UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 18, 2004
Used Kar Parts, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 04-3721895
- --------------------------------- --------------------
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification No.)
3 West 57th Street, 8th Floor
New York, New York 10019
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (646) 442-4985
-------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5 Other Events and Required FD Disclosure.
On May 18, 2004, Used Kar Parts, Inc., a Florida corporation ("Used
Kar"), entered into a Securities Exchange Agreement (the "Agreement") by and
among Xenomics, a California corporation (the "Xenomics") and the individuals
named on Schedule 1.1 thereto (the "Shareholders") A copy of the Agreement is
attached hereto as Exhibit 10.1.
Pursuant to the Agreement, Used Kar agreed to purchase all of the
outstanding shares of common stock of Xenomics which is owned by the
Shareholders aggregating 3,807,055 shares in exchange for 2,258,001 shares of
common stock of Used Kar. The closing of the transaction is subject to a number
of conditions, including (i) the closing occurring prior to June 15, 2004, (ii)
Used Kar completing a private placement of its common stock, (iii) Xenomics
entering into a consulting agreement with L. David Tomei and employment
agreements with each of Samuil Umansky and Hovsep Melkonyan (each of whom are
shareholders), (iv) each of L. David Tomei, Samuil Umansky and Hovsep Melkonyan
entering into a one year option agreement with Used Kar to acquire certain
technology from Xenomics upon the occurrence of certain conditions related to
the failure of Used Kar to apply financial resources to the development of the
technology and (v) a voting agreement being entered into by Used Kar, the
Shareholders, Used Kar's shareholders holding unregistered common stock and the
investors in the proposed private placement to provide certain protection for
minority shareholders.
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit
Number Description
------ -----------
10.1 Securities Exchange Agreement by and among Used Kar
Parts, Inc., the individuals named on Schedule 1.1
thereto and Xenomics dated as of May 18, 2004.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereto duly authorized.
Dated: June 1, 2004 USED KAR PARTS, INC.
By: /s/ Christoph Bruening
------------------------------
Christoph Bruening
President
3
Exhibit 10.1
SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT ("this Agreement") dated as of May 18,
2004 by and among USED KAR PARTS, INC., a Florida corporation ("Purchaser"), the
individuals named on Schedule 1.1 hereto (the "Shareholders") and XENOMICS, a
California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Shareholders own all 3,807,755 outstanding shares (the
"Company Shares") of common stock, $.001 par value of the Company (the "Company
Common Stock"); and
WHEREAS, the Shareholders wish to sell and Purchaser desires to
purchase the Company Shares pursuant to this Agreement in exchange for shares of
the common stock $.001 par value ("Purchaser Stock") of the Purchaser (as
effected by certain recapitalization transactions described herein, the
"Purchaser Shares"); and
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the Company Shares pursuant to this
Agreement, Purchaser shall own all of the outstanding shares of capital stock of
the Company;
NOW, THEREFORE, IT IS AGREED:
ARTICLE 1
REPRESENTATIONS OF THE SHAREHOLDERS
The Shareholders, individually, represent and warrant to the Purchaser
as of the date of this Agreement and as of the date of the Closing as follows:
1.1 Ownership of Stock. Such Shareholder is the lawful owner of the
number of shares of Company Shares listed opposite the name of such Shareholder
in Schedule 1.1 hereto (in the aggregate constituting all of the issued and
outstanding shares of Company Common Stock), free and clear of all preemptive or
similar rights, liens, encumbrances, restrictions and claims of every kind. Such
Shareholder has full legal right, power and authority to enter into this
Agreement and to sell, assign, transfer and convey the Company Shares so owned
by such Shareholder pursuant to this Agreement and the delivery to Purchaser of
the Company Shares by such Shareholder pursuant to the provisions of this
Agreement will transfer to Purchaser valid title thereto, free and clear of all
liens, encumbrances, restrictions and claims of every kind. Such Shareholder is
a resident or incorporated under the laws of the state set forth opposite such
Shareholder's name in Schedule 1.1.
1
1.2 Authority to Execute and Perform Agreement; No Breach. Such
Shareholder has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement, and to sell, assign,
transfer and convey the Company Shares owned by such Shareholder and to perform
fully their respective obligations hereunder. This Agreement has been duly
executed and delivered by such Shareholder and, assuming due execution and
delivery by, and enforceability against, Purchaser, constitutes the valid and
binding obligation of such Shareholder enforceable 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 such Shareholder or in connection with the execution and delivery by
such Shareholder of this Agreement and consummation and performance by them of
the transactions contemplated hereby, other than as set forth on Schedule 1.2.
The execution, delivery and performance of this Agreement by such Shareholder
and the consummation of the transactions contemplated hereby in accordance with
the terms and conditions hereof by such Shareholder will not:
(a) knowingly violate, conflict with or result in the breach of
any of the material terms of, or constitute (or with notice or
lapse of time or both would constitute) a material default
under, any contract, lease, agreement or other instrument or
obligation to which such Shareholder is a party or by or to
which any of the properties and assets of such Shareholder may
be bound or subject;
(b) violate any order, judgment, injunction, award or decree of
any court, arbitrator, governmental or regulatory body, by
which either such Shareholder or the securities, assets,
properties or business of such Shareholder is bound; or
(c) knowingly violate any statute, law or regulation.
1.3 Restrictive Agreements. Except as set forth on Schedule 1.3
attached hereto, Such Shareholder is not subject to, or a party to, mortgage,
lien, lease, license, permit, agreement, contract, instrument, law, rule,
ordinance, regulation, order, judgment or decree, or any other restriction of
any kind or character, which would prevent consummation of the transactions
contemplated by this Agreement, compliance by such Shareholder with the terms,
conditions and provisions of which would restrict the ability of the Company to
acquire any property or conduct its business as conducted or proposed to be
conducted.
1.4 Securities Matters. Such Shareholder:
(a) understands that the Purchaser Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities act in reliance on exemptions
therefrom.
2
(b) acknowledges that the Purchaser Shares are being acquired
solely for such Shareholder's own account, for investment and
are not being acquired with a view to or for the resale,
distribution, subdivision or fractionalization thereof, the
Shareholder has no present plans to enter into any such
contract, undertaking, agreement or arrangement and such
Shareholder further understands that the Purchaser Shares, may
only be resold pursuant to a registration statement under the
Securities Act, or pursuant to some other available exemption;
(d) acknowledges that in connection with the purchase of the
Purchaser Shares, no representation has been made by
representatives of the Purchaser regarding its business,
assets or prospects other than that set forth herein and that
it is relying upon the information set forth in the filings
made by Purchaser pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended and such other
representations and warranties as set forth in this Agreement.
(e) Agrees that the certificate or certificates representing the
Purchaser Shares will be inscribed with substantially the
following legend:
"The securities represented by this certificate have not been registered under
the Securities Act of 1933. The securities have been acquired for investment and
may not be sold, transferred assigned in the absence of an effective
registration statement for these securities under the Securities Act of 1933 or
an opinion of Purchaser's counsel that registration is not required under said
Act."
1.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Company or the Shareholders 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 2
REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser as of the date of
this Agreement and as of the date of the Closing as follows:
2.1 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. 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 California, which is the
3
only jurisdiction in which the character or location of the properties owned or
leased by the Company or the nature of the business conducted by the Company
makes such qualification necessary. However, the failure to be so qualified or
in good standing in any given jurisdiction will not be deemed to be a breach of
this Section 2.1 unless the failure of the Company to be in good standing in any
such jurisdiction individually or in all such jurisdictions collectively has or
is likely to have a material adverse effect on the Company or on the
transactions contemplated herein.
2.2 Capital Stock. The Company has an authorized capitalization
consisting of 10,000,000 shares of stock, $.001 par value, of which 8,000,000
shares are Common Stock and 2,000,000 shares are Preferred Stock. There are
3,807,755 shares of Common Stock issued and outstanding and no shares of
Preferred Stock are either issued or outstanding. All such outstanding shares
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth as Schedule 2.2 attached hereto, 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, other than the sale of the Company
Shares as contemplated by this Agreement.
2.3 Financial Statements and No Material Changes. Annexed hereto as
Schedule 2.3 is the unaudited consolidated balance sheet of the Company (the
"Financial Statements") as of March 31, 2004 (the "Balance Sheet Date").
