LOAN AND SECURITY AGREEMENT
---------------------------
The parties to this Loan and Security Agreement ("Agreement") are
Re-Track, USA, Inc. (RETRACK), Martin Kelly (Kelly) and PERRY ROWAN SMITH JR.
REVOKABLE TRUST (SMITH) (collectively the "Parties").
WHEREAS, the RETRACK desires to corporate obtain financing for the
continuing implementation of its Syringe Technology; and
WHEREAS, the SMITH desires to provide a portion of that financing under
the following terms and conditions;
THEREFORE, in consideration of the mutual promises exchanged and other
good and valuable consideration passing between the Parties, the receipt and
sufficiency of which is hereby acknowledged and confessed the Parties agree as
follows:
1. SMITH agrees to provide RETRACK with the sum of Two hundred
thousand Dollars ($200,000.00) by transferring these funds to
the account of Michael Haining and Alton W. Payne, P.C., to be
used for the acquisition of various patents and patent
applications and other patent rights and the funding of that
certain Settlement and Release Agreement dated ___________
among Alton Payne, Alton W. Payne P.C., Delmar L. Sroufe, and
Sroufe, Payne & Lundeen, L.L.P. Michael L. Haining, Safe Tech
Medical Products, Inc., Martin Kelly, Rex Green, Entertainment
& Holdings Inc. and Re-Track, USA, Inc.
2. RETRACT agrees to sign the attached promissory note in the
amount of $200,000.00 for a term of nine (9) months with
interest to be paid at the rate of twelve (12%) percent per
annum, and by causing exactly Ten (10%) percent of the equity
in RETRACT (approximately 890,000 shares) to be issued in the
name of SMITH. Such shares of stock shall contain a
restriction stamped on the certificate pursuant to Rule 144.
RETRACK agrees to provide piggy-back registration rights, as
it relates to the issuance of these shares; however, such
rights are subject to underwriters' approval. SMITH shall
execute the documentation necessary for the issuance of these
shares by RETRACK. SMITH shall have the right to exchange all
of his stock in RETRACT for an equivalent amount of stock in
any subsidiary of RETRACT at his discretion before the stock
in such subsidiary is free trading. And in the event that an
underwriter for the purpose of an IPO (Initial Public
Offering) of RETRACT or its subsidiary, including the filing
of all necessary document required by the Security Exchange
Commission to consummate the IPO by November 28, 1998, then
SMITH shall have the right at his discretion to have any or
all patents described herein be immediately assigned to SMITH
free and clear of any liens or encumbrances; provided however,
SMITH shall give RETRACT 30 days written notice that of his
intent to have the patents assigned. Upon receiving such
notice of SMITH's intent RETRACK may pay the full amount of
the note that is then due and owing, including interest,
within that 30 day notice period and SMITH shall release its
security interest in the patents.
Page -1-
<PAGE>
3. RETRACT, and its officers and directors hereby warrant and
agree that they shall not sell, transfer, borrow or divest, or
in any way encumber these patents without written permission
by SMITH at any time prior to the payment in full of the
promissory note. RETRACK hereby agrees and warrants that it
shall be responsible for any maintenance or upkeep on all
patents so they shall remain in full force and effect.
4. RETRACT hereby grants to SMITH a security interest in its
Syringe technology, including the patents and patent
applications listed on the attached Exhibit 1.
5. Kelly hereby grants an option to SMITH for the acquisition of
up to 25% of Kelly's interest in RETRACK or any of its
subsidiaries. Kelly currently owns 6,500,000 shares of RETRACK
or approximately 87%. SMITH has the right to purchase these
shares at the price of $2.00 per share and this option shall
remain open for 18 months from the date of the execution of
this Agreement. This option is personal in nature and shall
not be conveyed or assigned without the express written
consent of Kelly. Kelly shall have the sole and exclusive
right to determine if such option to purchase may be assigned,
without liability for withholding his consent.
6. The Parties acknowledge that additional documentation may be
required by any underwriter, the SEC or any other state or
federal agency at a later date and hereby agree to execute the
documentation necessary to facilitate the agreements expressed
herein.
7. The Parties acknowledge and warrant that they have read and
understand this Agreement. The Parties execute this Agreement
of their own free will after having had an opportunity to
discuss its provisions with an attorney of their choice. The
Parties warrant that, as of the date of execution, no
representations have been made other than the written
provisions in this Agreement and that they do not rely on any
representations other than those stated in this Agreement. The
undersigned warrant that they are authorized to execute this
Agreement on behalf of the Parties in the capacities stated,
and that they are legally competent to execute this Agreement
and bind each party for whom they sign.
8. The undersigned each warrant that the respective corporation
for whom they execute this Agreement is a duly organized,
validly existing corporation in good standing under the laws
of the jurisdiction of its incorporation with all requisite
corporate power and authority to execute, deliver, and perform
this Agreement, and that the execution and delivery of this
Agreement is duly and validly authorized by all necessary
corporate action so as to be a valid and binding obligation of
the respective corporation.
Page -2-
<PAGE>
9. ARBITRATION. Any claim or controversy arising out of or
relating to this Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the expedited
commercial arbitration rules of the American Arbitration
Association. There shall be appointed three (3) arbitrators,
one who is appointed by the Kelly, one who is appointed by
SMITH and the third shall be appointed by the two appointed
arbitrators. Judgment upon the awarded granted by the
arbitrators may be entered in any court having jurisdiction.
The parties agree that any arbitration shall be completed
within one year from the date that one party notifies the
other in writing that such a claim or controversy exists. The
location of the arbitration shall be Houston, Texas, unless
mutually agreed upon by all parties.
10. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
11. This Settlement and Release Agreement may be executed in
multiple originals of equal dignity.
Page -3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
PERRY ROWAN SMITH REVOKABLE TRUST
By: /S/ P. ROWAN SMITH
----------------------------
Date: 7-1-98 Title: Owner
-------------------- --------------------------
Re-Track, USA, Inc.
By: /s/ Martin Kelly
-----------------------------
Date: 6-30-1998 Title: President, CEO
-------------------- --------------------------
Date: 6-30-1998 /S/ MARTIN KELLY
------------------- ---------------------------------
<PAGE>
EXHIBIT 1
---------
1. SYRINGE PATENTS
---------------
(a) Standard Retractable Needle Syringe
U.S. Foreign
4,790,822 Belgium Pat. No. 0 388 137
4,950,251 Germany Pat. No. 690 09 248.2-08
5,152,750 France Pat. No. 0 388 137
5,342,323 Great Britain Pat. No. 0 388 137
Italy Pat. No. 0 388 137
Netherlands Pat. No. 0 388 137
Sweden Pat. No. 0 388 137
Mexico Pat. No. 173,117
Mexico Pat. No. 177,859
Taiwan Pat. No. UN- 76031
Australia Pat. No. 657,885
(b) Retractable Needle Dental Syringe
U.S. Foreign
5,453,093 None
I, Michael L. Haining, the patentee, by these presents do sell, assign
and transfer unto said assignee the entire right, title and interest in and to
the above referenced patents; the same to be held and enjoyed by the said
assignee for his own use and behoof, and for his legal representatives and
assigns, to the full end of the term for which said Patent is granted, as fully
and entirely as the same would have been held by me had this assignment and sale
not been made.
Executed this 1 day of July, 1998,
at ____________________________________________________________.
/S/ Michael L. Haining
--------------------------------
Michael L. Haining
/S/ Michael L. Haining
--------------------------------
Safe Tech Medical Products, Inc.
