<PAGE> 1
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): FEBRUARY 3, 1997
EXX INC
(Exact name of registrant as specified in its charter)
NEVADA 1-5654 88-0325271
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
organization) Number)
1359 EAST FLAMINGO ROAD
SUITE 689
LAS VEGAS, NEVADA 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 598-3223
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective February 3, 1997, Steven Toy Inc, a newly-
formed, wholly-owned subsidiary of the Registrant ("Steven Toy"),
acquired all of the outstanding capital stock of Handi-Pac, Inc.,
d/b/a Steven Manufacturing Co., a Missouri corporation ("Handi-
Pac"). Handi-Pac manufactures and sells several lines of toys,
including "pre-school," "ride-on," "classic" and other educational
toys.
In return for all of the outstanding shares of Handi-Pac
and other valuable consideration, the Registrant paid Bev Taylor,
the sole shareholder of Handi-Pac, the sum of $50,000 and granted
him the right to purchase fifty thousand (50,000) shares of the
Class A Common Stock of the Registrant. In addition, a revocable
trust established by Mr. Taylor, assigned to Hi-Flier, Inc., a
wholly-owned subsidiary of the Registrant ("Hi-Flier"), without
recourse, all of its right, title and interest in certain
Promissory Notes made by Handi-Pac with a principal balance of
$350,000 in exchange for payment by Hi-Flier of $350,000, which
obligations are secured by certain assets of Handi-Pac. The terms
of the transaction were negotiated on an arm's-length basis by non-
affiliated parties.
Handi-Pac's gross sales of approximately $6.0 million
accompanied a net loss of approximately $700,000 in 1996. The precise
gross sales and net loss cannot be determined until an audit of Handi-Pac's
results for 1996 is completed. The Registrant anticipates losses will
continue into 1997. The Registrant hopes that Steven Toy will generate
profits in 1998 and beyond as a manufacturer and seller of toys.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
-------------------------------------------
Pursuant to Item 7(a)(4) of Form 8-K, the Registrant will file the
required financial statements of Handi-Pac, Inc., d/b/a Steven
Manufacturing Co. and pro forma financial information as soon as is
practicable, but not later than 60 days after the date on which
this report is required to be filed.
(b) Pro forma financial information. See Item 7(a) above.
-------------------------------
(c) Exhibits. See Exhibit Index.
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<PAGE> 3
SIGNATURES
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.
Dated: February 17, 1997
EXX INC
By /s/ David A. Segal
----------------------------------------------
David A. Segal, Chairman of the Board and
Chief Executive Officer
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<PAGE> 4
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
2.1 Stock Purchase Agreement dated February 3, 1997, by and
among Steven Toy Inc, a Missouri corporation, Handi-Pac,
Inc. d/b/a Steven Manufacturing Co., a Missouri corporation,
and Bev Taylor, a single person residing in the State of
Missouri.
99.1 Assignment Agreement dated February 3, 1997, by and between
Bev Taylor as sole Trustee of the Bev Taylor Revocable Trust
dated November 25, 1987, as amended January 17, 1990,
February 26, 1992 and February 20, 1996, Bev Taylor as sole
Trustee of the Frances K. Taylor Revocable Trust dated
November 25, 1987, as amended January 17, 1990 and February
26, 1992, Bev Taylor, an individual, and HI-FLIER, INC., a
Nevada corporation.
99.2 Stock Option Agreement dated February 3, 1997, by and among
EXX INC, a Nevada corporation, and Steven Toy Inc., a
Missouri corporation.
</TABLE>
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<PAGE> 1
===============================================================================
STOCK PURCHASE AGREEMENT
By and Among
STEVEN TOY INC
("BUYER")
and
HANDI-PAC, INC.
(D/B/A STEVEN MANUFACTURING CO.)