The Financial Statements were carefully prepared from the books and
records of the Company, and although the Financial Statements are not audited
and do not contain the footnotes which would be required in audited financial
statements, present fairly the financial position, assets and liabilities of the
Company and the results of its operations, on a cash basis for the respective
periods indicated applying accounting principles on a consistent basis.
The Company maintains accurate books and records reflecting its assets
and liabilities and maintains proper and adequate internal accounting controls
which provide assurance that (i) transactions are executed with management's
authorization; (ii) transactions are recorded as necessary to maintain
accountability for the Company's consolidated assets; (iii) access to the
Company's assets is permitted only in accordance with management's
authorization; (iv) the reporting of the Company's assets is compared with
existing assets at regular intervals; and (v) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis.
Since the Balance Sheet Date there has been (a) 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 public
force or otherwise and (b) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
4
results of operations or prospects, of the Company and to the best knowledge,
information and belief of the Shareholders, no fact or condition exists or is
contemplated or threatened which might cause such a change in the future.
2.4 Books and Records. The corporate materials supplied to the
Purchaser are true, correct and complete in all material respects.
2.5 Title to Properties; Encumbrances.
(a) Except as set forth on Schedule 2.5 attached hereto, the
Company has valid and marketable title to (a) all of its
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
the Schedules hereto; and (b) all of the material properties
and assets purchased by the Company since the Balance Sheet
Date all of which purchases as of a date not more than two
days prior to the date of this Agreement, have been set forth
on Schedule 2.5 attached hereto; in each case subject to no
encumbrance, lien, charge or other restriction 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 restrictions or limitations on
the use of real property or irregularities in title thereto
which do not materially detract from the value of, or impair
the use of, such property by the Company in the operation of
its business; (iii) liens for current taxes, assessments or
governmental charges or levies on property not yet due and
delinquent; and (iv) liens described on Schedule 2.5 attached
hereto (liens of the type described in clause (i), (ii) and
(iii) above are hereinafter sometimes referred to as
"Permitted Liens").
(b) The rights, properties and other assets presently owned,
leased or licensed, by the Company reflected on the balance
sheet included in the Financial Statements or acquired since
the Balance Sheet Date include all rights, properties and
other assets necessary to permit the Company to conduct its
business in the same manner as its business has heretofore
been conducted. All such properties and assets owned or leased
by the Company are in satisfactory condition and repair, other
than ordinary wear and tear.
To the Company's knowledge, no structure or improvement on the
real property leased by the Company, 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.
With respect to the real property and structures and
improvements, whether now existing, under construction or
intended to be constructed pursuant to existing plans and
specifications, the Company has all governmental permits,
approvals, consents or similar authorizations necessary to own
or lease, construct and operate its properties, each of which
are listed on Schedule 2.5(b). Such governmental permits,
5
approvals, consents or similar authorizations will remain in
effect or, if due to expire by its terms, the Shareholders
have no reason to believe that they will not be renewable in
accordance with their terms.
To the Company's knowledge, no violations of any easements or
restrictions relating to the real property exist.
To the Company's knowledge, no material structural defects in
any of the buildings or other improvements erected on the
leased real property exist.
2.6 Leases. Schedule 2.6 attached hereto, contains an accurate and
complete list and description of the terms of all leases to which the Company is
a party (as lessee or lessor). Each lease set forth on Schedule 2.6 (or required
to be set forth on Schedule 2.6) 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 thereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including the consummation 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. The Company has not violated any of the terms or conditions under any
such lease in any material respect. The property leased by the Company is in a
state of good maintenance and repair and is adequate and suitable for the
purposes for which it is presently being used.
2.7 Material Contracts. Except as set forth on Schedule 2.7 attached
hereto, the Company is not bound by:
(a) any agreement, contract or commitment relating to the
employment of any person by the Company, or any bonus,
deferred compensation, pension, profit sharing, stock option,
employee stock purchase, retirement or other employee benefit
plan;
(b) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(c) any loan or advance to, or investment in, any individual,
partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person") or
any agreement, contract or commitment relating to the making
of any such loan, advance or investment;
6
(d) any guarantee or other contingent 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 agreement, contract or commitment limiting the freedom of
the Company or any subsidiary to engage in any line of
business or to compete with any Person;
(g) any agreement, contract or commitment not entered into in the
ordinary course of business which involves $1,000 or more and
is not cancelable without penalty or premium within 30 days;
or
(h) any agreement, contract or commitment which might reasonably
be expected to have a potential adverse impact on the business
or operations of the Company; or
(i) any agreement, contract or commitment not reflected in the
Financial Statement under which the Company is obligated to
make cash payments of, or deliver products or render services
with a value greater than $1,000 individually or $5,000 in the
aggregate, or receive cash payments of, or receive products or
services with a value greater than $1,000 individually or
$5,000 in the aggregate, and any other agreement, contract or
commitment which is material to the conduct of the business of
the Company.
Each contract or agreement set forth on Schedule 2.7 (or not required
to be set forth on Schedule 2.7) is in full force and effect and, to the
Company's knowledge, there exists no default or event of default or event,
occurrence, condition or act (including the consummation of the transactions
contemplated hereby) which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default or event of
default thereunder. The Company has not violated any of the terms or conditions
of any contract or agreement set forth on Schedule 2.7 (or not required to be
set forth on Schedule 2.7) in any material respect, and, to the knowledge, of
the Shareholders, all of the covenants to be performed by any other party
thereto have been fully performed. Except as set forth on Schedule 2.7, the
consummation of the transactions contemplated hereby does not constitute an
event of default (or an event, which with notice or the lapse of time or both
would constitute a default) under any such contract or agreement.
2.8 Restrictive Documents. (a) Except as set forth on Schedule 2.8
attached hereto, the Company is not subject to, or a party to, any charter,
by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, which could materially adversely affect
the business practices, operations or condition of the Company or any of its
assets or property, or which would prevent consummation of the transactions
contemplated by this Agreement, or the continued operation of the Company's
business after the date hereof or the Closing Date (as hereinafter defined) on
7
substantially the same basis as heretofore operated or which would restrict the
ability of the Company to acquire any property or conduct business in any area.
2.9 Litigation. Except as set forth on Schedule 2.9 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the knowledge of the
Shareholders any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of the Shareholders, threatened, against
or affecting the Company, or any of its properties or rights, or any officer,
director or employee of the Company other than such items which are
insignificant and immaterial and which do not adversely affect (i) the right or
ability of the Company to carry on business as now conducted; (ii) the
condition, whether financial or otherwise, or properties of the Company; or
(iii) the consummation of the transactions contemplated hereby. To the knowledge
of the Company there is no valid basis for any such action, proceeding or
investigation. To the knowledge of the Company 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
officer, director or employee of the Company, or the securities, assets,
properties or business 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 to carry on its business as now conducted and as
proposed to be conducted by the Purchaser after the consummation of the
transactions contemplated by this Agreement; (ii) the condition, whether
financial or otherwise, of properties of the Company; or (iii) the consummation
of the transactions contemplated hereby.
2.10 Taxes. Except as set forth on Schedule 1.10, the Company and every
member of the consolidated group of which the Company is a part 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. Such returns and
reports reflect accurately all known liability for taxes of the Company for the
periods covered thereby. Except as set forth on Schedule 1.12, 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 shown to be due from, the
Company and any member of the consolidated group of which the Company is a part,
have been fully paid and fully provided for in the books and financial
statements of the Company. To the knowledge of the Company, no examination of
any tax return of the Company or any member of a consolidated group of which the
Company is a part, is currently in progress. There are no outstanding agreements
or waivers extending the statutory period of limitation applicable to any tax
return of the Company.
2.11 Liabilities. The Company has no outstanding claims, liabilities or
indebtedness, contingent or otherwise, which are not properly reflected in the
Financial Statements in a manner consistently with past practice, other than (i)
liabilities incurred subsequent to the Balance Sheet Date in the ordinary course
of business not exceeding $1,000 individually or $5,000 in the aggregate, and
(ii) liabilities disclosed in Schedule 2.11 hereto. At the Closing, the
liabilities of the Company which would be required to be reflected on a balance
sheet of the Company prepared on such date in the manner described in Section
8
2.3 will not exceed $100,000 including fees and expenses of counsel incurred
preparing for, negotiating and performing this Agreement. The Company is not in
default in respect of the terms or conditions of any indebtedness.