Michael L. Haining, President
<PAGE>
2. SYRINGE APPLICATION
-------------------
U.S. Foreign
None pending Korea Application No. 3506/1990
Canada Application No. 2,032,730-8
Japan Application No. 401754/90
Europe Application No. 92 91 1991.5
Austria
Belgium
Switzerland and Liechtenstein
Germany
France
United Kingdom
Italy
Luxembourg
Netherlands
Sweden
Spain
Portugal
India Application No. 854/De1/92
Malaysia Application No. PI 9201716
I, Michael L. Haining, the patentee, by these presents do sell, assign
and transfer unto said assignee the entire right, title and interest in and to
the above referenced patents; the same to be held and enjoyed by the said
assignee for his own use and behoof, and for his legal representatives and
assigns, to the full end of the term for which said Patent is granted, as fully
and entirely as the same would have been held by me had this assignment and sale
not been made.
Executed this 1 day of July, 1998,
at ____________________________________________________________.
/S/ Michael L. Haining
--------------------------------
Michael L. Haining
/S/ Michael L. Haining
--------------------------------
Safe Tech Medical Products, Inc.
Michael L. Haining, President
<PAGE>
PROMISSORY NOTE
---------------
$200,000.00 July 1, 1998
FOR VALUE RECEIVED, Re-Track USA, Inc., a New York Corporation,
hereinafter referred to as "Maker", promises to pay to the order of ROWAN SMITH,
OR HIS DESIGNEE, hereinafter called "Payee", at 4900 Woodway, Suite 880,
Houston, Texas 77056, or at such other place as the Payee or any other holder
hereof may designate, the principal sum of two hundred thousand Dollars
($200,000.00), in lawful money of the United States of America, together with
interest on the whole of the principal amount hereof from time to time remaining
unpaid from the date hereof until maturity at a per-annum rate of interest
(based on 360 days, and for the actual number of days elapsed) equal to the
lesser of (a) twelve percent (12.0%) per annum, or (b) the "Maximum Legal Rate
of Interest" (as hereinafter defined).
The term of this Note is nine (9) months. Privilege is reserved to
prepay at any time, without premium or fee, the entire indebtedness or any part
hereof. At the end of the term of this Note, the entire remaining balance of
principal and interest due and owing hereunder, if any, shall be due and
payable.
This Note, to the extent of the full face amount hereof, evidences the
indebtedness of the Maker to Payee by virtue of monies loaned to the Maker at
Maker's special instance and request, and the payment hereof is secured by the
following:
All Syringe technology, including all patents and patent
applications listed on Exhibit 1.
All past-due principal and interest on this Note shall bear interest
from the date it is due until the date of payment at the Maximum Legal Rate of
Interest.
It is expressly understood, however, that nothing contained in the
Security Agreement, executed herewith, any other agreement, instrument or
document executed by Maker, or otherwise, shall affect or impair the right,
which is unconditional and absolute, of the holder hereof to enforce payment of
all sums due under this Note at or after maturity, whether by acceleration or
otherwise, or shall affect the Obligation of Maker, which is also unconditional
and absolute, to pay the sums payable under this Note in accordance with its
terms.
As used herein, the term "Maximum Legal Rate of Interest" shall mean
and refer to the maximum rate of non-usurious interest, if any, that Payee may
from time to time charge Maker and in regard to which Maker would be prevented
from successfully raising the claim or defense of usury under applicable state
or federal law as now, or to the extent permitted by law, as may hereafter be in
effect (said law permitting the highest rate being herein referred to as the
"Interest Law"). Unless changed in accordance with law, the applicable interest
rate ceiling under Texas law shall be the weekly (indicated) rate ceiling, from
time to time in effect, as provided in Article 5069-1.04 of the Texas Revised
Civil Statutes, as amended. It is the intention of Maker and Payee to conform
strictly to the Interest Law applicable to this loan transaction. Accordingly,
it is agreed that notwithstanding any provision contained herein, or in any
document securing the payment hereof, or in any document otherwise relating
-1-
<PAGE>
thereto (Security Instruments), the aggregate of all interest and any other
charges or consideration constituting interest under applicable Interest Law
that is taken, reserved, contracted for, charged or received under this Note, or
under any of the Security Instruments or otherwise in connection with this loan
transaction, shall under no circumstances exceed the maximum amount of interest
allowed by the Interest Law applicable to this loan transaction. If any excess
of interest in such respect is provided for, or shall be adjudicated to be so
provided for, in this Note or in any of the Security Instruments, then in such
event (a) the provisions of this paragraph shall govern and control, (b) neither
Maker nor Maker's legal representatives, successors or assigns or any other
party liable for the payment of this Note shall be obligated to pay the amount
of such interest to the extent that it is in excess of the maximum amount
allowed by the Interest Law applicable to this loan transaction, (c) any excess
shall be deemed a mistake and canceled automatically and, if theretofore paid,
shall be credited on this Note by Payee (or if this Note shall have been paid in
full, refunded to Maker) and (d) the effective rate of interest shall be
automatically subject to reduction to the Maximum Legal Rate of Interest allowed
under such Interest Law as now or hereafter construed by Courts of appropriate
jurisdiction. All sums paid or agreed to be paid by the Payee for the use,
forbearance or detention of the indebtedness represented hereby shall, to the
extent permitted by the Interest Law applicable to this loan transaction, be
amortized, prorated, allocated and spread throughout the full term of this Note.
If default shall be made in the payment of principal or interest on
this Note, as the same becomes due and payable, or if there is a default in any
of the terms, covenants, agreements, conditions or provisions set forth in any
instrument or document given to secure this Note or relating to this Note, or
should Maker or any endorser, surety or guarantor hereof become insolvent or
commit an act of bankruptcy or make an assignment for the benefit of creditors
or authorize the filing of a voluntary petition in bankruptcy, or should a
receiver of any of the property of Maker be appointed, or should involuntary
bankruptcy proceedings be filed or threatened against Maker or any endorser,
surety or guarantor hereof, then in any of such events, Payee or any other
holder hereof may, at its option, and without notice, declare the entirety of
this Note and any other note or notes executed by Maker and held by Payee or any
other holder hereof, together with all accrued but unpaid interest hereof and
thereon, immediately due and payable and to foreclose all liens securing payment
of same.
If this Note is not paid at maturity, however such maturity may be
brought about, and same is placed in the hands of an attorney for collection, or
if collected by suit or through bankruptcy, probate, receivership or other legal
or judicial proceedings, the Maker hereof agrees to pay an additional amount of
ten percent (10%) upon the principal and interest hereof then owing as costs of
collection and attorney's fees, or such other amount as may be reasonable.
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<PAGE>
This Note is executed under and shall be governed by the laws of the
State of Texas, except to the extent that limitations as to interest rate
charges shall be governed by the laws of the State of Texas and of the United
States of America.
RE-TRACK LISA, INC.
BY: /S/ Martin Kelly
------------------------------------
Martin Kelly, President
Date: 6/30/98
----------------------------------
STATE OF NEW YORK ss.
SS.
COUNTY OF ss.
BEFORE ME, the undersigned authority, on this day personally appeared
Martin Kelly, President of Re-Track LISA, Inc., who, being by me first duly
sworn slated that he has thoroughly read the foregoing Promissory Note and the
facts stated therein are true correct.
