SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) November 1, 1996
LOGIPHONE GROUP, INC.
(Exact name of registrant as specified in charter)
Delaware 33-19324 75-0223079
(State of Other Juris- (Commission (IRS Employer
diction of Incorporation) File Number) Identification No.)
607 West Broadway, Suite 315, Fairfield, Iowa 52556
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (515) 281-5204
Star Resources, Inc.
5420 LBJ Freeway, Suite 540
Dallas, Texas 75240
(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
On November 1, 1996, the Registrant completed a sale of 4,000,000
shares (the "Star Shares") of common stock, par value $.0001 (the "Common
Stock"), to ICA Marketing Company, L.C., an Iowa limited liability company
("ICA-Iowa"), in exchange for all of the issued and outstanding equity (the "ICA
Shares") in ICA B.V., a Dutch limited liability company (the "Company"), as well
as an assignment of all of the debt owed by the Company to ICA-Iowa. The Star
Shares are being held in escrow pending the registration of the transfer of the
ICA Shares to Registrant under Dutch law. In connection with this transaction,
the Registrant amended its Certificate of Incorporation, inter alia, to change
its name to Logiphone Group, Inc. Registrant is hereinafter sometimes referred
to as "Logiphone Group."
Following the acquisition of the Company, the recent one-for-82.85
reverse stock split of the Registrant (See Item 5), and the contemplated
issuance of 500,000 shares (the "DutchCo Shares") of Common Stock to DutchCo (as
hereinafter defined) pursuant to the DutchCo Agreement (as hereinafter defined)
(See Item 1 and Item 2 below), ICA-Iowa shall own 80% percent of the outstanding
Common Stock of Logiphone Group. Due to their ownership interest in ICA-Iowa,
certain persons, directly and indirectly, beneficially own in excess of 5% of
the outstanding shares of Common Stock of Logiphone Group. In addition, certain
stockholders of the Registrant prior to the acquisition of the Company, directly
and indirectly, beneficially own in excess of 5% of the outstanding shares of
Common Stock following the acquisition of the Company. The following table sets
forth as of November 11, 1996, information known to the management of the
Logiphone Group concerning the beneficial ownership of Common Stock with respect
to (i) each person known by Logiphone Group to be a beneficial owner of more
than 5% of outstanding Common Stock of Logiphone Group, (ii) each current
director and executive officer of Logiphone Group, and (iii) all current
directors and executive officers of Logiphone Group as a group (6 persons at
such date.)
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<TABLE>
<CAPTION>
Beneficial Ownership
----------------------------------------
Name of Beneficial Owner Number Percent(1)
- ------------------------------------------------------ ------------------ ----------------
(i) Certain Beneficial Owners
<S> <C> <C> <C>
John M. Muelman(2) 373,057 7.5%
Lawrence E. Steinberg(3) 849,603(4) 17%
(ii) Directors and Executive Officers
Ron Gardner(2) 311,140(5) 6.2%
Michael A. Hershman(8) 86,796(5) 1.7%
Michael Hilsenrath(2)(6) 450,000(5) 9%
Doron Mishor 550,000(5) 10.9%
David Okeson(2) 236,528(5) 4.7%
Marc Schechtman(2) 3,565,286(3)(5)(9)(10) 54.9%
(iii) All Current Directors and Executive Officers
as a Group (6 persons) 5,199,750 80%
<FN>
(1) The percentages are calculated based on (i) 5 million shares of Common
Stock issued and outstanding, which assumes that the DutchCo Shares
shall be issued to DutchCo pursuant to the DutchCo Agreement, and (ii)
the assumption that as to each beneficial owner with a currently
exercisable option granted by Logiphone Group, such option has been
exercised.
(2) The beneficial ownership reflected herein is pursuant to such
beneficial owner's beneficial ownership of units (the "Units") in
ICA-Iowa.
(3) Mr. Steinberg is a former director and President of the Registrant.
Includes beneficial ownership of 493,137 shares pursuant to Mr.
Steinberg's beneficial ownership of Units. Mr. Steinberg has granted an
option (the "Steinberg Option") to Mr. Schechtman to purchase 693,137
shares of Common Stock for $4,666,667 in cash. This option expires on
the earlier of (a) 18 months from the date of the option (September 28,
1996) or (b) the later of (i) 90 days after the end of a period of ten
(10) trading days in which the closing bid price of Common Stock is at
least $8 per share or (ii) six months from the date of the option.
(4) Includes 48,280 shares owned by trusts for the benefit of
Mr. Steinberg's children, of which trusts he is a trustee.
(5) Includes 50,000 shares subject to presently exercisable stock options.
See "Stock Option Plan" under Item 5.
(6) The beneficial ownership reflected herein (except for the shares
underlying the stock options) relates to the record ownership of Becky
Hilsenrath, Mr. Hilsenrath's wife, of Units. Mr. Hilsenrath disclaims
beneficial ownership with respect to such Units and the resulting
shares of Common Stock.
(7) Mr. Mishor's beneficial ownership (except for the shares underlying his
stock options) is through his ownership and control of DutchCo.
See Item 2. Mr. Mishor has granted to Mr. Schectman a right of first
refusal for six (6) months from the date hereof to purchase the DutchCo
Shares for $25 million.
(8) Mr. Hershman is a former secretary of the Registrant.
(9) Mr. Schechtman has the following options to purchase Common Stock (not
including the right of first refusal with respect to the DutchCo
Shares) (i) 50,000 shares pursuant to the Stock Option Plan, (ii) the
Steinberg Option, (iii) 700,000 shares at an exercise price of $50 per
share exercisable for two (2) years from the date of grant (November
11, 1996); and (iv) 750,000 shares at an exercise price of $100 per
share exercisable for two (2) years from the date of grant (November
11, 1996).
(10) Includes 18,653 shares beneficially owned by Mr. Schechtman's son
through ownership of Units. Mr.Schechtman disclaims beneficial
ownership with respect to such shares.
</FN>
</TABLE>
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All members of the Board of Directors of the Registrant and all of the
executive officers of the Registrant prior to the acquisition of the Company,
have resigned, except that Michael Hershman has remained as a director of
Logiphone Group. The Board of Directors of Logiphone Group, which is elected
annually at its meeting of stockholders, consists of five individuals. The
following table sets forth information about the current Directors and the
executive officers of the Registrant.
Name Age Position
Ron Gardner 55 Director and President
Michael Hershman 41 Director
Michael Hilsenrath 37 General Manager of the Company
Doron Mishor 35 Director
David Okeson 51 Director
Marc Schechtman 45 Director, Chairman and Chief Executive Officer
Ron Gardner has served as President and a director of Logiphone Group
since November, 1996. Mr. Gardner has served as President of the Company, now a
Dutch subsidiary of the Registrant, since March 1996. Prior to that time, Mr.
Gardner was Director of Sales for Debit Card Services for The Furst Group from
May 1995 to February 1996, which is engaged in telecommunication services. Mr.
Gardner was employed by Comac Incorporated, a U.S. reseller of
telecommunications services, from 1988 until 1995, first as Vice President of
Sales and from 1993 as President.
Michael Hilsenrath has been involved with the Company since September
1995 as General Manager. Prior to that time, Mr. Hilsenrath worked with Cable
and Wireless, an English telecommunications firm, for ten years, as an employee
and consultant. He was last employed with Cable and Wireless as General Manager,
Voice and Facsimile Services.
Michael A. Hershman has served as Secretary and director of Registrant
since 1992. Mr. Hershman, a Certified Public Accountant, is President of Eagle
Equity Management, Inc. ("Eagle Equity"), a company which is owned 100% by
Lawrence Steinberg, the former principal stockholder, President, and director of
Registrant, and which provides real estate and investment management services,
since December 1992 and served as its Executive Vice President during 1991 and
1992. Eagle Equity has provided management and accounting services to
Registrant.
From 1986 to 1991, Mr. Hershman was a partner in a firm providing real estate
brokerage and management services. Mr Hershman received a Bachelors degree in
Accounting from the University of Texas at Austin in 1977.
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Doron Mishor founded Logiphone Group Telephone Communications Ltd.
("Logiphone Israel"), a company engaged in the development, production and
marketing of small PBXs in Israel and abroad, in 1992. Mr. Mishor was previously
Deputy Managing Director and Chief Operating Officer of Gambit Computer
Communications Ltd, an Israeli company engaged in the development, production
and marketing of advanced products for computer communications, from 1990-1992.
Prior to that time, Mr. Mishor was a partner and manager at Linar Industries
Ltd., which is an Israeli company engaged in the development, production and
marketing of civilian electronic systems for the domestic Israel and foreign
markets. Mr. Mishor was elected as a director of Logiphone Group in November,
1996 pursuant to the Agreement (the "DutchCo Agreement") between Logiphone Group
and DutchCo, all of the stock of which is beneficially owned by Mr. Mishor.
David Okeson was elected as a director of Logiphone Group in November,
1996. Mr. Okeson has been in the business printing industry for 27 years,
including for the last 20 years, as President of Warren Business Forms, Inc. He
is a private investor involved in various companies.
Marc Schechtman was elected as Chairman, Chief Executive Officer and a
director of Logiphone Group in November, 1996. Mr. Schechtman founded ICA-Iowa
in March of 1994 and has served as Chairman since its formation. Prior to that
time, Mr. Schechtman was a consultant in the telecommunications industry,
primarily in the arena of market analysis in general and international expansion
in particular.
Item 2. Acquisition or Disposition of Assets.
GENERAL
In the transaction described in Item 1, the Registrant acquired all of
the outstanding equity interest in the Company. Founded in 1994, the Company is
a reseller of international telecommunication services in the Netherlands. The
European telecommunications industry is undergoing a radical transformation.
Each country has traditionally been a monopoly with the monopoly provider being
the Post, Telephone and Telegraph authority ("PTT") of that country. In the
1990s, European countries have begun introducing competition into their
telecommunications markets. The European Union's Parliament has mandated that
each member country permit competition by January 1, 1998. Each European country
is introducing competition at its own pace and in its own way. The Company's
plan is to be positioned to participate in the newly competitive markets and
exploit opportunities in various markets as they appear.
Recently, Logiphone Group has begun preparations to enter the business
of providing public access fax Internet services. Logiphone Group's business
plan is to create a network for real time international fax services that can be
provided to businesses at a substantial discount when compared with traditional
fax services from telephone companies.
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THE CURRENT BUSINESS IN THE NETHERLANDS
The Company has established its initial operations in the Netherlands.
The Netherlands international calling market generates revenues of approximately
$1.7 billing per year. While the overwhelmingly dominant carrier is the Dutch
PTT, the Company believes the market potential is sufficient to provide a base
from which it may launch its entry into other European markets.
The Netherlands Network
A long distance call that uses the Company has three phases:
o Access--transporting the call from the caller's phone to the
Company;
o Switching--confirming that the caller is an authorized
customer and directing the call to its destination; and
o Termination--taking the call from the Company's switch to the
called party.
The Company is dependent on the Dutch PTT to provide access, and it
uses other international carriers to provide termination.
The Company owns three switches in the Netherlands; one is located in
each of Amsterdam, the nation's capital, Rotterdam, the world's busiest port,
and Raamsdonksveer, which is located in the southern region of the country. The
Company leases lines between these switches from the Dutch PTT. By having
switches located in various areas, the Company is able to reduce the cost of
access as the cost of receiving a local call and transporting it between two
switches on a leased line is less than the cost of access for a customer's call
from one of the cities to the switch in another city. The leased lines also
allow the Company to aggregate its traffic in one location before delivering it
to an international carrier for termination. This enables the Company to receive
volume discount pricing for termination.
A consumer who uses the Company's services--or any long distance
service other than the Dutch PTT--is required to dial a local Dutch telephone
number in order to reach its preferred long distance carrier. The caller is then
required to dial an authorization code so the carrier may verify the caller's
authorization to make calls through its system. Finally, the caller must enter
the telephone number he wishes to dial. This is similar to the procedure that
persons in the United States wishing to use a carrier other than AT&T were
required to follow prior to the break up of AT&T in 1984. To offset the
inconvenience of these dialing requirements, the Company has established a
relationship with Logiphone Israel, a manufacturer of PBXs and dialers, to
incorporate features that provide least cost routing for long distance calls to
the Company's switch. See "Key Contracts." The equipment can be placed at the
customer premises and connected to the customer's telephone system. When this
equipment is in place, callers then dial an international long distance call in
the same manner that they would place that call using the Dutch PTT. The
Company's equipment will select the desired carrier, such as the Company, for
that call, dial that carrier's switch and input the authorization code and the
called number.
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Sales and Marketing
The Company initially plans to target business customers spending
approximately $450 per month in international long distance. Under current
regulatory requirements, the customers must join a calling association, which is
the manner in which the Company is organized, in order to use services such as
the ones the Company offers. The Company proposes to market its services in the
Netherlands through PBX retailers. The Company has developed a relationship with
Jabeco Import/Export B.V. of Raamsdonksveer ("Jabeco"). Jabeco has been an
importer of telecommunications equipment for several years and evolved into a
PBX dealer when the market for providing telecommunications equipment was opened
to competition. It has operated a PBX business for eight years. As a PBX dealer,
it sells and installs business telecommunications systems. In addition to its
own customer base, Jabeco has developed relationships with 40 PBX dealers in the
Netherlands through whom it sells and markets products. Beyond that, Jabeco has
developed a relationship with 24 other dealers arising from its membership in an
association to promote a competitive environment for PBX dealers. The Company's
plans call for the Company to exploit these relationships to sell its long
distance telecommunications services. The 64 dealers with whom Jabeco has a
relationship already have relationships with over 100,000 customers for whom
they have installed office phone systems in the last seven years and for whom
they are providing services. They are able to offer the Company's dialer and PBX
as an upgrade to the customer's office telephone system and by this means can
introduce the Company's services to their customer base. Moreover, since one
piece of equipment with which the Company provides services is the Logiphone
Israel PBX, the PBX dealers can offer the Company's equipment in making sales to
customers who need to replace equipment. The Company does not currently charge
for its dialers or PBXs if the customer meets certain long distance volume
thresholds, so price will not be a constraint on PBX sales by these dealers.
The Company will compensate PBX dealers by paying commissions for as
long as the dealer's clients use the Company's services, so rather than looking
for a profit on the equipment, they are receiving commission from the Company.
Dealers will still be able to make sales of ancillary equipment such as phones
to customers who have been provided a Logiphone Israel PBX. Moreover, dealers
will not be required to recommend the Company's service exclusively. If another
carrier offers a better rate for calls to certain destinations, the dialer and
PBX can be programmed to direct calls for those destinations to that carrier.
Thus, the dealers are able to present their clients with a total solution for
taking advantage of the new competitive calling environment. Because of these
advantageous aspects of selling for the Company, the Company believes PBX
dealers will be a highly motivated sales force. The Company plans to work
closely with the dealers, meeting with them regularly to contact and qualify
customers and to review the status of existing customers.
In addition to its use of PBX dealers, the Company intends to conduct
telemarketing and direct mail marketing activities and to develop additional
channels for marketing its products.
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Key Contracts
In order to complete its business plan, the Company is dependent upon a
supply of dialers and PBXs, carriers who will provide termination for the
Company's calls, and back office service providers that will provide billing and
customer service.
Logiphone Group and the Company have executed a Strategic Alliance
Agreement (the "Logiphone Agreement") with Logiphone Israel, which was signed on
November 10, 1996, under which Logiphone Israel will sell PBXs to the Company on
a "most favored customer," firstpriority basis at cost plus 10%. Logiphone
Israel has agreed during the five-year term of the Logiphone Agreement not to
sell such PBXs to the Company's competitors who plan to rent the PBXs or provide
them below cost to the customer. Logiphone Israel has agreed to develop new
equipment for the Company, subject to Logiphone Group funding the capital costs
for such development. In addition, Logiphone Group has agreed to make an advance
to Logiphone Israel of 25% of the net proceeds of any of its securities
offerings up to one million dollars ($1,000,000). The proceeds of such advance
are to be used primarily for research and development by Logiphone Israel. The
Logiphone Agreement terminates if Logiphone Group has not advanced $1 million to
Logiphone Israel within 90 days of the date the Logiphone Agreement was
executed. This advance shall be a loan (the "Loan") to Logiphone Israel bearing
interest at 10% per annum and shall be due on the fifth anniversary of the date
of the Loan. Logiphone Israel shall have the right, at any time during the term
of the Loan, to either repay that outstanding balance of the Loan or to convert
the Loan to a 7.5% equity interest in Logiphone on a fully-diluted basis, and
the Logiphone Israel stock acquired upon such conversion shall have preemptive
rights. The Logiphone Agreement grants Logiphone Group the right to use
"Logiphone" in its corporate name and in connection with products purchased from
Logiphone Israel and further provides that if Logiphone Group has made the full
$1 million Loan to Logiphone Israel, Logiphone Group may use the "Logiphone"
name in perpetuity. Pursuant to the Logiphone Agreement, Logiphone Group has
agreed during the term of the Logiphone Agreement to purchase certain minimum
numbers of PBXs on a monthly basis, and has agreed not to purchase end-user
telephone communications equipment from third parties; provided, however, that
Logiphone Israel is able to produce and deliver such product with equivalent
features and functionality at a price equal to or lower than that available from
competing suppliers.