2.12 Intellectual Properties.
(a) Since its formation, to the Company's knowledge, the business
of the Company has not developed or utilized any Intellectual
Property (as hereinafter defined) except that which is listed
on Schedule 2.12, rights obtained by the Company pursuant to
the assignment and other ownership rights obtained by common
law assignments, licenses, consulting agreements and work for
hire employment agreements and commercially or publicly
available software and databases used by the Company as also
listed on Schedule 2.12. Except as otherwise set forth on
Schedule 2.12, to the knowledge of the Company, the Company
owns all right, title and interest in the Intellectual
Property listed on Schedule 2.12 including, without
limitation, the rights to use, transfer, assign and license
the same. Each item of Intellectual Property listed on
Schedule 2.12 and owned by the Company has, as applicable,
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 2.12, no claim adverse to the interests of the
Company in the Intellectual Property or agreements listed on
Schedule 2.12 has been made, threatened or asserted. To the
knowledge of the Company, no Person has infringed or otherwise
violated the rights of the Company in any of the Intellectual
Property or agreements listed on Schedule 2.12 nor has any
present or former employee or consultant violated any
agreement with the Company relating to Intellectual Property.
Except as set forth on Schedule 2.12, no litigation is
pending, threatened or asserted wherein the Company is accused
of infringing or otherwise violating Intellectual Property
rights of others, or of breaching a contract conveying rights
under Intellectual Property. For purposes of this Section
2.12, "Intellectual Property" means domestic and foreign
patents, patent applications, registered and unregistered
trademarks and service marks, trade names, registered and
unregistered copyrights, computer programs, databases, trade
secrets, proprietary information, and domain names. The
Shareholders have assigned any Intellectual Property owned by
them and used in the Company's business to the Company. To the
knowledge of the Company, the operation of the business of the
Company does not infringe on the Intellectual Property rights
of others.
(b) Schedule 2.12(b) lists the Company's pending patent
applications.
2.13 Compliance with Laws. To the knowledge of the Company, neither the
Company, nor to the knowledge of the Company, any officer, director or employee
of the Company, is in violation of any applicable order, judgment, injunction,
9
award or decree, related to, arising out of or affecting the business or
operations of the Company or its properties or assets. To the knowledge of the
Company, neither the Company, nor any officer, director or employee of the
Company 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
environment and OSHA and the Americans with Disabilities Act) other than
insignificant or immaterial violations which do not and will not adversely
affect (i) the Company's business or property; (ii) the business proposed to be
conducted by the Purchaser after the consummation of the transactions
contemplated by this Agreement; or (iii) the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Company, each permit,
license, order or approval of any governmental or regulatory body or other
applicable authority ("Permits") that is material to the conduct of the
Company's 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 Company, threatened, to revoke or limit any Permit, which
revocation or limitation could have an adverse effect on the Company's business
or property or the business to be conducted by the Purchaser after the
consummation of the transactions contemplated by this Agreement. Schedule 2.13
contains a list of all Permits. Except as set forth on Schedule 2.13, no
approval or consent of any person is needed in order that the Permits continue
in full force and effect following the consummation of the transactions
contemplated by this Agreement.
2.14 Employment Relations. The Company 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.
2.15 Employee Benefit Plans. The Company has no employee welfare
benefit plan (an "Employee Welfare Plan"), as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
2.16 Interests in Clients, Suppliers, Etc. Except as set forth on
Schedule 2.16 attached hereto, no Shareholder nor any officer or director of the
Company 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 Company. Ownership of securities of a
company whose securities are registered under the Securities Exchange Act of
1934, as amended, not in excess of 1% of any class of such securities shall not
be deemed to be a financial interest for purposes of this Section 2.16.
2.17 Bank Accounts and Powers of Attorney. Set forth on Schedule 2.17
attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which the Company 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 and a summary
statement of the terms thereof.
10
2.18 No Changes Since Balance Sheet Date. Except as stated otherwise in
this Agreement or the Schedules and Exhibits hereto, since the Balance Sheet
Date, the Company has 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 and which have resulted in
an increase of liabilities since the date of the Balance Sheet
of not more than $5,000 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 $1,000 or made aggregate capital expenditures and
commitments therefor in excess of $5,000;
(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 distribution 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 $10,000 in the aggregate charged to applicable
reserves, and none of which individually or in the aggregate
is material to the Company;
(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
understanding;
(j) canceled or waived any claims or rights of substantial value;
(k) made any change in any method of accounting or auditing
practice;
11
(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 Company's Financial Statements or incurred in the ordinary
course of business and consistent with past practice since the
Balance Sheet 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 shareholders or any affiliate or associate of its officers,
directors or shareholders, except compensation to officers at
rates not exceeding the rate of compensation in effect as of
the Balance Sheet Date;
(o) suffered any material adverse changes in its working capital,
financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business operations or
prospects; or
(p) agreed, whether or not in writing, to do any of the foregoing.
2.19 Certain Business Practices. No officer, director, shareholder,
employee, agent or other representative of the Company, or to the Company's
knowledge, SpaXen Italia, S.R.L., a limited liability company under the laws of
Italy ("SpaXen"), or any person acting on behalf of either of them has directly
or indirectly, within the past five years, given or agreed to give any illegal,
unethical or improper gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the Company or SpaXen or assist the Company or SpaXen in connection with
an actual or proposed transaction or grant.
2.20 Subsidiaries. The Company has no interest in any corporation,
partnership, joint venture or other entity except for the interest in SpaXen
more specifically set forth on Schedule 2.20. Except as set forth on Schedule
2.20, the Company holds of record and owns beneficially all its interest in
SpaXen free and clear of any restrictions on transfer (other than restrictions
under the Securities Act and state securities laws), taxes, liens, options,
warrants, purchase rights, contracts, commitments, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require any of the Company or SpaXen to sell, transfer, or otherwise
dispose of any equity of SpaXen or that could require SpaXen to issue, sell, or
otherwise cause to become outstanding any of its equity. Except as set forth on
Schedule 2.20, there are no outstanding appreciation, phantom stock, profit
participation, or similar rights with respect to SpaXen. There are no voting
12
trusts, proxies, or other agreements or understandings with respect to the
voting of any equity or management interest in SpaXen. SpaXen does not control
directly or indirectly or have any direct or indirect equity participation in
any corporation, partnership, trust, or other business association, which is not
a subsidiary of the Company.
2.21 Disclosure. Neither this Agreement, nor the Financial Statements
referred to in Section 2.3 hereof, 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 Shareholders
or by or on behalf of any of the Company's directors or officers in connection
with the transactions contemplated by this Agreement contains any untrue
statement of a material fact, or omits any statement of a material fact
necessary in order to make the statements contained herein or therein not
misleading. To the knowledge of the Company, there is no fact relating to the
Company known to the Company which could materially and adversely affect the
business, prospects or financial condition of the Company or its properties or
assets, which has not been set forth in this Agreement, the Financial Statements
referred to in Section 1.21 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 Company or by or on behalf of any of the Company's
directors or officers in connection with the transactions contemplated by this
Agreement.
2.22 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Company or the Shareholders 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.
2.23 Copies of Documents. The Company has caused to be made available
for inspection and copying by the Purchaser and its advisers, true, complete and
correct copies of all documents referred to in this Article 2 or in any Schedule
attached hereto.
ARTICLE 3
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents and warrants to the Shareholders as of the
date of this Agreement and the date of the Closing as follows:
3.1 Organization and Corporate Power. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida, and is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which such qualification is required
13
and where the failure to be so qualified would have a materially adverse effect
upon the Purchaser. The Purchaser has all requisite corporate power and
authority to conduct its business as now being conducted. The Purchaser's
Articles of Incorporation as amended to date, certified by the Secretary of
State of Florida, and the By-laws of the Purchaser as amended to date, certified
by the President and the Secretary of the Purchaser, which have been delivered
to the Shareholders prior to the execution hereof, are true and complete copies
thereof as in effect as of the date hereof.