SUBSCRIBED AND SWORN TO, BEFORE ME, on this the .________day of
____________,1998.
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<PAGE>
MEMORANDUM OF AGREEMENT
-----------------------
This Memorandum of Agreement is made on the day, month and year
hereinafter written by and between P. ROWAN SMITH. JR. ("SMITH"), MARTIN KELLY
("KELLY") AND RE-TRACK USA, INC. ("RE-TRACK"), a Delaware corporation, with
respect to certain outstanding indebtedness (the "DEBT") to THE PERRY ROWAN
SMITH, JR. REVOCABLE TRUST (the "TRUST"), upon the following terms and
conditions, and thus:
1. Smith will cause the Trust to renew and extend the current maturity
date of the Debt upon the following terms:
a. The maturity date will be renewed and extended until March
31, 2000. If Re-Track is not otherwise in default of its obligations to Smith
and/or Trust on said maturity date, Re-Track may at its option renew and extend
the maturity date until March 31, 2001, PROVIDED Re-Track reduces the principal
sum of the Debt by an amount equal to $25,000 and pays all accrued interest
thereon. Further, if Re-Track is not otherwise in default of its obligations to
Smith and/or Trust on March 31, 2001, Re-Track may at its option renew and
extend the maturity date until March 31, 2002, PROVIDED Re-Track reduces the
principal sum of the Debt by an amount equal to $25,000 and pays all accrued
interest thereon. Further if Re-Track is not otherwise in default of its
obligations to Smith and/or Trust on March 31, 2002, Re-Track may at its option
renew and extend the maturity date until March 31, 2003, PROVIDED Re-Track
reduces the principal sum of the Debt by an amount equal to $25,000 and pays al1
accrued interest thereon. Further, if Re-Track is not otherwise in default of
its obligations to Smith and/or Trust on March 31, 2003, Re-Track may at its
option renew and extend the maturity date until March 31, 2004, PROVIDED
Re-Track reduces the principal sum of the Debt by an amount equal to $25,000 and
pays all accrued interest thereon. Further, if Re-Track is not otherwise in
default of its obligations to Smith and/or Trust on March 31, 2004, Re-Track may
at its option renew and extend the maturity date until March 31, 2005, PROVIDED
Re-Track reduces the principa1 sum of the Debt by an amount equal to $25,000 and
pays all accrued interest thereon. Each renewal and extension option granted
thereunder must be exercised by Re-Track on or before the then current
maturity-date or the Debt and the reduction of principal and accrued interest
must be paid upon the exercise of the applicable option. Notwithstanding any
contrary provision of this Agreement, the Debt sha11 not be renewed or extended
beyond March 31, 2005, on which date the entire balance of principal and accrued
interest shall be due and payable in full.
b. All loan documents, including promissory note and security
agreements, will be restated to the Trust's satisfaction whereupon Re-Track will
execute, acknowledge, and deliver the same to the Trust. The renewal and
extension documents will include a release by Re-Track of all claims, if any,
known or unknown, against the Trust and Smith.
c. Re-Track will deliver to the Trust such corporate
authorizations and required consents as evidenced by appropriate director
resolutions and officer certificates as the Trust may require.
<PAGE>
2. Any outstanding stock options granted by Kelly to the Trust will be
terminated and cancelled in all respects. Kelly wi11 grant a stock option to
Smith or his designee to acquire 1,000,000 shares of Re-Track which are now
owned by Kelly. The purchase price per share will be $1.00, and the term of the
stock option will be 36 months. The option shares will be adjusted for stock
splits, stock dividends, and other recapitalizations so that Smith's percentage
of ownership in Re-Track will increase or decrease in the same proportion that
the shares of Re-Track which are now owned by Kelly increase or decrease by
reason thereof. Smith shall be entitled to approve the form and content of said
stock option.
3. Re-Track will agree to give Smith stock registration rights with
respect to said option shares in the event of an initial public offering or
secondary offerings that follow thereafter to the same extent that Kelly has
stock registration rights. All shares of stock issued to Smith will be fully
paid and non-assessable and shall be of equal dignity with all shares of stock
owned by Kelly.
4. Re-Track will grant to Smith or its designee an exclusive license
(the "LICENSE") to manufacture, produce, distribute, and sell the disposable
hypodermic syringe ("SYRINGE") in the following territories ("TERRITORIES"):
a. Pakistan and India
b. Norway, Sweden, Denmark, and Finland
c. Mexico, Brazil, Argentina, and Chile
d, Israel, Jordan, Saudi Arabia, Yemen, Oman,
Turkey, Iraq, Iran,
Syria and The United Arab Emirates
e. Continent of Africa
5. The License term will be 10 years. There wil1 be no fee for the
initial term of the License. There will be a royalty paid by the licensee to
Re-Track equal to 10% of the sales price paid to the licensee for each Syringe
sold by the licensee ("10% ROYALTY"). The 10% Royalty will be due and payable
annually within 60 days after the end of each calendar year during the first
through the fifth years of the initial term, and thereafter (including the
renewal terms), the 10% Royalty will be due and payable semi-annually within 60
days after the end of each semi-annual calendar year. The licensee will furnish
and verify to Re-Track an annual statement of sales. If the annual statement
differs from the estimated payments, the licensee and Re-Track will promptly
adjust any incorrect 10% Royalty payments previously made by the licensee to
Re-Track. The scope of the License will extend to all uses for the Syringe.
Re-Track will indemnity, defend and hold harmless the licensee from any claims
of patent infringement or license rights made by third parties against licensee.
Re-Track will make available to the licensee all modifications, enhancements and
improvements made or caused to be made by Re-Track to all patents for the
Syringe which are owned by Re-Track.
6. Re-Track will grant to the licensee an option to renew and extend
the term of the License perpetually and continuously thereafter on an annual
basis so long as the license is not in default of its obligations under the
license at the time of the exercise by the licensee of the relevant option. If
the licensee fails to exercise its option to renew and extend the term at least
30 days prior to the next expiry date of the license, the license will terminate
on said expiry date. The option will be exercisable upon the payment of an
annual fee of $25,000 plus the 10% Royalty for each Syringe sold by the license
during such renewal form.
7. The License will be fully transferable by the licensee subject to
Re-Track's approval of the transferee PROVIDED such approval shall not be
unreasonably withheld, delayed or conditioned by Re-Track. Re-Track will
continue to be entitled to receive from the licensee the 10% Royalty following
any such transfer but will not be entitled to any additional royalty by reason
of any such transfer by the licensee PROVIDED the licensee will pay to Re-Track
20% of all front-end fees paid by the transferee to the licensee related to such
transfer.
-2-
<PAGE>
8. Re-Track will provide, or cause to be provided, to the licensee at
Re-Track's sole cost, expense and risk all technical data, information and other
materials that may be necessary or required by the licensee in order to
manufacture, produce, distribute, and sell the Syringe.
9. Re-Track may, at its option, purchase from the licensee up to 10% of
all Syringes which are manufactured annually by the licensee, on a
non-cumulative basis, at the actual cost to manufacture the Syringe plus 7%
together with (a) all sales or similar tax applicable thereto, (b) all special
cost to package the Syringes according to Re-Track's specifications, and (c) all
freight and shipment charges. Re-Track's rights granted under this paragraph are
non-transferable, directly or indirectly, without the licensee's prior written
consent and Re-Track will covenant and agree not to market, sell or distribute
the Syringes in the Territories.
10. The parties agree to close the transactions contemplated by this
Agreement on or before April 1, 1999. Each of the parties agrees to act in good
faith to negotiate and complete the terms of the written agreement evidencing
such license and all rights described herein, and each agrees not to
unreasonably withhold, delay or condition its approval on any terms or
provisions of such agreement.
