UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 18, 1996
HERZOG INTERNATIONAL HOLDINGS, INC.
(Formerly Xebec Galleon, Inc.)
(Exact name of registrant as specified in its charter)
NEVADA 33-55254-12 87-0438447
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Frankenstrabe 25
D-63791 Karlstein, Germany
(Address of principal executive offices)
Registrant's telephone number, including area code 011 49 618 895 7865
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ITEM 1. Changes in Control of Registrant.
See Item 2.
ITEM 2. Acquisition of Assets.
On October 18, 1996, Xebec Galleon, Inc. ("the Company"),
pursuant to an agreement dated as of October 18, 1996, and in consideration of
the issuance of 4,000,000 authorized but unissued shares, acquired 100% of the
issued and outstanding stock of Herzog, GmbH, ("Herzog"), a company organized
under the laws of Germany. After the completion of the merger, the shareholders
of Herzog became the holders of approximately 73% of the issued and outstanding
common shares of the Company. Through the merger with Herzog, the Company has
acquired all assets, liabilities, trademarks and business undertakings of
Herzog.
Simultaneously, Krista Nielson and David Yeaman, the directors
of the Company, resigned and Udo Herzog, Andrea Herzog, Wilfried Kirchhoff,
Franz-Josef Hansen and Ronald G. Williams were elected to the Board of Directors
of the Company, resulting in effective control of the Company passing to the new
board of directors. No material relationship existed or now exists, between any
former director, officer or affiliate of either the Company or Herzog.
The table below sets forth the percentage of voting securities
of the Company now beneficially owned by controlling shareholders, officers and
directors:
Number of Shares Percent of
Owner Beneficially Owned Voting Securities
Udo Herzog 3,800,000 73.1%
Select Capital Advisors, Inc. 250,000 4.8%
Select International Security, GmbH 252,400 4.9%
London Select Enterprises, Ltd. 239,900 4.6%
Capital General Corporation 517,500 9.6%
All Officers and Directors as a Group 3,800,000 73.1%
Herzog is in the business of designing, producing and
marketing men's leather and sportswear in the above average price range. The
collections are sold under two brand names: Yves Saint Laurent, Paris (YSL) and
Herzog Men's Wear.
The products, which are designed partly in-house with YSL are
manufactured to their specifications and under their own quality control by
factories in Hungary, Croatian and Slovenia. All raw material is sourced in
Europe. The raw material is warehoused in Germany and shipped to the various
production units on demand. The finished product is returned and warehoused in
Germany. This process allows the Company flexibility because of proximity to the
production base and fast delivery to the European markets.
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The Company has 400-500 customers who are all well established
names in the textile industry. Sales are conducted by the presence at fashion
centers, participation at trade shows and direct sales to large accounts. The
Company employs 12 people.
The Company, through the merger with Herzog intends to
continue to use and devote the acquired assets in the same business plan as
described above.
ITEM 5. Other Events.
Effective November 1, 1996, pursuant to written action adopted
unanimously by the Board of Directors and a majority of the shareholders, the
Company changed its name to Herzog International Holdings, Inc.
ITEM 7. Financial Statements and Exhibits.
It is impracticable to provide required financial statements
concurrently with the filing of this report. The Company
expects to file the financial statements within the required
period.
Exhibits:
Plan of Merger between the Company and Herzog, GmbH.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HERZOG INTERNATIONAL HOLDINGS, INC.
(FORMERLY XEBEC GALLEON, INC.)
By: s\Udo Herzog
-----------------------------------
Udo Herzog, President
Dated: November 4, 1996
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STOCK EXCHANGE AGREEMENT
by and among
XEBEC GALLEON, INC.,
SHAREHOLDERS LISTED ON EXHIBIT A
AND
HERZOG, GmbH
October 18, 1996
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "Agreement") dated as of October 18,
1996, by and among Xebec Galleon, Inc. ("Xebec"), a Nevada corporation, and
HERZOG, GmbH ("Herzog"), a German corporation and Udo Herzog, (the "Selling
Shareholder") who is the holder of all outstanding shares of capital stock of
Herzog, as set forth on Exhibit "A" annexed hereto.
WHEREAS, Herzog, is engaged in the textile industry (collectively the
"Business"); and
WHEREAS, each of the Selling Shareholder desire to sell the number of
shares of the issued and outstanding capital stock of Herzog set forth opposite
their names on Exhibit A annexed hereto which constitute 100% of the issued and
outstanding shares of Herzog. The foregoing shares of capital stock are
hereinafter collectively referred to as the "Herzog Shares".
WHEREAS, this Agreement sets forth the terms and conditions upon which
the Selling Shareholder will sell the Herzog Shares to Xebec , and Xebec will
purchase from the Selling Shareholder one hundred (100%) percent of the Herzog
Shares.
In consideration of the mutual promises contained herein and intending
to be legally bound, the parties hereto covenant and agree as follows:
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1. Purchase and Sale.
1.Purchase and Sale.
1.1 Herzog Shares to be Sold. Subject to the
terms and conditions of this Agreement, at the Closing each Selling Shareholder
shall sell, transfer, convey, assign and deliver to Xebec all the Herzog Shares
free and clear of all liens, claims, charges and encumbrances of whatever
nature. The purchase price to be paid by Xebec and the terms and conditions of
such purchase shall be as specified in Section 1.2.
1.2 Amount and Payment of Purchase Price. Subject to the terms and
conditions of this Agreement, Xebec agrees to pay the Selling Shareholder the
purchase price (the "Purchase Price"), payable on the Closing Date consisting of
4,000,000 shares ("Shares") of Xebec Common Stock.
2.The Closing.
The closing (the "Closing") shall take place on October 18, 1996 at
1:00 p.m. EST at 1221 Brickell Avenue, Suite 1010, Miami, Florida, or at such
other place and time as agreed upon by the parties. 3. Items to be Delivered at
Closing3.Items to be Delivered at Closing.
3.1 Selling Shareholder's Deliveries.
At the Closing, the Selling Shareholder will deliver to Xebec :
(i) stock certificates evidencing the Herzog Shares owned by
the Selling Shareholder, duly endorsed in blank and with all requisite stock
transfer and tax stamps affixed, transfer with signatures; and (ii) all such
opinions, contracts, resolutions, agreements and documents as are provided for
herein to be delivered by the Selling
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Shareholder to Xebec and such other instruments, documents and agreements as
Xebec may reasonably request for the purpose of carrying out the transactions
contemplated by this Agreement.
3.2 Xebec Galleon' Deliveries. At the Closing, Xebec
will deliver or cause to be delivered to the Selling Shareholder the Xebec
Shares and all such opinions, contracts, resolutions, agreements and documents
as are provided for herein to be delivered by Xebec to the Selling Shareholder.
3.3 Further Assurances. After the Closing, the
Selling Shareholder shall from time to time, at the request of Xebec and at
Xebec 's expense, execute and deliver such other instruments and take such other
actions as Xebec may reasonably request, in order to more effectively consummate
the transactions contemplated hereby. After the Closing, Xebec shall from time
to time at the request of the Selling Shareholder and at the Selling
Shareholder' expense, execute and deliver such other instruments and take such
other actions as the Selling Shareholder may reasonably request, in order to
more effectively consummate the transaction contemplated hereby.