3.2 Authorization. The Purchaser has full power, legal capacity and
authority to enter into this Agreement, to execute all attendant documents and
instruments necessary to consummate the transaction herein contemplated, and to
issue and sell the Purchaser Shares to the Shareholders, and to perform all of
its obligations hereunder. This Agreement and all other agreements, documents
and instruments to be executed in connection herewith have been effectively
authorized by all necessary action, corporate or otherwise, on the part of the
Purchaser, which authorizations remain in full force and effect, have been duly
executed and delivered by the Purchaser, and no other corporate proceedings on
the part of the Purchaser are required to authorize this Agreement and the
transactions contemplated hereby, except as specifically set forth herein. This
Agreement constitutes the legal, valid and binding obligation of the Purchaser
and is enforceable with respect to the Purchaser in accordance with its terms,
except as enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, priority or other laws of court decisions relating to or
affecting generally the enforcements of creditors' rights or affecting generally
the availability of equitable remedies. Neither the execution and delivery of
this Agreement, nor the consummation by the Purchaser of any of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a breach or, violation of, or default under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, credit agreement or other agreement, document, instrument or
obligation (including, without limitation, any of its charter documents) to
which the Purchaser is a party or by which the Purchaser or any of its assets or
properties may be bound, or (ii) violate any judgment, order, injunction,
decree, statute, rule or properties of the Purchaser. No authorization, consent
or approval of any public body of authority or any third party is necessary for
the consummation by the Purchaser of the transactions contemplated by this
Agreement.
3.3 Capitalization. Immediately prior to the Closing, the authorized
capital stock of the Purchaser will consist of 50,000,000 shares of Common
Stock, $.001 par value and 20,000,000 shares of Preferred Stock, $.001 par
value, of which 12,790,789 shares of Common Stock will be issued and
outstanding. All of the outstanding shares of the Purchaser's Common Stock have
been, and all of the Purchaser's Common Stock to be issued and sold to the
Shareholders pursuant to this Agreement, when issued and delivered as provided
herein will be duly authorized, validly issued, fully paid and non-assessable
and free of preemptive or similar rights and issued in compliance with federal
and state securities laws. 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 Purchaser other than the sale of the Purchaser Shares as contemplated by
this Agreement and the grant of options described in Section 5.15 and 6.10.
14
3.4 Financial Statements.
(a) The Purchaser's financial statements contained in its Form
10-QSB for the period ended October 31, 2003 (the "Purchaser's
Financial Statements") are complete in material respects and
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout
the periods indicated. The Purchaser's Financial Statements
accurately set out and describe the financial condition and
operating results of the Purchaser as of the dates, and for
the periods indicated therein, subject to normal year-end
audit adjustments. Except as set forth in the Purchaser's
Financial Statements, the Purchaser has no liabilities,
contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to October 31,
2003 not in excess of $10,000 and (ii) obligations under
contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting
principles to be reflected in the Purchaser's Financial
Statements. The Purchaser maintains and will continue to
maintain a standard system of accounting established and
administered in accordance with generally accepted accounting
principles.
(b) Except as set forth in Schedule 3.4, since October 31, 2003
there has been (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
Purchaser 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
public force or otherwise and (ii) 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 Purchaser and to the best knowledge, information
and belief of Purchaser, no fact or condition exists or is
contemplated or threatened which might cause such a change in
the future.
3.5 Subsidiaries. The Purchaser has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
3.6. Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the most recent balance sheet included in the
Purchaser's Financial Statements, the Purchaser has no liability(s) or
obligation(s) (whether accrued, to become due, contingent or otherwise) which
individually or in the aggregate could have a materially adverse effect on the
business, assets, properties, condition (financial or otherwise) or prospects of
15
the Purchaser. Except as disclosed in filings made with the SEC, there are no
material changes in the business of the Purchaser.
3.7 No Pending Material Litigation or Proceedings. Except as set forth
in the Purchaser's Form 10-QSB, there are no actions, suits or proceedings
pending or, to the best of the Purchaser's knowledge, threatened against or
affecting the Purchaser (including actions, suits or proceedings where
liabilities may be adequately covered by insurance) at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, court, board, bureau, agency or instrumentality, domestic or
foreign, or affecting any of the officers or directors of the Purchaser in
connection with the business, operations or affairs of the Purchaser, which
might result in any adverse change in the business, properties or assets, or in
the condition (financial or otherwise) of the Purchaser, or which might prevent
the sale of the transactions contemplated by this Agreement. The Purchaser is
not subject to any voluntary or involuntary proceeding under the United States
Bankruptcy Code and has not made an assignment for the benefit of creditors.
3.8 Disclosure. Neither this Agreement, nor any certificate, exhibit,
or other written document or statement, furnished to the Shareholders by the
Purchaser in connection with the transactions contemplated by this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to be stated in order to make the
statements contained herein or therein not misleading.
3.9 Tax Returns and Payments. Except as otherwise reflected in the
Purchaser's Financial Statements, Purchaser has timely filed or caused to be
timely filed (including allowable extensions) all material federal, state,
local, foreign and other tax returns for income taxes, sales taxes, withholding
taxes, employment taxes, property taxes, franchise taxes and all other taxes of
every kind whatsoever which are required by law to have been filed. Except as
otherwise reflected in the Financial Statements, Purchaser has paid or caused to
be paid all taxes, assessments, fees, penalties and other governmental charges
which were shown to be due pursuant to said returns and all other taxes,
assessments, fees, penalties and other governmental charges which have become
due and payable on said returns. The provisions for income and other taxes
reflected in the Financial Statements make adequate provision for all accrued
and unpaid taxes of Purchaser, whether or not disputed, and Purchaser has made
and will continue to make adequate provision for such taxes on its books and
records. Except as otherwise reflected in the Financial Statements, Purchaser is
not party to any action or proceeding pending or threatened by any governmental
authority for assessment or collection of taxes; no unresolved claim for
assessment or collection of such taxes has been asserted against Purchaser, and
no audit or investigation by state or local government authorities is under way.
Purchaser will make available for review by the Shareholders or their
representatives copies of the federal income and state franchise tax returns of
Purchaser as may be requested.
3.10 Compliance with Law and Government Regulations. The Purchaser is
in compliance with all applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standards, whether mandatory or voluntary, imposed
16
by the United States of America, any state, county, municipality or agency of
any thereof, and any foreign country or government to which the Purchaser is
subject. Without limiting the generality of the foregoing, the Purchaser has
filed all reports and statements required to be filed pursuant to the Securities
Act of 1933 (the "1933 Act") and Securities Exchange Act of 1934 (the "1934
Act") including all periodic reports required under the Section 13 or 15 of the
Exchange Act. Each of such reports was complete, did not contain any material
misstatement of or omit to state any material fact.
3.11 No Changes Since Purchaser's Balance Sheet Date. Since the October
31, 2003 ("Purchaser's Balance Sheet Date"), the Purchaser has 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 and which have resulted in
an increase of liabilities since the date of the Balance Sheet
of not more than $5,000 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 $1,000 or made aggregate capital expenditures and
commitments therefor in excess of $5,000;
(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 distribution 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 $1,000 in the aggregate charged to applicable
reserves, and none of which individually or in the aggregate
is material to the Company;
(i) granted any increase in the rate of wages, salaries, bonuses
or other remuneration or benefits of any executive employee or
17
other employees or consultants, and no such increase is
customary on a periodic basis or required by agreement or
understanding;
(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 Company's Financial Statements or incurred in the ordinary
course of business and consistent with past practice since the
Balance Sheet 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 shareholders or any affiliate or associate of its officers,
directors or shareholders, except compensation to officers at
rates not exceeding the rate of compensation in effect as of
the Balance Sheet Date;
(o) suffered any material adverse changes in its working capital,
financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business operations or
prospects; or
(p) agreed, whether or not in writing, to do any of the foregoing.
3.12 Books and Records. The corporate materials of the Purchaser
supplied to the Company are true, correct and complete in all material respects.
3.13 Restrictive Documents. (a) Except as set forth on Schedule 3.13
attached hereto, the Purchaser is not subject to, or a party to, any charter,
by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, which could materially adversely affect
the business practices, operations or condition of the Purchaser or any of its
assets or property, or which would prevent consummation of the transactions
contemplated by this Agreement, or the continued operation of the Purchaser's
business after the date hereof or the Closing Date (as hereinafter defined) on
substantially the same basis as heretofore operated and as planned to be
conducted or which would restrict the ability of the Company to acquire any
property or conduct business in any area.