In addition, Logiphone Group has negotiated an agreement (the "DutchCo
Agreement") with an affiliate of Logiphone Israel (DutchCo"), pursuant to which
DutchCo shall purchase 500,000 shares (the "DutchCo Shares") of Common Stock of
Logiphone Group for the payment of $120,000 in cash. In connection with the
DutchCo Agreement, DutchCo will provide certain management services to Logiphone
Group for one (1) year. In consideration for such management services, Logiphone
Group will pay a management fee of $240,000 to DutchCo. In addition, in
connection with the DutchCo Agreement, Doron Mishor, the principal stockholder,
sole director and president, of Logiphone Israel and DutchCo, has been elected
to Logiphone Group's Board of Directors. The DutchCo Agreement is subject to the
negotiation and execution of a definitive agreement.
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In connection with the Logiphone Agreement and the DutchCo Agreement,
Doron Mishor has granted an option to Logiphone Group to purchase all of the
stock of Logiphone Israel for $10,000,000 during the first 12 months and for
$15,000,000 during months 13 through 36. The definitive option agreement is
being prepared to confirm the terms of this option agreement.
The Company has an agreement with Esprit Telecom Benelux B.V., the
second largest telephone company in the Netherlands ("Esprit"), to provide
international terminations from the Company's Dutch points of presence. The
Company is able to select the low cost carrier on each route for each call that
its customer makes. The Esprit contract is for a term of one year but is renewed
for an indefinite period unless terminated by the Company on 60 days notice
prior to the end of the year. The Company has provided a $45,000 bank guarantee
with respect to this agreement.
The Company has entered an agreement with Intertech, a U.S. based
corporation providing services to long distance resellers in the United States,
to provide billing, collection and certain management reporting functions under
a two-year agreement. The agreement may be earlier terminated for non-payment or
other breach.
Competition
The Company faces substantial competition. The single largest
competitor is the Dutch PTT, which still retains an overwhelming proportion of
the market. There are a variety of other providers, many of whom are associated
with large telecommunications companies. These companies typically target larger
customers than the Company is targeting and include Esprit, the second largest
telephone company in the Netherlands, which also operates in at least seven
other countries; Global One, a consortium of Deutsche Telekom, France Telecom,
and Sprint; British Telecom; and Telegate, a subsidiary of Telecom Finland. In
addition, there are resellers who are targeting medium-sized businesses. These
include Worldcom B.V., Versatel and Viatel. Each of these is considerably better
financed than the Company. There are also small resellers, both those using
switches and those without switches. These include Bel-Net, which has been
operating for over a year, Telegroup and Global Link. Some of those resellers
operate call back operations. A European customer calls their switch in the U.S.
and hangs up. The switch then calls back the customer and completes the call.
This permits the call back operator to take advantage of the rates, available
for calling from the U.S. to Europe, for which competition is well entrenched,
that are much lower than the rates available for calling from Europe to the
U.S., for which competition is just beginning. The Company can expect to face
similar types of competition in other countries as it expands.
Regulation
Communications in the Netherlands is regulated by the Ministry of
Traffic and Waterworks. All members of the European Union, including the
Netherlands, are required to permit competition with its monopoly PTT by
facilities-based carriers by January 1, 1998. The Dutch Ministry has indicated
that it wishes to have competition by facilities-based carriers by July 1, 1997.
The Company is not a facilities-based carrier. It has received permission from
the
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Ministry to provide its international resale service. The Ministry has the power
to regulate rates and in addition has the power to regulate equipment attached
to the public network. At the present time, the Ministry does not regulate the
rates offered by the Company and other carriers. The Ministry currently does
regulate the rates offered by the Company's major competitor, the Dutch PTT;
however, the Ministry may change its stance with respect to such regulation in
the future.
The PBX and the dialer that the Company offers have been approved by
the Ministry for attachment to the Dutch public network. There are others
dialers used in the Netherlands that have not received this certification, but
the Company believes that having certified dialers is a positive feature for PBX
dealers who are asked to markets its services. Accordingly, the Company does not
see regulation as inhibiting its ability to provide service in the Netherlands
at this time.
The degree of regulation in other European countries varies. All
regulate equipment that may be used in connection with the telephone networks in
their country. The only European countries in which the Logiphone PBX has been
approved for use are Spain, Belgium, Luxembourg and the Netherlands.
Accordingly, the Company will be required to obtain approval to use the
equipment in other countries.
Geographic Expansion
Once the Company's operations have been proved in the Netherlands, the
Company intends to enter other European countries. Germany, Belgium and France
are likely candidates for expansion due to their proximity to the Netherlands
and the large amount of calling between the Netherlands and each of them. Spain
is another likely candidate for expansion because (i) an affiliate of Logiphone
Israel has an office in Spain and (ii) the large amount of telecommunication
activities in Spain. Jabeco has developed distribution channels in Belgium and
relationships with PBX dealer associations in Germany. It also has distributors
in Japan and Hungary; exports products to Italy, Malta and Morocco; and works
with dealers in the United Kingdom and other European and Asian countries. In
addition, the Company is developing a relationship with an international
association of PBX dealers by which it will make its services available to
members of the association. No decision has been made with respect to the timing
or location of additional operations. Several factors will be considered in
choosing a country in which to expand, such as regulatory climate, availability
and cost of termination services, availability of a national sales force, and
ability to procure suitable dialers and PBXs that have been approved for use in
the country.
INTERNET FAX SERVICE
Logiphone Group is in the process of developing the infrastructure that
provides for real time Internet fax service. Traditional faxing is accomplished
over telephone lines and is subject to long distance charges. Currently,
Internet fax services use store and forward systems, which are not real time.
Logiphone Group's approach combines the advantages of low cost Internet routing
with the convenience and real time configuration associated with conventional
faxing via telephone lines.
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Logiphone Group business plan is for its Internet fax service to be a
public access network that will be global in its breadth. Logiphone Group's
Internet fax service will allow subscribers to fax anywhere in the world without
paying international telephone charges. International fax costs will be
substantially reduced by becoming a Logiphone Group Internet fax subscriber.
To begin to establish the infrastructure that will allow real time
Internet fax services, Logiphone Group plans to install the necessary hardware
in over 40 countries. Local Internet Service Providers (ISPs) are targeted to
receive this hardware from Logiphone Group. End-user subscriber fees will
provide a revenue stream for both Logiphone Group and ISPs.
Key Contacts
To provide the necessary hardware for this infrastructure, Logiphone
Group has turned to two strategic partners. They are RADLINX, Ltd. ("RADLINX")
of Tel Aviv, Israel, and Logiphone Israel.
RADLINX, established in 1990, develops, manufactures and distributes a
range of Internet/Intranet messaging system and access solutions. RADLINX is
part of the Israeli-based RAD Group, a leading data communications group in
Israel. RADLINX has developed the PASSaFAX technology, which is used for
converting fax protocol signals into Internet protocol signals, and vice versa.
RADLINX has already installed 300 PASSaFAX systems throughout the world for
dedicated point-to-point fax services. Logiphone Group plans to leverage this
technology and private network experience to build a public access global
network.
Logiphone Israel will supply modems and PBX systems for the ISP sites.
Logiphone Israel is developing a smart auto-dialer for Logiphone Group Internet
fax subscribers. Any Logiphone Israel equipment will need to be approved for use
in the countries in which it will be installed. Logiphone Israel exports and
sells its telecommunications products in ten countries and is already a leading
manufacturer of small business telephone systems in Israel. Several Logiphone
Israel products are distributed by the Israeli national telephone company,
BEZEQ.
Key Contracts
The Company has entered into a Strategic Alliance Agreement (the
"RADLINX Agreement") dated October 8, 1996, with RADLINX. Pursuant to the
RADLINX Agreement, RADLINX has agreed during the four year term of the RADLINX
Agreement to sell to the Company on a "most favored customer," first priority
basis products (the "RADLINX Products") consisting of equipment, hardware and
software designed for the transmission of facsimile messages over the Internet,
designed and manufactured by RADLINX, which are known as "Fax Over Internet"
Products. RADLINX has agreed during the first 24 months of the RADLINX Agreement
not to sell the RADLINX Products to the Company's competitors. The Company has
agreed during the term of the RADLINX Agreement to purchase from RADLINX certain
minimum quantities of the RADLINX Products and not to purchase Fax Over Internet
Products from any third party; provided, however, that RADLINX is able to
produce and timely deliver the RADLINX Products ordered by the Company from time
to time. The RADLINX Agreement
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grants to the Company the right to use the "RADLINX" name and RADLINX's trade
names "PASSaFAX" and "PASSaPORT" in connection with RADLINX Products purchased
from RADLINX. The RADLINX Agreement provides for an option to be granted to
Logiphone Group to acquire new shares of RADLINX on terms to be mutually agreed
by the parties. The option fee will be a minimum of $1 million and is payable in
three equal installments with the first installment due on November 20, 1996.
The option fee payments are non-refundable if the option is not exercised. If
the option is exercised, the option fee shall be deducted from the option
exercise price.
Conventional Faxing
Logiphone Group believes that its public access Internet faxing system
represents a major improvement over conventional faxing in terms of pricing for
international faxes. With conventional faxing, users must transmit over
telephone lines. Users typically feed a document into a stand alone fax machine,
key-in the destination fax number, and hit the send button. From there, the fax
signal is routed over the public switched telephone network (PSTN).
At the local telephone switch, the destination number is analyzed to
determine what path it should follow. International calls must be transferred to
a long distance network. This leg of the transmission can be provided by many
international service providers, but telephone charges apply, depending upon
origin, destination and time of day.
As the fax signal nears its destination in another country, it is
rerouted to a local switch. This switch sends the fax to the telephone number on
the receiving fax machine.
This method uses a communication path between the two fax machines. At
the conclusion of the transmission, the receiving fax machine sends back
information regarding the status of transmission. Usually, this is a printout at
the sending fax that notes the successful transmission of so many pages.
The advantages of this methodology is the simplicity of operating and
the real time confirmation, or lack of, that a user receives during fax
transmission. International faxing can require multiple attempts before a
successful transmission. Receiving immediate confirmation of the successful fax
transmission is a very important factor for many businesses.
There are variations upon this scenario, such as using a PC equipped
with a fax/modem, but the mechanics are quite similar, and the sender still
incurs international telephone charges.
Internet Faxing
Sending faxes via the Internet bypasses the international telephone
networks. This has the advantage of eliminating the international telephone
charges associated with sending the fax. Domestic telephone charges, if any,
will be less than international telephone charges. But for an Internet fax
service to be truly accepted by the user community, the management of Logiphone
Group believes that such service must have several features.
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First, it should be as easy to operate as a fax machine is today.
Second, it must have the same image quality as conventional faxing. Third, it
should provide real time feedback on fax status and confirmation of successful
faxes. Finally, Internet faxing must be a service that is widely available to
ordinary businesses worldwide. This means a public access network. In short,
Internet faxing must be as user friendly as today's fax machines, available in
almost any location, and offer a cost advantage by routing over the Internet.
Sending faxes over the Internet is possible today, but with
limitations. First, such services are only available on corporate LAN networks
that have a direct connection with the Internet. This is not a service to which
most business users have access economically. Secondly, current Internet faxing
is not real time. These so-called store and forward systems will send back
status information some time after the fax is sent. Often, this can be a long
delay, and has proved to be unsatisfactory to many users.
PASSaFAXing
Management believes that the system to be deployed by Logiphone Group
will eliminate these shortcomings. First of all, it will be a public access
network, so subscribers will not need to have a special or dedicated connection
to the Internet. Internet connections will be provided by service companies.
The most logical way to establish this public access Internet
infrastructure is to leverage an existing network of Internet Service Providers
("ISPs"), who already provide Internet access using many popular web browsers.
Logiphone Group will provide the hardware to upgrade these ISPs, allowing them
to provide Internet fax services.
Secondly, Logiphone Group's Internet fax service will not require the
fax sender to alter their transmission methods in any way. They will still use
their fax machines as usual, but will receive the cost saving from Internet
routing. Real time status information and transmission confirmation is a very
important aspect of user acceptance which has been incorporated into this
system. In effect, Internet fax routing will be transparent to the user.
The major components of the Logiphone Group's Internet fax system are
described below. At the sending fax machine, the user loads the document, enters
the destination fax phone number, and pushes the start button. The fax machine
scans the document line by line, and converts the image of the document into
analog signals. These generally follow the G3 facsimile protocol and is the
normal mode of operation of these fax machines.
An auto-dialer supplied by the Logiphone Group will be provided to the
Internet fax subscriber. It is a small box about the size of a cigarette pack.
The subscriber merely attaches it to the telephone line, between the fax machine
and the wall plug. The auto-dialer can be used with fax machines that have a
direct connection to the public telephone network or with business faxes that
use a PBX telephone system.
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This device determines if the outgoing fax number is an international
or domestic telephone call. If it is a domestic call, the fax signal is simply
passed through the auto-dialer onto the public telephone network for
conventional faxing. For international faxes, the auto-dialer will send the fax
to the ISP who will transmit it over the Internet.
Conversion for Internet Transmission
The auto-dialer on the sending fax machine now makes contact with the
local ISP, which has been equipped with the Logiphone Group PASSaFAX hardware.
The purpose of this hardware is to convert G3 facsimile protocol signals into
Internet protocol signals for transmission over the Internet. At the reciprocal
ISP site, at the receiving end, the reverse occurs; Internet protocols are
converted back to G3 facsimile protocols for transmission over the telephone
lines to the receiving fax.
At the ISP, a PBX telephone system is used to manage in-coming and
out-going calls. This system first checks to see which of the many modems is
available, and then routs the incoming call to this modem. For out-going calls,
the PBX system directs information from the modems to available outside
telephone lines.
To ensure minimum access times and efficient routing to the receiving
fax machine, each ISP site contains many parallel channels. Each channel
consists of a modem and PASSaFAX hardware system. System capacity is easily
expanded by adding more channels at the ISP. The bandwidth required to convert
faxes into Internet protocols for transmission is quite small compared to the
bandwidth required for normal Internet image data. Therefore, adding fax
services to ISP installation should have a negligible impact on access times and
total bandwidth.
The modem is used to convert the analog G3 fax signals into a digital
format when sending a fax, and visa-versa at the receiving end ISP. The digital
fax signal is then sent to the PASSaFAX hardware, where the telephone number of
the destination fax machine is examined. Using a lookup table, the ISP site
closest to the destination fax is then identified. Two thousand ISP site
addresses are contained within the PASSaFAX hardware. Software provides room for
an additional 2000 sites to be contained in the lookup table.
The sending ISP then establishes contact over the Internet with the
receiving ISP through standard Internet handshaking routines. The receiving fax
machine is called over the public telephone network, and contact established
through G3 protocols. At this point, end-to-end handshaking contact between the
sending and receiving fax machines has been established, just as in conventional
faxing.
Now, each PASSaFAX unit begins to convert the digitized facsimile
document into Internet protocols. The image of the document is "packetized" into
TCP/IP protocol signals for transmission over the Internet. This protocol allows
each packet to take any route over the Internet to get to its destination. At
the destination site, the packets are reassembled into their original sequence.
Parity checks insure that no packets are lost during the Internet transmission.
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The remote ISP PASSaFAX hardware now reconverts the Internet protocols
back into G3 protocol signals. Modems reconvert the signals to analog format and
the G3 fax tone signal is routed out through the PBX to the remote fax machine.
Standard confirmation or error signals from the remote fax machine are
passed back to the ISP, over the Internet, and onto the sending fax. In this
way, real time confirmation of the fax is accomplished, just as in conventional
faxing.
It is important to note that the remote fax machine does not have to
have an auto-dialer to receive faxes via the Internet. However, it must have one
to initiate PASSaFAXing.
Competition
Logiphone Group's Internet fax service will compete with current
telephonic fax services for the international fax business. Management believes
that over the past decade, fax has found a solid market niche because: (1) it is
publicly accessible worldwide; (2) a confirmable, hard copy can be received
virtually anywhere in the world without delay for a reasonable cost; and (3) fax
delivers a professional impact allowing the sender to use letterhead and a
signature. Of these three reasons, the first two are the real essence of its
success.
Management believes that any communications company wanting to compete
in the fax market must be able to offer a real time service that delivers high
quality copy globally wherever there are phone lines. Further, the system should
be transparent to the user--the user should not need a computer, an Internet
connection or anything more than a normal fax device. Finally and most
importantly, to gain a significant market share, the company has to offer its
service at a price substantially less than the current phone line based fax
system.
Logiphone Group's Internet fax service fulfills all of the above
criteria, which current Internet-to-fax services do not. FaxSav, Xpedite,
Graphnet, AT&T, Mercury, ElectraSoft, Digitran, and several major telecom
companies offer "store and forward" systems that have delays in sending of faxes
and a difficult message delivery confirmation process. Management believes that
because of these drawbacks, store and forward systems have not captured a
significant market share and, in most cases, are not global.
Companies such a Telematics, Brooktrout Technologies, Canadian Marconi,
and Voice & Data offer real time fax service but it is over the X.25 network,
which Management believes is from 10 to 1000 times more expensive than the
Internet. Like the Internet, the X.25 is an international data network. However,
unlike the Internet, its costs are very high due to the low volume of traffic
and the resulting rate increases levied by the carriers.