3.4 Confidentiality. Each party hereto agrees that it
will hold and cause its affiliates, employees, auditors, attorneys, financial
advisors, bankers and other consultants, to hold in strict confidence, unless
compelled to disclose by judicial or administrative process, all documents and
information concerning the other party furnished to it by such other party or
their representatives in connection with transactions contemplated by this
Agreement (except to the extent that such
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information can be shown to have been furnished (i) previously known by the
party to which it was furnished, (ii) in the public domain through no fault of
such party, (iii) lawfully acquired from other sources by the party to which it
was furnished), and each party agrees that it will treat such information as the
sole property of the party furnishing such information and it will not use such
information other than for evaluating the transactions described herein or
release or disclose such information to any other person, except its employees,
auditors, attorneys, financial advisors, banks and other consultants and
advisors in connection with this Agreement. If the transactions contemplated by
this Agreement are not consummated, such confidence shall be maintained except
to the extent such information comes into the public domain through no fault of
the party required to hold it in confidence, and such information shall not be
used to the detriment of, or in relation to any investment in, the other party
and all such documents (including copies thereof) shall be returned to the other
party immediately upon the written request of such other party. 4.
Representations and Warranties of Herzog and the Selling
Shareholder.
4.Representations and Warranties of Herzog and the Selling
Shareholders.
As a material inducement to Xebec to enter into and perform this
Agreement and complete the purchase of the Herzog Shares, Herzog and the Selling
Shareholder, jointly and severally make the representations and warranties set
forth in this Section 4, intending Xebec to rely, and acknowledging that Xebec
is relying, on such representations and warranties in executing this Agreement
and entering into the transactions contemplated hereby:
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4.1 Organization and Corporate Authority. Herzog is a corporation
duly organized, validly existing and in good
standing under the laws of Germany with full corporate power and authority to
own or lease and use its properties and assets, and to carry on its business as
now conducted. Herzog is qualified as a foreign corporation to do business in
every other jurisdiction where such qualification is necessary to conduct its
business as presently conducted.
4.2 Charter, By-Laws and Minutes. The
copies of the Articles of Incorporation and the By-Laws of Herzog and minutes of
meetings of its Board of Directors and shareholder (or consents in lieu
thereof), and any shareholder agreements of Herzog, all as furnished to Xebec
(in the form attached as Schedule 4.2) are true, correct and complete copies
thereof.
4.3 Authorization and Validity.
(a) The Selling Shareholder has the full right, power and authority to
enter into this Agreement and to sell, transfer and convey to Xebec at the
Closing the Herzog Shares to be sold to Xebec by such Selling Shareholder
pursuant to this Agreement, and, upon consummation of the transactions
contemplated by this Agreement, Xebec will acquire the Herzog Shares free and
clear of all covenants, conditions, restrictions, voting trust arrangements,
liens, claims, charges, encumbrances, options and other rights of any kind.
(b) The Selling Shareholder has good and marketable title to the
Herzog Shares to be sold to Xebec by such Selling Shareholder pursuant to this
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Agreement, free and clear of all covenants, conditions, restrictions, voting
trust arrangements, liens, claims, charges, encumbrances, options and other
rights of any kind.
(c) This Agreement constitutes the valid and binding
obligation of each Selling Shareholder, enforceable against such Selling
Shareholder in accordance with its terms.
(d) This Agreement has been duly and validly authorized by
all necessary corporate action and upon execution constitutes the valid and
legally binding obligations of Herzog enforceable in accordance with their
respective terms. A copy of the Resolution is attached as Schedule 4.3(d).
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4.4No Violation.
(a) Neither the Selling Shareholder nor Herzog is a party
to, subject to or bound by any agreement or judgment, order, writ, prohibition,
injunction or decree of any court or governmental body that would prohibit or
prevent the execution, delivery or performance of this Agreement by Herzog or
such Selling Shareholder. Neither the execution, delivery or performance of this
Agreement, nor the consummation of the transactions contemplated hereby will
violate, or be in conflict with, or constitute a default (or an event which with
notice or lapse or time or both, would constitute a default) under, or result in
a termination of or accelerate the performance required, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of the Selling Shareholder or Herzog under any
agreement, commitment, indenture or other instrument to which the Selling
Shareholder or Herzog is bound, or violate any statute or law or any judgment,
decree, order, award, regulation or rule of any court, governmental authority or
arbitration tribunal applicable to the Selling Shareholder or Herzog.
(b) Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate any provision of the Articles of Incorporation or Bylaws of Herzog (ii)
violate, or be in conflict with, or constitute a default (or an event which with
notice or lapse of time or both, would constitute a default) under, or give rise
to a right of termination of or
<PAGE>
result in the termination or accelerate the performance required by or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of Herzog under, any agreement, commitment,
indenture or other instrument to which Herzog is a party or by which Herzog is
bound, or to which the property of Herzog is subject; (iii) violate any statute
or law or any judgment, decree, order, award, regulation or rule of any court,
governmental authority or arbitration tribunal applicable to Herzog; or (iv)
give rise to the right of termination by any domestic or foreign governmental
authority or tribunal of any license, registration, certificate, right of
authority to engage in business in such places where Herzog now does or has a
right to engage in business or heretofore has engaged in business.
4.5 Absence of Certain Changes. Since
December 31, 1995, Herzog has not: (i) suffered any material adverse change in
its working capital, financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business, operations or prospects;
(ii) paid, discharged or satisfied any claims, liabilities or obligations
(absolute accrued, contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business and consistence with past
practice; (iii) written off as uncollectible any notes or accounts receivable;
(iv) cancelled any debts or waived any claims or rights of substantial value;
(v) sold, transferred or otherwise disposed of any of its properties or assets
(personal or mixed, tangible or intangible), except in the ordinary course of
business and consistent with past practice;
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(vi) granted any general increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension, profit or other
profit sharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any officer, employee, except where such
increase is customary on a periodic basis; (vii) declared, paid or set aside for
payment any dividend or other distribution in respect of its capital stock or
redeemed, purchased or otherwise acquired, directly or indirectly, any shares of
capital stock or other securities of Herzog; or (viii) agreed, whether in
writing or otherwise, to take any action described in this section.
4.6 New Subsidiaries; Other Interests. Herzog owns, directly or
indirectly, the capital stock or other equity securities of those corporations
discussed on Schedule 4.6 (the "Subsidiaries"). Each of the representations and
warranties of Herzog and the Selling Shareholder shall also apply to the
Subsidiaries taken as a whole and while it is understood that certain changes
may be made in the Financial Statements and Interim Financial Statements (see
below) as a result of the current audit, it is represented and warranted that
there will not be any material adverse change in the financial condition,
business or prospects of the Subsidiaries taken as a whole.
4.7 Financial Statements.
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(a) As contained in Exhibit B, the Selling Shareholder have
heretofore delivered to Xebec : (i) an audited balance sheet of Herzog as of
October 31, 1995, including statements of income, changes in stockholders'
equity for the years ending October 31, 1994 and 1995 (the "Financial
Statements"), together with notes thereto, all prepared in accordance with
generally accepted accounting principals consistently applied and all unaudited
by Deloitte & Touche, Certified Public Accountants, in accordance with generally
accepted auditing standards, which reports upon the Financial Statements are
included as a part thereof: (ii) an unaudited consolidated balance sheet of
Herzog as of August 31, 1996 (the "Most Recent Balance Sheet"), and unaudited
consolidated statements of income, changes in stockholders' equity for the three
(3) months then ended (the "Interim Financial Statements"). The Financial
Statements and Notes thereto and the Interim Financial Statements and any Notes
thereto fairly present the assets, liabilities and financial condition as of the
respective dates thereof, and such statements of income, changes in
stockholders' equity, statements of cash flows, and Notes thereto, fairly
present the results of operations for the period therein referred to; all in
accordance with generally accepted accounting principals consistently applied
throughout the periods involved.
