EXHIBIT 10.27
COMMON STOCK RESALE LIMITATION AGREEMENT
This Common Stock Resale Limitation Agreement (this "Agreement") is entered
into this 8 day of March 2001, by and among Upgrade International
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Corporation, a Washington corporation (the "Company"), Xxxxxx X. Xxxxx, an
individual ("Xxxxx"), and Xxxxxx X. Xxxxx, in his capacity as trustee
("Trustee") of the Xxxxx Family Trust (the "Trust").
WHEREAS, Xxxxx and the Trust beneficially own the Shares (as defined below)
and desire to use the Shares as collateral to secure a loan;
WHEREAS, in order to use the Shares as collateral for such loan, the
prospective lenders have indicated that the Shares must be held in a brokerage
account via the Depository Trust Company ("DTC") through its Deposit Withdrawal
Agent Commission ("DWAC") system;
WHEREAS, the Shares are currently evidenced by a stock certificate bearing
a restrictive legend, due to Xxxxx'x and the Trust's status as "affiliates" of
the Company; and
WHEREAS, in order to facilitate Xxxxx'x and the Trust's request to remove
the restrictive legend and clear the Shares to a brokerage account, the Company
requires assurance that Xxxxx and the Trust will not act as underwriters within
the meaning of section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act");
NOW THEREFORE, in consideration of the premises and other good and valid
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
1. SHARES. As of the date of this Agreement, the "Shares" are owned
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and evidenced as follows:
Certificate No. Shares Owner
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735 3,000,000 The Xxxxx Family Trust
The certificate evidencing the Shares bears a restrictive legend. Xxxxx and the
Trustee hereby represent and warrant that the Shares were acquired, and the full
purchase price was paid therefor, on December 11, 1997. The Company hereby
confirms its understanding that such representation and warranty is accurate.
Xxxxx and the Trustee hereby represent and warrant that Xxxxx, the Trustee
and/or the Trust have good title to the Shares, free and clear of any liens and
encumbrances with full power to dispose of the same in accordance with
applicable law.
2. STATUS OF XXXXX AND THE TRUST. Xxxxx hereby acknowledges, on his
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own behalf and as Trustee of the Trust, that, for purposes of Rule 144 ("Rule
144") under the Securities Act, the Shares are held by an "affiliate".
3. RULE 144 DISCLOSURE. Xxxxx hereby acknowledges, on his own behalf
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and as Trustee of the Trust, that he is familiar with the terms of Rule 144 and
that the Shares have not been registered under the Securities Act and,
therefore, cannot be resold unless they are registered under the Securities Act
or unless an exemption from registration is available.
4. NEGATIVE COVENANTS. Xxxxx and Trustee on behalf of the Trust hereby
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covenant that he shall not: (a) engage in any transaction with respect to the
Shares in violation of the Securities Act, including Rule 144; or (b) engage in
any transaction with respect to the Shares that would afford a third party
opportunity to violate the Securities Act, including Rule 144, without first
permitting the Company and its counsel to review any such proposed transaction
and suggest reasonable changes to the terms thereof in order to satisfy the
Company's duty to exercise reasonable care to assure that the counterparty will
not be an underwriter within the meaning of section 2(11) of the Securities Act.
5. AFFIRMATIVE COVENANTS. Xxxxx and Trustee on behalf of the Trust
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hereby covenant that he shall: (a) notify the Company in advance of any
transaction he or the Trust plans to engage in with respect to the Shares; (b)
notify any counterparty (or their broker or agent) to any proposed transaction
with respect to the Shares that prior to entering into any such transaction he
shall first permit the Company and its counsel to review any such proposed
transaction and suggest reasonable changes to the terms thereof in order to
satisfy the Company's duty to exercise reasonable care to assure that the
counterparty will not be an underwriter within the meaning of section 2(11) of
the Securities Act; (c) permit the Company and its counsel to review any
proposed transaction with respect to the Shares and suggest reasonable changes
to the terms thereof in order to satisfy the Company's duty to exercise
reasonable care to assure that the counterparty will not be an underwriter
within the meaning of section 2(11) of the Securities Act; (d) provide the
Company each month with a copy of the statement of the broker or brokers that
hold the Shares; (e) promptly provide the Company with copies of any notices
delivered (or copied) to him or the Trust with respect to the Shares (or any
notice of an event or occurrence that could ultimately lead to a transfer of the
Shares); (f) accept as final and binding the determinations of the Company, in
consultation with its counsel, whether a proposed transaction would violate the
Securities Act, including Rule 144; (g) upon completion of or failure to enter
into the proposed loan transaction, take steps to have the Shares once again be
evidenced by certificates bearing a restrictive legend.
6. AUTHORIZATION TO CLEAR SHARES. Subject to the terms and conditions
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of this Agreement and the delivery of an opinion of counsel to the Company's
transfer agent, the Company hereby agrees to authorize the Shares to be cleared
to a brokerage account via the DTC through its DWAC system.
7. INJUNCTIVE RELIEF. The parties acknowledge and agree that
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irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
Common Stock Resale Limitation Agreement
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8. AUTHORITY TO ACT; ENFORCEABILITY. Each of the undersigned hereby
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represents and warrants that (a) he is an authorized signatory and that the
party on whose behalf he has executed this Agreement has duly authorized him to
do so; (b) this Agreement has been duly executed and delivered by the party on
whose behalf he has signed; and (c) this Agreement constitutes a valid and
binding obligation of such party enforceable against him or it, as the case may
be, in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
9. TERMINATION. This Agreement shall terminate upon the earliest of:
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(a) the return of the Shares to certificated status as contemplated by Section
5(g); (b) the sale of all of the Shares in accordance with applicable securities
laws, including Rule 144; or (c) all of the Shares owned by Xxxxx, Trustee
and/or the Trust becoming eligible for sale under Rule 144(k), accompanied by an
opinion of counsel reasonably satisfactory to the Company to that effect.
10. RELIANCE. Each of the parties hereto expressly agrees that Xxxxx
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Xxxxxx Xxxxxxx P.L.L.C. and ChaseMellon Shareholder Services may rely on their
representations, warranties, acknowledgements, agreements, confirmations and
covenants contained herein as being true and correct or to be faithfully
performed, as the case may be.
11. FURTHER ASSURANCES. From and after the date of this Agreement,
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upon the request of one or more of the others, each of the parties hereto shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
XXXXXX X. XXXXX, UPGRADE INTERNATIONAL
in his individual capacity CORPORATION
/s/ /s/
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Xxxxxx X. Xxxxx By Xxxxxx Xxxxx
Its Chief Operating Officer and
Chief Financial Officer
XXXXXX X. XXXXX, as Trustee
/s/
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Xxxxxx X. Xxxxx, as Trustee for The Xxxxx
Family Trust
Common Stock Resale Limitation Agreement
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