E-mail may be another competitor to fax over the Internet. An analysis
of e-mail relative to fax that was done by Symantec in 1996 indicates that
e-mail has replaced billions of simple text messages that would have formerly
been faxes, but it has only replaced a tiny percentage of faxes that involve
graphics or other complex formatting. Management believes that e-mail falls
short
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of overtaking the fax market because it lacks: (1) professional graphics such as
company logo and marketing visuals, (2) hard copy accountability, and
3) reliable delivery.
However, e-mail attachments promise to eliminate the first inequity by
sending the original computer file. This gives the receiver an editable image,
higher resolution, and the option of color. Even though this approach is gaining
acceptance within corporations, e-mail, according to Symantec, suffers from
certain limitations that give fax services an advantage over e-mail: recipients
frequently do not have the native application to open the document and it is
time consuming to figure out the application and how to open it. In contrast,
fax does not require any software skills for document replication. Furthermore,
compatibility among the 60 million fax devices world wide is not an issue.
According to a 1996 Pitney Bowes/Gallup poll, fax is still the preferred method
of business communication among both Fortune 500 and mid-size companies.
Management believes that real time fax and e-mail will continue to grow within
their own respective markets.
Logiphone Group's business plan is to build a global real time,
Internet based fax service that will initially cover the majority of routes in
over 40 countries and will expand to meet global demand. RADLinx has advised
Logiphone Group that tests at its over 300 locations show that the Internet fax
service provides the same quality of facsimile as the current phone line based
system at a fraction of the cost. The rate for Logiphone Group's fax service
will be significantly less than the rate for traditional fax services from
telephone companies.
Regulation
Logiphone Group has been advised by its counsel that, at the present
time, Logiphone Group's Internet fax service will not be subject to regulation
in the United States or in member countries of the European Union. Logiphone
Group's Internet fax service may be subject to regulation outside the European
Union, and there is no assurance that such fax service may in the future become
subject to regulation in the United States and within the European Union. In
addition, the Federal Communications Commission has been requested to consider
imposing usage sensitive access charges on ISPs.
Employees
The Company has seven employees and four contractors.
Property
The Company occupies space owned by Jabeco in Raamsdonksveer, Holland
and pays rent of approximately $4,500 per month. The Company's business offices
and one switch are located in this space. The Company's other switches are
located in space provided rent free by Esprit and Elcotel, one of the Company's
agents. Logiphone Group's corporate offices are located in Fairfield, Iowa.
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Plan of Operation
Logiphone Group will not be able to implement the business plan without
raising substantial additional funds. As noted above, the Logiphone Agreement
contemplates that Logiphone Group will make a $1 million loan to Logiphone
Israel by February 10, 1997. In addition, pursuant to the RADLINX Agreement,
Logiphone Group plans to advance to RADLINX at least $1 million as payment of
the option fee, one-third of which is due on November 20, 1997 with the second
and third equal payments due on February 20, 1997 and May 20, 1997.
During the next 12 months, Logiphone Group's international
telecommunications business will require approximately $6 million to cover
operational/marketing/and administrative costs, to pay certain payables, to
purchase additional dialers and other equipment and to expand its business to
new countries.
During the next 12 months, Logiphone Group's Internet fax business will
require approximately $6 million (in addition to the option fee advance
referenced above and the Loan to Logiphone Israel) to commence its Internet fax
business, to expand this business to over 40 countries and to cover operating,
marketing and administrative costs.
Thereafter, even if such funds are sufficient to meet these needs,
Logiphone Group will need to raise substantial additional funds in order to
expand its business in accordance with its business plan.
Logiphone Group is actively implementing plans to undertake equity
and/or debt offerings to raise the necessary funds to implement its business
plan. There is no assurance that Logiphone Group will be able to raise the
necessary funds at all or on terms favorable to Logiphone Group.
Forward Looking Information
This document includes "forwarding looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although Logiphone Group
believes that the expectations reflected in such forward looking statements are
based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved. Important factors ("Cautionary Disclosures") that
could cause the actual results to differ materially from Logiphone Group's
expectations are set forth below. Subsequent written and oral forward looking
statements attributable to the Logiphone Group or persons acting on its behalf
are expressly qualified in their entirety by the Cautionary Disclosures.
The telecommunications industry is competitive and is significantly
affected by the introduction of new discount concepts and the marketing
activities of industry participants. Some of the Logiphone Group's competitors
have greater name recognition, greater marketing capability, and have, or have
access to, substantially greater financial and personal resources than is
available to the Logiphone Group. The ability of the Logiphone Group to compete
effectively in the telecommunication industry will depend on its ability to
provide high quality, market-driven services at effective prices, generally less
than those charged by the competitors. There can be
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<PAGE>
no assurance that the Logiphone Group will be able to compete successfully with
existing or future companies.
The telecommunication industry has been characterized by rapid
technological change, frequent new service introductions and evolving industry
standards. New competitors may enter the telecommunications industry with new or
add-on technology.
Changes in the regulatory or political environment in those places
where Logiphone Group conducts or plans to conduct its business could adversely
affect Logiphone Group and its ability to implement its business plan. The
imposition of Internet access charges, which may be considered by the Federal
Communication Commission, could increase the cost of Logiphone Group's Internet
fax services.
In order for the Logiphone Group to implement its business plan, it
needs to raise approximately $12 million within 12 months (in addition to the
option fee advance referenced above and the loan to Logiphone Israel) and
additional funds thereafter. The ability and costs of such financing will depend
on a variety of factors, including macroeconomic forces beyond Logiphone Group's
control, and Logiphone Group's performance during the period in which it is
seeking financing. There is not assurance that such financing will be available
at all or on terms favorable to Logiphone Group.
Item 5. Other Material Information
REVERSE STOCK SPLIT. On October 23, 1996, the Board of Directors of Registrant
approved a one-for-82.85 reverse stock split of the Common Stock. Any fractional
shares resulting from the reverse stock split shall be rounded up to the nearest
whole share of Common Stock. Mr. Steinberg has agreed to contribute to the
Registrant such number of shares of Common Stock necessary to reduce the number
of outstanding shares of Common Stock immediately after the reverse stock split
but prior to the acquisition of the Company by Registrant to 500,000 shares. The
reverse stock split has been approved by the stockholders of Registrant
possessing more than 50% of the issued and outstanding shares of Common Stock,
the reverse stock split became effective on October 25, 1996.
CHANGE OF NAME. The Board of Directors also approved changing the name of
Registrant to Logiphone Group, Inc. to better reflect the recent acquisition of
the Company by the Registrant. The name change has been approved by the
stockholders holding more than 50% of the issued and outstanding shares of
Common Stock and became effective at the same time as the reverse stock split.
STOCK OPTION PLAN
On November 11, 1996, the Board of Directors granted to each Director
and executive officer an option to purchase 50,000 shares at an exercise price
of $20 per share for an exercise period of two years. It is contemplated that
the shares of Common Stock underlying such options
CORPDAL:56921.4 26308-00002
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<PAGE>
will be registered with the Securities and Exchange Commission on a Form S-8 so
that such shares will be freely tradeable shares, subject to Rule 144.
Item 7. Financial Statements and Exhibits
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable to provide all of
the required financial statements for the Company at this time. The Registrant
will file such financial statements as soon as practicable, but no later than 60
days after this report must be filed.
PRO FORMA FINANCIAL INFORMATION. It is impracticable to provide the required pro
forma financial statements for the Company at this time. The Registrant will
file such financial statements as soon as practicable, but no later than 60 days
after this report must be filed.
EXHIBITS. The following exhibits are furnished in accordance with Item 601 of
Regulation S-K.
3.1 Certificate of Amendment to Registrant's Certificate of Incorporation,
effective October 25, 1996.
10.1 Strategic Alliance Agreement, dated October 8, 1996, by and between
RADLINX LTD. and I.C.A. International Callers Association, B.V.
(certain annexes have been omitted pursuant to Rule 601(b)(2) of
Regulation S-K).
10.2 Strategic Alliance Agreement, dated as of November 10, 1996, by and
between Logiphone Telephone Communications, Ltd.; Logiphone Group,
Inc., and I.C.A. B.V.
10.3 Agreement For Exchange of Stock, dated October 10, 1996, by and between
Star Resources, Inc., ICA Marketing Company, L.C. and ICA B.V.
10.4 Amendment to Agreement For Exchange of Stock, dated October 31, 1996,
by and between Star Resources, Inc., ICA Marketing Group, L.C. and
ICA B.V.
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<PAGE>
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 thereunto duly authorized.
LOGIPHONE GROUP, INC.
(formerly Star Resources, Inc.)
Date: November 12, 1996 By:/s/ Ronald D. Gardner
Ronald D. Gardner, President
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<PAGE>
Index to Exhibits
Exhibit Number Exhibit
3.1 Certificate of Amendment to Registrant's
Certificate of Incorporation, effective
October 25, 1996
10.1 Strategic Alliance Agreement, dated
October 8, 1996, by and between
RADLINX LTD. and I.C.A. International
Callers Association, B.V. (certain annexes
have been omitted pursuant to Rule
601(b)(2) of Regulation S-K)
10.2 Strategic Alliance Agreement, dated as of
November 10, 1996, by and between
Logiphone Telephone Communications,
Ltd.; Logiphone Group, Inc., and I.C.A.
B.V.
10.3 Agreement For Exchange of Stock, dated
October 10, 1996, by and between Star
Resources, Inc., ICA Marketing Company,
L.C. and ICA B.V.
10.4 Amendment to Agreement For Exchange of
Stock, dated October 31, 1996, by and
between Star Resources, Inc., ICA
Marketing Group, L.C. and ICA B.V.
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<PAGE>
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION
OF STAR RESOURCES, INC.
STAR RESOURCES, INC., a corporation organized and existing under and by
virtue of the General Corporation Laws of the State of Delaware (the
"Corporation"), does hereby certify:
FIRST: ARTICLE FIRST of the Certificate of Incorporation is amended by
changing the name of the Company to "Logiphone Group, Inc."
Accordingly, ARTICLE FIRST of the Certificate of Incorporation as
amended is deleted and the following new ARTICLE FIRST is substituted in lieu
thereof:
"ARTICLE FIRST
The name of the Corporation is Logiphone Group, Inc. (the
"Corporation")."
SECOND: ARTICLE FOURTH of the Certificate of Incorporation is amended
by reducing the number of authorized shares of common stock from one hundred
twenty million (120,000,000) to twenty million (20,000,000) shares of common
stock with a par value of $.0001 per share.
Accordingly, the first paragraph of ARTICLE FOURTH of the Certificate
of Incorporation as amended is deleted and the following new first paragraph of
ARTICLE FOURTH is substituted in lieu thereof:
"ARTICLE FOURTH
That the total number of shares of all classes of stock which the
Corporation shall have authority to issue shall be twenty-one million
(21,000,000) shares, of which one million (1,000,000) shall be
preferred stock of the par value of one cent ($.01) (hereinafter called
the "Preferred Stock") and of which twenty million (20,000,000) shares
shall be common stock of the par value of one one-hundredth of one cent
($.0001) (hereinafter called the "Common Stock")."
The remainder of ARTICLE FOURTH regarding the terms of the Preferred
Stock and Common Stock shall remain the same.
THIRD: That thereafter, pursuant to a resolution of its Board of
Directors and a consent in writing, including the proposed amendment, was signed
by the holders of in excess of a majority of the outstanding shares of Common
Stock of the Corporation, which was not less than the minimum number of votes
necessary to authorize such an amendment at a meeting at which all stockholders
having the right to vote thereon were present and voted, and written notices of
such action has been sent to all other stockholders who have not consented in
writing to such action.
FOURTH: Said amendment was duly adopted in accordance with the
provisions of Section 228 and Section 242 of the General Corporation Laws of the
State of Delaware.
-1-
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<PAGE>
FIFTH: That upon filing of this Certificate of Amendment with the
Secretary of State of Delaware (i) each eighty-two and eighty-five one
hundredths (82.85) shares of Common Stock, par value one one-hundredth of one
cent ($.0001), previously outstanding on such date of filing shall be deemed to
have been exchanged for one (1) new share of outstanding Common Stock, par value
one one-hundredth of one cent ($.0001); (ii) certificates representing shares of
Common Stock previously outstanding on such date of filing shall be exchanged
for new certificates reflecting the one-for-eighty-two and eighty-five one
hundredths (1:82.85) reverse stock split; and (iii) fractional shares shall be
rounded up to the nearest whole share.
IN WITNESS WHEREOF, the undersigned have hereunder subscribed our names
this 23rd day of October, 1996.
/s/ Lawrence E. Steinberg
Lawrence E. Steinberg
President
/s/ Michael A. Hershman
Michael A. Hershman
Secretary
-2-
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STRATEGIC ALLIANCE AGREEMENT
This Agreement (hereinafter: the "Agreement") is made and entered as of the 8th
day of October, 1996, by and between RADLINX LTD., a limited company
incorporated and validly existing under the laws of the State of Israel, with
registered offices at 8, Hanechoshet Street, Israel (hereinafter: "Radlinx") and
I.C.A. INTERNATIONAL CALLERS ASSOCIATION B.V., a limited company incorporated
and validly existing under the laws of The Netherlands, with registered offices
at Brasem 31 - 4941 SE Raamsdonksveer, The Netherlands (hereinafter: "Strategic
Partner") (Radlinx and Strategic Partner shall hereinafter be collectively
referred to as: the "Parties").
WHEREAS Radlinx is engaged in the design, manufacture and marketing of
equipment, hardware and software designed for the transmission
of facsimile messages over the Internet, which are known as
"Fax Over Internet" Products; and
WHEREAS Strategic Partner wishes to establish an international "Fax
Over Internet" service network and to insure a reliable,
ongoing, supply source for the equipment, hardware and
software it will need in order to establish, maintain and
further develop such network; and
WHEREAS the Parties wish to set up a strategic alliance in accordance
with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth and the covenants and
undertakings contained herein, the Parties agree as follows:
1. INTRODUCTION
1.1 The preamble and Annexes to this Agreement form an integral
part hereof.
1.2 The paragraph headings used in this Agreement are inserted for
convenience only, and shall not be used in the construction of
any provision hereof.
2. DEFINITIONS
As used herein, each of the following terms shall, unless the context
clearly indicates otherwise, have the meaning ascribed to it herein:
2.1 "Proprietary shall mean the patents, trade-names and
Rights" designs relating Rights" to the Products (as
defined below), which are registered or
pending in the name of Radlinx,as elaborated
and broken down by specific countries in
ANNEX 2.1, as well as such other
intellectual property rights which Radlinx
legally owns.
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2.2 "Products" shall mean equipment, hardware
and software designed for the transmission
of facsimile messages over the Internet,
designed and manufactured by Radlinx, which
are known as "Fax Over Internet" Products,
as elaborated in ANNEX 2.2, as such Annex
may from time to time be modified or
expanded with Strategic Partner's written
consent.
3. REPRESENTATIONS AND WARRANTIES OF RADLINX
Radlinx hereby represents and warrants to Strategic Partner as follows:
3.1 Radlinx is a limited liability company, duly incorporated,
validly existing and in good standing under the laws of the
State of Israel. Radlinx has full power and authority to own
its property, and to conduct its current business, as well as
the business contemplated under this Agreement.
3.2 Radlinx has the technical know-how required for the
fulfillment of its obligations hereunder.
3.3 Radlinx has tested the Products, and represents that they
satisfactorily perform, in all material respects, the
functions which they are designed to perform.
3.4 To the best of its knowledge, no consents or approvals of any
government, government agency, or any third party are required
for the execution, delivery or performance of this Agreement
by Radlinx.
3.5 Radlinx has full power and authority to execute, deliver and
perform this Agreement. This Agreement, once executed, shall
constitute a valid and binding obligation of Radlinx,
enforceable against Radlinx in accordance with its terms and
conditions.
3.6 This Agreement has been duly executed and delivered by the
authorized officers of Radlinx on its behalf.
3.7 To the best of its knowledge, Radlinx has legal rights and
good and marketable title to all of its assets, both real and
personal, tangible and intangible, including the Proprietary
Rights.
3.8 To the best of Radlinx's knowledge, it has complied in all
material respects with all laws and regulations applicable to
it and to its business. To the best of Radlinx's knowledge, it
has obtained and is holding all permits, licenses, consents
and approvals which are required or necessary in connection
with its business, including in connection with the
development, sale and distribution of its products, and it is
not in default under any of such permits, licenses consents or
approvals. To the best knowledge of Radlinx, no suspension or
cancellation of any such
CORPDAL:57838.1 26308-00002
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<PAGE>
permit, license, consent or approval is pending or threatened,
nor does Radlinx anticipate any difficulties in their renewal.
3.9 To the best of Radlinx's knowledge, it has the full power,
right and authority to use the Proprietary Rights in
connection with the conduct of its business, and such use does
not infringe or violate any third party rights. Radlinx is not
aware of any claim that has been asserted by any third party
concerning its ownership or right to use any of the
Proprietary Rights, or challenging or questioning the validity
of any of the Proprietary Rights, and it is unaware of the
existence of any grounds for such claim. Each of the
Proprietary Rights is valid and subsisting, has not been
canceled, abandoned or otherwise terminated and, where
applicable, has been duly issued or filed.