18
3.14 Disclosure. Neither this Agreement, nor the Purchaser's Financial
Statements referred to in Section 3.4 hereof, nor any filing with the Securities
and Exchange Commission made by the Purchaser, nor 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
any of the Purchaser's directors or officers in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact,
or omits any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading. To the knowledge of the
Purchaser, there is no fact relating to Purchaser known to the Purchaser which
could materially and adversely affect the business, prospects or financial
condition of the Purchaser or its properties or assets, which has not been set
forth in this Agreement, the Purchaser's Financial Statements referred to in
Section 3.4 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 Purchaser or by or on behalf of any of the Purchaser's directors or officers
in connection with the transactions contemplated by this Agreement.
3.23 Shareholder Record. Immediately prior to Closing, Schedule 3.24
shall list the shareholders of record of the Company as of the most recent date
practicable and after the transactions described in Section 4.3.
3.24 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from the Shareholders 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 herein.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Sale of Shares. Subject to the terms and conditions herein stated,
the Shareholders agree to sell, assign, transfer and deliver to Purchaser on the
Closing Date, and Purchaser agrees to purchase the Company Shares from the
Shareholders on the Closing Date. The certificates representing the Company
Shares shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by the Shareholders transferring the same, with all necessary
transfer tax and other revenue stamps, acquired at Shareholders' expense,
affixed and canceled. The Shareholders agree to cure any deficiencies with
respect to the endorsement of the certificates representing the Company Shares
owned by the Shareholders or with respect to the stock power accompanying any
such certificates.
4.2 Price for the Company Shares. In full consideration for the
acquisition of the Company Shares, the Purchaser will issue to the Shareholders
an aggregate of 2,258,001 Purchaser Shares after giving effect to the
19
recapitalization transactions described in Section 4.3, below; provided,
however, that 300,000 shares of the Purchaser Shares issuable to the
Shareholders (hereinafter "Escrowed Shares") shall be delivered into escrow
pursuant to Section 4.5 and held as specified in the Shareholder Escrow
Agreement (as defined below) and, to the extent such Escrowed Shares are not
applied to the payment of indemnification claims against the Shareholders, the
remaining Escrowed Shares shall be delivered to the Shareholders; and provided
further that 350,000 additional shares of Purchaser Common Stock (hereinafter,
the "Contingent Shares") shall be issued at Closing and delivered into escrow
pursuant to Section 4.5 and held as specified in the Purchaser Escrow Agreement
(as defined below) and, to the extent such Contingent Shares are not applied to
the payment of indemnification claims against the Purchaser, the remaining
Contingent Shares shall be surrendered to the Purchaser for cancellation and
shall thereupon cease to exist. Schedule 1.1 lists the name of each Shareholder
and identifies the number of Purchaser Shares issuable to each Shareholder
(including the number of shares of Escrowed Shares) and the number of Contingent
Shares issuable to each Shareholder.
4.3 Recapitalization of Purchaser. The Purchaser shall consummate the
following transactions immediately prior to the Closing (the
"Recapitalization"):
(a) The Purchaser will redeem a portion of its outstanding shares
of restricted Common Stock.
(b) The Purchaser shall complete a private placement of common
stock.
(c) The Purchaser shall split its outstanding shares of Common
Stock such that after the redemption set forth in paragraph
4.3(a) and private placement set forth in paragraph 4.3(b),
and immediately before the issuance of shares set forth in
Section 4.2, there will be 12,790,789 shares of Purchaser
Common Stock outstanding.
(d) The Purchaser shall change its name to ProvaGen, Inc.
4.4 Closing. The sales referred to in Sections 3.1 shall take place at
10:00 A.M. at the offices of Sommer & Schneider LLP, 595 Stewart Avenue, Suite
710, Garden City, New York, 11530 at two business days after all the conditions
set forth in Articles 5 and 6 have been fulfilled or waived, but not later than
June 15, 2004, or at such other time and date as the parties hereto shall agree
in writing. Such time and date are herein referred to as the "Closing Date."
4.5 Escrows. At Closing, the Purchaser shall deliver: (1) to an escrow
agent mutually acceptable to Shareholders and Purchaser appointed pursuant to
the Purchaser Escrow Agreement (the "Purchaser Escrow Agent") certificates
evidencing 350,000 Contingent Shares issued in the name of each Shareholder in
the amounts set forth on Schedule 1.1 as security for payment of potential
future indemnification claims against by Shareholders against Purchaser in
20
substantially the form attached hereto as Exhibit A (the "Purchaser Escrow
Agreement"); and (2) to an escrow agent mutually acceptable to Shareholders and
Purchaser appointed pursuant to the Shareholder Escrow Agreement (the
"Shareholder Escrow Agent" and together with the Purchaser Escrow Agent, the
"Escrow Agents") certificates evidencing 300,000 Escrowed Shares issued pro rata
in the name of each Shareholder on the Closing Date as security for payment of
potential future indemnification claims by Purchaser against Shareholders,
pursuant to an Escrow Agreement in substantially the form attached hereto as
Exhibit B (the "Shareholder Escrow agreement").
ARTICLE 5
CONDITIONS TO PURCHASER'S OBLIGATIONS
The purchase of the Company Shares by Purchaser on the Closing Date is
conditioned upon satisfaction, on or prior to such date, of the following
conditions:
5.1 Opinion of Counsel. The Shareholders shall have furnished the
Purchaser with a favorable opinion dated the Closing Date of Kirkpatrick and
Lockhart LLP in form reasonably acceptable to Purchaser, provided such opinion
shall cover only issues of law and not matters confirming representations of
fact made by the Company and Shareholders.
5.2 Good Standing and Other Certificates. The Shareholders shall have
delivered to the Purchaser:
(a) copies of the Company's charter including all amendments
thereto, in each case certified by the Secretary of State or
other appropriate official of its jurisdiction of
incorporation;
(b) a certificate from the Secretary of State or other appropriate
official of their respective jurisdictions of incorporation to
the effect that the Company is in good standing or subsisting
in such jurisdiction and listing all charter documents
including all amendments thereto, of the Company's charter
documents on file;
(c) a copy of the By-Laws of the Company, certified by the
respective Secretary of each entity as being true and correct
and in effect on the Closing Date.
(d) a resolution of the Company's Board of Directors certified by
their respective Secretary approving the transactions
contemplated hereby.
5.3 No Material Adverse Change. Prior to the Closing Date, there shall
be no material adverse change in the assets or liabilities, the business or
condition, financial or otherwise, 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
21
or other public force or otherwise, and the Shareholders shall have delivered to
the Purchaser a certificate signed by the Company's duly authorized
representative, dated the Closing Date, to such effect.
5.4 Truth of Representations and Warranties. The representations and
warranties of each Shareholder contained in this Agreement or in any Schedule
attached 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.
5.5 Performance of Agreements. All of the agreements of each
Shareholder to be performed on or before the Closing Date pursuant to the terms
hereof shall have been duly performed, and the Shareholders shall have delivered
to the Purchaser a certificate, signed by the Shareholders' duly authorized
representative dated the Closing Date, to such effect.
5.6 No Litigation Threatened. No action or proceedings shall have been
instituted or threatened before a court or other government body or by any
public authority to restrain or prohibit any of the transactions contemplated
hereby, and the Shareholders shall have delivered to the Purchaser a certificate
signed by the Shareholders' duly authorized representative, dated the Closing
Date, to such effect.
5.7 Governmental Approvals. All governmental and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received, including, without
limitation, any consent required under the organization documents of SpaXen.
5.8 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be satisfactory in form and substance to the Purchaser and their counsel,
and the Purchaser shall have received copies of all such documents and other
evidences as they or their counsel may reasonably request in order to establish
the consummation of such transactions and the taking of all proceedings in
connection therewith.
5.9 Employment Agreements. The Company shall have entered into
three-year employment agreements with L. David Tomei, Samuil Umansky and Hovsep
Melkonyan, substantially in the form annexed hereto as Exhibits C1, C2 and C3.
5.10 [Intentionally Omitted]
5.11 Options and Warrants. All outstanding options or warrants to
purchase capital stock of the Company shall have been surrendered for
cancellation.
