EXHIBIT 99.1
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AGREEMENT OF RESCISSION, REPURCHASE AND SETTLEMENT
THIS AGREEMENT OF RESCISSION, REPURCHASE AND SETTLEMENT dated as of
November 1, 1995 is by XXXX Investors, L.L.C., a limited liability company
organized under the laws of the State of Delaware, with its principal business
and office address located at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000
("XXXX Investors") and XXXX, Inc., a New York business corporation with its
principal business headquarters located at 0000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx
Xxxx 00000 (the "Company").
WITNESSETH:
WHEREAS, on September 25, 1995, the Company sold and CPAC Investors
purchased, in a private placement, 1,000,000 shares of the $.01 par value common
stock of the Company at $11.00 per common share, pursuant to the terms and
conditions of a Subscription Agreement executed by the parties hereto on
September 22, 1995; and
WHEREAS, on October 4, 1995, the Company sold and certain other accredited
investors unrelated to XXXX Investors purchased, in a second private placement,
500,000 shares of the Company's $.01 par value common stock at $11.00 per common
share, pursuant to the terms and conditions of subscription agreements executed
by the Company and such other accredited investors on October 4, 1995; and
WHEREAS, in conjunction with its review of the Company's Current Report
(Form 8-K) reporting both placements, received by The NASDAQ Stock Market
("NASDAQ") on October 6, 1995, the Staff of NASDAQ (the "Staff") raised concerns
that, in accordance with certain provisions of the National Association of
Securities Dealers ("NASD") Bylaws dealing with corporate governance, prior
shareholder approval should have been obtained to the extent that the number of
shares sold in the placement equaled or exceeded 20% of the Company's pre-
placement issued and outstanding shares; and
WHEREAS, on October 17, 1995, the Company presented its position to the
Staff that the requisite shareholder approval for the entire number of shares
issued in the placements had been obtained; and
WHEREAS, on October 24, 1995, the Staff disagreed with the Company's
position and advised the Company that in order to remain listed as a National
Market Security on NASDAQ and in order to bring the Company into compliance with
the NASD Bylaw provisions governing shareholder approval of stock issuances in
certain circumstances, the Company should consider rescinding that portion of
the placement as equaled or exceeded 20% of the Company's pre-placement issued
and outstanding shares; and
WHEREAS, although the Company continues to believe that its position
regarding shareholder approval of both placements is correct, the Company has
concluded that the costs and uncertainties associated with an appeal and hearing
with respect to the Staff's conclusions outweigh the benefits to be derived
therefrom; and
WHEREAS, the Company believes that it is in its best interest that it
rescind the sale of that number of shares sold in the placements as equaled or
exceeded 20% of its pre-placement issued and outstanding shares; and
WHEREAS, based upon the Company's 4,341,114 pre-placement issued and
outstanding shares, the number of shares to be rescinded is 632,000 shares; and
WHEREAS, the parties to this Agreement continue to believe that the
purchase by XXXX Investors of all 1,000,000 shares at $11.00 per common share as
originally consummated was and continues to be in their mutual best interests;
and
WHEREAS, the Staff has stated that upon the consummation and final closing
of the rescission of the shares as described herein, a resale by the Company and
a repurchase by XXXX Investors of 632,000 common shares at $11.00 per share is
permissable under the NASD Bylaw corporate governance provisions, provided that
the shareholders of the Company approve such resale and repurchase prior to its
actual consummation.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
(1) For the purpose of rescinding that portion of the private placement to
XXXX Investors dated September 25, 1995 of 1,000,000 shares of the Company's
$.01 par value common stock as in the opinion of the Staff require rescission,
the Company agrees to transfer to XXXX Investors, the sum of $6,952,000,
together with interest at the rate of 5.8% per annum commencing on September 25,
1995 to and including the date of the transfer of the funds. In consideration
therefor, XXXX Investors agrees to convey to the Company, 632,000 shares of the
Company's $.01 par value common stock presently owned by XXXX Investors. The
transfer to XXXX Investors of payment in exchange for the reconveyance of such
shares shall be made by way of wire transfer to XXXX Investors of immediately
available funds.
(2) Subject to the provisions of this Agreement and specifically, the
approval of the shareholders of the Company prior to its actual consummation,
the Company will sell and XXXX Investors will purchase 632,000 shares of the
Company's $.01 par value common stock at a purchase price of $11.00 per common
share, subject to and in accordance with the terms and conditions of a
subscription agreement similar to the Subscription Agreement entered into by the
parties to this Agreement dated as of September 22, 1995.