(b) SEC Requirements. Selling Shareholder acknowledge that
Xebec is a publicly held company and that the Financial Statements and Interim
Financial Statements for Herzog conform to the requirements of Regulation S-X
and
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other requirements of the Securities and Exchange Commission.
(c) Filing requirement with the SEC. Xebec/Herzog
understands and agrees that once this transaction is completed, it will be a
public company subject to the extensive, complex state, federal and NASD
securities regulations incumbent on public companies. In particular, the parties
understand and agree that a Form 8-K must be filed with the United States
Securities and Exchange Commission within fifteen days after closing which
filing requires that audited financial statements be filed within sixty days
after the filing of the 8-K and that such responsibility shall not be the
responsibility of Capital General Corporation, its officers, directors or
employees nor the existing officers of Xebec, but the sole responsibility of the
new officers and directors of Xebec/Herzog.
(d) Undisclosed Liabilities. Herzog has no liability, duty
or obligation, including obligations under liability claims, or other tort,
contractual claims or obligations, to employees, or otherwise, and Herzog has
not committed any act or omission, and no event has occurred and no condition
exists, which could give rise to such a liability, which is not disclosed or
reflected in the Financial Statements or the Notes thereto, whether current,
long-term, fixed, contingent, or otherwise and which would be required to be
reflected, disclosed or accrued on the Financial Statements, (under FASB 5) in
accordance with GAAP. Herzog has no other such liability, duty or
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obligation, whether fixed, contingent or otherwise. Without limiting the
foregoing (i) no claim has been threatened or asserted by any present or former
employee, customer or client of Herzog regarding any act or omission of either
Herzog or its personnel, nor has any claim been threatened or asserted by any
person regarding any violation by either Herzog or its personnel of any laws or
any rules, guidelines, policies or regulations of any governmental agency or
state regulatory authority, (ii) no event has occurred and no condition exists
that might give rise to any such claim, and (iii) Herzog and the Selling
Shareholder have no knowledge of any event or condition which might lead them to
believe that any such claim might be asserted.
(e) Accounting Changes. Herzog has not since inception,
changed its accounting practices, methods or principles in any respect. Since
January 1, 1996, there has not (i) been any material adverse change in the
assets, business, operations, liabilities (absolute, accrued, contingent or
otherwise), prospects or financial condition of Herzog other than as reflected
on the Interim Financial Statements.
(f) Internal Controls. Herzog maintains internal controls
with respect to its books, records, finances, customer accounts and other
operations which are adequate under federal regulatory rules and regulations
including compliance with the Foreign Corrupt Practices Act and are in
accordance with standard industry practices.
(g) Capitalization. Herzog's authorized capitalization
consists of a Notarized Statement by Dr. Richard Boelsche indicating that Udo
Herzog owns 100% of the capital of the company. Except as set forth on Schedule
4.7 there are no
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outstanding (a) securities convertible into or exchangeable for the shares of
capital stock of Herzog; (b) options, warrants or other rights to purchase or
subscribe to shares of capital stock of Herzog or securities convertible into or
exchangeable for shares of capital stock of Herzog; or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance of any capital stock of Herzog, any such convertible or
exchangeable securities or any such options, warrants or rights.
4.8 Taxes. While no material changes are expected, final taxes
owed and status of liabilities will be subject to the tax audit results dated
October 31, 1996, which will be provided to Xebec on or before January 31, 1997.
(a) Filing and Payment. Herzog has filed all federal, state,
local and other tax returns which are required to be filed by it and which have
become due and has paid all taxes shown thereon, including without limitation
all taxes on properties, income, business and occupation, licenses, sales and
payrolls, and none of the assets or properties of Herzog are subject to any lien
or charge for taxes, except statutory liens for taxes not yet due. For purposes
of this Agreement, "Taxes" shall mean all taxes, charges, fees, levies and other
assessments however denominated, including any interest, penalties or additions
to tax that may become payable in respect thereof, imposed by any governmental
body, including, without limiting the generality of the foregoing, all net
income, gross income, payroll, withholding, unemployment insurance, social
security, sales, use, excise, franchise, gross receipts, occupation, real and
personal property, stamp, transfer, workers' compensation, ad valorem, profits,
license,
<PAGE>
employment, estimated, severance and other taxes, customs, duties, fees,
assessments or charges of any kind whatever. "Tax" shall mean any one of the
foregoing.
(b) Audits. No federal income, state excise or business or
occupation Tax returns of the Herzog have been audited by the appropriate
authorities, and the Herzog has not granted any power of attorney to any person
to represent it before such authorities or other applicable authorities. No
federal or state Tax liabilities have been assessed or proposed which remain
unpaid. Herzog is unaware of any basis upon which any assessment for a material
amount of additional Taxes of Herzog could be made.
(c) Withholding. All Taxes which Herzog is required by law
to withhold or collect have been withheld or collected and have been paid over
to the proper governmental authorities or are properly held by Herzog for such
payment, and all withholdings, collections or other payments payable in
connection therewith as of the dates of the Financial Statements, are fully
reflected or disclosed in the balance sheets included as part of the Financial
Statements as at such dates and for the periods then ended. No waivers of
statutes of limitations with respect to any Tax returns of Herzog nor extensions
of time for the assessment of any tax have been given which are now in effect.
(d) Transfer Taxes; Transferee Tax Liability. No transfer
Taxes are or will be due and payable as a result of the sale of the Herzog
Shares or the
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transactions contemplated hereby.
4.9 Interests of Certain Affiliates.
No officer, director, shareholder or employee of Herzog has any loan, other
obligation or other transaction outstanding and owing from Herzog or for which
Herzog is or may be liable under guaranty or otherwise.
4.10 Insurance. Herzog does not carry directors' and
officers' liability insurance. Exhibit 4.10 provides a list of all insurance
policies maintained by Herzog, the nature of the policy, the deductible and the
term of such policy, and except as set forth in Schedule 4.10, Herzog has no
other insurance policies. Schedule 4.10 also contains a description of claims
against Herzog that are currently unsettled or uncompromised (whether insured or
uninsured or in litigation or not).
4.11 Names, Franchises, Permits, Etc. Herzog has not infringed
or violated in any way any software or other
license, or any trademark, trade name, copyright, trade secret right or
contractual relationship of others, or received any notice, claim or protest
respecting any such violation or infringement.
4.12 Title to Assets. Herzog owns good and
marketable title to all the properties and assets of the type required to be
reflected on the Most Recent Balance Sheet which it purports to own (whether
personal or mixed, tangible or intangible). All such properties and assets are
free and clear of all title defects or objections, liens, claims, charges,
security interest or other encumbrances of any nature whatsoever, including,
without limitation, leases, chattel mortgages, conditional sales contracts,
<PAGE>
collateral security agreements and other title or interest retention agreements.
The rights, properties and other assets presently owned, leased or licensed by
Herzog and described elsewhere in this Agreement include all rights, properties
and other assets necessary to permit Herzog to conduct its business in all
material respects in the same general manner as its business has been conducted
since inception. To the extent that any assets set forth in the Financial
Statements are owned by the Selling Shareholder or any other third party, title
to such assets shall be good and marketable and such assets shall be transferred
by appropriate conveyance of title with any costs associated therewith (tag
fees, transfer taxes, etc.) being borne by the Selling Shareholder.