("HANDI-PAC")
and
BEV TAYLOR,
("SHAREHOLDER")
Dated
as of February 3, 1997
===============================================================================
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE
1.1 Purchase and Sale; Purchase Price. . . . . . . . 1
1.2 Time and Place of Closing. . . . . . . . . . . . 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYER
2.1 Organization . . . . . . . . . . . . . . . . . . 2
2.2 Authorization. . . . . . . . . . . . . . . . . . 2
2.3 Non-Contravention. . . . . . . . . . . . . . . . 2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HANDI-PAC AND
THE SHAREHOLDER
3.1 Organization . . . . . . . . . . . . . . . . . . 2
3.2 Articles of Incorporation, Bylaws and
Amendments . . . . . . . . . . . . . . . . . . . 3
3.3 Capital Structure and Ownership. . . . . . . . . 3
3.4 Authorization. . . . . . . . . . . . . . . . . . 3
3.5 Financial Statements and Absence of Changes. . . 3
3.6 Title to and Condition of Assets and Property. . 4
3.7 Environmental Matters. . . . . . . . . . . . . . 4
3.8 Intellectual Property. . . . . . . . . . . . . . 5
3.9 Liabilities. . . . . . . . . . . . . . . . . . . 5
3.10 Contracts. . . . . . . . . . . . . . . . . . . . 5
3.11 Litigation; Compliance and Other Product
Issues, Compliance with Laws . . . . . . . . . . 7
3.12 Non-Contravention. . . . . . . . . . . . . . . . 7
3.13 Licenses, Permits and Required Consents. . . . . 7
3.14 Insurance. . . . . . . . . . . . . . . . . . . . 8
3.15 Employee Benefit Plans . . . . . . . . . . . . . 8
3.16 Taxes and Returns. . . . . . . . . . . . . . . . 9
3.17 Changes. . . . . . . . . . . . . . . . . . . . . 10
3.18 Accounts Receivable. . . . . . . . . . . . . . . 11
3.19 No Adverse Actions . . . . . . . . . . . . . . . 11
3.20 Labor Matters. . . . . . . . . . . . . . . . . . 11
3.21 Minute and Stock Books; Records. . . . . . . . . 11
ARTICLE IV ADDITIONAL AGREEMENTS OF THE PARTIES
4.1 Further Assurances . . . . . . . . . . . . . . . 12
4.2 Payment of Taxes . . . . . . . . . . . . . . . . 12
4.3 Delivery . . . . . . . . . . . . . . . . . . . . 12
4.4 Employees; Employment Agreements . . . . . . . . 12
4.5 Confidentiality. . . . . . . . . . . . . . . . . 12
4.6 Noncompete Agreement . . . . . . . . . . . . . . 13
4.7 Termination of Lease . . . . . . . . . . . . . . 14
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<PAGE> 3
4.8 Shareholder and Affiliate Obligations and/or
Agreements . . . . . . . . . . . . . . . . . . . 14
4.9 The Commerce Warren County Bank Loan . . . . . . 15
4.10 The Bay-Hermann-Berger Bank Loan . . . . . . . . 15
4.11 Defense and/or Indemnification Obligations of
Handi-Pac. . . . . . . . . . . . . . . . . . . . 16
4.12 Requested Documentation. . . . . . . . . . . . . 16
4.13 Investment Representations . . . . . . . . . . . 16
4.14 Voluntary Petition in Bankruptcy.. . . . . . . . 17
4.15 Reporting Requirements . . . . . . . . . . . . . 17
4.16 Research and Development Computer. . . . . . . . 17
ARTICLE V [RESERVED]
ARTICLE VI THE CLOSING
6.1 Deliveries by Handi-Pac and the Shareholder. . . 18
6.2 Buyer's Deliveries . . . . . . . . . . . . . . . 19
ARTICLE VII INDEMNIFICATION
7.1 General Indemnification. . . . . . . . . . . . . 20
7.2 Notice of, and Procedures for, Collecting
Indemnification. . . . . . . . . . . . . . . . . 21
ARTICLE VIII [RESERVED]
ARTICLE IX MISCELLANEOUS
9.1 Expenses . . . . . . . . . . . . . . . . . . . . 23
9.2 [Reserved] . . . . . . . . . . . . . . . . . . . 23
9.3 Governing Law. . . . . . . . . . . . . . . . . . 24
9.4 Notices. . . . . . . . . . . . . . . . . . . . . 24
9.5 Assignment . . . . . . . . . . . . . . . . . . . 25
9.6 Section Headings; Schedules and Exhibits . . . . 25
9.7 Counterparts . . . . . . . . . . . . . . . . . . 25