11. The parties acknowledge that the failure of any party to fulfill
its obligations in accordance with the terms of this Agreement will damage the
other parties in a way that could not be adequately compensated by monetary
damages. Each of the parties therefore agrees that if it fails or refuses to
perform its covenants and obligations under this Agreement, the non-defaulting
parties shall be entitled to obtain specific performance by any defaulting party
of its covenants and obligations hereunder. The rights and remedies granted in
this Agreement in the event of default by any party are cumulative, and the
exercise of such rights and remedies shall be without prejudice to the
enforcement of any other right or remedy authorized by law or this Agreement.
12. The waiver by any party of a breach or violation of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
subsequent breach thereof.
13. Any and all notices required or permitted to be given under this
Agreement shall be void and of no effect unless such notice is in written form
and is delivered to the person to whom such notice is directed, either in person
or deposited in the United States mail, as a registered or certified item,
return receipt requested, postage prepaid, addressed to such person at the
following address, which address may be changed by delivery of notice in
accordance with these notice provisions:
If to Smith and/or the Trust:
Mr. P. Rowan Smith, Jr.
c/o Texas Regional Properties, L.L.P.
16420 Park Ten Place, Suite 220
Houston, Texas 77084
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<PAGE>
If to Kelly and/or Re-Track:
Mr. Martin Kelly
Re-Track USA, Inc.
22 S. Main St
New City, New York 10956
14. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Texas. Venue hereof shall be in Harris
County, Texas for all purposes.
15. This Agreement is executed in multiple counterparts, each of which
shall be deemed an original and together shall constitute one and the same
Agreement.
16. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect-any other provision thereof; and this Agreement shall be construed as if
such invalid, illegal, or unenforceable provision had never been contained
herein.
17. This Agreement shall be constitute the sole and only agreement of
the parties hereto and supersedes any prior understandings of written or oral
agreements between the parties respecting the within subject matter.
18. The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, representatives,
successors, and assigns.
19. If any legal action is brought by any of the parties hereto, it is
expressly agreed that the prevailing party in such action shall be entitled to
recover from the other parties reasonable attorney's fees in addition to any
other relief that may be sought.
EXECUTED this 11th day of March 1999.
/S/ P. Rowan Smith Jr.
----------------------
P. ROWAN SMITH, JR.
-4-
<PAGE>
/S/ Martin Kelly
--------------------------------------
MARTIN KELLY
RE-TRACK USA, INC.
By: /s/ Martin Kelly
-----------------------------------
Name: Martin Kelly
---------------------------------
Title: President, CEO
---------------------------------
THE PERRY ROWAN SMITH, JR.
REVOCABLE TRUST
By: /s/ P. Rowan Smith
-----------------------------------
Name: P. Rowan Smith
---------------------------------
Title: Trustee
--------------------------------
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<PAGE>
FIRST AMENDMENT TO MEMORANDUM OF AGREEMENT
------------------------------------------
This First Amendment to Memorandum of Agreement ("AMENDMENT") is made
on the day, month and year hereinafter written by and between P. ROWAN SMITH,
JR. ("SMITH"), MARTIN KELLY ("KELLY") and RE-TRACK USA, INC. ("RE-TRACK"), a
Delaware corporation with respect to certain outstanding indebtedness (the
"DEBT") to THE PERRY ROWAN SMITH, JR. REVOCABLE TRUST (the "TRUST"), upon the
following terms and conditions, and thus:
WHEREAS, the parties executed on March 11, 1999, a certain Memorandum
of agreement with respect to the Debt ("MEMORANDUM"); and
WHEREAS, the parties now desire and wish to amend the Memorandum.
NOW, THEREFORE, it is agreed as follows:
1. Paragraph 1.a. of the Memorandum is hereby amended by deleting the
same in its entirety and by substituting the following in its place and stead:
"The maturity date wi11 be renewed and extended until March 31, 2004,
on which date the balance of principal and accrued, unpaid interest
shall be due and payable in full. Interest only shall be due and
payable in annual installments beginning March 31, 2000, and
continuing annually and regularly thereafter until the final maturity
date of March 31, 2004."
2. Paragraph 2. of the Memorandum is hereby amended by adding the
following thereto:
"If Re-Track pays the Debt in full, principal and accrued, unpaid
interest, on or before March 31, 2002, and Re-Track successfully
completes an initial public offering of its common stock, Smith agrees
on Kelly's written demand to exercise said stock option by purchasing
at least 225,000 shares of Re-Track at a purchase price per share of
$1,00, subject to adjustment as aforesaid, and to complete such
purchase within 30 days after receipt of such demand."
3. Paragraph 4. of the Memorandum is hereby amended by adding the
following countries thereto:
"f. Argentina
g. Bolivia
h. Brazil
i. Chile
j. Columbia
k. Equador
l. Falkland Islands
m. French Guiana
n. Guyana
o. Paraguay
p. Peru
q. Sariname
r. Uruaguy
s. Venezuela
t. China"
<PAGE>
Each of the above named countries shall be included in the definition of the
term "TERRITORIES" as such term is defined and used in the Memorandum and its
Amendment.
4. Paragraph 5. of the Memorandum is hereby amended by adding the
following thereto:
"Smith agrees to advance for the benefit of Re-Track certain patent
renewal fees up to $3,391 as set forth in a letter dated 12 March 1999
from Mathys & Squire to Re-Track. Re-Track shall authorize and empower
Smith, at his sole cost and expense, to file in the Territories such
patents covering the Re-Track Syringe technology, including all current
or subsequent modifications, enhancements, improvements and other
related intangible rights as Smith in his sole discretion and judgment
may deem necessary and proper."
5. This Amendment shall be interpreted, construed and governed
according to the laws of the State of Texas. Venue hereof shall be in Harris
County, Texas for all purposes.
6. This Amendment is executed in multiple counterparts, each of which
shall be deemed an original and together shall constitute one and the same
Amendment.
7. In case of any one or more of the provisions contained in this
Amendment shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision thereof; and this Amendment shall be construed as if
such invalid, illegal, or unenforceable provision had never been contained
herein.
8. This Amendment constitutes the sole and only agreement of the
parties hereto and supersedes any prior understandings of written or oral
agreements between the parties respecting the within subject matter.
9. The provisions of this Amendment shall be binding upon and inure to
the benefit of the parties and their respective heirs, representatives,
successors and assigns.
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<PAGE>
10. The parties to this Amendment hereby ratify and affirm the
Memorandum and stipulate and acknowledge that the same shall remain in full
force and effect except as amended hereby.
EXECUTED this 30th day of March 1999.
/S/ P. Rowan Smith Jr.
----------------------
P. ROWAN SMITH, JR.
/S/ Martin Kelly
----------------
MARTIN KELLY
RE-TRACK USA, INC.
By: /s/ Martin Kelly
----------------------------------
Name: Martin Kelly
--------------------------------
Title: President, CEO
-------------------------------
THE PERRY ROWAN SMITH, JR.
REVOCABLE TRUST
By: /s/ P. Rowan Smith, Jr.
----------------------------------
Name: P. Rowan Smith, Jr.
--------------------------------
Title: Owner
-------------------------------
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<PAGE>
EXTENSION AND MODIFICATION AGREEMENT
------------------------------------
This Extension and Modification Agreement ("AGREEMENT") is made as of October 7,
1999, by and between RE-TRACK USA, INC. ("RETRACK') a Delaware corporation,
MARTIN KELLY, an individual residing in ____________________________ County,
("KELLY"), THE PERRY ROWAN SMITH JR. REVOCABLE TRUST (the "TRUST"), and PERRY
ROWAN SMITH JR., an individual residing in Harris County, Texas ("SMITH").