4.13 Condition of Assets. The equipment,
machinery and all other tangible assets of Herzog are in good operating
condition and repair, subject only to ordinary wear and tear and are all
adequate for the use to which they are being put. None of such equipment or
machinery is in need of maintenance or repair except for ordinary, routine
maintenance and repairs which are not material in nature or cost.
4.14 Leases; Contracts. Schedule 4.14 sets forth
all leases pursuant to which Herzog leases real or personal property for its
facilities of operations. Such agreements are in good standing and valid and
enforceable in accordance with their respective terms, and there are no existing
defaults or events of default by Herzog or, to the best knowledge of Herzog, by
any other party thereto or events which with notice or lapse of time or both
would constitute defaults or events of default under or with respect to any of
such agreements. Herzog has not received any notice of any default
<PAGE>
or claim of default with respect to any such agreements or knows of any fact or
circumstance which might constitute or give rise to such a claim.
4.15 Agreements. Schedule 4.15 sets forth any material
contract or arrangement to which Herzog is a party or by or to which it or its
assets, properties or business are bound or subject, whether oral or written
("Material Contract").
All of the agreements set forth in Schedule 4.15 are valid,
binding, enforceable agreements in full force and effect. Herzog is not in
default under any of them (nor is any other party to any of such agreements, nor
does any condition exist which with notice or lapse of time or both would
constitute a default thereunder). To the knowledge of Herzog and the Selling
Shareholder, there has been no threatened cancellation or termination of any
Material Contract. Herzog is not a party to, nor are the assets of Herzog
subject to or bound by or affected by, any provision of any order of any court
or other agency of government or any indenture, agreement or other instrument or
commitment which adversely effects the operations of Herzog.
4.16 Employment Matters. Except as described in
Schedule 4.16, Herzog is not a party to any employment agreement or agreement to
lend to, or guarantee any loan to any employee or agreement relating to a bonus,
severance pay or similar plan, agreement, arrangement or understanding. Herzog
has incurred no liability, or taken or failed to take, any action which will
result in any liability in respect of any failure to comply with applicable laws
dealing with minimum wages or maximum hours for any employees, and all payments
due from Herzog on account of its employee health and
<PAGE>
welfare insurance, holiday and vacation pay and similar benefits have been paid.
Herzog is not a party to any collective bargaining agreement governing its
employees. There is no pending or threatened election for union representation
of Herzog's employees. The Selling Shareholder has heretofore delivered to Xebec
complete and correct copies of all Employment and Consulting Agreements to which
Herzog is a party or by which it is bound as currently in effect.
4.17 Litigation. Except as described in Schedule 4.17, no
action, suit, order, judgment, injunction, award or proceeding of any kind has
been filed or commenced, or, to the knowledge of Herzog, is threatened, before
any court, commission, agency or other administrative authority against Herzog
or which questions or challenges the validity of this Agreement or any action
taken or to be taken by Herzog or by any Selling Shareholder pursuant to this
Agreement or in connection with the transactions contemplated hereby which could
be anticipated to materially and adversely affect Herzog's performance or
consummation of the transactions contemplated hereunder or the financial
condition of Herzog; and (ii) to the best knowledge of the Selling Shareholder
and Herzog, there is no basis for any such suit, proceeding or investigation.
Herzog is not subject to any unsatisfied judgment, order or decree entered in
any law suit or proceeding.
4.18 Finder's Fee. Herzog has not incurred any obligation
of any kind whatsoever to any party for a finder's fee in connection with the
transactions contemplated by this Agreement.
<PAGE>
4.19 Approvals. No approval, waiver, authorization, order,
license or consent of or registration, qualification or filing with or
notification to any governmental or regulatory authority, agency or other person
or entity is required in connection with or as a condition of the execution,
delivery or performance by Herzog or the Selling Shareholder of this Agreement
or any related agreements.
4.20 Licenses and Compliance with Law.
Herzog has had and continues to have all federal, state and local licenses
and permits required to transact its business and, is in compliance with all
applicable federal, state and local laws, regulations, and guidelines applicable
to Herzog's business. Herzog has accurately and timely filed all reports, claims
and other filings required to be filed in connection with all federal, state and
local laws and regulations governing the business of Herzog. No validation
review or program integrity review related to Herzog has been conducted by any
federal, state or local governmental agency and, no such review is scheduled,
pending or threatened against or affecting Herzog or the consummation of the
transactions contemplated hereby.
4.21 Trademarks, Tradenames, Etc. There
are no trademarks, tradenames, copyrights, registrations, technology, know how
and process (the "Intellectual Property") necessary for the operation of
Herzog's business as presently conducted. Any loss or expiration of any such
Intellectual Property would not have a material adverse effect on the financial
condition of Herzog; and the use of such Intellectual Property by Herzog does
not infringe on the rights of any person.
<PAGE>
4.22 Disclosures. No representations or warranties
contained in this Agreement and no statements contained in any financial
statements, the Schedules or in any Exhibits, or any certificate delivered to
Xebec pursuant to the provisions hereof, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in order to make the statements contained herein or therein not
misleading and in order to fully and fairly provide the information required to
be provided in any such document.
Herzog understands and agrees that Xebec has been attempting
to provide various internet services to prospective businesses but is otherwise
without substantial assets or liabilities and with its public shareholder is
thus defined herein as a public "shell" corporation. Herzog understands and
agrees that Xebec is a "shell" corporation and makes no claim on any assets
owned by Xebec previous to the closing contemplated herein.
Herzog agrees that subsequant to this transaction it will
continue to pursue such internet business or make the appropriate amendments in
filings and disclosurse to the SEC and to the public.
Herzog acknowledges receipt of a copy of the Prospectus
dated June 30, 1993, which is attached hereto as Exhibit C and the subsequent
SEC filings including 10-K's and 10-Q's which are made a part of this Agreement,
setting forth the relevant terms, conditions and disclosures of Xebec, as well
as such other information as Herzog deems necessary or appropriate as a prudent
sophisticated and
<PAGE>
knowledgeable investor in evaluating the acquisition of Xebec's shares and
making this Agreement. Herzog has carefully read the Prospectus, including
particularly the portion thereof entitled "Risk Factors" and the subsequent SEC
filings and acknowledges that Xebec has made available the opportunity to obtain
additional information to verify the accuracy of the information contained in
the Prospectus and to evaluate the merits and risks of this transaction. Herzog
acknowledges that they have had the opportunity to ask questions of Xebec and
Capital General and have received satisfactory answers from Xebec, Capital
General, or its affiliates, associates or employees concerning the terms and
conditions of this transaction and the information in the Prospectus and
subsequent SEC filings.
4.23 Books and Records. The books and records of
Herzog are complete and correct and have been maintained in accordance with
sound business practices, including, but not limited to, the maintenance of an
adequate system of internal control.
4.24 Tax or Securities Consequences. Herzog hereby further acknowledges
and agrees that no representations or warranties have been made by Xebec or
Capital General Corporation as to the benefits to be derived by Herzog in
completing this transaction. It is expressly understood and agreed that neither
Capital General Corporation nor Xebec or its officers or agents have made any
warranty or agreement, expressed or implied, as to the tax or securities
consequences of the transactions contemplated by this agreement or the tax or
securities consequences of any action pursuant to or growing out of this
agreement.
<PAGE>
Herzog is aware that there can be no assurance regarding the individual
tax consequences of this transaction, nor can there be any assurance that the
Internal Revenue Code or the regulation promulgated thereunder will not be
amended in such manner as to deprive Herzog of any tax benefit that might
otherwise be received. Herzog is relying upon the advice of their personal tax
advisor with respect to the tax aspects of this transaction.