5.12 Share Restrictions. The Company shall have waived all rights under
existing share repurchase agreements.
22
5.13 Governance. Gabriele M. Cerrone shall have been nominated to serve
on the Board of Directors of the Purchaser, appointed Vice Chairman of the Board
and shall have been granted 1,050,000 options exercisable at $1.25 per share
vesting in the same proportion as those granted to L. David Tomei, Samuil
Umansky and Hovsep Melkonyan at Closing.
5.14 Shareholder Escrow Agreement. The Shareholders shall have entered
into the Shareholder Escrow Agreement, substantially in the form annexed hereto
as Exhibit B.
5.15 Warrants. The Purchaser shall have issued warrants to acquire
3,000 and 7,000 shares of Purchaser Common Stock at an exercise price of $1.25
to Laura Dever and Lenny Toboroff, respectively, each of whom are consultants to
the Purchaser.
5.16 Closing. The transactions contemplated by this Agreement shall
have been consummated by June 15, 2004.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF
THE SHAREHOLDERS
The obligations of the Shareholders on the Closing Date are conditioned
upon satisfaction, on or prior to such date, of the following conditions:
6.1 Opinion of Counsel. The Purchaser shall have furnished the
Shareholders with a favorable opinion dated the Closing Date of Sommer &
Schneider LLP in form reasonably acceptable to Shareholders and Company,
provided such opinion shall cover only issues of law and not matters confirming
representations of fact made by the Purchaser.
6.2 Good Standing Certificates and Other Corporate Documents. The
Purchaser shall have delivered to the Shareholders:
(a) copies of the Articles of Incorporation of the Purchaser,
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 Purchaser is in good standing in
such State and listing all charter documents, including all
amendments thereto, of Purchaser on file;
(c) a copy of the By-Laws of the Company, certified by the
respective Secretary of each entity as being true and correct
and in effect on the Closing Date;
(d) a resolution of the Company's Board of Directors certified by
their respective Secretary approving the transactions
contemplated hereby;
23
(e) the Shareholders will acquire the Purchaser Shares free of any
adverse claim under Section 8-303 if the Uniform Commercial
Code; and
(f) the issuance of the Purchaser Shares does not violate
applicable law and does not require any regulatory approvals,
notice or consents.
6.3 Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement 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
Purchaser shall have delivered to the Shareholders a certificate signed by the
Purchaser's duly authorized representative, dated the Closing Date, to such
effect.
6.3 No Material Adverse Change. Prior to the Closing Date, there shall
be no material adverse change in the assets or liabilities, the business or
condition, financial or otherwise, 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 public force or otherwise, and the Purchaser shall have delivered to
the Shareholders a certificate signed by the Purchaser's duly authorized
representative, dated the Closing Date, to such effect.
6.4 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.
6.5 Performance of Agreements. All of the agreements of the Purchaser
to be performed on or before the Closing Date pursuant to the terms hereof shall
have been duly performed, and the Purchaser shall have delivered to the
Shareholder a certificate, dated the Closing Date, to such effect.
6.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Shareholders and
their counsel, and the Shareholders shall have received copies of all such
documents and other evidences as they or their counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.7 No Litigation Threatened. No action or proceedings shall have been
instituted or threatened before a court or other government body or by any
public authority to restrain or prohibit any of the transactions contemplated
hereby, and the Purchaser shall have delivered to the Shareholder's a
certificate signed by the Purchaser's duly authorized representative, dated the
Closing Date, to such effect.
24
6.8 Employment Agreements. The Purchaser shall have entered into the
employment agreements referred to in Section 5.9, above.
6.9 Recapitalization. The Purchaser shall have completed all of the
recapitalization transactions described in Section 4.3, above and, as a result
thereof
(a) there are no more than 12,790,789 shares of the Purchaser's
Common Stock outstanding prior to the issuance of 2,258,001
Purchaser Shares to the Shareholders pursuant to this
Agreement,
(b) 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 Purchaser, other than
the sale of the Purchaser Shares as contemplated by this
Agreement and the grant of options and warrants described in
Section 5.14 above, and Sections 6.10 and 6.14 below.
(c) the Purchaser shall have cash and cash equivalents at Closing
of not less than $1.5 million and its liabilities, including
any costs and expenses associated with the recapitalization
and the transactions contemplated hereby, shall not exceed
$2,500, and
(d) Purchaser shall have delivered to the Shareholder a
certificate signed by the Company's duly authorized
representative, dated the Closing Date, to such effect
6.10 Stock Options. The Purchaser shall have adopted an Equity
Incentive Plan and shall have granted L. David Tomei, Samuil Umansky and Hovsep
Melkonyan the options described in the employment agreements referred to in
Section 4.9, above.
6.11 Option to Reacquire Technology. The Purchaser shall have entered
into the agreement with L. David Tomei, Samuil Umansky and Hovsep Melkonyan in
the form annexed hereto as Exhibit E (the "Technology Acquisition Agreement").
6.12 Voting Agreement. The Purchaser, the Shareholders, Purchaser's
shareholders holding unregistered Purchaser Common Stock, and the investors in
the Private Placement shall have entered into a Voting Agreement in the form
attached hereto as Exhibit F providing that the Shareholders shall have the
right to elect: (a) at least 1/3 and not less than 2 of the members of the
Purchaser's Board of Directors provided the number of directors constituting the
whole board is 5 or more; and (b) 1 member of the board of directors and have 1
person serve as a non-voting observer with full rights to notice of and to
attend board meetings provided the number of directors constituting the whole
board is less than 5. L. David Tomei and Samuil Umansky shall be the initial
persons appointed by the Shareholders to serve in such capacities.
25
6.13 Purchaser Escrow Agreement. Purchaser shall have entered into the
Purchaser Escrow Agreement, substantially in the form annexed hereto as Exhibit
A.
6.14 Warrant for Irv Weiman. The Purchaser shall have issued a warrant
to acquire 10,000 shares of Purchaser Common Stock at an exercise price of $1.25
to Irv Weiman, who is a former consultant of the Company.
6.15 Payment Guarantee. Purchaser shall have guaranteed in form
reasonably acceptable to Shareholders and Company all of Company's cash payment
obligations to Anatoly V. Lichtenstein under Section 4 of that certain
Assignment Agreement dated December 21, 1999 between the Company and Anatoly V.
Lichtenstein.
6.16 Closing. The transactions contemplated by this Agreement shall
have been consummated by June 15, 2004.
ARTICLE 7
COVENANTS OF THE SHAREHOLDERS
7.1 Non-Competition; Non-Interference. In consideration of the purchase
of the Shares by Purchaser, each Shareholder individually agrees that from the
date of this Agreement until the earlier of (i) June 30, 2007 and (ii) exercise
of the option under the Technology Acquisition Agreement, such Shareholder will
not, whether for their own account or for the account of any other person,
directly or indirectly:
(a) engage or invest in, own, manage, operate, control or
participate in the ownership, management, operation or control
of, be employed by, associated or in any manner connected with
or render services or advice to, any business, the products or
services of which compete, in whole or in part, with the
products or activities of the Company in which the Company was
engaged at the time up to the Closing Date;
(b) solicit any potential customer or client to which the Company
has made a presentation, or with which the Company has been in
contact, not to hire the Company, or to hire another company
whether or not such Company Party had personal contact with
such person during or by reason of his or its association with
the Company; or
(c) solicit the business of any company, which is a customer or
client of the Company, or was its customer or client within
two years prior to the date of this Agreement;
26
(d) persuade or attempt to persuade any employee of the Company,
or any individual who was its employee during the two years
prior to the date of this Agreement, to leave the Company's
employ, or to become employed by or otherwise be engaged as an
independent consultant or otherwise for, any person other than
the Company; or
(e) disclose or use any confidential information of the Company or
any of their clients and customers. For purposes of this
section "confidential information" with respect to any entity
shall mean trade secrets concerning such entity's operations,
future plans, projected and historical sales, marketing,
costs, production, growth and distribution, any customer
lists, customer information or other information relating to
the products or services, whether patentable or not,
concerning the business of such entity as conducted prior to
the Closing Date.
(f) Notwithstanding the foregoing, the Shareholder's duties and
obligations under this Section 7.1 shall terminate if the
Shareholders exercise their right to reacquire the Company's
technology pursuant to the terms of the Technology Agreement.