WITNESSETH:
WHEREAS, Retrack, Kelly and the Trust entered into that certain Loan
and Security Agreement dated June 30, 1998, (the "LOAN AND SECURITY AGREEMENT")
whereby the Trust agreed to provide certain financing to Retrack for the
continuing development and implementation of Retrack's syringe technology, as
defined therein (the "SYRINGE TECHNOLOGY"), and Retrack and Kelly, among other
things, agreed to (i) grant and assign to the Trust certain rights, and security
interests in and to the Syringe Technology including, without limitation,
Retrack's patent rights and patent applications appurtenant thereto (the
"PATENTS"), each as more particularly defined therein; (ii) issue ten percent
(10%) of the authorized shares of Retrack stock (approximately 890,000 shares)
to the Trust; and (iii) grant to the Trust an option, to be exercised within
eighteen (18) months from the effective date of the Loan and Security Agreement,
to acquire from Kelly up to twenty-five percent (25%), or 1,625,000 shares, of
Kelly's 6,500,000 shares of Retrack stock (the "FIRST OPTION"), all on the terms
and conditions and as more particularly set forth therein; and
WHEREAS, as further consideration for the Loan and Security Agreement
Retrack, as Maker, executed that certain Promissory Note dated July 1, 1998, in
the original principal amount of Two Hundred Thousand and No/100 Dollars
($200,000.00) payable to the order of Smith or his designee on or before April
1, 1999, together with all unpaid and accrued interest as therein provided (the
"Note"); and
WHEREAS, the indebtedness evidenced by the Note was independently
secured by the Syringe Technology and the Patents as also described therein; and
WHEREAS, Retrack, Kelly, the Trust and Smith entered into that certain
Memorandum of Agreement dated March 11, 1999, whereby Smith would cause the
Trust to renew and extend the indebtedness evidenced by the Note and secured by
the Syringe Technology and the Patents PROVIDED that, among other things, (i)
Kelly would grant to Smith, or Smith's designee, a stock option, effective for
thirty-six (36) months, to acquire 1,000,000 shares of Retrack stock then owned
by Kelly provided such amount of shares would be adjusted in the event of stock
splits, dividends or other recapitalizations occurring prior to Smith's
exercising such option (the "SECOND OPTION") AND WHICH SECOND OPTION WAS
INTENDED TO CANCEL AND REPLACE THE FIRST OPTION; (ii) Retrack would agree to
give Smith stock registration rights with respect to the said option shares in
the event of an initial public offering or secondary offering following
thereafter to the same extent that Kelly has any such stock registration rights;
(iii) Retrack would grant to Smith or Smith's designee an exclusive license
agreement to manufacture, produce, distribute and sell retractable hypodermic
syringes in certain geographic territories employing or incorporating the
Syringe Technology and/or the Patents on the terms described therein (the
"EXCLUSIVE LICENSE AGREEMENT"); and (iv) that on or before April 1, 1999, the
parties would act in good faith to negotiate and complete the several written
agreements necessary to evidence the license agreement and all other rights and
transfers contemplated by the Memorandum of Agreement; and
<PAGE>
WHEREAS, Retrack, Kelly, the Trust and Smith entered into that certain
First Amendment to Memorandum of Agreement dated March 29, 1999, whereby
Retrack, Kelly, the Trust and Smith agreed to modify and amend limited
provisions of the Memorandum of Agreement as more specifically set forth therein
(the Memorandum of Agreement and the First Amendment to Memorandum Agreement are
hereinafter collectively referred to as the "MEMORANDUM AGREEMENT"); and
WHEREAS, SIMULTANEOUSLY WITH THIS AGREEMENT, RETRACK, SMITH AND THE
TRUST SHALL EXECUTE AN EXCLUSIVE LICENSE AGREEMENT (THE "LICENSE AGREEMENT")
ATTACHED HERETO AS EXHIBIT A WHICH INCORPORATES THE TERMS AND CONDITIONS OF THE
MEMORANDUM AGREEMENT; AND
WHEREAS, Retrack and Kelly each hereby expressly stipulates and
acknowledges for all purposes that Retrack and Kelly have defaulted in the
payment of the Note and breached the terms of the Loan and Security Agreement
(and each as conditionally renewed, modified or extended by the Memorandum of
Agreement) by, among other things, Retrack's failure to make timely payments
under the Note to Smith and Retrack's and Kelly's failure to grant, transfer and
assign to the Trust and/or Smith all of the security interests including the
Patents as required in the Loan and Security Agreement and the Note; and
WHEREAS, Retrack and Kelly each stipulates, acknowledges and agrees
that, although Smith and the Trust in good faith prepared the several written
agreements contemplated by the Memorandum of Agreement including, without
limitation, the license agreement, Retrack and Kelley refused to execute such
agreements and that due to such failure Retrack and Kelly defaulted under the
terms of the Memorandum of Agreement; and
WHEREAS, Retrack stipulates, acknowledges and agrees that the original
principal amount of the Note, with all accrued interest owing thereon, remains
due and payable and that Smith is entitled to enforce the payment of such
indebtedness and foreclose its security interests in and to the Syringe
Technology and the Patents as provided in the Note and the Loan and Security
Agreement; and
WHEREAS, Retrack represented to the Trust and to Smith that Retrack is
currently engaged in an initial public offering of its stock to raise a minimum
of One Million and No/100 Dollars ($1,000,000.00) in capital (the "OFFERING")
and now desires to remain the sole and exclusive holder of he world-wide rights
to manufacture, produce, distribute and sell hypodermic syringes employing or
incorporating the Syringe Technology and the Patents and to terminate all prior
understandings and agreements which would grant the Trust and/or Smith an
exclusive license of the Syringe Technology and the Patents.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed, Retrack, Kelly, the
Trust and Smith agree as follows:
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<PAGE>
1. ABEYANCE AND TERMINATION OF PRIOR AGREEMENTS
(a) Contingent upon the terms and conditions expressly set forth in
this Agreement and the full execution of the License Agreement, the Memorandum
Agreement, and all provisions stated therein shall be canceled and forever
terminated.
(b) The First Option and Second Option granted by the Loan and Security
Agreement and the Memorandum Agreement are hereby canceled and forever
terminated.
2. COMPLETION OF OFFERING.
(a) In the event Retrack successfully completes the Offering on or
before April 1, 2000, Retrack covenants and agrees to immediately pay the full
amount of the remaining original principal balance due under the Note, as
modified hereby, together with all interest accrued thereon through such date,
to Smith, Smith's designee or any other holder of the Note whereupon Retrack
shall thereafter be released from any and all future obligation for the payment
of the indebtedness evidenced by the Note. Additionally, upon the successful
completion of the Offering and the payment of the remaining original principal
balance due under the Note, as modified hereby, together with all interest
accrued thereon through such date the License Agreement, described below and
executed as part of this Agreement, and all rights granted to Licensee therein,
shall be deemed terminated and canceled for all purposes effective as of the
date of Retrack's payment of all sums due and owing under the Note.
(b) The parties hereto stipulate, acknowledge and agree that in the
event Retrack fails to successfully complete the Offering on or before April 1,
2000, for whatever reason, the License Agreement shall immediately become
effective, binding and enforceable as between the parties thereto.
