
receiver or file an involuntary action against the Company under Chapter 7
or 11 of Title 11 of the United States Code declare a default against the
Company or otherwise commence or caused to be commenced any collection
proceedings against the Company or enforce or cause enforcement of any of
his rights against the Company except pursuant to a certain Security
Agreement and Collateral Agent Agreement entered into at or about the date
hereof. Holder also agrees to not collect from the Company payments in
excess of the prior monthly agreed to payments under any previously
existing agreements with the Company. |
4. |
Acknowledgements.
Holder
acknowledges that his rights are limited to those granted under this
Agreement and under the Security Agreement and he is not entitled to any
other benefit under the transactions contemplated hereby and thereby. He
also acknowledges that he has not been represented by Grushko &Mittman
in an attorney/client capacity and that the only relationship between the
two is with respect to Grushko & Xxxxxxx’x role as Collateral Agent
with respect to the transactions contemplated
hereby. |
5.
|
Limited
Antidilution.
Holder acknowledges that despite any previously existing agreements to the
contrary with the Company his antidilution rights with regard to Company
stock is limited as follows: |
a. |
Antidilution
rights shall only be granted with respect to issuances of Common Stock
(whether by new issuances, conversion from debt instruments or exercise of
warrants or options) for consideration less than $.10 per share, subject
to equitable adjustment for stock splits and the like (“Antidilution
Transactions”). |
b. |
With
respect to Antidilution Transactions, Holder shall receive a number of
shares so that his percentage of shares relative to such transaction
(inclusive of his shares) is 10%. For example, if an investor were to
receive 1000 shares, Holder would be entitled to receive 110 shares, as
110 shares to 1110 (1000+110) shares, is 10%. In order to simplify, all
new issuances which are Antidilution Transactions shall be multiplied by
11% to obtain the number of shares due Holder. Any shares received by
Holder as a result of Anti-dilution Transactions shall be subject to the
restrictions described herein. |
194
6. |
Miscellaneous. |
a. |
At
any time, and from time to time, after the signing of this Agreement
Holder will execute such additional instruments and take such action as
may be reasonably requested by the Subscribers to carry out the intent and
purposes of this Agreement. |
b. |
This
Agreement shall be governed, construed and enforced in accordance with the
laws of the State of New York
without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction, except to the
extent that the securities laws of the state in which Holder resides and
federal securities laws may apply. Any proceeding brought to enforce this
Agreement may be brought exclusively in courts sitting in New York County,
New York. |
c. |
This
Agreement contains the entire agreement of the Holder with respect to the
subject matter hereof. |
d. |
This
Agreement shall be binding upon Holder, its legal representatives,
successors and assigns. |
e. |
This
Agreement may be signed and delivered by facsimile and such facsimile
signed and delivered shall be enforceable. |
f. |
The
Company agrees not to take any action or allow any act to be taken which
would be inconsistent with this Agreement. |
IN
WITNESS WHEREOF, and intending to be legally bound hereby, Holder has executed
this Agreement as of the day and year first above written.
Dated:
April ___, 2005
HOLDER: | ||
(Signature
of Holder) | ||
XXXXX
X. XXXXX | ||
(Print
Name of Holder) | ||
Number
of Shares of Common Stock | ||
Beneficially
Owned | ||
[DESCRIBE
CONVERTIBLE INSTRUMENTS] | ||
COMPANY: | ||
ENERGY
& ENGINE TECHNOLOGY CORPORATION | ||
By: |
195