9.8 Amendment. . . . . . . . . . . . . . . . . . . . 25
9.9 Entire Agreement . . . . . . . . . . . . . . . . 25
9.10 Binding Effect . . . . . . . . . . . . . . . . . 25
9.11 Survival . . . . . . . . . . . . . . . . . . . . 25
9.12 Severability . . . . . . . . . . . . . . . . . . 25
9.13 Third Parties. . . . . . . . . . . . . . . . . . 25
9.14 Equitable Remedies . . . . . . . . . . . . . . . 25
9.15 Knowledge. . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<PAGE> 4
<TABLE>
LIST OF SCHEDULES AND EXHIBITS
<CAPTION>
SCHEDULE DESCRIPTION
<C> <S>
3.2 List of Articles of Incorporation and
Bylaws, as Amended
3.3 Capital Structure and Ownership
3.6(a) Liens, Claims, Charges, Security
Interests, Options or Other Title
Defects or Encumbrances with Respect to,
and Ownership of, Assets
3.6(b) Description of Property
3.7 Environmental Disclosures
3.8 Intellectual Property
3.9 Obligations or Liabilities
3.10 Contracts
3.11 Litigation and Claims
3.12 Defaults
3.13(a) Franchises, Licenses, Permits, Etc.
3.13(b) Required Consents, Etc.
3.14(a) Insurance List
3.14(b) Insurance Claims
3.15 Employee Benefit Plans
3.16 Tax Matters
3.21 Records and Information Off Premises
4.8(a)
Part 1 Cancellation of Certain Instruments as
of 12/31/96
4.8(a)
Part 2 Reduction of Principal Balances of
Certain Instruments as of 12/31/96
- iii -
<PAGE> 5
<CAPTION>
EXHIBIT DESCRIPTION
<C> <S>
A Assignment of Option Agreement
B First Amendment to Employment Agreement
of Sam Scott
C Assignment
</TABLE>
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<PAGE> 6
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (this "Agreement") is made
---------
as of February 3, 1997, by and among STEVEN TOY INC, a Missouri
corporation ("Buyer"), HANDI-PAC, INC., d/b/a Steven
-----
Manufacturing Co., a Missouri corporation ("Handi-Pac"), and
---------
BEV TAYLOR, a single person residing in the State of Missouri and
the sole shareholder of Handi-Pac (the "Shareholder").
-----------
WITNESSETH:
In consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE; PURCHASE PRICE.
---------------------------------
(a) Handi-Pac and the Shareholder each acknowledge and
agree that their joint and several representations, covenants,
warranties, agreements, indemnities and other undertakings
contained in this Agreement are made and given to induce Buyer
to enter into this Agreement and consummate the transactions
contemplated by this Agreement and that Buyer in reliance
thereon has agreed to execute this Agreement and consummate
the transactions contemplated by this Agreement. The
Shareholder hereby sells, conveys, transfers, assigns and
delivers to Buyer, free and clear of all restrictions, liens,
claims, charges, security interests, options or other defects
or encumbrances, and Buyer hereby purchases, all right, title
and interest in and to all of the issued and outstanding
shares of stock of Handi-Pac (the "Shares").
------
(b) In full payment for the Shares, and also in
consideration of the representations, covenants, warranties,
agreements and indemnities contained in this Agreement and the
other agreements and documents contemplated hereby, Buyer will
pay, and the Shareholder will accept, at Closing (as
hereinafter defined), subject to the provisions of this
Agreement (the "Purchase Price"), as follows:
--------------
(i) Fifty Thousand Dollars ($50,000) payable at the
Closing by treasurer's check drawn on Summit Bank; and
(ii) The right to purchase fifty thousand (50,000)
shares of the Class A Common Stock of EXX INC, a Nevada
corporation, pursuant to an Assignment of that certain Stock
Option Agreement dated February 3, 1997 in the form of
Exhibit A attached hereto and incorporated herein by
---------
reference (the "Assignment of Option Agreement").