Notwithstanding the foregoing, in the event Retrack, prior to completing the
Offering or at any time thereafter (i) defaults or breaches any of the terms and
conditions of this Agreement; (ii) files a voluntary petition in United States
Bankruptcy Court as a debtor or seeking liquidation or reorganization of its
assets for the benefit of its creditors; (iii) makes an assignment of any of its
assets or interests for the benefit of creditors; (iv) files a petition for or
consents to the appointment of a receiver for the management of its assets or
any part thereof; (v) is named as a defendant or insolvent debtor in any
petition or cause of action filed by any creditor, or alleged creditor, of
Retrack in a United States Bankruptcy Court seeking a reorganization or
liquidation of Retrack's assets and such petition or cause of action is not
abandoned or dismissed within sixty (60) days from the date of filing; or (vi)
undergoes voluntary or involuntary dissolution and as a result thereof forfeits
its corporate charter or authority to transact business in any state in which
Retrack is presently incorporated or authorized to transact business, then in
any of such foregoing events the License Agreement shall immediately become
effective, binding and enforceable as between the parties thereto.
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<PAGE>
3. MODIFICATION AND EXTENSION OF NOTE AND SECURITY. The Note and all
terms and conditions thereunder shall be extended and modified as follows:
(a) Effective as of the date hereof, the original principal balance due
under the Note shall be increased by the amount of (i) Eighteen Thousand Two
Hundred Sixty Six and 66/100 Dollars ($18,266.66) which amount represents the
total accrued and unpaid interest due and payable by Retrack as provided in the
Note calculated through April 1, 1999; and (ii) Twenty Thousand and No/100
Dollars ($20,000.00) which amount represents the total amount of attorneys fees
incurred and paid by the Trust and/or Smith to prepare and deliver to Retrack
and Kelly for execution the Memorandum of Agreement and all of the agreements
prepared in connection therewith including, without limitation, a renewal
promissory note, security agreement and collateral assignment agreement, call
option agreement, escrow agreement, termination of stock option agreement and
license agreement. Accordingly, the original principal balance due and payable
under the Note as of the date hereof shall be Two Hundred Thirty Eight Thousand
Two Hundred Sixty Six and 66/100 Dollars ($238,266.66) and all interest due and
payable thereunder shall be at the rates provided under the terms of the Note.
(b) The Maturity Date, as defined in the Note, shall be renewed and
extended to April 1, 2000, and all principal and accrued interest thereon shall
not be due and payable until such date except in the event of default by Retrack
and/or Kelly of this Agreement or as otherwise provided under the terms of the
Note, the Loan and Security Agreement or this Agreement. Additionally, in the
event Retrack successfully completes its Offering prior to April 1, 2000, and
provided Retrack is not in default of its obligations under this Agreement,
Retrack may, at its option, extend the maturity date of the Note for four (4)
consecutive periods of one (1) year each upon the payment of all interest
accruing to the unpaid original principal balance (as modified herein) remaining
due under the Note for the immediately preceding year on or before April 1,
2000, or such subsequently extended maturity date.
(c) In the event Retrack pays the full amount of the remaining original
principal balance due under the Note, as modified hereby, together with all
interest accrued thereon through such date, prior to December 31, 1999, the
License Agreement executed herewith and all rights granted to Licensee therein,
shall be deemed terminated and cancelled for all purposes effective as of the
date of Retrack's payment of all sums due and owing under the Note.
(d) Notwithstanding anything to the contrary contained in this
Agreement or otherwise, in the event of any event of default or breach of this
Agreement or the Note by Retrack or Kelly, Smith shall be entitled to accelerate
the entire amount of the unpaid original principal balance of the Note, as
modified hereby, together with all interest accruing thereon without notice
whereupon the total amount thereof shall be immediately due and payable by
Retrack. In furtherance thereof, Retrack waives all notice of such acceleration
and Smith's intent to accelerate for all purposes and covenants and agrees to
immediately pay the entire amount due and owing upon such acceleration. Upon
such acceleration of the entire remaining balance due under the Note Smith shall
further be entitled to enforce all of the security interests provided under the
Note including, without limitation, those interests in and to the Syringe
Technology and the Patents and all such other rights, at law and equity to which
Smith might otherwise be entitled.
-4-
<PAGE>
(e) Retrack acknowledges and agrees that the terms and conditions of
this extension and modification of the Note as outlined above shall be fully
binding upon Retrack in the same manner and effect as a newly executed
promissory note.
(f) Retrack covenants and agrees that at the request of the Trust it
will take all steps necessary to perfect the Note and the security interests
granted therein and cooperate in executing a replacement note provided such
replacement note contains the same material terms and conditions as the current
Note including the security interests, extensions and modifications specified
above.
(g) Notwithstanding anything in this Agreement to the contrary, nothing
in this Agreement shall be deemed to modify, amend, limit or extinguish Smith's
or the Trust's security interest in and to the Syringe Technology and/or the
Patents created by the Loan and Security Agreement and the Note.
4. CONSIDERATION.
(a) As consideration for the total and complete termination and release
of the First Option and the Second Option provided in the Loan and Security
Agreement and the Memorandum of Agreement as set forth above, Retrack shall,
within five (5) business days after the full execution of this Agreement, issue
and deliver to the Trust 200,000 shares of Retrack common stock. Notwithstanding
anything in this Agreement to the contrary, Smith and the Trust shall each be
entitled to retain all shares Retrack stock issued to each respectively prior to
the date hereof pursuant to the terms of the Loan and Security Agreement,
the Memorandum Agreement or otherwise. The 200,000 SHARES OF RETRACK COMMON
STOCK ISSUED TO THE TRUST IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT SHALL
CONTAIN A RESTRICTION STAMP ON EACH RESPECTIVE SHARE CERTIFICATE ISSUED PURSUANT
TO RULE 144. ADDITIONALLY, RETRACK FURTHER COVENANTS AND AGREES TO PROVIDE
PIGGY-BACK REGISTRATION RIGHTS, AS SUCH MAY RELATE TO THE ISSUANCE OF THESE
SHARES; PROVIDED HOWEVER THAT SUCH RIGHTS SHALL BE SUBJECT TO RETRACK'S
UNDERWRITERS' APPROVAL. All shares of Retrack common stock issued to the Trust
in accordance with the terms of this Section 4 shall be fully paid and
non-assessable and shall be of equal dignity with all shares of Retrack stock
owned by Kelly. Contemporaneously with the execution of this Agreement Retrack,
at its sole cost and expense, shall prepare and submit to the Trust for its
approval all documentation necessary for the issuance of the 200,000 shares of
Retrack common stock to the Trust including, without limitation, draft copies of
the share certificates to be issued.
(b) In furtherance of Retrack's desire to be the sole and exclusive
holder of the world-wide rights to manufacture, produce, distribute and sell
hypodermic syringes employing or incorporating the Syringe Technology and/or the
Patents and as further consideration for Smith and the Trust to enter into this
Agreement, Retrack agrees to pay a perpetual royalty to the Trust based upon
Retrack's use, development, production and sales of such hypodermic syringes
incorporating the Syringe Technology and the Patents as follows:
(i) Retrack shall pay the Trust a royalty (the "ROYALTY")
equal to two percent (2%) of the gross sales of all hypodermic syringes sold by
Retrack in any market world-wide (either alone or incorporated into
subassemblies or other finished products) employing the Syringe Technology
and/or the Patents as defined above and in the License Agreement (the "RETRACK
PRODUCT"). As used herein, the terms "GROSS SALES" shall mean all revenue
derived from the sale by Retrack of any such Retrack Product which employs or
-5-
<PAGE>
incorporates any or all of the Syringe Technology and/or the Patents and all
technological advancements or characteristics associated therewith less any (A)
sales or excise taxes paid directly or indirectly by Retrack; (B) any reasonable
and customary shipping costs incurred by Retrack in connection with such sales;
and (C) normal and customary trade discounts, returns and allowances allowed
thereon as part of any valid and enforceable sales agreement.