5. Representations of Xebec Galleon.
As a material inducement to Herzog and the Selling Shareholder to ente
into and perform this Agreement, Xebec makes the representations and warranties
set forth in this Section 5.
5.1 Organization of Xebec and Corporate Authority and Corporate
Authority. Xebec is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, with full corporate power and
authority to own or lease and use its properties and assets, to carry on its
business as such business is now conducted, to execute and deliver this
Agreement and any related agreements to which it is or will become a party at
the Closing, and to carry out the transactions contemplated hereby and thereby.
5.2 Xebec Authority. This Agreement and any related agreements to which
Xebec is a party and the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of
<PAGE>
Xebec. This Agreement and any related agreements to which it is a party have
been duly executed and delivered and constitute, valid and legally binding
obligations of Xebec, enforceable in accordance with their respective terms.
5.3 No Violation. Neither the execution and delivery by
Xebec of this Agreement or any of the related agreements to which Xebec is a
party, nor consummation of the transactions herein or therein contemplated, nor
compliance with the terms, conditions and provisions hereof or thereof, conflict
with or violate any provision of law applicable to Xebec, or the charter or
By-Laws of Xebec or result in a violation or default in any provision of any
law, regulation, order, writ, injunction or decree of any court or governmental
agency or authority or of any agreement or instrument to which Xebec is a party
or by which Xebec is bound or to which Xebec is subject, or constitute a default
thereunder or result in the imposition of any lien, charge, encumbrance or
security interest of any nature whatsoever upon any of Xebec assets pursuant to
the terms of any such agreement or instrument.
There are no legal, administrative or other proceedings, or other
claims, judgments, injunctions or restrictions, either threatened, pending or
outstanding against or involving Xebec which are known, or which they have
reasonable grounds to know, of any basis for any such proceedings, or other
claims, judgments, injunctions or restrictions, except as in the Prospectus
attached hereto as Exhibit C and made a part of this Agreement or otherwise
disclosed herein. Specifically, a "Complaint and Order Denying Exemptions and to
Cease and Desist in the Matter of Capital General
<PAGE>
Corporation, David Rex Yeaman et al. filed by the State of New Jersey in
January, 1994. This matter was resolved as disclosed in the Company's Form
10-Q/A filing with the SEC dated November 28, 1994. However, Herzog and the
Selling Shareholder acknowledge and represent that they are aware of the risks
of being a public company and understand and agree that regulatory efforts
regarding public shell transactions similar to the transaction contemplated
herein have been and are currently being exerted by some states, the U.S.
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. (NASD). Xebec agrees to provide any supplemental information which
may be requested by Herzog relating to any matter discussed herein or in the
Prospectus attached hereto as Exhibit C.
To the knowledge of the officers of Xebec, Xebec is not a
party to nor bound by any agreement, deed, lease, power of attorney or other
instrument other than which is herein disclosed. Xebec has executed an Agreement
with National Stock Transfer, Inc., a transfer agency company affiliated with
Capital General Corporation. A copy of this agreement is available for
inspection by Herzog.
Herzog and the Selling Shareholder acknowledge that it is
their responsibility to comply with the appropriate state and federal securities
laws, as well as NASD rules and regulations, particularly secondary trading
requirements. Herzog agrees to list Xebec in either Moody's Investor Services or
Standard and Poors, exempting secondary trading of Xebec's stock in those states
providing for such secondary trading exemption.
<PAGE>
5.4 Approvals. No approval, waiver, authorization, order,
license or consent of or registration, qualification or filing with or notice to
any governmental or regulatory authorities, agency or other person or entity is
required in connection with or as a condition of the execution, delivery or
performance by Xebec of this Agreement and the related agreements to which it is
a party.
6.Expenses.
The parties to this Agreement shall bear their respective direct and
indirect expenses incurred with the preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby, whether
or not the transactions contemplated hereby are consummated, including without
limitation all fees and expenses of agents, representative's counsel and
accountants.
7.Survival of Representations and Warranties.
The respective representative warranties of the parties contained
herein or any certificates delivered prior to at the Closing shall not be deemed
waived or otherwise affected by any investigation made by any other party
hereto. Each and every such representation, warranty, covenant and agreement
shall survive the execution and delivery hereof and the Closing hereunder for a
period of two (2) years.
8.Covenants of Selling Shareholders. Selling Shareholder hereby
covenant and agree with Xebec :
8.1 Access to Information. The Selling Shareholder shall until the
earlier to
<PAGE>
occur of the Closing or the termination of this Agreement pursuant to Section 12
hereof, cause Herzog to afford Xebec , its counsel, accountants and other
representatives and advisors full access to the operations, offices, properties,
books and records of Herzog, including but not limited to all books of account,
corporate and tax records, material contracts and agreements, filings with any
regulatory authority, litigation files (except for any files that may be the
subject of privilege), patent and trademark records, engineering and technology
reports. Xebec shall have the right to review any and all papers of Herzog's
accountants, and shall have full opportunity to make such investigations as it
shall desire to make of the affairs of Herzog; and the Selling Shareholder will
cause the officers, accountants and representatives of Herzog to furnish such
additional financial, operating and other information as Xebec shall from time
to time reasonably request.
8.2 Obtaining Consents. Selling Shareholder shall
use their best efforts, and shall cause Herzog to use its best efforts, to
obtain prior to the Closing all consents, approvals and authorizations necessary
to the consummation of the transactions contemplated hereby and will delivery
(or cause Herzog to deliver) to Xebec copies of such consents promptly after it
is obtained.
8.3 Covenant to Satisfy Conditions.
The Selling Shareholder shall use his best efforts to ensure that the conditions
set forth in Article 8 hereof are satisfied.
8.4 Provide Information. The Selling Shareholder
agrees promptly to inform and advise Herzog of any fact or situation which, is
or could be reasonably expected to result in a violation of any representation
and warranty contained in herein.
<PAGE>
8.5 Investment Intent. The Selling Shareholder shall acquire the Shares
for investment purposes and not with a view toward resale or distribution.
Herzog and the Selling Shareholder covenant and warrant that
the shares of common stock of Xebec to be received by them pursuant to this
agreement are being acquired for their own account and for investment and not
with the present view toward the sale or distribution in the United States
thereof and will not be disposed of except (I) pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or (ii)
another transaction, which, in the opinion of counsel acceptable to Xebec, is
exempt from registration under the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder. In
order to effectuate the covenants of this paragraph, an appropriate endorsement
will be placed on the certificates for shares of common stock of Xebec delivered
to Herzog pursuant to this agreement and stop transfer instructions shall be
placed with the transfer agent for the securities.
The Selling Shareholder is aware that the shares distributed
to him will not have been registered pursuant to the Securities Act of 1933, as
amended; and, therefore, under current interpretations and applicable rules,
particularly Rule 144 and Regulation S, he will probably have to retain such
shares for a period of at least two (2) years and at the expiration of such
two-year period his sale may be confined to brokerage transactions of limited
amounts requiring a notification filing on Form 144 with the Securities and
Exchange Commission and such disposition may be available
<PAGE>
only if the Xebec is current in his filings with the Securities and Exchange
Commission and Herzog is aware of Rule 144 issued by the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the other
limitations imposed thereby on their disposition of Xebec's shares.
8.6 Sophisticated Investor. Herzog and the Selling Shareholder
acknowledge that they have carefully evaluated their financial resources and
investment position and the risks associated with this transaction and
acknowledges that they are able to bear the economic risks of this transaction.