------------------------------
<PAGE> 7
1.2 TIME AND PLACE OF CLOSING. Consummation of the sale
-------------------------
and purchase of the Shares (the "Closing") shall take place on
-------
the date hereof at the offices of Thompson Coburn located at One
Mercantile Center, St. Louis, Missouri 63101 (the "Closing Date").
-------
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Handi-Pac and the Shareholder
as follows, which representations and warranties are made as of the
date hereof:
2.1 ORGANIZATION. Buyer is a corporation duly
------------
incorporated, validly existing and in good standing under the laws
of the State of Missouri.
2.2 AUTHORIZATION. The execution, delivery and
-------------
performance by Buyer of this Agreement have been duly and validly
authorized by the Board of Directors of Buyer and this Agreement
constitutes the valid and binding agreement of Buyer, enforceable
in accordance with its terms, subject to (i) general principles of
equity, regardless of whether enforcement is sought in a proceeding
in equity or at law, and (ii) bankruptcy, reorganization,
insolvency, fraudulent conveyance, moratorium, receivership or
other similar laws relating to or affecting creditors' rights
generally.
2.3 NON-CONTRAVENTION. Neither the execution or delivery
-----------------
of this Agreement, nor the performance by Buyer of the transactions
contemplated hereby, will result in the breach of any term or
provision of, or constitute a default under, the Articles of
Incorporation or Bylaws, as amended, of Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HANDI-PAC AND THE
SHAREHOLDER
Handi-Pac and the Shareholder, jointly and severally,
represent and warrant to Buyer as follows, which representations
and warranties are made as of the date hereof:
3.1 (a) ORGANIZATION. Handi-Pac is a corporation duly
------------
organized, validly existing and in good standing under the laws of
the State of Missouri. The operation of Handi-Pac's business and
the ownership of its assets do not require Handi-Pac to qualify to
do business as a foreign corporation in any jurisdiction where the
failure to so qualify would have a material adverse effect on
Handi-Pac. Handi-Pac has full power and authority to own its
properties and assets and to carry on lawfully its business as
currently conducted.
(b) SUBSIDIARIES. Handi-Pac does not have any
------------
subsidiaries and does not own or hold any securities of, or any
interest in, any other person or entity and is not subject to any
joint venture, partnership or other arrangement or contract which
is treated as a partnership for federal income tax purposes.
- 2 -
<PAGE> 8
3.2 ARTICLES OF INCORPORATION, BYLAWS AND AMENDMENTS. A
------------------------------------------------
true, complete and correct copy of the Articles of Incorporation
and Bylaws of Handi-Pac, together with all amendments thereto, have
been delivered to Buyer, as set forth on Schedule 3.2 attached
------------
hereto. There are no agreements, whether or not Handi-Pac is a
party thereto, imposing any restrictions upon the transfer of or
otherwise pertaining to the securities of Handi-Pac (including but
not limited to the Shares). Any and all such restrictions shall be
duly complied with or effectively waived as of the Closing.
3.3 CAPITAL STRUCTURE AND OWNERSHIP. Handi-Pac has
-------------------------------
authorized, issued and outstanding the number of shares of stock
and other securities as indicated on Schedule 3.3 attached
------------
hereto. All such outstanding securities have been duly and validly
issued, are fully paid and nonassessable and have not been issued
in violation of the preemptive rights of any person or applicable
federal or state securities laws. No shares of any other class of
capital stock of Handi-Pac are issued or outstanding. There are no
outstanding options, warrants or other rights to acquire securities
of Handi-Pac, nor are there securities outstanding which are
convertible into securities of Handi-Pac. Except pursuant to
applicable corporate laws and as contemplated by Sections 4.9 and
4.10 hereof, there are no restrictions, including but not limited
to self-imposed restrictions, on the retained earnings of Handi-Pac
or on the ability of Handi-Pac to declare and pay dividends.