7.2 Construction. It is the desire and intent of the parties to this
Agreement that the provisions of Section 7.1 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. If any particular provisions or
portion of Section 7.1 shall be adjudicated to be invalid or unenforceable, for
any reason, including, without limitation, the geographic or business scope or
duration thereof, such provision shall be construed in such a way as to make it
valid and enforceable to the maximum extent possible. Any validity or
unenforceability of any provision of this Agreement shall attach only to such
provision and shall not effect or render invalid any other provision of this
Agreement or any other agreement or instrument.
7.3 Enforcement. The parties recognize that the performance of the
obligations under Section 7 by each Shareholder is special, unique and
extraordinary in character, and that in the event of the breach by such
Shareholder of the terms and conditions of Section 7.1 to be performed, the
Company and/or the Purchaser would suffer irreparable harm for which there would
be no adequate remedy at law. Accordingly, each Shareholder agrees that in such
event, in addition to any other remedies which the Company and/or Purchaser may
have in law or equity for money damages or other relief, the Company and the
Purchaser shall be entitled to temporary and/or injunctive relief, without the
necessity of posting a bond therefor or of proving damages, to enforce the
provisions hereof.
ARTICLE 8
CONDUCT OF BUSINESS; EXCLUSIVE DEALING; REVIEW
27
8.1. Conduct of Business of the Company. During the period from the
date of this Agreement to the Closing Date, the Shareholders shall cause the
Company and each of its subsidiaries to conduct their respective operations only
according to their ordinary and usual course of business and to use their best
efforts to preserve intact their respective business organizations, keep
available the services of their officers and employees and maintain satisfactory
relationships with licensors, suppliers, distributors, clients and others having
business relationships with them. Notwithstanding the immediately preceding
sentence, prior to the Closing Date, except as may be first approved by the
Purchaser or as is otherwise permitted or required by this Agreement, the
Shareholders will cause (a) the Company's and each of its subsidiaries'
respective Certificate of Incorporation and By-Laws to be maintained in their
form on the date of this Agreement, (b) the compensation payable or to become
payable by the Company and each of its subsidiaries to any officer, employee or
agent on the Balance Sheet Date to be maintained at their levels on the date of
this Agreement, (c) the Company and each of its subsidiaries to refrain from
making any bonus, pension, retirement or insurance payment or arrangement to or
with any such persons except those that may have already been accrued, (d) the
Company and each of its subsidiaries to refrain from entering into any contract
or commitment except contracts in the ordinary course of business, (e) the
Company and each of its subsidiaries to refrain from making any change affecting
any bank, safe deposit or power of attorney arrangements of the Company or any
such subsidiary and (f) the Company and each of its subsidiaries to refrain from
taking any of the actions referred to in Section 2.17 hereof. The Shareholders
agree not to take any action, or omit to take any action, which would cause the
representations and warranties contained in Article I hereof to be untrue or
incorrect. During the period from the date of this Agreement to the Closing
Date, the Shareholders shall cause the Company to confer on a regular and
frequent basis with one or more designated representatives of the Purchaser to
report material operational matters and to report the general status of ongoing
operations. The Shareholders shall cause the Company and each of its
subsidiaries to notify Purchaser of any unexpected emergency or other change in
the normal course of its business or in the operation of its properties and of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), adjudicatory proceedings, budget
meetings or submissions involving any material property of the Company and each
of its subsidiaries, and to keep Purchaser fully informed of such events and
permit its representatives prompt access to all materials prepared in connection
therewith.
8.2. Exclusive Dealing. During the period from the date of this
Agreement to the earlier of (a) Closing Date or (b) termination of this
Agreement in accordance with Section 10.15 below, the Shareholders shall not,
and shall cause the Company to refrain from taking any action to, directly or
indirectly, encourage, initiate or engage in discussions or negotiations with,
or provide any information to, any Person, other than the Purchaser, concerning
any purchase of the shares, securities of the Company or any merger, sale of
assets or similar transaction involving the Company.
8.3. Further Review. Shareholders and the Purchaser may, prior to the
Closing Date, through their representatives, review the properties, books and
records of the Company or Purchaser, respectively, and each of its subsidiaries
28
and its financial and legal condition as they deem necessary or advisable to
familiarize themselves with such properties and other matters; such review shall
not, however, affect the representations and warranties made by the other party
hereunder or the remedies of the reviewing party for breaches of those
representations and warranties. The Shareholders shall cause the Company and
each of its subsidiaries to, and Purchaser shall permit, after the date of
execution of this Agreement, full access to the premises and to all the books
and records of the Purchaser and Company, respectively, and their subsidiaries
and to cause the officers of the Purchaser and Company and each of their
subsidiaries to furnish the reviewing party and their representatives with such
financial and operating data and other information with respect to the business
and properties of the Purchaser or Company, as the case may be, and their
subsidiaries as the reviewing party shall from time to time reasonably request.
In the event of termination of this Agreement, the reviewing party shall keep
confidential any material information obtained from the Purchaser, the
Shareholders or the Company or any subsidiary concerning respective properties,
operations and business (unless readily ascertainable from public or published
information or trade sources) until the same ceases to be material (or becomes
so ascertainable) and, at the request of the reviewed party, shall return to the
reviewed party and its subsidiaries all copies of any schedules, statements,
documents or other written information obtained in connection therewith. The
reviewed party shall deliver or cause to be delivered such additional
instruments as the reviewing party may reasonably request for the purpose of
consummating the transactions contemplated by this Agreement.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
9.1 Survival of Covenants and Agreements. The respective
representations, warranties, covenants and agreements of the Shareholders, the
Company and the Purchaser 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 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.
9.2 Indemnification.
(a) The Shareholders agree to indemnify and hold the Purchaser and
their officers, directors, shareholders, employees, affiliates
and agents harmless from damages, losses, liabilities,
assessments, judgments, costs or expenses (including, without
limitation, penalties, interest and reasonable counsel fees
and expenses), (each a "Claim"), in excess of $25,000 in the
aggregate, as a result of or arising out of the material
breach of any representation or warranty made by the
Shareholders and the Company, or the failure of any material
representation or warranty made by the Shareholders and the
Company in this Agreement or in any Schedule attached hereto
29
or any document or agreement delivered hereunder to be true
and correct in all material respects as of the date of this
Agreement and as of the Closing Date.
(b) The Purchaser agrees to indemnify and hold the Shareholders
and each of their officers, directors, shareholders,
employees, affiliates and agents harmless from damages, losses
or expenses (including, without limitation, reasonable counsel
fees and expenses) in excess of $25,000, in the aggregate,
suffered or paid, directly or indirectly, as a result of or
arising out of the failure of any representation or warranty
made by the Purchaser in this Agreement to be true and correct
in all respects as of the date of this Agreement and as of the
Closing Date.
9.3 Conditions of Indemnification.
(a) A party entitled to indemnification hereunder (the
"Indemnified Party") shall notify the party or parties liable
for such indemnification (the "Indemnified Party") in writing
of any Claim or potential liability for Taxes ("Tax Claim")
which the Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement.
Such notice shall be given within a reasonable (taking into
account the nature of the Claim or Tax Claim) period of time
after the Indemnified Party has actual knowledge thereof. The
Indemnifying Party shall satisfy its obligations under this
Article 8 within forty days after receipt of subsequent
written notice from the Indemnified Party if an amount is
specified therein, or promptly following receipt of subsequent
written notice or notices specifying the amount of such Claim
or Tax Claim additions thereto; provided, however, that for so
long as the Indemnifying Party is in good faith defending a
Claim or Tax Claim pursuant to Section 9.3(b) hereof, its
obligation to indemnify the Indemnified Party with respect
thereto shall be suspended (other than with respect to any
costs, expenses or other liabilities incurred by the
Indemnified Party prior to the assumption of the defense by
the Indemnifying Party). Failure to provide a notice of Claim
or Tax Claim within the time period referred to above shall
not constitute a defense to a Claim or Tax Claim or release
the Indemnifying Party from any obligation hereunder to the
extent that such failure does not prejudice the position of
the Indemnifying Party.