Herzog and the Selling Shareholder further acknowledge that their knowledge and
experience in financial and business matters in general, and investments in
particular, qualifies them as sophisticated investors, and therefore capable of
evaluating the merits and risks of this transaction.
9.Conditions Precedent to the Obligations of Xebec Galleon.
The obligations of Xebec to consummate this Agreement and the
transactions contemplated hereby are subject to the satisfaction at or before
the Closing of those conditions imposed upon Herzog and the Selling Shareholder,
any of which Xebec may in its sole discretion waive.
9.1 Representations and Warranties True.
All of the representations and warranties of Herzog and the
Selling Shareholder contained in herein shall be true as of the date of this
Agreement, and shall be deemed to have been made again at and as of the
<PAGE>
Closing, and shall be true at and as of the Closing. Herzog and the Selling
Shareholder shall have performed or complied in all material respects with all
covenants and conditions required by this Agreement to be performed or complied
with prior to or at the Closing.
9.2 No Obstructive Proceedings. No action
or proceedings shall have been instituted against, and no order, decree or
judgment of any court, agency, commission or governmental authority shall be
subsisting against Herzog or the Selling Shareholder which seek, to, or would,
render it unlawful as of the Closing to effect the transactions set forth herein
in accordance with the terms hereof, and no such action shall seek damages in a
material amount by reason of the transactions contemplated hereby. Also, no
legal objection to the transactions contemplated by this Agreement shall have
been received from or threatened by any governmental department or agency.
9.3 Certificates, Documents, Financial Statements and Due Diligence
Inspection Satisfactory. All certificates, Financial Statements and documents
delivered by Herzog and the Selling Shareholder pursuant to this Agreement shall
be satisfactory in form and substance to Xebec and its counsel acting
reasonably and in good faith. Herzog shall deliver to Xebec an unaudited
balance sheet and related financial statements as of a date 30 days prior to
Closing, which shall be in form and substance satisfactory to Xebec . Xebec
shall be satisfied, as determined in its sole discretion, that its due diligence
inspection of Herzog and the Selling Shareholder has revealed no reason why
Xebec should not consummate the transactions contemplated by this Agreement.
9.4 Performance. The Selling Shareholder shall have performed and
complied
<PAGE>
with all covenants, obligations and conditions required by this Agreement to be
performed or complied with either prior to or at the Closing.
9.5 Opinion of Counsel. The Selling Shareholder
have furnished to Xebec an opinion of its counsel, acceptable to Xebec , dated
the date of the Closing, substantially in the form set forth in Exhibit 9.5
hereto.
9.6 Governmental Permits and Approvals Corporate Resolutions.
Any and all permits and approvals from any governmental or regulatory body
required for the lawful consummation of the Closing shall have been obtained.
9.7 Third Party Consents. All necessary
consents, permits and approvals, which may be required in connection with the
performance by Herzog and each Selling Shareholder of their obligations under
this Agreement or the continuation of any agreements by Herzog after the Closing
shall be obtained.
9.8 Compliance Certificate. Xebec shall have
received a certificate signed by the President or a Vice President and the
Secretary of Herzog dated as of the Closing and satisfactory in form and
substance to Xebec substantially in the form of Exhibit 9.8 hereof.
<PAGE>
10.Conditions Precedent to the Obligations of Selling Shareholder.
The obligations of Selling Shareholder to consummate this Agreement and the
transactions contemplated hereby are subject to the satisfaction at or before
the Closing of each and every one of the following conditions, any of which
Selling Shareholder may, in their sole discretion waive.
10.1 Representations and Warranties True.
All of the representations and warranties made by Xebec
contained herein shall be true as of the date of this Agreement, shall be deemed
to have been made again at and as of the date of Closing; and shall be true at
and as of the date of Closing; Xebec shall have performed and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing.
10.2 No Obstructive Proceeding. No action
or proceedings shall have been instituted against, and no order, decree or
judgment of any court, agency, commission or governmental authority shall be
subsisting against Xebec which seeks to, or would, render it unlawful as of the
Closing to affect the transactions set forth herein in accordance with the terms
hereof, and no such action shall seek damages in a material amount by reason of
the transactions contemplated hereby. Also, no legal objection to the
transactions contemplated by this Agreement shall have been received from or
threatened by any governmental department or agency.
10.3 Performance by Xebec Galleon. Xebec
shall have performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by
<PAGE>
them either prior to or at the Closing.
10.4 Compliance Certificate. Herzog and the
Selling Shareholder shall have received a certificate signed by the President or
a Vice President and the Secretary of Xebec dated as of the Closing, reasonably
satisfactory in form and substance to Herzog substantially in the form of
Exhibit 10.4 hereof.
10.5 Opinion of Counsel. Xebec shall have furnished to Herzog and the
Selling Shareholder an opinion of its counsel, acceptable to Herzog and the
Selling Shareholder dated the day of this Closing substantially in the form set
forth in Exhibit 10.5 hereof.
11. Conduct of Herzog's Business Pending the Closing.
Pending the Closing, and except as otherwise expressly consented to or
approved by Xebec in writing:
11.1 Regular Course of Business. Herzog
will carry on its business in the ordinary course of business consistent with
past practice.
11.2 Amendments. No change or amendment shall be made in the
Certificate of Incorporation or Bylaws of Herzog.
11.3Capital Changes; Dividends; Redemptions.
Herzog will not issue or sell any shares of capital
stock or other securities acquired directly or indirectly, by redemption or
otherwise, any such capital stock; reclassify or split up any such capital
stock, declare or pay any dividends thereon in cash, securities or other
property or make any other distribution with respect thereto; or grant or enter
into any options, warrants, calls or commitments of any kind with respect
thereto.
<PAGE>
11.4 Subsidiaries. Herzog will not organize any new
subsidiary, acquire any capital stock or other equity securities of any other
corporation or acquire any entity or ownership interest in any business.
11.5 Organization11.5Organization. Herzog shall use its best efforts
to preserve its corporate existence and business organization substantially
intact, including its present relationship with the material customers.
11.6 Certain Changes. Except as may be expressly
provided in writing or elsewhere in this Agreement, Herzog will not: (I) borrow
any funds or incur, or assume or become subject to, whether directly or by way
of guarantee or otherwise, any obligation or liability (absolute or contingent);
(ii) discharge or satisfy any claim, liability or obligation (absolute, accrued,
contingent or otherwise), in excess of $50,000; (iii) prepay any obligation
having a fixed maturity of more than 60 days from the date such obligation was
issued or incurred; (iv) permit or allow any of its property or assets (personal
or mixed, tangible or intangible) to be subject to any pledge, lien or
encumbrance; (v) cancel any debts or waive any claims or rights of substantial
value or sell, transfer or otherwise dispose of any of its properties or assets;
(vi) (A) grant any general increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension, profit sharing or
other plan, or commitment or fringe benefit) or (B) any increase in the
compensation payable or to become payable to any employee other than increases
required by an existing agreement which is set forth in the schedules to this
Agreement; (vii) make any single capital expenditure commitment in excess of
$50,000 for additions to its property, plant or equipment or make aggregate
capital
<PAGE>
expenditures and commitments in excess of $50,000 for additions to its property,
plant or equipment; (viii) pay, loan or advance any amount to, or sell, transfer
or lease its properties or assets to, or enter into an agreement or arrangement
with or for the benefit of, any of its officers, directors, or shareholder or
any affiliate or associate of any of its officers, directors or shareholder;
(ix) agree, whether in writing or otherwise to do any of the foregoing; and (x)
compromise any claim or lawsuit or institute any action or proceeding involving
Herzog or any of its properties or assets in excess of $50,000.