The residence address of the sole Shareholder of the Shares
and the number of outstanding shares held by the Shareholder are
set forth on Schedule 3.3 attached hereto. Such Shares and
------------
other securities are owned as indicated on said Schedule 3.3
------------
beneficially and of record, free and clear of all restrictions,
liens, claims, charges, security interests, options or other
defects or encumbrances. Upon consummation of the transactions at
the Closing as contemplated by this Agreement, Buyer will acquire
title to the Shares, free and clear of all restrictions, liens,
claims, charges, security interests, options or other defects or
encumbrances.
3.4 AUTHORIZATION. Each of Handi-Pac and the Shareholder
-------------
has full legal right, power and authority to enter into this
Agreement and to carry out the transactions contemplated by this
Agreement. The execution, delivery and performance by Handi-Pac of
this Agreement and the other agreements and documents referred to
herein and the actions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on
the part of Handi-Pac, and this Agreement and such other agreements
and documents constitute valid and binding obligations of Handi-Pac
and the Shareholder, enforceable in accordance with their terms,
subject to (i) general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law, and (ii)
bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or
affecting creditors' rights generally.
3.5 FINANCIAL STATEMENTS AND ABSENCE OF CHANGES. The
-------------------------------------------
audited balance sheets as of December 31, 1995 and December 31,
1994 and the income statements and the statements of cash flows for
the fiscal years then ended of Handi-Pac and the unaudited balance
sheets as of December 31, 1996 and September 30, 1996, and the
unaudited income statements and statements of cash flows for the
twelve months ended December 31, 1996 and for the nine months ended
September 30, 1996 of Handi-Pac (the "Financial Statements")
--------------------
have been provided
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<PAGE> 9
to Buyer. Each of the Financial Statements fairly presents in all
material respects the financial condition and assets and
liabilities or the results of operations of Handi-Pac as of the
dates and for the periods indicated. The Financial Statements were
prepared in accordance with generally accepted accounting
principles applicable to Handi-Pac consistently applied. Except as
reflected in the Financial Statements, Handi-Pac, to the best
knowledge of Handi-Pac and Shareholder, does not have any debts,
obligations, guaranties of obligations of others or liabilities
(contingent or otherwise) that would be required to be disclosed in
financial statements prepared in accordance with generally accepted
accounting principles. Notwithstanding the foregoing or anything
else in this Agreement to the contrary, the Buyer shall have no
right to make a claim under this Agreement with respect to the
valuation of the inventory, machinery, tooling or equipment or the
adequacy of the reserves for the inventory, machinery, tooling or
equipment with respect thereto.
3.6 TITLE TO AND CONDITION OF ASSETS AND PROPERTY.
---------------------------------------------
Handi-Pac has good and marketable title to any assets reflected in
the Financial Statements or otherwise currently owned and used in
the operation of its business, and such assets are free and clear
of all liens, claims, charges, security interests, options, or
other title defects or encumbrances, except as set forth on
Schedule 3.6(a) attached hereto. The Shareholder and the
- ---------------
Affiliates of the Shareholder have conveyed to Handi-Pac clear and
marketable title to all assets (excluding the real property
described in Sections 4.7 and 6.2(g) hereof and improvements
thereon owned by the Betco Trust) owned by any of them which are
used (or the use thereof is contemplated as of the date hereof),
located or otherwise in the possession of Handi-Pac free and clear
of all liens, claims, charges, security interests, options, or
other title defects or encumbrances (except for the lien as noted
on Schedule 3.6(b) hereto) including, without limitation,
---------------
assets which were previously licensed or leased to Handi-Pac.