Radlinx has no knowledge of any claim or inquiry as to whether
any product, activity or operation of Radlinx infringes upon
or involves, or has resulted in the infringement of, any
proprietary right of any other person, corporation or any
other entity.
3.10 To the best of Radlinx's knowledge, since the inception of
Radlinx, it or any one acting on its behalf has not violated
and has not been claimed to have violated the Foreign Corrupt
Practices Act or of any similar state or federal statute
relating to bribery.
3.11 That the representations and warranties set forth above shall
be true and complete as of the execution hereof, and that it
shall use its best efforts to insure that the representations
and warranties set forth above concerning matters relating to
the performance of Radlinx's obligations hereunder, shall
survive the execution hereof for the duration of such
performance, regardless of what investigations, if any,
Strategic Partner shall have made thereof.
4. REPRESENTATIONS AND WARRANTIES OF STRATEGIC PARTNER
Strategic Partner hereby represents and warrants to Radlinx as follows:
4.1 I.C.A. International Callers Association B.V. is a
corporation, duly incorporated, validly existing and in good
standing under the laws of The Netherlands.
4.2 Strategic Partner shall make its best efforts to have the
resources, financial and otherwise, required for the
fulfillment of its obligations herein; Strategic Partner has
the ability to market, distribute, and sell the Products
worldwide in the manner set forth herein.
4.3 No consents or approvals of any government, government agency
or any other third party are required in connection with the
execution, delivery and performance of this Agreement by
Strategic Partner, except that Strategic Partner may have to
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obtain certain permits and licenses in connection with the
importation, marketing, distribution, sale, installation and
service of the Products in certain countries pursuant to
Section 8.1.1 of this Agreement.
4.4 This Agreement, once executed by Strategic Partner, shall be a
valid and binding obligation of Strategic Partner, enforceable
against Strategic Partner in accordance with its terms and
conditions.
4.5 This Agreement has been duly executed and delivered by the
authorized officers of Strategic Partner, on its behalf.
5. THE COOPERATION
5.1 In consideration of the timely and complete fulfillment of the
Parties' obligations hereunder, the Parties hereto agree to
cooperate in the planning, design, research and development,
and marketing of the Products. More specifically, the Parties
agree as follows:
5.1.1 Radlinx shall use its best efforts in demonstrating
the Products to potential investors and/or customers
of Strategic Partner, including but not limited to a
demonstration involving the transmission of a fax
over the Internet to the sites designated by
Strategic Partner.
5.1.2 In the event that Radlinx shall seek to discontinue
the manufacture of any Product, which it may do for
valid business reasons and only upon a 120 day
advance written notice to Strategic Partner, Radlinx
shall insure the uninterrupted supply to Strategic
Partner of a compatible and suitable Product, as well
as the support of both the discontinued Product as
well as the replacement Product, in accordance with
ANNEX 8.2.1, in a manner that will not jeopardize
Strategic Partner's ability to timely meet its
business plans and commitments.
5.1.3 The Parties shall mutually agree what activities
Radlinx shall carry out in connection with the
research, development, design and manufacture of Fax
Over Internet products, for sale to Strategic
Partner, all of which shall be considered as
"Products" hereunder, and shall accordingly modify
ANNEX 7.4 hereof to reflect such agreement.
5.1.4 Radlinx shall invite its clients and dealers to
participate in Strategic Partner's network of dealers
of telephone and facsimile communication equipment.
5.2 Strategic Partner shall furnish Radlinx, on an annual basis,
with a forecast of its acquisition of Products during the
following year.
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6. ORDERS; PURCHASE OF PRODUCTS
6.1 Strategic Partner shall forward its firm non-cancelable order
for the Products it wishes to purchase from Radlinx during
each month hereof (hereinafter: the "Relevant Month"), at
least 90 days prior to the commencement of the Relevant Month,
it being agreed that the size and nature of Strategic
Partner's order for each of the first three months hereof
shall be mutually agreed upon by the Parties as soon as
possible after the execution of this Agreement. Strategic
Partner agrees to place an order for 750 "ports" of the
Product within 30 days from the execution of this Agreement,
for delivery within 60 days from execution hereof, it being
agreed that this first order shall account as part of the
order which Strategic Partner is supposed to place for the
first month of the First 12 Month Period under Section
12.2.1.1 below.
6.2 Strategic Partner shall be entitled to a "most favored
customer" status, such that any Products purchased from
Radlinx by Strategic Partner shall be supplied to Strategic
Partner on a first priority basis compared to other Radlinx
customers.
6.3 Without derogating from paragraph 6.2 above, Strategic Partner
shall have the right to purchase the Products from Radlinx at
the prices as set forth in ANNEX 6.3, but in no event more
than the prices charged by Radlinx from other customers for
such Products.
6.4 The terms of payment for Products purchased from Radlinx by
Strategic Partner hereunder shall be 45 (forty five) days from
Radlinx's shipping of the relevant and Products and its
issuance of an invoice therefor. Payment shall be made by wire
transfer to Radlinx's bank account.
7. OPTION FEE
7.1 In consideration of Strategic Partner's option to acquire
shares of Radlinx's by way of subscription for new shares, in
accordance with the principles elaborated in ANNEX 7.1 hereof
(hereinafter: the "Option"), Strategic Partner shall pay to
Radlinx an option fee (hereinafter: the "Option Fee") in the
amount of up to $1,000,000 (one million US Dollars). The
Option Fee shall be paid to Radlinx in three equal
installments, each in the middle of the relevant quarter, as
elaborated in ANNEX 7.1.
7.2 If the Option is not exercised by Strategic Partner in
accordance with ANNEX 7.1, the Option Fee shall become
non-refundable. However, if the Option is exercised, then the
Option Fee shall be considered an advance payment on account
of the shares issued to Strategic partners, and shall be
deducted from the consideration otherwise payable to Radlinx
for such shares.
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7.3 In the event that ANNEX 7.1 has not been drafted and executed
by both Parties by the expiration of 30 days from execution of
this Agreement at the latest, then either Party may terminate
this Agreement upon a 10 day notice to the other, in which
event this Agreement shall become null and void, and neither
Party shall have any claim or cause of action against the
other in connection therewith. This provision shall survive
the termination of this Agreement.
7.4 Radlinx shall conduct research and development activities
concerning its Fax over Internet products, in accordance with
ANNEX 7.4, as it may be modified from time to time with the
Parties' mutual written consent.
8. UNDERTAKINGS
8.1 Strategic Partner hereby undertakes as follows:
8.1.1 to abide by and obey, in all material respects, all
laws, permits, licenses, ordinances, by-laws, rules
and regulations of any competent authority pertaining
to the Products purchased from Radlinx and the
import, marketing, distribution, sale, installation
and service thereof in any territory where Strategic
Partner may engage in such activity. Strategic
Partner shall bear the full responsibility and cost
to apply for, obtain, and maintain all permits,
licenses, and approvals, governmental or otherwise,
required in connection with the importation,
marketing, distribution, sale, installation and
servicing of any Product purchased form Radlinx, and
any such permit, license or approval shall be owned
by Strategic Partner;
8.1.2 to follow Radlinx's storage, shipping, handling,
installation and use instructions concerning the
Products purchased from the Radlinx.
8.2 Radlinx hereby undertakes as follows:
8.2.1 to Sell the Products to Strategic Partner as provided
hereunder and to support such Products in accordance
with Annex 8.2.1 hereof,
8.2.2 to abide by and obey, in all material respects, all
laws, permits, licenses, ordinances, by-laws, rules
and regulations of any competent authority pertaining
to the Products sold to Strategic Partner and the
export, marketing, distribution, sale, and service
thereof in any territory where Radlinx may engage in
such activity. Radlinx shall bear the full
responsibility and cost to apply for, obtain, and
maintain all permits, licenses, and approvals,
governmental or otherwise, required in Israel in
connection with the exportation, marketing,
distribution and sale of any Product sold to
Strategic Partner hereunder.
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8.2.3 to cooperate with Strategic Partner with respect to
Strategic Partner's compliance with its undertakings
in 8.1.2 hereunder.
8.3 Effective as of the execution of this Agreement, Strategic
Partner shall have the right to use the "Radlinx" name and
Radlinx's trade names "PASSAFAX" and "PASSAPORT" in connection
with Products purchased from Radlinx.
9. WARRANTY
Products purchased by Strategic Partner from Radlinx shall be subject
to Radlinx's standard warranty and to Radlinx's Return Material
Authorization Procedure, both of which in the form attached hereto as
ANNEX 9.
10. CONFIDENTIALITY
During the term of this Agreement and at any time thereafter, except as
required by applicable law, each party shall maintain in complete
confidence all information pertaining to the other party's business
and/or its products, including, without limitation, any technical
information, design or data with respect to such products, and any
marketing techniques or client list, and shall take all necessary
measures to ensure that such information and data shall not be made
available to any third party. The confidentiality obligations hereunder
shall not apply to information which is or becomes part of the public
domain due to no fault of the Party claiming nonconfidentiality
thereof, or is already known to the receiving Party at the time
disclosure is made hereunder or becomes available to that Party from a
third party who is entitled to disclose such information. Each Party
acknowledges that the information received or to be received by it
hereunder shall constitute "confidential information" hereunder,
subject to the exceptions enumerated above.
11. RELATIONSHIP OF PARTIES
Nothing contained herein shall be deemed to constitute either Party or
anyone acting on its behalf as a partner and/or employee and/or agent
and/or legal representative of the other Party, and neither Party shall
make any statements or representations to the contrary. Strategic
Partner shall effect all sales of the Products hereunder as a principal
on its own account.
12. TERM OF AGREEMENT
12.1 This Agreement shall remain in effect until the forth
anniversary of the date hereof, at which time it may be
renewed upon the mutual written consent of the Parties.
12.2 Notwithstanding the above, upon the occurrence of the event
referred to in this paragraph below, Strategic Partner shall
not entitled to the special terms of sale as set forth in
Section 6 above, but shall be entitled to purchase the
Products at
CORPDAL:57838.1 26308-00002
7
<PAGE>
market prices, terms and conditions. In addition, upon the
occurrence of the event referred to in this paragraph below,
Radlinx shall be entitled to market, sell or otherwise
distribute any of the Products to any party, and shall not be
bound to the provisions of Section 13.2 below, all in
accordance with Section 13.2 below:
12.2.1 if Strategic Partner shall not purchase from Radlinx
the following quantities of the Products during the
first 12 month period commencing upon the expiration
of 90 days from the execution of this Agreement (the
"First 12 Month Period"), it being clarified that
reference herein is made to the number of "ports" of
the Products purchased:
12.2.1.1 during the first month of the First
12 Month Period - 1,500 ports;
12.2.1.2 during the second month of the First
12 Month Period - 2,000 ports;
12.2.1.3 during the third month of the First
12 Month Period - 2,500 ports;
12.2.1.4 during each of the forth through the
twelfth month of the First 12 Month
Period - 3,000 ports.
12.2.2 If Strategic Partner shall not purchase from Radlinx
during the 12 month period following the First 12
Month Period (as defined above) at least 70% of the
quantities of the Products it has undertaken to
purchase during the First 12 Month Period.
12.3 Notwithstanding paragraphs 12.2.1 and 12.2.2 above, if, in any
given month, Strategic Partner fails to meet the minimum
amount for that month, it shall nevertheless be deemed to have
met the minimum amount for that month if it had exceeded the
minimum amount set for any of the preceding months by at least
the shortfall amount.
12.4 Radlinx's sole remedy in the event of a breach by Strategic
Partner of its minimum purchase obligation hereunder shall be
to terminate this Agreement, provided that Strategic Partner
has been given a 60 day advance written notice within which to
remedy such breach, and that it has not cured the breach
within the said period. It is clarified that, notwithstanding
the termination of this Agreement by Radlinx due to Strategic
Partner's failure to meet its minimum purchase obligation
hereunder, Radlinx shall continue supplying the Products
ordered by Strategic Partner, at market prices, terms and
conditions.
CORPDAL:57838.1 26308-00002
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<PAGE>
13. EXCLUSIVITY
13.1 Strategic Partner agrees that, during the term of this
Agreement, Radlinx shall be its sole supplier of Fax over
Internet Products it may require, and that Strategic Partner
shall not in any way market or otherwise distribute any
competing products, provided, however, that Radlinx is able to
produce and timely deliver the Products ordered by Strategic
Partner from time to time at the agreed upon prices. In the
event that Radlinx is unable to produce or deliver one or more
of the Products, Strategic Partner may purchase a competing
product or products immediately upon giving Radlinx prior
written notice to that effect, and Strategic Partner shall be
entitled to continue purchasing such competing product or
products for as long as Radlinx is unable to supply the
relevant Product or Products hereunder.
13.2 Radlinx undertakes that, during the first 24 months of this
Agreement (starting from the expiration of 90 days from
execution hereof) and provided Strategic Partner is in
compliance with its minimum purchase obligations under
paragraph 12.2.1 above, it shall not directly or indirectly
sell, market or distribute the Products or any of them, and
shall directly or indirectly sell, market or distribute any of
the Products to any third party that, to Radlinx's knowledge,
is or plans to become an international fax service provider
over the Internet, offering its services to the public, in any
location(s) or territory(ies) throughout the world and
competing with Strategic Partner's services. Radlinx further
undertakes that its abovementioned exclusivity obligations
shall continue for the 24 month period starting upon the
expiration of the 24 month period referred to earlier in this
paragraph, provided Strategic Partner is in compliance with
its minimum purchase obligations under paragraph 12.2.2 above.
14. ASSIGNMENT
Strategic Partner shall be entitled to use sub-contractors and/or
dealers for the sale and distribution of Radlinx products, but shall
not be entitled to assign its rights or delegate its obligations under
this Agreement to any third party, except with the prior written
consent of Radlinx.
15. FORCE MAJEURE
15.1 If either party is affected by Force Majeure it shall
forthwith notify the other party of the nature and extent
thereof.
15.2 Neither party shall be deemed to be in breach of this
Agreement or otherwise liable to the other by reason of any
delay in performance or nonperformance of any of the
obligations hereunder to the extent that such delay or
non-performance is due to any Force Majeure.
CORPDAL:57838.1 26308-00002
9
<PAGE>
15.3 If the Force Majeure in question prevails for a continuous
period in excess of 60 days, the parties shall enter into bona
fide discussions with the view to alleviating its effects or
agreeing to alternative arrangements which could include
termination of this Agreement.
15.4 "Force Majeure" for the purposes of this section shall mean
any circumstances beyond the reasonable control of each party,
including, without limitation, decrees of governments, acts of
God, strikes, lock-out, war, riot, civil unrest, sabotage,
floods, fires, unavoidable accidents, explosions, earthquakes,
embargo and acts of civil or military authority.
15.5 In the case of Force Majeure, and for such period it will
prevail, Strategic Partner shall be entitled to purchase
products similar to the Products herein from any other party.
16. MODIFICATION AND WAIVER
No modification or amendment of any of the provisions of this
Agreement, nor any Waiver by any party or its consent to any deviation
from the conditions of this Agreement shall be binding upon any of the
parties unless made in writing and signed by all the parties. No waiver
of any rights by any party hereto shall be construed as a waiver of the
same or any other right at any prior or subsequent time.
17. ENTIRE AGREEMENT
This Agreement, together with its annexes, forms an entire and
conclusive agreement between the parties and supersedes all proposals,
agreements, understandings, representations and warranties, whether
oral or written, expressed or implied, that were communicated between
the parties prior to signature hereof and the same will be of no effect
and inadmissible as evidence.
18. ENFORCEABILITY
If any term, provisions, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or their authority to be
invalid, void, unenforceable or against its regulatory or public
policy, the remainder of the terms, provisions, covenants and
restriction of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
19. BINDING EFFECT
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective heirs, executors,
representatives and assigns. The rights and obligations of the parties
hereto may not be assigned in whole or in part
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20. JURISDICTION AND GOVERNING LAW
Any action, suit or proceeding arising out of or relating to this
Agreement against Radlinx shall be brought exclusively in the courts of
Tel-Aviv-Jaffa. Any action, suit or proceeding arising out of or
relating to this Agreement against Strategic Partner shall be brought
exclusively in the competent state or federal court sitting in Dallas,
Texas. The law applicable to all such actions, suits or proceedings, as
well to the construction of this Agreement, shall be the law of the
jurisdiction where the action is instituted.
21. COUNTERPARTS
This Agreement may be signed in one or more counterparts each of which
shall constitute an original and all of which shall constitute one and
the same agreement.
22. BOARD APPROVALS
This Agreement and the Parties' obligations thereunder is subject to
the approval of the Parties' respective Boards of Directors. If Such
approvals have not been given by the expiration of 30 days from the
execution of this Agreement, this Agreement shall become null and void
and neither Party shall have any claim or cause or action against the
other in connection therewith. This provision shall survive termination
of this Agreement.
23. PROPRIETARY RIGHTS
Radlinx shall remain the owner of all proprietary rights relating to
the Products, with the exception of the Products listed in ANNEX 23 (as
modified from time to time with the Parties' written consent) with
regard to which Strategic Partner shall be the sole owner of all
proprietary rights.