(b) If the facts giving rise to any such indemnification involve
any actual, threatened or possible Claim or demand or Tax
Claim by any person not a party to this Agreement against the
Indemnified Party, the Indemnifying Party shall be entitled to
contest or defend such Claim or demand Tax Claim at its
expense and through counsel of its own choosing, which counsel
shall be reasonably acceptable to the Indemnified Party, such
right to contest or defend shall only apply if the
30
Indemnifying Party gave written notice of its intention to
assume the contest and defense of such Claim or demand Tax
Claim to the Indemnified Party as soon as practicable, but in
no event more than thirty days after receipt of the notice of
Claims or Tax Claim, and provided the Indemnified Party with
appropriate assurances as to the creditworthiness of the
Indemnifying Party, and that the Indemnifying Party will be in
a position to pay all fees, expenses and judgments that might
arise out of such Claim or demand Tax Claim. The Indemnified
Party shall have the obligation to cooperate in the defense of
any such Claim or demand Tax Claim and the right, at its own
expense, to participate in the defense of any Claim or Tax
Claim. So long as the Indemnifying Party is defending in good
faith any such Claim or demand Tax Claim asserted by a third
party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim or demand Tax Claim.
The Indemnifying Party shall have the right to settle or
compromise any such Claim or demand Tax Claim without the
consent of the Indemnified Party at any time utilizing its own
funds to do so if in connection with such settlement or
compromise the Indemnified Party is fully released by the
third party and is paid in full any indemnification amounts
due hereunder. The Indemnified Party shall make available to
the Indemnifying Party or its agents all records and other
materials in the Indemnified Party's possession reasonably
required by it for its use in contesting any third party Claim
or demand Tax Claim and shall otherwise cooperate, at the
expense of the Indemnifying Party, in the defense thereof in
such manner as the Indemnifying Party may reasonably request.
Whether or not the Indemnifying Party elects to defend such
Claim or demand Tax Claim, the Indemnified Party shall have no
obligation to do so.
9.4 Limitations on Indemnification for Breaches of Representations and
Warranties. Notwithstanding anything contained in this Agreement to the
contrary, (a) the individual liability of the Shareholders under Section 9.2 for
any liability arising as a result of the failure of Shareholders' or Company's
representations and warranties to be true and correct or arising for any other
reason under Section 9.2(a), shall not exceed the number of Escrowed Shares
multiplied by the $.95 (the "Closing Value") and the cancellation of the
Escrowed Shares shall be the sole remedy of Purchaser in respect of such
indemnification; and (b) the aggregate liability of Purchaser and its affiliates
under Section 9.2(b) for any liability arising as a result of the failure of
Purchaser's representations and warranties to be true and correct, shall not
exceed the number of Contingent Shares multiplied by the Closing Value and the
release of Contingent Shares form escrow to Shareholders shall be the sole
remedy in respect of such indemnification.
9.5 Payment of Indemnification Liabilities.
(a) At the sole discretion of the indemnifying party, payments of
claims to an indemnified party may be made by wire transfer of
immediately available funds within 10 business days after the
date of the notice of sums due and owing provided for in
Section 9.2, in lieu of the release of shares from the
Purchaser or Shareholder Escrows.
31
(b) In the event that Purchaser, in accordance with Section
9.5(a), does not elect to pay any liabilities owing by it by
wire transfer, the number of Contingent Shares to be released
with respect to any such liability shall be determined by
dividing the amount of such liability by $.95 and multiplying
the result thus obtained by 1.15.
(c) In the event that a Shareholder does not elect to pay
liabilities owing by wire transfer, the number of Escrowed to
be released from Escrow to Purchaser with respect to such
liability and to be cancelled shall be determined by dividing
the amount of such liability by $.95.
ARTICLE 10
MISCELLANEOUS
10.1 Knowledge . Knowledge means, with respect to any person, the
actual knowledge of such person and, in the case of a corporation, the actual
knowledge of its executive officers and directors.
10.2 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers, except as provided in Section [1.13] of this Agreement.
10.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State without regard to conflicts of laws.
10.4 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York, or
in the United States District Court for the Eastern or Southern District of New
York, and, by execution and delivery of this Agreement, each of the parties to
this Agreement accepts the exclusive jurisdiction of such courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The prevailing party or parties in any such litigation
shall be entitled to receive from the losing party or parties all costs and
expenses, including reasonable counsel fees, incurred by the prevailing party or
parties.
10.5 Captions. The Article and Section captions used herein for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
32
10.6 Publicity. Except as otherwise required by law, or disclosure to a
limited number of accredited investors for the purpose of completing the private
placement described in Section 4.3, above, none of the parties hereto shall
issue any press release or make any other public statement, in each case
relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of Purchaser and the
Company to the contents and the manner of presentation and publication thereof.
10.7 Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given when delivered in person, one
business day after delivery to a reputable overnight carrier, four business days
if delivered by registered or certified mail, postage prepaid or when sent by
telecopy with a copy following by hand or overnight carrier or mailed, certified
or registered mail, postage prepaid, addressed as follows:
If to the Purchaser:
Used Kar Parts, Inc.
3 West 57th Street, 8th Floor
New York, NY 10019
Attn:
with a required copy to:
Herbert H. Sommer, Esq.
Sommer & Schneider LLP
595 Stewart Avenue, Suite 710
Garden City, NY 11530
If to Shareholders:
L. David Tomei
3018 California Street
San Francisco, CA 94115
Samuil Umansky
6034 Monterey Avenue
Richmond, CA 94805
Hovsep S. Melkonyan
950 Evelyn Avenue
Albany, CA 94706
Anatoly V. Lichtenstein
32 Kashirskoe shosse, Bldg 3, Apt. 229
Moscow, Russia 115522
Kathryn P. Wilke
769 Horizon Drive
Martinez, CA 94553
33
If to Company:
Xenomics, Inc.
6034 Monterey Ave.
Richmond, CA 94805
with a required copy to:
Dirk Michels, Esq.
Kirkpatrick & Lockhart LLP
Four Embarcadero Center, 10th Floor
San Francisco, CA 94111
10.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
10.9 Counterparts. This Agreement may be executed in two or more
counterparts and delivered by facsimile all of which taken together shall
constitute one instrument.
10.10 Entire Agreement. This Agreement, including the Schedules hereto
and the other documents referred to herein which form a part hereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
10.11 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by Purchaser and the Shareholders holding a
majority of the Company Shares.
10.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereof.
10.14 Cooperation After Closing.From and after the Closing Date, each
of the parties hereto shall execute such documents and other papers and take
such further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
10.15 Termination. This Agreement may be terminated at any time prior
to Closing by the written agreement of all the parties hereto. In addition, if
the Closing has not occurred by May 31, 2004, this Agreement may be terminated
by any party hereto by giving written notice all other parties hereto. Upon such
termination, the parties rights and obligations under this Agreement shall
terminate.
[SIGNATURE PAGE FOLLOWS]
34
IN WITNESS WHEREOF, each of the Purchaser and Shareholders have
executed this Agreement, all as of the day and year first above written.
PURCHASER:
USED KAR PARTS, INC.
By: /s/ Christoph Bruening
------------------------------
Title: President
SHAREHOLDERS:
/s/ L. David Tomei
------------------------------
L. David Tomei
/s/ Samuil Umansky
------------------------------
Samuil Umansky
/s/ Hovsep S. Melkonyan
------------------------------
Hovsep S. Melkonyan
/s/ Anatoly V. Lichtenstein
------------------------------
Anatoly V. Lichtenstein
/s/ Kathryn P. Wilke
------------------------------
Kathryn P. Wilke
35
SCHEDULE 1.1
Ownership of Stock
PURCHASER CONTINGENT
SHAREHOLDERS COMPANY SHARES SHARES SHARES
- ------------ -------------- --------- ----------
L. David Tomei 1,582,954 938,360 145,450
(incl. 124,671 Escrowed
Shares)
Samuil Umansky 1,492,954 885,809 137,304
(incl. 117,689 Escrowed
Shares)
Hovsep S. Melkonyan 588,409 348,803 54,066
(incl. 46,342 Escrowed
Shares)
Anatoly V. Lichtenstein 112,500 66,689 10,337
(incl. 8,861 Escrowed
Shares)
Kathryn P. Wilke 30,938 18,340 2,843
(incl. 2,437 Escrowed
Shares)
Totals 3,807,755 2,258,001 350,000
(incl. 300,000 Escrowed
Shares)
36