Schedule 3.6(b) attached hereto sets forth a description of all
- ---------------
real property currently owned, leased or otherwise occupied or used
by Handi-Pac, with respect to which true, correct and complete
copies of the relevant deeds, leases and other agreements have
previously been delivered to Buyer. Except as set forth on
Schedule 3.6(b) attached hereto, Handi-Pac does not own any
- ---------------
real property or any interest therein. Schedule 3.6(b)
---------------
attached hereto sets forth a description of all material personal
property leased by Handi-Pac as either lessor or lessee. All
personal property reflected on the Financial Statements, in the
possession of plastic fabricators, held by sales representatives as
samples, or located on the premises (whether leased or owned) of
Handi-Pac, whether owned, leased or otherwise used by Handi-Pac,
constitutes all of the material assets currently used in said
business. To the best knowledge of the Shareholder and Handi-Pac,
the buildings, assets and operations of Handi-Pac conform in all
material respects with all applicable restrictive covenants, deeds,
leases, and restrictions and all applicable federal, state and
local laws, ordinances, rules and regulations (including but not
limited to those relating to zoning and working conditions).
3.7 ENVIRONMENTAL MATTERS. To the best knowledge of the
---------------------
Shareholder and Handi-Pac, Handi-Pac has duly complied in all
materials respects with, and its business, operations, assets,
equipment, leaseholds and other facilities are in material
compliance with, the provisions of all applicable federal, state
and local environmental, health and safety laws, codes and
ordinances and all rules and regulations promulgated thereunder,
governing (i) air emissions, (ii) discharges to surface water or
ground water, (iii) solid or liquid waste disposal, (iv) the use,
storage, generation, handling, transport, discharge, release, or
disposal of Hazardous Materials
- 4 -
<PAGE> 10
(as defined below) or toxic substances or wastes, or (v) other
environmental, health or safety matters (collectively, the
"Environmental Laws"), including, without limitation, the
------------------
Comprehensive Environmental Response Compensation and Liability Act
of 1980, 42 U.S.C. Sections 9601 et seq., as amended, the Resource
-- ---
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.,
-- ---
as amended, the Federal Water Pollution Control Act, 33 U.S.C.
Sections 1251 et seq., as amended, and the Clean Air Act, 42
-- ---
U.S.C. Sections 7401 et seq., as amended.
-- ---
To the best knowledge of the Shareholder and Handi-Pac, Handi-
Pac possesses all material governmental permits, licenses, orders,
consents and approvals required under the Environmental Laws and
necessary to the ownership of its properties, and to the conduct of
the business, of Handi-Pac. To the best knowledge of the
Shareholder and Handi-Pac, there are no material investigations,
administrative proceedings, judicial actions, orders, claims or
notices which are pending, anticipated or threatened against Handi-
Pac relating to the environment.
3.8 INTELLECTUAL PROPERTY. Schedule 3.8 attached
--------------------- ------------
hereto sets forth all material patents, copyrights, trade names,
trademarks, service marks, or other such names or marks or
applications therefor which Handi-Pac owns, licenses or otherwise
uses and Handi-Pac has not within the last five (5) years conducted
business under any corporate, trade or fictitious name other than
as set forth in Schedule 3.8. Except as set forth on
------------
Schedule 3.11 attached hereto, there are no pending or, to the
- -------------
best knowledge of Handi-Pac and the Shareholder, threatened actions
or claims of infringement upon the rights to any intellectual
property of others. There are no actions or claims of infringement
pending, threatened or contemplated by or on behalf of Handi-Pac
with regard to any matters concerning intellectual property.
3.9 LIABILITIES. To the best knowledge of the
-----------
Shareholder and Handi-Pac, except (i) as and to the extent
reflected or reserved against in the Financial Statements or (ii)
as disclosed in Schedule 3.9 or any other Schedule hereto,
------------
Handi-Pac does not have any material liabilities or obligations as
of the date hereof, secured or unsecured (whether accrued,
absolute, contingent or otherwise). For purposes of this Section
3.9, the term "material" shall mean and refer to liabilities in
--------
an amount equal to or greater than $10,000 individually or an
amount equal to or greater than $25,000 in the aggregate.