24. NOTICES
Any notice hereunder shall be sent by both: (i) certified or
registered mail and (ii) facsimile or hand delivery, and shall be
addressed to the addresses specified above or any other address of
which either party shall advise the other in writing. The notice shall
be deemed to have been received three (3) business days after mailing
and transmission as prescribed above. The Parties' respective
facsimile numbers are as follows:
(i) Radlinx: 972-3-6475057; (ii) Strategic Partner: (515) 469-5630.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of
the date first above written.
RADLINX LTD. I.C.A. INTERNATIONAL CALLERS
ASSOCIATION B.V.
By: By:
------------------------- ------------------------
Name: Name:
------------------------- ----------------------
Title: Title:
--------------------------- ---------------------
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<PAGE>
ANNEX 2.1
PROPRIETARY RIGHTS
List of trademarks
Name Serial Number Reg. no. action due
Passafax 75/009219 Filed on October 23, 1995
Filed on August 27, 1996
Passaport 74/492048 1932268
List of patents
Patent pending no. 08/662635
CORPDAL:57838.1 26308-00002
<PAGE>
ANNEX 2.2
At the time of execution hereof, the Products are:
1. PFI
2. PF8
as per the Technical Specifications and brochure attached hereto.
[The Technical Specifications and brochure are omitted]
CORPDAL:57838.1 26308-00002
<PAGE>
ANNEX 6.3
The price payable by Strategic for each Product purchased hereunder shall be
determined in accordance with the following formula:
Price per Product = "cost" (as defined below) divided by 0.65,
where "cost" shall consist only of the actual and substantiated cost to Radlinx
of the following items: cost of raw materials; assembly costs; cost of final
testing and royalties paid to third parties.
However, the Parties specifically agree that the Price as determined in
accordance with the above formula shall in no event exceed $250 for each unit of
the Product known as PF1 (including the power supply) and $750 for each unit of
the Product known as PF8.
CORPDAL:57838.1 26308-00002
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ANNEX 7.4
[Product development schedule omitted]
CORPDAL:57838.1 26308-00002
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ANNEX 9
[Warranty and related information omitted]
CORPDAL:57838.1 26308-00002
<PAGE>
ANNEX 23
The Products are: the routing server and the management software of the Fax
over Internet products.
CORPDAL:57838.1 26308-00002
<PAGE>
STRATEGIC ALLIANCE AGREEMENT
Made and entered on this ____ day of ___________1996
by and between
Logiphone Telephone Communications Ltd., a limited company registered and
validly existing under the laws of the State of Israel, with registered
offices at 4 Hamasger St., Industrial Zone, P.O.B. 2357, Ra'anana 43650
Israel (hereinafter, "Logiphone");
on the first part;
And
1. Logiphone Group, Inc., formerly known as Star Resources, Inc.,
a corporation incorporated and validly existing under the laws of the State
of Delaware, USA. with registered offices at Two Lincoln Centre, Suite 540,
5420 LBJ Freeway L.B. 56 Dallas, Texas 75240 (hereinafter, "Star");
2. ICA BV, a B.V., registered and validly existing under the laws
of The Netherlands, with registered offices at Brasem 31-4941 SE
Raamsdanksveer (hereinafter: "ICA");
(hereinafter jointly together referred to as: "Strategic Partner"):
on the second part;
Whereas, Logiphone is engaged in the design, manufacture and marketing of
telephone exchanges and Other telecommunications equipment; and
Whereas, ICA is engaged in marketing, distribution and sale,
directly and through a network of agents and dealers, of telephone
communications equipment and services; and
Whereas, pursuant to an agreement dated October 10, 1996, Star has
purchased the entire outstanding and issued share capital of ICA in
consideration of the issue of Star Common Stock; and
Whereas, Strategic Partner wishes to purchase telephone communications
equipment from Logiphone and Logiphone wishes to sell such equipment to
Strategic Partner and Strategic Partner wishes to fund
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certain capital requirements of Logiphone so as to enable Logiphone to
further develop products the Strategic Partner may wish to purchase under the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration or the premises and of the respective
representations and warranties hereinafter set forth and the covenants and
undertakings contained herein, the parties agree as follows:
1. Introduction
1.1 The preamble and appendices to this Agreement form an integral
part hereof.
1.2 The headings of the paragraphs of this Agreement are inserted
for convenience only and do not constitute an integral part
hereof.
1.3 Star and ICA enter into this Agreement jointly and severally
and shall together be referred to as "Strategic Partner".
1.4 Except as expressly provided for herein, this Agreement shall
be effective as of the Effective Date. In the event that
the Effective Date has not been reached by December 15,1996,
then this Agreement shall be null and void and the parties
hereto shall have no claim against the other in respect
hereof.
2. Definitions
As used herein, the following terms shall, unless the context clearly indicates
otherwise, have the following meanings:
2.1 "Effective Date" shall mean the day upon which Logiphone shall have
received at least $250,000 of the funds as stated in Section 7 below.
2.2 "Proprietary Rights" shall mean any patent, registered or pending, methods,
models, technical data, plans, drawings, shape, designs, names, trade names,
patents, calculations, or sketches relating to any product designed, developed,
produced or sold by Logiphone, and any improvement, modification or enhancement
thereof.
3. Representations and Warranties of Logiphone
Logiphone warrants and represents to Strategic Partner as follows, which
representations and warranties shall survive the Effective Date, regardless of
what investigation, if any, Strategic Partner shall have made thereof:
3.1 Logiphone is a limited liability company, duly incorporated, validly
existing and in good standing under the laws of the State of Israel. Logiphone
has full power and authority to own its property to
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conduct the business being conducted by it and contemplated to be conducted
hereunder, and to execute, deliver and perform this Agreement.
3.2 Logiphone has the technical know-how required for the fulfillment of
its undertakings obligations herein.
3.3 No consents or approvals of any government or government agency or any
other public or third party are required by Logiphone to execute, deliver and
perform this Agreement.
3.4 This Agreement executed by Logiphone is a valid and binding obligation
of Logiphone and is enforceable against it in accordance with its terms.
3.5 The execution, delivery and performance of this Agreement, by and on
behalf of Logiphone, has been approved by the Board of Directors of Logiphone.
This Agreement has been duly executed and delivered by and on behalf of
Logiphone by its authorized officers.
3.6 Logiphone has legal rights and good and marketable title to all of its
assets both real and personal, tangible and intangible (including the
Proprietary Rights), that it purports to own, including the assets as stated in
the financial statements of Logiphone and in this Agreement, free and clear of
all leases, liens, security interests and encumbrances of any kind, except for
those liens and pledges listed in Annex 3.6 attached hereto.
3.7 Logiphone has complied in all material respects with all laws and
regulations applicable to it. Logiphone has all the permits, licenses, orders,
consents and approval of all governmental or regulatory bodies material to
carrying on its business. Logiphone is not in default under any such permits,
licenses or any other authority. To the best of its knowledge, no suspension or
cancellation of any such permits, licenses, or other authority is threatened,
nor does Logiphone anticipate any difficulties in their renewal.
3.8 Except as disclosed in Annex 3.6, Logiphone has the right to use the
Proprietary Rights used in the conduct of its business without infringing or
violating the rights of any third parties. No claim has been asserted by any
person to ownership of or right to use any Proprietary Right or challenging or
questioning the validity or effectiveness of any such license or agreement, and
Logiphone does not know of any valid basis for any such claim. Each of the
Proprietary Rights is valid and subsisting, has not been canceled, abandoned or
otherwise terminated and, if applicable, has been duly issued or filed.
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Logiphone has no knowledge of any claim or inquiry as to whether, any product,
activity or operation of Logiphone infringes upon or involves, or has resulted
in the infringement of, any proprietary right of any other person, corporation
or other entity; and no proceedings have been instituted, are pending or are
threatened that challenge the rights of Logiphone; nor is Logiphone bound by any
agreement of indemnification for any proprietary right as to the property
manufactured, used or sold by Logiphone.
3.9 Since the inception of Logiphone, there have been no violations of the
Foreign Corrupt Practices Act or of any similar state or federal statute
relating to bribery by Logiphone or any of its agents.
4. Representations and warranties of Star and ICA
Star and ICA, jointly and severally, warrant and represent to Logiphone as
follows, which representations and warranties shall survive the Effective Date,
regardless of what investigations, if any, Logiphone shall have made thereof:
4.1 Star is a corporation, duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. ICA is a B.V., duly
registered, validly existing and in good standing under the laws of The
Netherlands.
4.2 Pursuant to an agreement dated October 10, 1996, between ICA, Star and
ICA Marketing Company, L.C. Star purchased 100% of the issued and paid-up share
capital of ICA in consideration of the issue of shares equal to approximately
89% of the outstanding and paid-up Star Common Stock.
4.3 Strategic Partner shall make best efforts to have the resources,
financial and otherwise, required for the fulfillment of its obligations herein
and it has the ability to market, distribute, and sell Logiphone products
effectively in the manner set forth herein.
4.4 No consents or approvals of any government or government agency or any other
public or third party are required by Strategic Partner to execute, deliver and
perform this Agreement, except that (i) in connection with the raising of
capital as contemplated in Section 7.1 hereof, Strategic Partner may have to
make certain filings with the United States Securities and Exchange Commission,
certain state securities commissions and certain foreign securities authorities
and seek clearance by such securities authorities with respect to such filings
and (ii) Strategic Partner may have to obtain certain permits and licenses in
connection with the import, marketing, distribution, sale, installation and
service of Logiphone products in certain jurisdictions pursuant to Section 8.1
of the Agreement.
4.5 This Agreement is a valid and binding obligation of Strategic Partner
and is enforceable against them in accordance with their respective terms.
4.6 The execution, delivery and performance of this Agreement, by and on behalf
of Strategic Partner, has been duly authorized by the Boards of Directors of
Strategic Partner, and this Agreement has been duly executed and delivered by
and on behalf of Strategic Partners' by their authorized officers. This
Agreement constitutes the valid and legally binding agreement of Strategic
Partner.
5. The Cooperation
5.1 In consideration of the timely and complete fulfillment of the parties'
obligations hereunder, the parties hereto shall cooperate in the planning,
design, research and development, marketing and distribution of telephone
communications equipment and specifically:
5.1.1 Strategic Partner shall make best efforts in establishing a network of
dealers in those locations set forth in Annex 5.1 for the distribution of
Logiphone's products in conjunction with its telephone communication services.
To this aim, Strategic Partner's strategic plan includes the purchase of
Logiphone's products for their distribution to end-users at no capital expense
to the end-user in consideration for a services contract with such end-users.
5.1.2 Logiphone shall not discontinue the manufacture of telephone
communications equipment which the Strategic Partner is currently purchasing
from Logiphone absent the Strategic Partner's prior consent.
5.1.3 Logiphone shall research, develop, design and manufacture new telephone
communications equipment for sale by Strategic Partner, at Strategic Partner's
request, provided, however, that Strategic Partner fund any capital requirements
of Logiphone for such research, development, design and manufacture on terms
mutually acceptable to Logiphone and Strategic Partner.
5.1.4 Logiphone shall invite the clients and dealers of its products to
participate in the Strategic Partner's network of dealers of telephone
communications equipment.
5.2 Strategic Partner shall furnish, once every quarter, a marketing,
purchasing and distribution plan for Logiphone products, detailing the Logiphone
products it estimates that it will purchase during the course of the quarter.
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6. Purchase of Logiphone Products
6.1 In consideration for the timely and complete fulfillment of Strategic
Partner's obligations herein, Strategic Partner shall have the following rights
with respect to the purchase of Logiphone products:
6.1.1 Strategic Partner shall have most "favored customer" status for the
purchase of products from Logiphone, namely, that any products purchased from
Logiphone by Strategic Partner shall be supplied to Strategic Partner on a
first-priority basis compared to other Logiphone customers.
6.1.2 Strategic Partner shall have the right to purchase products from Logiphone
at a FOB purchase price equal to the cost of such products to Logiphone as
defined in Annex 6.1.2 in addition to 10% of such cost (the "Purchase Price"),
but in no event more than the price charged by Logiphone to other customers for
such products. Logiphone shall use best efforts to implement cost controls so
that costs will be minimized to the extent reasonable.
6.1.3 Terms or payment for products purchased from Logiphone by Strategic
Partner shall be as agreed upon by the parties from time to time, in each case
considering the volume of any particular transaction, and the terms of payment
demanded by Logiphone in the ordinary course of business from its other
customers and the terms of payment demanded from Logiphone by its suppliers.
7. Investment in Logiphone
7.1 Star hereby undertakes, that within 15 days from the receipt of funds
from any private or public offering, or series of offerings of Star securities,
Star will provide Logiphone with funding in an amount equal to 25% of the net
proceeds of such offerings up to US $1,000,000.
7.2 The funds provided to the Logiphone shall be used for the further
research and development and working capital needs of Logiphone, in accordance
with the principles set forth in Annex 7.2.
7.3 The funds provided in accordance with the Section 7.1 shall be a loan to
Logiphone pursuant to the Loan Agreement in the form attached hereto as Annex
7.3 (the "Loan"). The Loan shall be due upon the fifth anniversary from the
Effective Date. Notwithstanding the above, Logiphone shall have the right, at
any time, to either repay the outstanding balance of the Loan or convert the
Loan to a 7.5% equity interest in Logiphone measured on a fully-diluted basis,
with preemptive rights. In the event the Loan, or any part thereof, shall be
converted to equity of Logiphone, any Logiphone shares held by Strategic Partner
shall be subject to a right of first refusal on the transfer of such shares
granted to the other shareholders of Logiphone.
7.4 In order to induce Strategic Partner to make this investment, Logiphone
agrees that for a period ending on the first anniversary of the Effective Date
it will not increase any executive salaries or pay any cash or in-kind dividends
or make any other distribution to shareholders.
8. Undertakings
8.1 Strategic Partner hereby undertakes as follows:
8.1.1 Abide and obey, in all material respects, all laws, permits, licenses,
ordinances, bylaws, rules and regulations of any competent authority pertaining
to the products purchased from Logiphone and the import, marketing,
distribution, sale, installation and service thereof in any territory where
Strategic Partner may engage in such activity. Strategic Partner shall bear the
full responsibility and cost to apply for, obtain, and maintain all permits,
licenses, and approvals, governmental or otherwise, required in connection with
the importation, marketing, distribution, sale, installation and servicing of
any product purchased form Logiphone, in which case such permit, license or
approval shall be owned by Strategic Partner, and Logiphone will have no right
to directly or indirectly market its products in reliance on such permit
licenses or approval except through Strategic Partner. Logiphone shall have the
right to bear 50% of the expenses associated with the application and
maintenance of such permits, licenses and approvals in which case such permit,
license or approval shall be in Logiphone's name as well, and Logiphone shall
own such permit, license or approval together with Strategic Partner and shall
have the right to directly or indirectly market its products in reliance
thereon.
8.1.2 Strategic Partner shall follow Logiphone's storage, shipping, handling,
installation and use instructions concerning products purchased from Logiphone.
8.2 Logiphone hereby undertakes as follows:
8.2.1 Sell the Logiphone Products to Strategic Partner as provided hereunder.
8.2.2 Abide and obey, in all material respects, all laws, permits, licenses,
ordinances, bylaws, rules and regulations of any competent authority pertaining
to the products sold to Strategic Partner and the export, marketing,
distribution, sale, and service thereof in any territory where Logiphone may
engage in such activity. Logiphone shall bear the full responsibility and cost
to apply for, obtain, and maintain all permits, licenses, and approvals,
governmental or otherwise, required in connection with the exportation,
marketing, distribution and sale of any product sold to Strategic Partner.
8.2.3 Logiphone shall cooperate with Strategic Partner with respect to Strategic
Partner's compliance with its undertakings in Section 8.2.2 hereunder.
9. Proprietary Rights
9.l The Proprietary Rights of any product developed, manufactured, sold by
Logiphone, or any part thereof, and any improvement, modification or enhancement
thereof, shall be in the sole ownership of Logiphone. It is hereby acknowledged
and agreed that Strategic Partner shall not in any way acquire any rights in the
Proprietary Rights, or any part thereof, with respect to any of the Logiphone
products.
9.2 Effective as of the execution of this Agreement, Strategic Partner shall
have the right to use "Logiphone" in its corporate name and in connection with
products purchased from Logiphone. If Strategic Partner has invested the full
$1,000,000 under Section 7.1 and made all payments to Dutchco required under a
certain agreement of even date herewith between Dutchco and Star, the Strategic
Partner may use the "Logiphone" name in perpetuity; otherwise, Strategic Partner
shall immediately cease to make any use of the "Logiphone" name upon termination
of this Agreement for any reason whatsoever or in the event Logiphone so
notified Strategic Partner upon the occurrence of any event as listed in Section
13 below, unless and to the extent Strategic Partner continues to purchase and
distribute Logiphone products. In the event any claim shall be made against the
"Logiphone" name in any territory in which Strategic Partner shall use the
"Logiphone" name, then Strategic Partner shall make all efforts to immediately
defend such claim, at its own expense.
9.3 Logiphone shall indemnify and hold Strategic Partner harmless against any
and all costs, claims, damages, expenses, losses and demands (including legal
expenses) incurred by or against Strategic Partner as a result of or in
connection with any claim made or alleged that the Proprietary Rights,
trademarks or any product supplied to Strategic Partner infringes any patent,
copyright, trade secret, trademark or other intellectual property rights of any
third party.