(ii) The royalty payable to the Trust hereunder shall accrue
upon the sale of any Retrack Product. A Retrack Product shall be deemed sold at
the time full payment for such product is received by Retrack, or its designated
representative.
(iii) In the event Retrack grants to any third party a license
or other right to manufacture, produce, distribute or sell any Retrack Product,
Retrack shall pay the Trust (A) ten percent (10%) of any up-front consideration
received by Retrack for such license, and (B) five percent (5%) of all royalties
or other residual income actually received by Retrack from such license.
Notwithstanding the foregoing, Retrack covenants and agrees that it will not
grant a license, or any other purported right or interest to manufacture,
produce, distribute or sell any Retrack Product to any third party which would
infringe upon or otherwise detract from the rights and exclusive geographic
territories granted to Smith or the Trust arising out of the License Agreement
without first obtaining Smith's and the Trust's prior written consent.
(iv) The Royalty payable hereunder shall be perpetual and
shall be payable quarterly in arrears by Retrack to the Trust during each of
Retrack's fiscal years and shall be due within forty-five (45) days of the
expiration of each such fiscal quarter following the effective date hereof.
Within forty-five 45 days of the end of each respective accounting period
Retrack shall furnish the Trust with a written statement, certified by a duly
authorized representative of Retrack, stating the value of the Retrack Products
sold in the preceding accounting period and setting forth the essential
information concerning the sales by Retrack of Retrack Product subject to the
Royalty and upon which the Royalty is calculated. Such information shall include
the gross sales price for each Retrack Product sold during such accounting
period, the quantity of Retract Products sold, the total amount of consideration
and royalties received by Retrack during such accounting period from any
licensee as may be permitted as provided above and all other facts necessary to
facilitate verification of the calculation of the Royalty payable pursuant to
the terms of this Agreement. Payment of the Royalty owed to the Trust shall
accompany each such statement.
(v) Retrack agrees that it will at all times keep complete,
true and correct books of account containing a current record of sales and
royalties received and other data in sufficient detail to enable the Royalty
payable under this Agreement to be computed and verified. Retrack further agrees
to permit an independent certified public accountant acceptable to the Trust to
have access for inspection of said books of account at Retrack's principal place
of business at reasonable intervals during business hours. The cost of such
independent certified public accountant shall be borne by the Trust.
(vi) All Royalties due hereunder shall be paid in United
States Dollars. All royalties for an accounting period computed in other
currencies shall be converted into United States Dollars at the buying rate for
the transfer of such other currencies to United States Dollars as quoted by the
Chase Manhattan Bank on the last day of such accounting period, or the business
day thereafter if such last day shall be a Sunday or a holiday.
-6-
<PAGE>
(vii) In the event any national government imposes any taxes
on any part of the payments required hereunder by Retrack to the Trust and
requests Retrack to withhold taxes from such payment, Retrack may deduct such
taxes from such payments. Tax receipts indicating payments or withholding of
taxes on behalf of the Trust shall be promptly submitted to the Trust. Retrack
shall cooperate with the Trust in a determination of the propriety of imposition
of any such tax.
(viii) In the event any national government imposes any
exchange restriction prohibiting payments as required under this Agreement, an
account in the name of the Trust shall be established in a financial institution
of the Trust's choice in the country of such national government and all moneys
due the Trust shall be paid into such account, or at the Trust's election,
payment shall be made to any account designated by the Trust that complies with
such restriction.
(ix) Notwithstanding anything in this agreement to the
contrary, Retrack's right to manufacture, produce, distribute and sell Retrack
Products or other hypodermic syringes employing the Syringe Technology and or
the Patents shall not infringe upon Smith's or the Trusts right to manufacture,
produce, distribute and sell such hypodermic syringes as contemplated and
authorized pursuant to the terms of the License Agreement and within the
Geographic Territories defined therein. Further, Retrack and Kelly each
covenants and agrees that for so long as the License Agreement remains in effect
pursuant to its terms and conditions or pursuant to the terms and conditions of
this Agreement, Retrack and Kelly shall not compete or interfere with such
rights held by Smith or the Trust nor seek to preclude or otherwise impede
Smith's or the Trust's use and enjoyment of the Syringe Technology and Patents
as therein provided.
(c) In the event of the sale of Retrack, all or substantially all of
Retrack's assets, or the Syringe Technology or the Patents, Retrack shall pay to
the Trust six percent (6%) of the gross proceeds and all other consideration for
such sale excluding any and all reasonable and customary commissions and closing
costs associated with sale. Retrack and Kelly each covenants and agrees not to
sell or otherwise transfer or convey Retrack or any of its assets including the
Syringe Technology and the Patents except to a BONA FIDE third party purchaser
in an arm's length transaction without the prior express written consent of
Smith and the Trust.
(d) THE TERMS AND CONDITIONS OF PARAGRAPHS 4(B) AND 4(C)-ROYALTIES-
SHALL BE MUTUALLY EXCLUSIVE WITH THE LICENSE AGREEMENT THAT IN NO CASE SHALL
SMITH AND/OR THE TRUST BE ENTITLED TO BOTH A LICENSE AGREEMENT AND A ROYALTY.
5. DIRECTORSHIP. For a period of five (5) years from the date of this
Agreement, Kelly covenants and agrees to endorse Smith for membership on the
Board of Directors of Retrack at any and all special shareholders' meetings and
annual shareholders' meetings of Retrack wherein substitute directors or full
directors shall be elected to the Board of Directors. In furtherance hereof,
Kelly covenants and agrees to execute and deliver to Smith any and all
instruments including, without limitation, proxy statements affecting all of
Kelly's shares of Retrack stock reasonably necessary to accomplish the purpose
and intent of this provision. As further inducement for Smith to execute this
Agreement, Kelly represents and warrants as of the date hereof that Kelly owns a
sufficient number of shares of Retrack stock having voting rights which will
enable Kelly to endorse and elect Smith as a member of the Board of Directors
for Retrack.
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<PAGE>
6. RETRACK'S REPRESENTATIONS AND WARRANTIES. Retrack, as a material
consideration and in order to induce the Trust and Smith to enter into this
Agreement hereby certifies, represents and warrants to the Trust and Smith as of
the date hereof as follows:
(a) Retrack is the sole and lawful owner of the Syringe Technology and
the Patents and, on or before October 1, 1999, shall have sole possession of and
good, indefeasible title to the Syringe Technology and the Patents free and
clear of all claims, liens, encumbrances, leases, licenses and agreements of any
kind and shall own all rights and interests appurtenant to the Syringe
Technology and the Patents including, without limitation, any trademark rights
of any kind relating thereto or any derivative thereof (whether filed of public
record or acquired by prior usage) in accordance with any state or federal
statute or common law;
(b) The execution of this Agreement, and all of Retrack's covenants and
obligations contained herein including, without limitation, the issuance of
shares of Retrack stock to the Trust and/or Smith have been duly authorized by
requisite corporate action and shareholder approval and are enforceable and
binding against Retrack in all respects. Further, the execution and delivery of
this Agreement does not constitute a violation or breach by Retrack of it
Articles of Incorporation, bylaws or any provision of any agreement or other
instrument to which Retrack is a party or to which Retrack may be subject
although not a party, and will not result in or constitute a violation or breach
of any judgment, order, writ, junction or decree issued against or binding upon
Retrack, the Syringe Technology or the Patents;
(c) No person, firm or entity has any right or interest in and to the
Syringe Technology or the Patents which right or interest is superior or greater
to that of Retrack;
(d) Retrack is currently negotiating in good faith with potential
underwriters and is using its best efforts to facilitate and successfully
complete the Offering on or before April 1, 2000;
(e) Except for those matters expressly disclosed to the Trust and Smith
in writing prior to the date hereof, there is no action, suit, proceeding or
claim affecting the Syringe Technology or the Patents, or any rights or
interests appurtenant thereto, nor affecting Retrack and relating to the
ownership, use or enjoyment of the Syringe Technology or the Patents pending or
being prosecuted in any court or by or before any federal, state, county or
municipal department, commission, board, bureau or agency or other governmental
entity nor is any such action, suit, proceeding or claim threatened or asserted;
and
(f) Retrack has, prior to and through the date hereof, secured,
preserved and maintained the Syringe Technology and the Patents, including all
registrations and qualifications that are necessary and proper or otherwise are
required by law, to prevent the use of the Syringe Technology or the Patents by
third parties or the infringement of the Syringe Technology or the Patents by
third parties, or the forfeiture of such rights.