3.10 CONTRACTS. Except as set forth in Schedule 3.10
--------- -------------
attached hereto or in any other Schedule attached hereto, true,
correct and complete copies of which contracts have been delivered
to Buyer, Handi-Pac is not a party to or bound by any of the
following (hereinafter, any of the following are referred to
collectively as the "Contracts" and individually as a "Contract"):
--------- --------
(a) contract for the purchase or sale of services,
equipment, inventory, materials, supplies, or any capital item
or items which requires the payment or receipt by Handi-Pac of
cash or other property or services having a value in excess of
$10,000 individually or $50,000 in the aggregate;
(b) supply agreements with the federal government or any
state or local government or any agency thereof;
- 5 -
<PAGE> 11
(c) collective bargaining agreement or other agreement
with any labor union or labor organization or any employment,
consulting, severance, bonus, deferred compensation or similar
agreement;
(d) agreement, indenture or other instrument relating to
the borrowing of money or guaranty of any obligation for the
borrowing of money;
(e) lease, license or similar agreement relating to
personal property having a value in excess of $10,000
individually or $50,000 in the aggregate;
(f) license, lease or other agreement to provide or
acquire services or equipment of any kind which requires the
payment or receipt by Handi-Pac of cash or other property or
services having a value in excess of $10,000 individually or
$50,000 in the aggregate;
(g) any instrument or agreement relating to indebtedness
by way of lease-purchase arrangements, conditional sale,
guarantee or other undertakings on which others rely in
extending credit, any joint venture agreements or any chattel
mortgages or other security arrangements;
(h) any agreement or contract with, or any obligation to
or from, an Affiliate, the Shareholder or any Affiliate of the
Shareholder. For purposes of this Agreement, "Affiliate"
---------
shall mean any person or entity: (i) that directly or
indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the person or
entity involved, including, without limitation, officers and
directors, (ii) that directly or beneficially owns or holds 5%
or more of any equity interest in such person or entity,
(iii) 5% or more of whose voting securities (or in the case of
a person which is not a corporation, 5% or more of any equity
interest) is owned directly or beneficially by the person or
entity involved, (iv) which is a trust for which such involved
person or entity is a trustee, a co-trustee, a beneficiary, a
co-beneficiary or is otherwise controlled in whole or in part
by such involved person or entity or for which a relative of
such involved person is the trustee, co-trustee, beneficiary
or co-beneficiary thereof or is otherwise controlled in whole
or in part by such relative, or (v) which is a relative of
such person, including, without limitation, spouses, children,
siblings and parents. As used herein, the term "control"
-------
shall mean possession, directly or indirectly, of the power to
direct or participate in the direction of the management or
policies of a person or entity, whether through ownership of
securities, by contract or otherwise;
(i) any powers of attorneys; or
(j) any other material agreements or contracts (whether
written or oral).
Except as set forth in Schedule 3.10 attached hereto,
-------------
neither Handi-Pac nor, to the best knowledge of Handi-Pac and the
Shareholder, any other party to any such Contract has breached any
provisions of, or is in violation or default under the terms of, or
has caused or permitted to exist any event that with or without due
notice or lapse of time or both would constitute a
- 6 -
<PAGE> 12
default or event of default under, any such Contract. Except as
indicated on said Schedule 3.10, all such Contracts are valid,
-------------
binding and in full force and effect and will continue in full
force and effect to the benefit of Handi-Pac, its successors and
assigns, if Handi-Pac so elects, without change following the
execution and delivery of this Agreement without obtaining the
consent of any other party thereto, except as set forth in
Schedule 3.13(b) attached hereto.
- ----------------
3.11 LITIGATION; COMPLIANCE AND OTHER PRODUCT ISSUES,
------------------------------------------------
COMPLIANCE WITH LAWS.
- --------------------
(a) Except as set forth on Schedule 3.11 attached
-------------
hereto, there is no pending or, to the best knowledge of
Handi-Pac and the Shareholder, threatened claim,
investigation, lawsuit or administrative proceeding against or
involving Handi-Pac, any of its properties, the operation of
its business, or involving this Agreement or the Shares. The
business of Handi-Pac is not affected by any pending or
threatened strike or other organized labor disturbance. To
the best knowledge of Shareholder and Handi-Pac, there is no
order, writ, injunction or decree relating to or affecting the
operations or the business of Handi-Pac or the transactions
contemplated by this Agreement.