(3) Immediately upon the closing with respect to the rescission agreed to
herein, the Company shall use its best efforts to obtain the approval of its
shareholders for the consummation of the sale to XXXX Investors of 632,000
shares of the Company's $.01 par value common shares at $11.00 per common share
and to this end shall promptly call a special meeting of its shareholders for
the express purpose of soliciting shareholder approval for such transaction. In
connection therewith, the Company shall send to its shareholders and shall file
with the Securities Exchange Commission and The NASDAQ Stock Market a Notice of
Meeting, Proxy Statement and Form of Proxy prepared in accordance with
provisions of Section 14 of the Securities Exchange Act of 1934. The Company
agrees that such Proxy Statement shall contain a statement in which the Board of
Directors recommends that shareholders vote in favor of the purchase by XXXX
Investors of 632,000 shares at $11.00 per share. At such special shareholders'
meeting, the Company agrees that its proxy holders, to the extent not otherwise
directed, officers and directors will vote all of their shares in favor of the
purchase by XXXX Investors of 632,000 shares at a purchase price of $11.00 per
share. XXXX Investors agrees to vote its 368,000 shares in favor of such
proposal.
(4) It is agreed that in accordance with the provisions of the NASD
Bylaws, the minimum vote which will constitute shareholder approval for the sale
to XXXX Investors of 632,000 shares by the Company shall be a majority of the
total votes cast on the proposal in person or by proxy, a quorum being present
in person or by proxy at such special meeting.
(5) The parties agree that closing with respect to the repurchase
transaction shall occur within ten (10) days after approval of the Company's
shareholders shall have been obtained at the offices of the Company or such
other place and date as mutually agreed upon.
(6) The obligation of XXXX Investors to repurchase the 632,000 shares as
described herein is further conditioned upon the following:
(i) there being no material adverse changes in the Company's assets,
operations, prospects or condition (financial or otherwise) from the date of
this Agreement through and up to the actual date of closing of the repurchase of
such shares;
(ii) the approval by the Company's shareholders as described herein,
within one hundred twenty (120) days of the date of this Agreement;
(iii) the delivery by the Company prior to the closing of a
certificate containing warranties and representations by the Company as to such
matters as XXXX Investors may require, including without limitation, shareholder
approval, the due issuance, authority and enforceability with respect to the
issuance of said shares and that said issuance will not result in or constitute
a breach or violation by the Company.
(7) Except as set forth herein, each of the parties hereto releases and
discharges the other from all actions, suits, damages, judgments, liabilities,
expenses, costs, interest, penalties, claims and demands of whatever kind,
nature and amount arising out of the original sale of 1,000,000 common shares to
XXXX Investors without shareholder approval and any failure on the part of the
shareholders of the Company to approve the resale-repurchase transaction
described in Section (2) of this Agreement.
(8) The parties agree that each party shall bear the responsibility to
file or cause to be filed, all forms and/or documents necessary for such party
to comply with any and all federal and state securities laws rules and
regulations as well as the rules and regulations specified by the NASD Bylaw
provisions applicable to such party with respect to the rescission and/or the
repurchase contemplated by this Agreement.
(9) The Company agrees to pay XXXX Investors the sum of $75,000 to assist
with its fees and expenses. Such payment shall be made upon the execution of
this Agreement.
(10)Any notices or other communication required or permitted herein shall
be sufficiently given if sent by registered or certified mail, postage prepaid,
return receipt requested, and to the addresses set forth above with copies of
any such notices or other communication sent to:
If to XXXX Investors: x/x Xxxxx Xxxxx, Xxx.
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Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the Company: Xxxxxx Xxxxxxxxxxx, Esq.
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Xxxxxxxxxxx, D'Xxxxxx, Xxxxxxxxxxx &
Greenfield
0000 Xxxxxxxxxx Xxxxxx Xxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
(11) This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and to the successors and assigns of the Company, its
affiliates and associates, and to the personal and legal representatives of XXXX
Investors, and to the extent applicable, its members, affiliates, associates,
successors, assigns and beneficiaries.
(12) This Agreement may be executed in any number of counterparts, all of
which shall constitute one and the same instrument, and any party hereto may
execute this Agreement by signing one or more counterparts.
(13) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the Company and XXXX Investors have executed and
delivered this Agreement as of this 1st day of November, 1995.
XXXX Investors, LLC
By:/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx
XXXX, Inc.
By:/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Chief Financial Officer