10. Warranty
10.1 Logiphone shall warrant all products sold under this Agreement in
accordance with its standard warranty in the form attached hereto as Annex 10.1
(the "Warrant"). Strategic Partner shall promptly give Logiphone written notice
of any actual or threatened claim made against the Strategic Partner and/or
Logiphone concerning any product purchased from Logiphone, or the Proprietary
Rights, save for the use of the "Logiphone" name as stated in Section 9.2, and
shall forward all documents it may receive and all relevant information it may
have in connection with such claim. Failure to so notify Logiphone or provide
such documents or information within the period of warranty as set forth in the
Warranty , shall be deemed to constitute a waiver of any claim in connection
therewith by Strategic Partner in the event that such delay materially impacts
Logiphone's ability to provide a defense to such warranty claim, and Logiphone
shall be released of any liability in connection therewith.
10.2 Logiphone's sole responsibility in connection with products sold shall be
for faulty manufacturing, design and workmanship. Logiphone shall either replace
or repair the defective products at its expense or refund Strategic Partner the
purchase price paid thereon by Strategic Partner, provided it receives Strategic
Partner's complaint as stated in the Warranty. Logiphone's liability is limited
to the repair, replacement or refund as stated above. Logiphone's liability
hereunder is contingent upon application, installation and use of the products
and/or any part thereof, in strict compliance with Logiphone's instructions.
10.3 Except as expressly provided for in this Section, no warranty, express or
implied, statutory or otherwise, including any warranties of merchantibility or
fitness for a particular use or purpose is made with the respect to the products
sold by Logiphone, or any part thereof, and all such warranties are hereby
expressly excluded. Logiphone shall not be liable to Strategic Partner and/or
any third party for any consequential or other damages incurred from the use of
Logiphone's products purchased by Strategic Partner and/or any third party,
except where such damages shall have been caused by Logiphone's willful and
gross negligence.
11. Confidentiality
During the term of this Agreement and at any time thereafter, except as required
by applicable law, each party shall maintain in complete confidence all
non-public information pertaining to the other parties' business and/or their
products, including, without limitation, any technical information, design or
data with respect to such products, and any marketing techniques or client list,
and shall take all necessary measures to ensure that such information and data
not be made available to any third party. Notwithstanding the foregoing,
Strategic Partner may disclose such matters relating to Logiphone's business
and/or products in connection with Strategic Partner's raising of capital, with
Logiphone's prior consent, and Logiphone shall respond to Strategic Partner's
request in this matter on a timely basis.
12. Relationship of Parties
Nothing contained herein shall be deemed to constitute Strategic Partner as a
partner and/or agent and/or legal representative of Logiphone and Strategic
Partner shall not make any statements or representations to the contrary. No
contracts, commitments, statements, or representations by or on behalf of
Logiphone shall be binding in any respect on Logiphone. Strategic Partner shall
effect all sales of Logiphone products as principal on its sole responsibility
and Logiphone shall not in any way be responsible for sales made by Strategic
Partner.
13. Term of Agreement
13.1 This Agreement shall remain in effect until the fifth anniversary of
the Effective Date, upon which it may be renewed by mutual written consent of
the parties.
13.2 Notwithstanding the above, upon the occurrence of any one of the following
events, Strategic Partner shall not be entitled to the special terms of sale as
set forth in Section 6 above, and shall be entitled to purchase Logiphone
products at market prices, terms and conditions. In addition, upon the
occurrence of any one of the following events, Logiphone shall be released from
its obligation as stated in Section 5.1.2 and shall be entitled to market, sell
or otherwise distribute any of its products to any party subject to the
limitation set forth in Paragraph 8.1.1 and shall not be bound to the provisions
of Section 14.2 below:
13.2.1 In the event Strategic Partner fails to provide the Logiphone
with $1,000,000 in funding within 90 days from the signing of this Agreement as
set forth in Section 7 above;
13.2.2 if Strategic Partner shall not purchase from Logiphone, and
fully and timely pay for in ten months out of each full calendar year during the
term of this Agreement:
13.2.2.1 1,500 units of PABX systems in each of the three months
following the sixth month from the Effective Date.
13.2.2.2 2,500 units of PABX systems in each of the 21 months
following the ninth month from the Effective Date.
13.2.2.3 3,000 units of PABX systems in each of the 12 months
following the 30th month from the Effective Dare.
13.2.2.4 1,500 units of PABX systems in each month from the 42nd month
from the Effective Date and for the duration of the term of this Agreement.
13.2.3 Notwithstanding paragraph 13.2.2 above, if, in any given month, Strategic
Partner fails to meet the minimum amount for that month, it shall nevertheless
be deemed to meet the minimum amount for that month if it had exceeded the
minimum amount set for any or the preceding months by at least the shortfall
amount.
13.3 Logiphone's sole remedy in the event of a breach of this Agreement by
Strategic Partner shall be to terminate this Agreement, including its
obligations under Section 14.2 hereof.
14. Non-competition
14.1 Strategic Partner, for the term of this Agreement, agrees that Logiphone
shall be their sole supplier of end-user telephone communications equipment for
distribution to end users, and that Strategic Partner shall not in any way
market or otherwise distribute any other competing products, provided, however,
that Logiphone is able to produce and deliver such product with equivalent
features and functionality at a price equal to or lower than that available from
competing suppliers. In the event that Logiphone is unable to produce or deliver
such product at such a price, Strategic Partner may purchase a competing
product.
14.2 Logiphone, for the term of this Agreement, shall not sell or otherwise
distribute, any products to a competitor of the Strategic Partner, a competitor
of the Strategic Partner being a distributor or telephone communications
equipment to end-users at no capital expense, below cost or for a rental fee to
the end-user in consideration for a services contract with such end-user,
without the prior written consent of the Strategic Partner.
15. Assignment
Strategic Partner shall be entitled to use sub-contractors and/or dealers for
the sale and distribution of Logiphone products, but shall not be entitled to
assign its rights or delegate its obligations under this Agreement to any third
party, except with the prior written consent of Logiphone.
16. Force Majeure
16.1 If either party is affected by Force Majeure, it shall forthwith notify
the other party of the nature and extent thereof.
16.2 Neither party shall be deemed to be in breach of this Agreement or
otherwise liable to the other by reason of any delay in performance or
non-performance of any of the obligations hereunder to the extent that such
delay or non-performance is due to any Force Majeure.
16.3 If the Force Majeure in question prevails for a continuous period in
excess of 60 days, the parties shall enter into bona fide discussions with the
view to alleviating its effects or agreeing to alternative arrangements which
could include termination of this Agreement.
16.4 "Force Majeure" for the purposes of this section shall mean any
circumstances beyond the reasonable control of each party, including, without
limitation, decrees of governments, acts of God, strikes, lockout, war, riot,
civil unrest, sabotage, floods, fires, unavoidable accidents, explosions,
earthquakes, embargo and acts of civil or military authority.
16.5 In the case of Force Majeure, and for such period it will prevail,
Strategic Partner shall be entitled to purchase end-user telephone
communications equipment from any other party.
17. Modification and Waiver
No modification or amendment of any of the provisions of this Agreement, nor
any waiver by any party or its consent to any deviation from the conditions of
this Agreement, shall be binding upon any of the parties unless made in writing
and signed by all the parties. No waiver of any rights by any
party hereto shall be construed as a waiver of the same or any other right at
any prior or subsequent time.
18. Entire Agreement
This Agreement, together with its annexes, forms an entire and conclusive
agreement between the parties and supersedes all proposals, agreements,
understandings, representations and warranties, whether oral or written,
expressed or implied, that were communicated between the parties prior to
signature hereof and the same will be of no effect and inadmissible as evidence.
19. Enforceability
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or their authority to be invalid, void,
unenforceable or against its regulatory or public policy, the remainder of the
terms, provisions, covenants and restriction of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
20. Binding Effect
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, executors,
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representatives and assigns. The rights and obligations of the parties hereto
may not be assigned in whole or in part.
21. Jurisdiction and Governing Law
21.1 Any action, suit or proceeding arising out of or relating to this Agreement
against Logiphone shall be brought exclusively in the courts of Tel-Aviv-Jaffa.
Any action, suit or proceeding arising out of or relating to this Agreement
against Strategic Partner shall be brought exclusively in any state or federal
court sitting in Dallas, Texas. All such actions, suits or proceedings shall be
governed and construed in accordance with the laws of the State of Israel.
22. Expenses
Strategic Partner shall bear all expenses incurred by the Logiphone Group in
connection with this Agreement up to $90,000. All such costs in excess of such
amount will be paid by Strategic Partner only with its prior approval. Except
as provided immediately above, each of the parties hereto shall
AGREEMENT FOR EXCHANGE OF STOCK
This Agreement for Exchange of Stock is entered into in Dallas County,
Texas this ___ day of September, 1996, between Star Resources, Inc., a Delaware
corporation, sometimes referred to in this Agreement as "Star" or "Purchaser,"
ICA Marketing Company, L.C., a limited liability company organized under the
laws of Iowa, sometimes referred to as "Seller" or "LC", and ICA B.V., a limited
liability company organized under the laws of the Netherlands, sometimes
referred to in this Agreement as "BV" or the "Acquired Entity."
The Purchaser will acquire from Seller all of the issued and
outstanding stock of BV (the "BV Shares") and all of the existing debt of BV to
LC (the "BV Debt") in exchange solely for shares of voting stock of the
Purchaser (the "Exchange"). Under this Agreement, the Acquired Entity will
become a subsidiary of the Purchaser.
Prior to closing the Exchange, Purchaser will amend its Certificate of
Incorporation and effect a reverse stock split so that the authorized
capitalization of Star consists of 10,000,000 authorized shares of common stock,
$.0001 par value per share, of which there will be 500,000 shares issued and
outstanding and 1,000,000 authorized shares of preferred stock, par value $.01
per share, of which none will be issued and outstanding (the "Amendment").
In order to consummate the Exchange, the Purchaser, Seller and Acquired
Entity, in consideration of the mutual covenants and on the basis of the
representations and warranties set forth, agree as follows:
ARTICLE 1
EXCHANGE OF CAPITAL STOCK
TRANSFER OF ACQUIRED ENTITY'S CAPITAL STOCK
1.01. Subject to the terms and conditions of this Agreement, Seller will
transfer and deliver to Star on the Closing Date an assignment of all of its
interests in the BV Stock and BV Debt and a stock power and any notes or other
evidences of indebtedness relating to BV Debt, properly endorsed in favor of
Star.
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CONSIDERATION FOR TRANSFER
1.02. In exchange for the BV Shares and BV Debt transferred by the Seller
pursuant to Paragraph 1.01, Star will issue and cause to be delivered to Seller
on the Closing Date 4,000,000 shares of post-Amendment Common Stock of
Star("Star Shares").
CLOSING DATE
1.03. Subject to the conditions precedent set forth in this Agreement and the
other obligations of the parties set forth in this Agreement, the Exchange shall
be consummated at 5420 LBJ Freeway, Suite 540, Dallas, Texas 75240, on October
21, 1996, at the hour of 9:00 a.m. or at any other place and date as the parties
fix by mutual consent. Consummation shall include the delivery by Seller of an
assignment of its BV Shares and its BV Debt, as provided in Paragraph 1.01 of
this Agreement, and the delivery by the Purchaser of certificates representing
its shares of Common Stock, as provided in Paragraph 1.02 of this Agreement. The
date of the consummation of this Agreement is referred to as the "Closing Date."
The Star Shares shall be held in escrow by Jenkens & Gilchrist, P.C. pending
registration of the transfer of BV Shares with appropriate authorities in the
Netherlands. Upon receipt of evidence of such registration of the Star Shares,
the Star Shares shall be delivered to Seller; if such registration is not
completed by December 31, 1996, either Star or ICA shall have the right to
rescind the Exchange, and the Star Shares shall be returned to Star and all
rights to the BV Shares shall belong to ICA. Star and ICA shall take actions as
are necessary to complete expeditiously such registration or rescission.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF STAR
Purchaser warrants and represents to Seller, as follows, which representations
and warranties shall survive the closing, regardless of what investigation, if
any, Seller shall have made thereof:
ORGANIZATION AND STANDING OF STAR
2.01. Star is a corporation, duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
CAPITALIZATION
2.02 Except as contemplated herein and as set forth in Annex 2.2, Star has not
undertaken to issue shares of any kind to any other parties, nor has it granted
any option and/or warrant to any party to purchase any of its shares.
Furthermore, Star has not declared or otherwise undertaken to distribute any
dividends to its shareholders which have not already been fully paid.
FINANCIAL STATEMENTS
2.03. The audited financial statements of Star for the fiscal year ending April
30, 1996, and the unaudited financial statements of Star for the three months
ending July 31, 1996 (the "Star Financial Statements"), previously provided to
Seller, are true and complete and have been prepared in accordance with
generally accepted accounting principles of the United States on a consistent
basis. Since July 31, 1996, except for transactional fees incurred in connection
with this transaction and transactions associated with the transaction described
in Annex 2.2, there has not been (i) any change in Star's financial condition,
assets, liabilities, or business, other than changes in the ordinary course of
business, none of which has been materially adverse; (ii) any damage or material
loss to Star's properties or business; (iii) any declaration, or setting aside
and/or payment of any dividend or other distribution in respect of Star's
shares.
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LITIGATION
2.04. Except as described in Annex 2.4, there is no litigation or proceeding
pending or, to its best knowledge, threatened against or relating to Star, its
subsidiaries, its properties, or business. Star has not been informed of any
action, proceeding or governmental inquiry or investigation pending or
threatened against it or any of its officers, directors or shareholders before
any court, arbitrators, board, tribunal or administrative or other governmental
agency, nor is Star aware that there are any circumstances that may lead to a
claim, demand or legal proceedings. The foregoing includes, without limiting its
generality, actions pending or threatened involving the prior employment of any
of Star's employees.
PROPERTY
2.05. Star has legal rights and good and marketable title to all of its assets
both real and personal, tangible and intangible, that it purports to own,
including the assets as stated in the Star Financial Statements, free and clear
of all leases, liens, security interests and encumbrances of any kind.
GUARANTEE
2.06. Star has not guaranteed and/or secured in any manner the
obligations of its shareholders or any third party.
WINDING UP
2.07. To the best of its knowledge, no action has been taken against Star for
the winding up of the company and/or in connection with the receivership of any
assets, and it is not aware of any such actions threatened against it.
ISSUANCE OF SHARES
2.08. Neither the execution and delivery of this Agreement, nor the performance
hereof by Star, will conflict with or result in any default under or violation
of any provisions of its certificate of incorporation, or any mortgage, material
agreement or other material
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instrument to which it or by which its property is bound or affected, or any
applicable statute, regulation, ordinance, judgment, order or decree affecting
Star or by which any of its property is bound or affected.
CONSENTS AND APPROVALS
2.09. Except as set forth in Annex 2.9, no consents or approvals of any
government or government agency or any other public or third party are required
by Star to execute, deliver or perform this Agreement.
SHAREHOLDERS AGREEMENTS
2.10. There are no shareholders or voting agreements between
Star and any shareholders of Star.
COMPENSATION
2.11. There are no obligations to grant bonuses or special rewards, including,
but not limited to options and/or warrants for shares of Star, to any officers
and/or directors and/or shareholders of Star.
INTERESTED PARTY TRANSACTIONS
2.12. Star is not a party to any interested party transaction involving any
director and/or shareholder except as described in its report on Form 10-KSB for
the fiscal year ended April 30, 1996. At Closing, Star will not be indebted to
any shareholder thereof or any entity controlled by such shareholder or any
affiliate thereof. All advances or loans by Star to any shareholder, officer,
director, employee, affiliate or agent of Star will be repaid in full, with
accrued interest to the date of payment.
MATERIAL AGREEMENTS
2.13. Star has in all material respects performed all
obligations to be performed by it under all contracts, agreements
and commitments to which it is a party, and there is not under any
such contracts, agreements or commitments any existing default or
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event of default or event that with notice or lapse of time or both would
constitute a default. There are no current and pending agreements,
understandings, contracts, commitments, licenses, permits, and leases (of real
or personal property), written or otherwise, between Star and any party that are
material to the business of Star, including, without limitation, any such
agreement that (i) involves, in the aggregate, the payment or receipt by Star of
more than $1,000, which cannot be canceled without penalty upon thirty (30) days
notice by Star; (ii) involve any arrangements or agreements of Star with its
competitors, or (iii) is outside the ordinary course of business of Star.
TAX MATTERS
2.14.1. Star has accurately prepared and timely submitted all tax returns and
filings that are required to be filed, and such tax returns and filings are true
and complete in all material respects. Star is registered with all tax
authorities as required by law and has timely paid any and all amounts due by it
to any tax, value added tax and national insurance authority and, to the best of
its knowledge and belief, is not in default in any tax payment due under the
law. Star is not the current beneficiary of any extension of time within which
to file any tax return. No claim has ever been made by an authority in a
jurisdiction where Star does not file tax returns that Star may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets that arose in connection with any failure (or alleged failure) to pay any
tax.