7. NOTICE. All notices, requests, demands and other communications
required to be made under this Agreement or in connection therewith shall be
given to or be made upon the respective parties at the following addresses:
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<PAGE>
To Retrack:
Re-Track USA, Inc.
22 South Main Street
New City, New York 10956
To Kelly:
c/o Re-Track USA, Inc.
22 South Main Street
New City, New York 10956
To the Trust:
The Perry Rowan Smith, Jr. Revocable Trust
16420 Park Ten Place, Suite 220
Houston, Texas 77084
To Smith:
c/o The Perry Rowan Smith, Jr. Revocable Trust
16420 Park Ten Place, Suite 220
Houston, Texas 77084
All notices, requests, demands and other communications given or made
in accordance with the provisions of this Agreement shall be in writing, shall
be delivered by certified or registered mail, return receipt requested, and
shall be deemed to have been given when deposited postage prepaid, with the
United States Postal Service addressed as specified above. Either party hereto
may change its address for Notice specified above by giving the other party ten
(10) days advance written notice of such change of address.
8. MISCELLANEOUS.
(a) Retrack shall deliver to the Trust and Smith certified copies of
all requisite corporate authorization and consent evidenced by duly executed
written resolutions and approvals of the board of directors, shareholders and
officers of Retrack as may be required in order to comply with its obligations
under the terms of this Agreement and which the Trust and Smith may otherwise
reasonably request.
(b) The parties hereto acknowledge that the failure of any other party,
to fulfill its obligations in accordance with the terms of this Agreement will
damage the other parties in a way that could not be adequately compensated by
monetary damages. Each of the parties therefore agrees that if it fails or
refuses to perform its covenants and obligations under this Agreement, the
non-defaulting party(s) shall be entitled to obtain specific performance by and
injunctive relief against any defaulting party of its covenants and obligations
hereunder. The rights and remedies granted in this Agreement in the event of
default by any party are cumulative, and the exercise of such rights and
remedies shall be without prejudice to the enforcement of any other right or
remedy provided under this Agreement or at law or equity.
(c) The waiver by any party of a breach or default of any provision of
this Agreement shall not operate as or be construed to be a waiver of any
similar or subsequent breach or default hereof.
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<PAGE>
(d) The parties hereto each does hereby acknowledge and stipulate that
(i) all negotiations and discussions pertaining to the subject matter of this
Agreement occurred in Houston, Harris County, Texas; and (ii) this Agreement has
been executed and delivered in the State of Texas and such execution and
delivery shall be deemed to be the transaction of business within the State of
Texas; and each does hereby covenant and agree that this Agreement shall be
governed by the laws of the State of Texas, and the rights and obligations of
the parties thereto shall be construed and interpreted in accordance with the
laws of the State of Texas.
(e) Retrack and Kelly each does hereby covenant and agree that
jurisdiction and venue with respect to all actions and proceedings instituted by
any party to enforce this Agreement, or to otherwise seek a declaration of
rights under this Agreement, shall be in Harris County, Texas, and any lawsuit
filed and prosecuted in connection therewith shall be exclusively in any State
District Court of Harris County, Texas, or in any United States District Court
for the Southern District of Texas, Houston Division. In the event any dispute
or controversy arises between the parties out of this Agreement, Retrack and
Kelly each hereby irrevocably appoints, authorizes and empowers the Secretary of
the State of Texas to act and serve as its respective agent for service of
process and citation with respect to any actions or proceedings filed by the
Trust or Smith against Retrack and/or Kelly. Retrack and Kelly each
unconditionally agrees that the Trust and Smith may serve any judicial process
or citation against Retrack and/or Kelly in connection with such actions or
proceedings by delivering the same to the Secretary of the State of Texas, in
accordance with Tex. Civ. Prac. & Rem. Code Ann. ss. 17.041 ET SEQ. (Vernon
1986), and requesting that such process or citation be forwarded to Retrack
and/or Kelly by registered mail at the address provided herein. Retrack and
Kelly each stipulates, acknowledges and agrees that the method of service
provided herein is reasonably calculated, under all of the circumstances, to
give actual notice of the proceedings to Retrack and Kelly in time to answer and
defend.
(f) This Agreement may not be modified or amended except by an
agreement in writing signed by all of the parties hereto. The parties may waive
any of the conditions contained herein or any of the obligations of the other
party hereunder, but any such waiver shall be effective only if in writing and
signed by the party waiving such conditions or obligations.
(g) This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original upon the execution of this Agreement by all
parties hereto and each such executed counterpart shall constitute one and the
same Agreement.
(h) In the event any of the provisions of this Agreement shall be held
invalid, illegal, or unenforceable in any respect by any court of competent
jurisdiction, such invalidity, illegality, or unenforceability shall not affect
the remainder of this Agreement and this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been a part hereof.
(i) The provisions of this Agreement shall be binding upon and inure to
the benefit of each of the parties and their respective heirs, representatives,
successors, and assigns.
(j) In the event it becomes necessary for either party hereto to file a
suit to enforce this Agreement or any provisions contained herein, the party
prevailing in such action shall be entitled to recover, in addition to all other
remedies or damages, reasonable attorney's fees incurred in such suit.
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<PAGE>
(k) Except as otherwise provided herein, all capitalized terms used in
this Agreement which are also used in the Loan and Security Agreement, Note or
the Memorandum of Agreement shall have the same meaning ascribed to such terms
therein. This Agreement shall amend the Loan and Security Agreement and Note to
the extent, but only to the extent, of the provisions contained herein. Any
provision of the Loan and Security Agreement and the Note not specifically
addressed herein shall remain unaffected by this Agreement. Except as otherwise
provided herein, all terms and provisions of the Loan and Security Agreement and
the Note are hereby ratified and confirmed by the parties hereto.
EXECUTED as of the date first written above.
RE-TRACK USA, INC.
By: /S/ Martin Kelly
-------------------------------------
Martin Kelly, President
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<PAGE>
THE PERRY ROWAN SMITH, JR.
REVOCABLE TRUST
By: /S/ Perry Rowan Smith Jr.
-------------------------------------
Perry Rowan Smith, Jr., Trustee
/S/ Martin Kelly
----------------------------------------
MARTIN KELLY
/S/ Perry Rowan Smith Jr.
----------------------------------------
PERRY ROWAN SMITH, JR.
EXHIBITS:
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Exhibit A - License Agreement
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