11.7 Insurance/Properties. Herzog shall
continue to insure, at individual and aggregate limits and scope of coverage not
less than those contained in Herzog's current insurance policies, its business
and operations and all property, real, personal and mixed, owned or leased by
Herzog, with financial responsible insurance companies against all ordinary and
insurable risks consistent with past practice. All such property shall be used,
operated, maintained and repairs in a customary manner.
11.8 Compliance with the Laws. Herzog shall
duly comply with all laws applicable to it and its properties, operations,
business and employees.
11.9 Wrongful Action. Herzog shall neither enter
into any transaction, take any action or fail to take any action which results
in, or could reasonably expect it to result in a breach of any of the
representations, warranties, disclosure agreements or covenants of the Selling
Shareholder or Herzog contained in this Agreement, the exhibits hereto or any
document delivered pursuant to this Agreement.
<PAGE>
12. Termination.
12.1Termination. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing by mutual consent of
Xebec, Herzog and the Selling Shareholder.
This agreement may be terminated and the transactions
provided for by this agreement may be abandoned without liability on the part of
any party to any other, at any time before the closing date by mutual consent of
Xebec and Herzog. In the event of termination and abandonment by any party as
herein provided, written notice shall forthwith be given to the other party, and
each party shall pay its own expenses incident to preparation for the
consummation of this agreement and the transactions contemplated hereunder. In
the event that this Agreement has not been completed by the closing date or
within thirty days thereafter, this Agreement and the transactions contemplated
hereby shall be deemed to have been abandoned and neither party shall be under
any further obligation to the other. In the event of such termination or
abandonment, Herzog shall forfeit any deposits, payments or other consideration
tendered in connection with the execution of this Agreement, unless otherwise
expressly provided herein.
12.2. Effect of Termination. In the event of
termination pursuant to Section 12.1, the transactions contemplated by this
Agreement shall be terminated without further action by Xebec, Herzog or the
Selling Shareholder. If the transactions contemplated by this Agreement are
terminated as provided herein:
(a) Each party will redeliver all documents, work papers and other material
<PAGE>
of any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof to the party furnishing the same;
(b) All confidential information received by any party
hereto with respect to the business of any other party shall be treated as
confidential in accordance with Section 3.4 of this Agreement; and
(C) No party hereto shall have any liability or further
obligation to any other party to this Agreement (I) except as stated in Sections
3.4, 6.1 and Section 12 and (ii) except that if such termination results from
the willful failure of any party to fulfill a condition to performance of any
other party or to perform a covenant contained in this Agreement or from a
material or willful breach by any party to this Agreement, such party shall be
fully liable for any and all damages, costs and expenses (including but not
limited to reasonable counsel fees) sustained or incurred by the other parties
hereto.
<PAGE>
13.1 Obligation of Selling Shareholders to Indemnify. Herzog and the
Selling Shareholder jointly and severally agrees to indemnify, defend and hold
harmless Xebec and its directors, officers, employees, affiliates and assigns
("Xebec Indemnitees") from and against any losses, liabilities, damages,
deficiencies, all suits, proceedings, investigations, claims, charges,
assessments, costs or expenses (including, but not limited to interest,
penalties and reasonable attorneys' fees and disbursements) incurred or suffered
by the Xebec Indemnitees or any of them, whether suit is instituted or not, and,
if instituted, whether at any trial and appellate level, and whether raised by
the parties hereto or any third party ("Loss") based upon, arising out of or
otherwise due to:
(a) any false and inaccurate representation or warranty made
by or on behalf of Herzog or the Selling Shareholder contained in this Agreement
or in any document or other writing delivered pursuant to this Agreement;
(b) Any breach or default in the performance, covenant or
agreement of Selling Shareholder contained in this Agreement or in any document
or other writing delivered pursuant to this Agreement;
(C) Facts or circumstances existing on or prior to the
Closing Date which give rise to claims by any third parties against Xebec, Xebec
Indemnitees or Herzog, including (but not limited to) any claims arising from
any service rendered by Herzog.
(d) All negotiations relative to this agreement and the
transactions contemplated hereby have been conducted with the assistance of
Capital General Corporation
<PAGE>
who is acting as a broker, finder and consultant on behalf of both Xebec and
Herzog. Both Xebec, Herzog and the selling shareholder agree to hold harmless
and indemnify Capital General Corporation auditors, officers and directors from
any and all claim, demand, cause of action or suit raised or filed in connection
with the operation or promotion of Xebec and/or Herzog and the trading of
Xebec/Herzog's shares.
13.2 Claims by Third Parties. Promptly after receipt by Xebec of any
demand, claim or circumstances which, with the lapse of time, would give rise to
a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation (an "Asserted Liability") that may result in a Loss,
Xebec shall properly give written notice thereof (the "Claims Notice") to the
Selling Shareholder. The Claims Notice shall describe the Asserted Liability in
reasonable detail, and shall indicate the amount (if stated) of the Loss that
has been or may be suffered by Xebec . If no written objection is received or,
if received or agreement is reached as to the amount of such loss, Xebec shall
thereupon have the right to recover the amount of such claim, from the Selling
Shareholder.
13.3 Defensive Claims by Third Parties. If a third party claim is
asserted which might result in a Loss giving rise to payment or indemnification
under Section 14.1, Xebec shall, with reasonable promptness, provide the Selling
Shareholder notice of any such claim, make available to the Selling Shareholder
all information (within Xebec's knowledge or control) relevant material to such
claim and otherwise keep the Selling Shareholder informed of the
progress of any defense, settlement or the disposition of the claim. The
Selling Shareholder
<PAGE>
shall fully cooperate in the defense, settlement or other disposition of such
claim; provided that any failure on the part of Xebec to comply with this
section shall not affect Xebec 's right to receive indemnification or payment
under this Section 14, unless such failure shall cause material prejudice to the
Selling Shareholder. The Selling Shareholder shall have the right to participate
in the defense, settlement or other disposition of any claim in which one or
more Selling Shareholder is named as a party and to be represented in the
proceedings related to such claim by their own legal counsel; provided that such
counsel is approved by Xebec (which approval shall not be unreasonably withheld)
and all costs and expenses of such counsel are born by the Selling Shareholder.
14.Indemnification by Xebec Galleon
14.1. Obligation of Xebec to Indemnify. Xebec hereby
agrees to indemnify, defend and hold harmless Selling Shareholder from and
against any losses, liabilities, damages, deficiencies, lawsuits, proceedings,
investigations, claims, charges, assessments, costs or expenses, including
interest, penalties and reasonable attorneys fees and disbursements incurred or
suffered by the Selling Shareholder, whether a suit is instituted or not, and if
instituted, whether any trial at appellate level and whether raised by the
parties hereto or any third party loss based upon, rising out of, or otherwise
due to (a) any false or inaccurate representation or warranty made by or on
behalf of Xebec Galleon contained in this Agreement or in any document or
otherwise pursuant to this Agreement; (b) any breach or default in the
performance, covenant or agreement of Xebec contained in this Agreement or in
any document or other writing delivered pursuant to this Agreement; (C) facts or
<PAGE>
circumstances existing on or prior to the closing date which give rise to claims
by any third parties against Xebec, including, but not limited to, any claims
arising from any service rendered by Xebec.