2.14.2 Star has withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
2.14.3. None of Star's tax returns have been audited or currently
are subject of audit.
2.14.4. No shareholder, director or officer of Star (or employee responsible for
tax matters for Star) expects any authority to assess any additional taxes for
any period for which tax returns have been filed. There is no dispute or claim
concerning any tax liability of Star either (A) claimed or raised by any
authority in
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writing, or (B) as to which any shareholder, director, or officer (or employee
responsible for tax matters for Star) has knowledge based upon personal contact
with any agent of such authority.
2.14.5. Star has not waived any statute of limitations in respect
of taxes or agreed to any extension of time with respect to a tax
assessment or deficiency.
2.14.6. Neither Star or any of Star's subsidiaries are subject to
any tax allocation or sharing agreement.
2.14.7. There are no unpaid taxes of Star. Star has no
subsidiaries.
EMPLOYEE LIABILITIES
2.15. As of December 31, 1995, all liabilities due on account of the employees
of Star, including all social benefits, workers' compensation and national or
state insurance payments, as required by agreement, collective or otherwise,
and/or by law, are covered by payments to appropriate insurance policies or are
set aside as stated in the Star Financial Statements. Star has no employee
benefit plans.
PERMITS AND LICENSES
2.16. Star has complied in all material respects with all laws and regulations
applicable to it. Star has all the permits, licenses, orders, consents and
approvals of all governmental and regulatory bodies material to carrying on its
business. Star is not in default under any of such permits, licenses or any
other authority. To the best of its knowledge, no suspension or the cancellation
of any such permits, licenses, or other authority is threatened nor does Star
anticipate any difficulties in their renewal.
LABOR RELATIONS
2.17. Star has not been the subject of any union activity or
labor dispute, and there have not been any strikes of any kind
called or threatened to be called against Star. Star has not
violated any applicable federal or state law or regulation relating
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to labor practices. Save as disclosed in Star's Financial Statements, Star has
no liability to any of its employees, agents or consultants in connection with
grievances arising from the termination of such employees, agents or
consultants.
CORRUPT PRACTICES
2.18. Since the inception of Star, there have been no violations of the Foreign
Corrupt Practices Act or of any similar state or federal statutes relating to
bribery by Star or any of its agents.
ENFORCEABILITY
2.19. The execution, delivery and performance of this Agreement, by and on
behalf of Star will be duly authorized by the Board of Directors of Star, and
subject to Board approval this Agreement has been duly executed and delivered by
and on behalf of Star by its authorized officers. Subject to Board approval,
this Agreement and all documents executed by Star in connection herewith are
valid and binding obligations of Star and are enforceable against it in
accordance with their respective terms.
SEC
2.20. Star has filed all reports, filings, schedules, and forms ("SEC Filings")
to the SEC that are required to be filed by Star, and such SEC Filings are true
and complete in all material respects. No claim is being made that Star has not
completely and accurately made all SEC Filings as required nor has any inquiry,
investigation or proceeding of any kind been conducted by the SEC with respect
to Star.
2.21. Star is acquiring the BV Shares for its own account for investment and not
for the purpose of distribution of the BV Shares as the them "distribution" is
used in connection with Section 2(11) of the Securities Act of 1933, as amended
(the "Securities Act").
DISCLOSURE
2.22. No representation or warranty by Star in this Agreement,
nor any statement or certificate furnished or to be furnished by
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Star pursuant hereto, or in connection with the transaction contemplated herein
contains any untrue statement of a material fact, or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LC AND BV
LC and BV warrant and represent to Star, as follows, which representations and
warranties shall survive the closing, regardless of what investigation, if any,
Star shall have made thereof:
ORGANIZATION AND STANDING OF LC AND BV
3.01.1. BV is a limited liability company, duly registered,
validly existing and in good standing under the laws of the
Netherlands.
3.01.2 LC is a limited liability company, validly existing and in
good standing under the laws of Iowa.
CAPITALIZATION
3.02. The authorized capitalization of BV consists of 1,500,000 guilders divided
into 15,000 shares of capital stock, 100 guilders par value per share, of which
there are 10,400 shares issued and outstanding, all of which are owned by Seller
(the "BV Shares").
BV has not undertaken to issue shares of any kind to any other parties, nor has
it granted any option and/or warrant to any party to purchase any of its shares.
Furthermore, BV has not declared or otherwise undertaken to distribute any
dividends to its shareholders that have not already been fully paid.
FINANCIAL STATEMENTS
3.03. The preliminary audited financial statements of BV for the period
beginning December 13, 1995 and ending June 24, 1996, previously provided to
Star (the "ICA Financial Statements"), are true and complete and have been
prepared in accordance with
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generally accepted accounting principles of the Netherlands on a consistent
basis. Except as set forth in Annex 3.3, since June 24, 1996, there has not been
(i) any change in BV's financial condition, assets, liabilities, or business,
other than changes in the ordinary course of business, none of which has been
materially adverse; (ii) any damage or material loss to ICA's properties or
business; (iii) any declaration, or setting aside and/or payment of any dividend
or other distribution in respect of BV's shares.
LITIGATION
3.04. There is no litigation or proceeding pending or, to the best of their
knowledge, threatened against or relating to LC, BV, their subsidiaries, their
properties, or business. Neither LC nor BV has been informed of any action,
proceeding or governmental inquiry or investigation pending or threatened
against either of them or any of their officers, directors or shareholders
before any court, arbitrators, board, tribunal or administrative or other
governmental agency, nor is BV or LC aware that there are any circumstances that
may lead to a claim, demand or legal proceedings. The foregoing includes,
without limiting its generality, actions pending or threatened involving the
prior employment of any of BV's employees.
PROPERTY
3.05.1. BV has legal rights and good and marketable title to all of its assets,
both real and personal, tangible and intangible, that it purports to own,
including the assets as stated in the ICA Financial Statements, free and clear
of all leases, liens, security interests and encumbrances of any kind, except
for those liens and pledges listed in Annex 3.5 attached hereto. All buildings,
structures and improvements owned or leased by BV and all equipment located
therein, conform in all material respects with all building, zoning and other
applicable laws and regulations. All buildings, machinery and equipment used by
BV are in good operating condition and reasonable state of repair, subject only
to ordinary wear and tear.
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3.05.2. LC has legal rights and good and marketable title to the BV Shares and
BV Debt free and clear of all leases, liens, security interests and encumbrances
of any kind.
GUARANTEE
3.06. BV has not guaranteed and/or secured in any manner the
obligations of its shareholders or any third party.
WINDING UP
3.07. To the best of its knowledge, no action has been taken against BV for the
winding up of the company and/or in connection with the receivership of any
assets, and it is not aware of any such actions threatened against it.
ISSUANCE OF SHARES
3.08. The Exchange in accordance with the terms of this Agreement will not
constitute a violation of any of BV's licenses, leases or contracts and all of
the foregoing will remain in full force and effect without acceleration as a
result of the transaction contemplated herein. Neither the execution and
delivery of this Agreement, nor the performance hereof by the Seller will
conflict with or result in any default under or violation of any provisions of
BV's or LC's corporate charter, or any mortgage, material agreement or other
material instrument to which LC or BV or by which BV's or LC's property is bound
or affected, or any applicable statute, regulation, ordinance, judgment, order
or decree affecting BV or LC or by which any of BV's or LC's property is bound
or affected.
CONSENTS AND APPROVALS
3.09. Except as set forth in Annex 3.9, no consents or approvals of any
government or government agency or any other public or third party are required
by BV or LC to execute, deliver or perform this Agreement.
SHAREHOLDERS AGREEMENTS
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3.10. There are no shareholders or voting agreements between BV
and any shareholders of BV or LC.
COMPENSATION
3.11. There are no obligations to grant bonuses or special rewards, including,
but not limited to options and/or warrants for shares of BV, to any officers
and/or directors and/or shareholders of BV or LC, except as set forth in Annex
3.11.
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INTERESTED PARTY TRANSACTIONS
3.12. BV is a party to the interested party transactions involving any director
and/or shareholder of LC or BV as described in Annex 3.12. Except as set forth
in Annex 3.12, BV is not indebted to Seller or any entity controlled by any
Seller or any affiliate thereof. Except for the BV Debt being assigned to Star,
all advances or loans by BV to any shareholder, officer, director, employee,
affiliate or agent of BV or Seller will be repaid in full, with accrued interest
to the date of payment.
MATERIAL AGREEMENTS
3.13. BV has in all material respects performed all obligations to be performed
by it under all contracts, agreements and commitments to which it is a party,
and there is not under any such contracts, agreements or commitments any
existing default or event of default or event that with notice or lapse of time
or both would constitute a default. Annex 3.13 contains a true and complete list
or brief description of all current and pending agreements, understandings,
contracts, commitments, licenses, permits, and leases (of real or personal
property), written or otherwise, between BV and any party that are material to
the business of BV. Annex 3.13 includes any agreement of the type referred to
above that (i) involves, in the aggregate, the payment or receipt by BV of more
than $1,000, which cannot be canceled without penalty upon thirty (30) days
notice by BV or which otherwise is material to BV, (ii) involves any
arrangements or agreements of BV with its competitors, and (iii) is outside the
ordinary course of business of BV. Such agreements are in full force and effect.
TAX MATTERS
3.14.1. BV has accurately prepared and timely submitted all tax returns and
filings that are required to be filed, and such tax returns and filings are true
and complete in all material respects. BV is registered with all tax authorities
as required by law and has timely paid any and all amounts due by it to any tax,
value added tax and national insurance authority and, to the best of its
knowledge and belief, is not in default in any tax payment due under the law. BV
is not the current beneficiary of any extension of time
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within which to file any tax return. No claim has ever been made by an authority
in a jurisdiction where BV does not file tax returns that BV may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets that arose in connection with any failure (or alleged failure) to pay any
tax.
3.14.2 BV has withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
3.14.3. Annex 3.14.3 lists all tax returns filed with respect to BV for taxable
periods ended on or after January 1, 1995, indicates those tax returns that have
been audited, and indicates those tax returns that currently are subject of
audit.
3.14.4. No shareholder, director or officer of BV (or employee responsible for
tax matters for BV) expects any authority to assess any additional taxes for any
period for which tax returns have been filed. There is no dispute or claim
concerning any tax liability of BV either (A) claimed or raised by any authority
in writing, or (B) as to which any shareholder, director, or officer (or
employee responsible for tax matters for BV) has knowledge based upon personal
contact with any agent of such authority.
3.14.5. BV has not waived any statute of limitation in respect of
taxes or agreed to any extension of time with respect to a tax
assessment or deficiency.
3.14.6. Neither BV or any of BV's subsidiaries are subject to any
tax allocation or sharing agreement.
3.14.7. The unpaid taxes of BV and its subsidiaries do not exceed
the reserve for tax liability.
EMPLOYEE LIABILITIES
3.15. As of June 24, 1996, all liabilities due on account of the employees of
BV, including all social benefits, workers' compensation and national or state
insurance payments, as required by agreement, collective or otherwise, and/or by
law, are covered by
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payments to appropriate insurance policies or are set aside as stated in the ICA
Financial Statements. Annex 3.15 sets forth all employee benefit plans of BV.
PERMITS AND LICENSES
3.16. BV has complied in all material respects with all laws and regulations
applicable to it. BV has all the permits, licenses, orders, consents and
approvals of all governmental and regulatory bodies material to carrying on its
business. BV is not in default under any of such permits, licenses or any other
authority. To the best of its knowledge, no suspension or the cancellation of
any such permits, licenses, or other authority is threatened nor does BV
anticipate any difficulties in their renewal. LC has complied in all material
respects with all laws and regulations applicable to it, including in connection
with the offer and issuance of membership interests to its members.
ACCOUNTS RECEIVABLE
3.17. BV's accounts receivable reflected on its balance sheet at June 24, 1996,
and all of BV's accounts receivable since the date thereof have arisen in the
ordinary course of business for goods delivered or services rendered.
LABOR RELATIONS
3.18. BV has not been the subject of any union activity or labor dispute, and
there have not been any strikes of any kind called or threatened to be called
against BV. BV has not violated any applicable federal or state law or
regulation relating to labor practices. Save as disclosed in the ICA Financial
Statements, BV has no liability to any of its employees, agents or consultants
in connection with grievances arising from the termination of such employees,
agents or consultants.
INSURANCE
3.19. All of the insurable properties of BV are insured for its
benefit under valid and enforceable policies, issued by insurers of
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recognized responsibility in amounts and against such risks and
losses as is customary in the industry.
CORRUPT PRACTICES
3.20. Since the inception of BV and LC, there have been no violations of the
Foreign Corrupt Practices Act or of any similar state or federal statutes
relating to bribery by BV and LC or any of their agents.
ENFORCEABILITY
3.21. The execution, delivery and performance of this Agreement, by and on
behalf of BV and LC have been duly authorized by the Board of Directors of BV
and LC, respectively, and this Agreement has been duly executed and delivered by
and on behalf of BV and LC by their authorized officers. This Agreement and all
documents executed by BV and LC in connection herewith are valid and binding
obligations of BV and LC and are enforceable against BV and LC in accordance
with their respective terms.
NO DISTRIBUTION
3.22. LC is acquiring the Star Shares for its own account for investment and not
for the purpose of distribution of the Star Shares, as the term "distribution"
is used in connection with Section 2(11) of the Securities Act.
DISCLOSURE
3.22. No representation or warranty by BV or LC in this Agreement, nor any
statement or certificate furnished or to be furnished by BV or LC pursuant
hereto, or in connection with the transaction contemplated herein contains any
untrue statement of a material fact, or omits, or will omit, to state a material
fact necessary to make the statements contained herein or therein not
misleading.
RECEIPT OF FINANCIAL REPORTS
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3.23. LC and BV acknowledge receipt of copies of Star's reports on Form 10-KSB
for Star's fiscal year ended April 30, 1996 and on Form 10-QSB for Star's fiscal
quarter ended July 31, 1996.
ARTICLE 4
CONDUCT OF BUSINESS OF ACQUIRED
CORPORATION PENDING CLOSING
DATE
CONDUCT OF BUSINESS IN ITS ORDINARY
COURSE
4.01. BV will carry on its business in substantially the same manner as previous
to the date of execution of this Agreement, and will:
(a) Continue in full force the amount and scope of insurance coverage carried
prior to that date;
(b) Maintain its business organization and keep it intact, to retain its present
employees, and to maintain its goodwill with suppliers, customers, and others
having business relationships with it;
(c) Exercise due diligence in safeguarding and maintaining confidential reports
and data used in its business;
(d) Maintain its assets and properties in good condition and repair, and not
sell or otherwise dispose of any of its assets or properties, except sales of
inventory in the ordinary course of business.
SATISFY CONDITIONS PRECEDENT
4.02. LC and BV will use their best efforts to satisfy all
conditions precedent contained in this Agreement.
ACCESS TO INFORMATION AND DOCUMENTS
4.03. (a) LC and BV will afford the officers and representatives of Star, from
the date of this Agreement until consummation of the Exchange, full access
during normal business hours to all properties, books, accounts, contracts,
commitments, and any other records of any kind of LC or BV. Sufficient access
shall be allowed to provide Star with full opportunity to make any investigation
it desires to make of LC and BV, and to keep itself fully informed of the
affairs of LC and BV.
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(b) In addition, LC and BV will permit Star to make extracts or copies of all
such books, accounts, contracts, commitments, and records, and to furnish to
Star, within 10 days after demand, any further financial and operating data of
the company as Star reasonably requests.
(c) Star will use any information obtained under this Paragraph only for its
own purposes in connection with the consummation of the transaction
contemplated by this Agreement, and will not divulge the information to any
other person.
NEGATIVE COVENANTS
4.04. Except with the prior written consent of Star, BV will not:
(a) Incur any liabilities other than BV Debt that will be assigned to Star at
closing and current liabilities incurred in the ordinary course of business;
(b) Incur any mortgage, lien, pledge, hypothecation, charge, encumbrance, or
restriction of any kind;
(c) Become a party to any contract, or renew, extend, or modify any existing
contract, except in the ordinary course of business;
(d) Make any capital expenditures, except for ordinary repairs, maintenance, and
replacement;
(e) Declare or pay any dividend on or make any other distribution to
Shareholders;
(f) Purchase, retire, or redeem any shares of common stock;
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(g) Issue or sell additional shares of stock, whether or not such stock has been
previously authorized or issued;
(h) Issue or sell any warrants, rights, or options to acquire any shares of its
capital stock;
(i) Amend its Articles of Organization or Bylaws;
(j) Pay or agree to pay any bonus, increase in compensation, pension, or
severance pay to any director, stockholder, officer, consultant, agent, or
employee;
(k) Discharge or satisfy any lien or encumbrance, nor pay any obligation or
liability, except current liabilities incurred in the ordinary course of
business since that date;
(l) Merge or consolidate with any other entity;
(m) Enter into any transactions or take any acts that would constitute a
breach of the representations, and warranties contained in this Agreement; or
(n) Institute, settle, or agree to settle any action or proceeding before
any court or governmental body.
4.05 Except with the prior written consent of Star, LC will not:
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(a) Incur any mortgage, lien, pledge, hypothecation, charge, encumbrance,
or restriction of any kind with respect to the BV Shares; or
(b) Enter into any transactions or take any acts that would constitute a
breach of the representations, and warranties contained in this Agreement.