14.2 Claims by Third Parties. Promptly after
receipt by the Selling Shareholder of any demand, claim or circumstances which
the lapse of time would give rise to a claim with a commencement (or threatened
commencement) of any action, proceeding or investigation (and asserted
liability), that may result in a loss, Selling Shareholder shall promptly give
written notice thereof (of claims notice) to Xebec. The claims notice shall
describe the asserted liability in reasonable detail, shall indicate the amount,
if stated, of the loss that has been or may be suffered by Selling Shareholder.
If no written objection is received, or if received agreement is reached as to
the amount of such loss, Selling Shareholder shall thereon have the right to
recover the amount of such claim from Xebec .
14.3 Defensive Claims by Third Parties.
If a third party claim is asserted which might result in a loss giving
rise to payment or indemnification under Section 14.1, Selling Shareholder
shall, with reasonable promptness, provide Xebec notice of any such claim, make
available to Xebec all information, within Selling Shareholder knowledge or
control, relevant material to such claim and otherwise keep Xebec informed of
the progress of any defense, settlement or disposition of the claim. Xebec shall
fully cooperate in defense, settlement, or other disposition of such claim;
provided that any failure on the part of Selling Shareholder to comply with this
section shall not effect Selling Shareholder's right to receive indemnification
or payment under this Section 14 unless such failure shall cause material
<PAGE>
prejudice to Xebec. Xebec shall have the right to participate in the defense,
settlement or other disposition of any claim in which Xebec or its related
company is named as a party to be represented in the proceedings related to such
claim by its own legal counsel, provided that such counsel is approved by
Selling Shareholder (which approval shall not be unreasonably
withheld) and all costs and expenses for such counsel are borne by Xebec.
15. General
15.1 Entire Agreement. All Exhibits and Schedules
hereto shall be deemed to be incorporated into and made a part of this
Agreement. This Agreement, together with the Exhibits and Schedules hereto, and
any related agreements contain the entire agreement among the parties and there
are no agreements, representations, or warranties by any of the parties hereto
which are not set forth herein. This Agreement may not be amended or revised
except by a writing signed by all parties hereto.
15.2 Separate Counterparts. This Agreement may
be executed in several identical counterparts, all of which when taken together
shall constitute but one instrument.
15.3 Parties in Interest. This Agreement is
binding on and shall inure to the benefit of the parties and their respective
heirs and permitted successors and assigns. Nothing in this Agreement is
intended to confer any right or remedy or by reason of this Agreement on any
person other than the Selling Shareholder or Xebec and their respective heirs,
successors and permitted assigns.
15.4 Assignment. This Agreement may not be assigned by the Selling
Shareholder. Xebec may assign this Agreement to Xebec or any affiliate wholly
owned by
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Xebec without the consent of the Selling Shareholder and such assignment shall
not in any way effect the terms, conditions or enforceability of this Agreement.
15.5 Notices. All notices hereunder shall be in writing and
shall be delivered or mailed by registered or certified mail, postage and fees
prepaid, to the party to be notified at the party's address shown below. Notices
which are hand delivered shall be effective on delivery. Notices which are
mailed shall be effective on the fifth day after mailing.
Xebec Galleon, Inc.
3098 South Highland Drive, Suite 460
Salt Lake City, UT 84106
With a copy to:
Day Shell & Liljenquist, L.C.
45 East Vine Street
Murray, UT 84107
Selling Shareholder:
Herzog GmbH
FrankenstraBe 25
D- 63791 Karlstein 1
With a copy to:
Bachmann, Hansen & Partner
Kapuzinerplatz 1
63739 Aschaffenburg
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15.6 Gender. All pronouns used herein shall include the
masculine, feminine and neuter gender, as the context requires.
15.7 Governing Law. It is understood and agreed that
all communications, negotiations, meetings, agreements and understandings
relative to this Agreement have taken place in or from the state of Nevada. NO
communications, offerings, proposals or other forms of negotiations have been
conducted in or from the state of Utah or any other state. This agreement may
not be modified or terminated orally, and shall be construed and interpreted
according to the laws of the State of Nevada and enforced in its courts.
Any and all disputes and controversies of every kind and nature between
the parties hereto arising out of or relating to this Agreement relating to the
existence, construction, validity, interpretation or meaning, performance,
non-performance, enforcement, operation, breach, continuance or termination
thereof shall be subject to an arbitration mutually agreeable to the parties or,
in the absence of such mutual agreement, then subject to arbitration in
accordance with the rules of the American Arbitration Association. It is the
intent of the parties hereto and the purpose of this provision to make the
submission to arbitration of any dispute or controversy arising hereunder an
express condition precedent to any legal or equitable action or proceeding of
any nature whatsoever.
15.8 Jurisdiction.
(a) Jurisdiction. Any suit, action or proceeding, whether claim or
counterclaim, arising out of or relating to this Agreement or any related
agreement or which in
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any way relates, directly or indirectly, to the Sale or the dealings of the
parties with respect thereto, in Clark County, Nevada, or the United States
District Court for the Southern District of Nevada, and each party irrevocably
consents and submits to the jurisdiction and venue of such courts. Each party
also irrevocably appoints and constitutes the Secretary of the State of Nevada
as its agent to accept and acknowledge on its or his behalf all service of
process in connection with any such matter and irrevocably waives any objection
which it may now or hereinafter have to the venue of any suit, action or
proceeding brought in such court and any claim that such court is an
inconvenient forum. Each party further agrees that service of process in
accordance with this paragraph shall be deemed in every respect effective and
valid personal service of process upon it or him.
15.9 Stock Ownership. WHEREAS, Capital, Yeaman Enterprises, Castleton
and Yeaman (the "Selling Shareholder") own, respectively, 1,059,800 shares of
Xebec a Nevada corporation (the "Company") Common Stock; On the closing date,
set herein to be October 18th, 1996, Xebec shall issue 4,000,000 shares of
Xebec's common stock bearing a restrictive Regulation S legend. As of the date
hereof, there are issued and outstanding (1,200,000) shares of common stock. It
is understood by Herzog that Xebec is presently authorized to issue 100,000,000
shares of common stock.
15.10 Nonaffiliate Status - Arms Length Transaction. The parties
hereby agree, acknowledge, and represent:
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a. That neither Herzog nor any of its officers, directors,
affiliates, or shareholders, including but not limited to
any of their spouses, relatives, or affiliates, have had any
business, family, personal, or other relationships, other
than this Agreement, with Xebec or any of its officers,
directors, affiliates, or significant stockholders or their
spouses, relatives, or affiliates;
b. That presently no such relationships exist and none are expected to
develop and that this Agreement and the transactions described herein are
strictly arms length transaction; and
c. That upon conclusion of the transactions described in this Agreement
Krista Nielson (Castleton), David R. Yeaman, Capital General Corporation,
Yeaman Enterprises, Inc., Four Star Ranch, individually or together as a
group, do not have, nor shall they have, any influence or power to direct
or cause the direction of the management and policies of the Herzog, that
is, they cease to be affiliates of Xebec effective with the execution of
this Agreement and their resignations as officers and directors of Xebec.
(This shall not be construed as having an affect on their voting rights
on any stock in Xebec they own from time to time.)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
XEBEC GALLEON, INC.
By: s\Krista Nielson
-----------------------------------
President
SELLING SHAREHOLDER
By: s\Udo Herzog
------------------------------------
as representatives of the Selling Shareholder
HERZOG, GmbH
By: s\Udo Herzog
-----------------------------------
Director
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