ARTICLE 5
CONDUCT OF BUSINESS OF PURCHASER PENDING
CLOSING DATE
CONDUCT OF BUSINESS IN ITS ORDINARY COURSE
5.01. Star will carry on its business in substantially the same
manner as before the date of execution of this Agreement.
SATISFY CONDITIONS PRECEDENT
5.02. Star will use its best efforts to satisfy all conditions
precedent contained in this Agreement.
ACCESS TO INFORMATION AND DOCUMENTS
5.03. (a) Star will provide LC from the date of this Agreement until the Closing
Date full access during normal business hours to all properties, books,
accounts, contracts, commitments, and records of Star. Sufficient access shall
be allowed to provide LC the full opportunity to make any investigation it
desires to make of Star, and to keep itself fully informed of the affairs of
Star.
(b) Star will permit LC to make extracts or copies of all books, accounts,
contracts, commitments, and records. Additionally, Star will furnish to LC,
within 10 days after demand, any further financial and operating data and other
information concerning its business and assets that LC reasonably requests.
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(c) LC may use any information secured pursuant to this Paragraph only for
its own purposes in connection with the consummation of the
transaction contemplated by this Agreement and may not divulge the
information to any other persons.
NEGATIVE COVENANTS
5.04. Except as contemplated by this Agreement or with the prior written consent
of LC, Star will not:
(a) Incur any liabilities other than current liabilities incurred in
the ordinary course of business;
(b) Incur any mortgage, lien, pledge, hypothecation, charge,
encumbrance, or restriction of any kind;
(c) Become a party to any contract, or renew, extend, or modify any
existing contract, except in the ordinary course of business;
(d) Make any capital expenditures, except for ordinary repairs,
maintenance, and replacement;
(e) Declare or pay any dividend on or make any other distribution to
Shareholders;
(f) Purchase, retire, or redeem any shares of capital stock;
(g) Issue or sell additional shares of stock, whether or not such
stock has been previously authorized or issued;
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(h) Issue or sell any warrants, rights, or options to acquire any
shares of its capital stock;
(i) Amend its Certificate of Incorporation or Bylaws;
(j) Pay or agree to pay any bonus, increase in compensation, pension,
or severance pay to any director, stockholder, officer,
consultant, agent, or employee;
(k) Discharge or satisfy any lien or encumbrance, nor pay any
obligation or liability, except current liabilities incurred in
the ordinary course of business since that date;
(l) Merge or consolidate with any other entity;
(m) Enter into any transactions or take any acts that would
constitute a breach of the representations, and warranties
contained in this Agreement; and
(n) Institute, settle, or agree to settle any action or
proceeding before any court or governmental body.
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ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF
ACQUIRED ENTITY
CONDITIONS PRECEDENT TO CLOSING
6.01. The obligations of Seller to consummate the Exchange shall be subject
to the conditions precedent specified in this Article 6.
EFFECTIVENESS OF AMENDMENT
6.02. Star shall have taken all actions required so that the Amendment is
effective.
TRUTH OF REPRESENTATIONS AND WARRANTIES
and Compliance With Covenants
6.03. The representations and warranties of Star contained in this Agreement
shall be true as of the Closing Date with the same effect as though made on the
Closing Date. Star shall have performed all obligations and comply with all
covenants required by this Agreement to be performed or complied with by it
prior to the Closing Date.
NO RESTRICTIONS
6.04. No action or proceeding by any governmental body or agency shall have
been threatened, asserted, or instituted to prohibit the consummation of the
transactions contemplated by this Agreement.
BOARD OF DIRECTORS
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6.05. Star shall elect three nominees of LC to the Board of Directors, and
all directors and officers of Star other than Michael A. Hirshman shall have
resigned.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF
PURCHASER
CONDITIONS PRECEDENT TO CLOSING
7.01. The obligations of Star to consummate the Exchange shall
be subject to the conditions precedent specified in this Article 7.
Audited and Updated Financial Statements
7.02. BV will have provided audited financial statements for the period
covered by the ICA Financial Statements that substantially conform to the
preliminary ICA Financial Statements and unaudited financial statements for the
period beginning June 24, 1996, and ending September 30, 1996, that have been
informally reviewed by BDO Seidman, and will be prepared in accordance with
generally accepted accounting principles of the Netherlands and on a consistent
basis and accurately represent the condition of BV for the period covered
thereby.
TRUTH OF REPRESENTATIONSAND WARRANTIES
and Compliance With Covenants
7.03. The representations and warranties of LC and BV contained in this
Agreement shall be true as of the Closing Date, with the same effect as though
made on the Closing
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Date. LC and BV shall perform all obligations and comply with all covenants
required by this Agreement to be performed or complied with by them prior to the
closing date.
ACCEPTABILITY OF PAPERS AND PROCEEDINGS
7.04. To the extent requested by Star, the form and substance of all papers
and proceedings under this Agreement shall be acceptable to counsel for Star.
NO RESTRICTIONS
7.05. No action or proceeding by any governmental body shall be threatened,
asserted, or instituted that the consummation of the transactions contemplated
by this Agreement.
ARTICLE 8
EXPENSES
8.01. LC shall pay the expenses incurred by both of the parties to this
Agreement arising out of this Agreement and the transactions contemplated in
this Agreement, including but not limited to all fees and expenses of their
counsel and accountants.
ARTICLE 9
COMPLIANCE WITH SECURITIES LAWS
LIMITATION ON DISTRIBUTION
9.01. Any distribution or other transfer of the Star Shares to any member
of LC or to any third party shall comply with all applicable laws, including
applicable federal and state securities laws.
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9.02. At Closing, LC shall deliver to Star an executed written statement or
investment letter in form and substance acceptable to counsel for Star
containing the acknowledgments, representations, covenants and agreements
contained in paragraph 9.03 of this Agreement.
9.03 Prior to any distribution or other transfer of the Star Shares to any
member of LC or to any third party, LC shall deliver to Star information
concerning such distribution or other transfer and the distributees or other
transferees, as the case may be, as requested by Star, including, but not
limited to, the name, state of residence and number of LC units owned by such
person and the distributee ("Shareholder") shall deliver to Star an executed
written statement or investment letter in form and substance acceptable to
counsel for Star containing the acknowledgments, representations, covenants and
agreements contained in paragraph 9.04 of this Agreement.
UNREGISTERED STOCK UNDER FEDERAL SECURITIES ACT
9.04.
(a) "Shareholder acknowledges that the Star Shares have not
been registered under the Federal Securities Act of 1933, as
amended, referred to in this Agreement as the "1933 Act," or
under any state securities laws and that, therefore, the
stock is not fully transferable except as permitted under
various exemptions contained in the 1933 Act and the rules of
the Securities and Exchange Commission interpreting the Act
and applicable state securities laws. The provisions
contained in this Paragraph 9.04 are intended to ensure
compliance with the 1933 Act and applicable state securities
laws.
THE NATURE OF THE SHAREHOLDER
(b) "Shareholder represents and warrants to Star as follows:
"(i) The Shareholder is knowledgeable in and experienced with
respect to stock investments in general and with respect to
investments of a nature similar to an investment in Star. By
reason of such knowledge and experience, the undersigned is
capable of evaluating the merits and risks of, and making an
informed business decision with regard to, an investment in
Star.
"(ii) Shareholder (x) has received Star's Form 10-KSB
for the fiscal year ended April 30, 1996 and the Form 10-QSB
for the quarter ended July 31, 1996; (y) has received all
other information he has deemed necessary to make an informed
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investment decision with respect to Star; and (z) has had the opportunity to ask
questions concerning Star.
NO DISTRIBUTION OF STOCK TO PUBLIC
(c) "Shareholder represents and warrants to Star that the Shareholder is
acquiring the Star Shares for the Shareholder's own account for investment, and
not for the purpose of resale or any other distribution of the shares. Each
Shareholder also represents and warrants that the Shareholder has no present
intention of disposing of all or any part of such shares at any particular time,
for any particular price, or on the happening of any particular circumstances.
Each Shareholder acknowledges that Star is relying on the truth and accuracy of
the warranties and representations set forth in this Paragraph in issuing the
shares without first registering the shares under the 1933 Act and applicable
state securities laws.
NO TRANSFERS IN VIOLATION OF THE 1933 ACT
(d) "Shareholder covenants and represents that none of the Star Shares will be
offered, sold, assigned, pledged, transferred, or otherwise disposed of except
after full compliance with all of the applicable provisions of the 1933 Act and
the rules and regulations of the Securities and Exchange Commission under the
1933 Act and applicable state securities laws. Therefore, each Shareholder
agrees not to sell or otherwise dispose of any of the Star Shares unless the
Shareholder:
(i) "Has delivered to Star a written legal opinion in form and substance
satisfactory to counsel for Star to the effect that the disposition is exempt
from registration under the 1933 Act and regulations interpreting the Act; or
(ii) "Has complied with the registration and prospectus requirements of the
1933 Act relating to such a disposition.
Star shall place a stop transfer order against transfer of shares until one of
the conditions set forth in this subparagraph has been met.
INVESTMENT LEGEND ON CERTIFICATES
(e) "Shareholder agrees that the certificates evidencing the Star Shares
will contain the following legend:
"THE SHARES OF STOCK OF STAR RESOURCES, INC. (THE "COMPANY") REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND THE HOLDER HEREOF CANNOT
MAKE ANY SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR OTHER TRANSFER OF ANY SHARES
OF SUCH STOCK EXCEPT PURSUANT TO AN OFFERING OF SUCH STOCK DULY REGISTERED UNDER
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNDER SUCH OTHER
CIRCUMSTANCES THAT IN THE OPINION OF COUNSEL FOR THE COMPANY, AT THE TIME, DOES
NOT REQUIRE REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE ACT AND MAY BE SUBJECT TO THE LIMITATIONS AND REPORTING REQUIREMENTS OF SAID
RULE UPON RESALE OR OTHER DISTRIBUTION THEREOF."
INDEMNIFICATION BY SHAREHOLDERS
(f) "If at any time in the future Shareholder sells or otherwise disposes of any
Star Shares without registration under the 1933 Act or any similar federal
statute or any applicable state securities laws that may then be in effect, such
Shareholder agrees to indemnify and hold harmless Star against any claims,
liabilities, penalties, costs, and expenses that may be asserted against or
suffered by the Purchaser as a result of such disposition."
ARTICLE 10
TERMINATION
DEFAULT
10.01. (a) Star or LC may, on or at any time prior to the Closing Date,
terminate this Agreement by notice to the other party in the event:
(i) The other party has defaulted by failing to perform any of its
covenants and agreements contained in this Agreement; and
(ii)Such default has not been fully cured within 30 days after receipt of the
notice specifying particularly the nature of the default.
DELAY
10.02. If consummation of the transaction specified in this Agreement has not
occurred by 11:59 P.M. Texas time, on November 30, 1996, any party that is not
in default in the timely performance of any of its covenants and conditions may
terminate this Agreement subsequent to that time by giving written notice of
termination to the other party. The written notice of termination shall be
effective upon the delivery of the notice in person to an officer of the party
or, if served by mail, upon the receipt of the notice by such party.
ARTICLE 11
MISCELLANEOUS
AMENDMENT
11.01. This Agreement may be amended or modified at any time and in
any manner only by an instrument in writing executed by the President of Star
and the Chief Executive Officer of LC.
WAIVER
11.02. Either Star or LC may, in writing:
EXTENSION OF TIME
(a) Extend the time for the performance of any of the obligations
of any other party to the Agreement.
WAIVING INACCURACIES
(b) Waive any inaccuracies and misrepresentations contained in
this Agreement or any document delivered pursuant to the Agreement made by any
other party to the Agreement.
WAIVING COMPLIANCE WITH COVENANTS
(c) Waive compliance with any of the covenants or performance of
any obligations contained in this Agreement by any other party to the Agreement.
WAIVING SATISFACTION OF CONDITION PRECEDENT
(d) Waive the fulfillment of any condition precedent to the
performance by any other party to the Agreement.
ASSIGNMENT
11.03.
(a) Neither this entire Agreement nor any right created by the Agreement
shall be assignable by either Star or LC without the prior written consent of
the other, except by the laws of succession.
(b) Except as limited by the provisions of subparagraph (a), this Agreement
shall be binding on and inure to the benefit of the respective successors and
assigns of the parties, as well as the parties.
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(c) Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties and their successors, any rights or
remedies under this Agreement.
NOTICES
11.04. Any notice or other communication required or permitted by this Agreement
must be in writing and shall be deemed to be properly given when delivered in
person to an officer of the other party, when deposited in the United States
mails for transmittal by certified or registered mail, postage prepaid, or when
deposited with a public telegraph company for transmittal, charges prepaid,
provided that the communication is addressed:
(a) In the case of Star, to:
Star Resources, Inc.
5420 LBJ Freeway
Suite 540
Dallas, Texas 75240
with a copy to:
Mark D. Wigder, Esq.
Jenkens & Gilchrist
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202
or to such other person or address designated by Star to receive notice.
(b) In the case of LC or BV, to:
ICA Marketing Company, L.C.
607 West Broadway
Suite 315
Fairfield, Iowa 52556
with a copy to:
William G. Milne, Esq.
13760 Noel Road
Suite 101
Dallas, Texas 75240
or to such other person or address designated by LC to receive notice.
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<PAGE>
HEADINGS
11.05. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
ENTIRE AGREEMENT
11.06. This instrument and the annexes to this instrument contain the
entire Agreement between the parties with respect to the transaction
contemplated by the Agreement. It may be executed in any number of counterparts
but the aggregate of the counterparts together constitute only one and
the same instruments.
EFFECT OF PARTIAL INVALIDITY
11.07. In the event that 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 provisions of this Agreement, but this Agreement shall be
constructed as if it never contained any such invalid, illegal, or unenforceable
provisions.
CONTROLLING LAW
11.08. The validity, interpretation, and performance of this agreement shall be
controlled by and construed under the laws of the State of Delaware.
ATTORNEYS' FEES
11.09 If any action at law or in equity, including an action for declaratory
relief, is brought to enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to recover reasonable attorney's fees from
the other party. The attorney's fees may be ordered by the court in the trial of
any action described in this Paragraph or may be enforced in a separate action
brought for determining attorney's fees.
SPECIFIC PERFORMANCE
11.10 The parties declare that it is impossible to measure in money the damages
that will accrue to a party or its successors as a result of the other parties'
failure to perform any of the obligations under this Agreement. Therefore, if a
party or its successor institutes any action or proceeding to enforce the
provisions of this Agreement, any party opposing such action or
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<PAGE>
proceeding agrees that specific performance may be sought and obtained for any
breach of this Agreement.
Executed on October 10, 1996.
STAR RESOURCES, INC. ICA B.V.
By: /s/ Lawrence E. Steinberg By: /s/ Ronald Gardner_______
Its: President_______________ Its: President_______________
ICA MARKETING COMPANY, L.C.
By: /s/ Ronald Gardner_____
Its: President_____________
agreement for exchange of stock.ica
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<PAGE>
AMENDMENT TO AGREEMENT
FOR EXCHANGE OF STOCK
This Amendment is made this day of October, 1996, by and
between Star Resources, Inc., ICA Marketing Company, L.C. and ICA
B.V.
BACKGROUND INFORMATION
The parties entered an Agreement for Exchange of Stock on October 10,
1996 (the "Agreement"). The Agreement provided that the exchange would occur at
a closing on October 21, 1996, or any other date the parties fix by mutual
consent. The Agreement also contemplated that prior to the closing Star would
amend its Articles of Incorporation. The parties wish to revise the amendment to
the Star's Articles of Incorporation and to delay the closing.
Accordingly, in consideration of the premises and the mutual agreements
set forth below, the parties agree as follows:
SUBSTANTIVE PROVISIONS
1. The third paragraph of the Agreement is amended to read in its
entirety as follows:
"Prior to closing the Exchange, Purchaser will amend its
Certificate of Incorporation and effect a reverse stock split
so that the authorized capitalization of Star consists of
20,000,000 authorized shares of common stock, $.0001 par value
per share, of which there will be 500,000 shares issued and
outstanding and 1,000,000 authorized shares of preferred
stock, par value $.01 per share, of which none will be issued
and outstanding and the name of Purchaser will be Logiphone
Group, Inc. (the 'Amendment')"
and the word "Amendment" as used in the Agreement shall refer to the transaction
described in such third paragraph as revised hereby.
2. The first sentence of Section 1.03 of the Agreement is
amended to read in its entirety as follows:
<PAGE>
"1.03. Subject to the conditions precedent set forth in this Agreement and the
other obligations of the parties set forth in this Agreement, the Exchange shall
be consummated at 5420 LBJ Freeway, Suite 540, Dallas, Texas 75240, on November
1, 1996, at the hour of 9:00 a.m. or at any other place and date as the parties
fix by mutual consent."
3. Except as amended hereby, the Agreement remains in full force and effect
in accordance with its terms.
STAR RESOURCES, INC. ICA MARKETING COMPANY, L.C.
By: __________________________ By: _________________________
Its: _________________________ Its: ________________________
ICA, B.V.
By: __________________________
Its: _________________________
close agree.ica
<PAGE>