(b) In addition, to the best knowledge of Handi-Pac and
the Shareholder, Handi-Pac has not received written notice
from any person or entity during the 24 months preceding the
date of this Agreement to the effect that a particular product
or component of a product manufactured or sold by Handi-Pac or
the packaging thereof is defective in workmanship or materials
in a manner which is inherently dangerous or lacking adequate
warnings or instructions on the proper usage thereof.
(c) To the best knowledge of the Shareholder and Handi-
Pac, Handi-Pac, its assets, business, operations, and use and
ownership or occupancy of property is in material compliance
with all applicable federal, state, municipal, local and
foreign laws, rules and regulations (including, without
limitation, securities, employment, tax, environment, civil
rights and occupational health and safety laws, rules and
regulations).
3.12 NON-CONTRAVENTION. Except as set forth in Schedule
----------------- --------
3.12, neither the execution of this Agreement nor the performance
- ----
of the transactions contemplated hereby will result in or cause the
breach of any term or provision of, constitute a default or event
of default under, or accelerate or augment the performance
otherwise required under, any provision of the Articles of
Incorporation or Bylaws of Handi-Pac, or any agreement (including
without limitation the Contracts), indenture, instrument, order,
law or regulation to which Handi-Pac or the Shareholder is a party
or by which they are bound, or will result in the creation of any
lien or encumbrance upon any property of Handi-Pac or the Shares.
3.13 LICENSES, PERMITS AND REQUIRED CONSENTS. To the best
---------------------------------------
knowledge of the Shareholder and Handi-Pac, Handi-Pac has all
material federal, state and local franchises, tariffs, licenses,
ordinances, certifications, approvals, authorizations and permits
necessary to the conduct of its business as currently conducted.
A list of all material franchises, tariffs, licenses, ordinances,
certifications, approvals, authorizations and permits is set forth
on Schedule 3.13(a) attached hereto, true, correct and complete
----------------
copies of which have previously been delivered to Buyer. To the
best knowledge of the Shareholder and Handi-Pac, all material
franchises, tariffs,
- 7 -
<PAGE> 13
licenses, ordinances, certifications, approvals, authorizations and
permits relating to the business of Handi-Pac are in full force and
effect, no violations have been made in respect thereof, and no
proceeding is pending or threatened which could have the effect of
revoking or limiting any such franchises, tariffs, licenses,
ordinances, certifications, approvals, authorizations or permits
and the same will not cease to remain in full force and effect by
reason of the performance of the transactions contemplated by this
Agreement.
Schedule 3.13(b) attached hereto sets forth all
----------------
registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications, authorizations, certifications,
waivers or other actions of any kind required to be made, filed,
given or obtained by or on behalf of Handi-Pac or the Shareholder
with, to, or from any persons, governmental authorities or private
entities in connection with the execution and delivery of this
Agreement and the performance of the transactions contemplated by
this Agreement.
3.14 INSURANCE. Schedule 3.14(a) attached hereto sets
--------- ----------------
forth a list of all policies of insurance (i) which insure the
properties, business or liability (including, but not limited to,
directors' and officers' liability) of Handi-Pac, or (ii) which
names Handi-Pac as a beneficiary or a loss payee or for which
Handi-Pac has paid all or part of the premium, which Schedule sets
forth the types and amounts of coverage; true, correct and complete
copies of all such policies have previously been delivered to
Buyer. Each of such policies is current and in full force and
effect and Handi-Pac has not received notice of default under, or
intended cancellation or nonrenewal of, any such policies. Within
the last six (6) months, Handi-Pac has not been refused any
insurance by an insurance carrier to which it has applied for
insurance. Schedule 3.14(b) lists all claims made under said
----------------
policies (other than policies regarding health and medical
insurance) and the status thereof since January 1, 1996.
3.15 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Schedule 3.15 attached hereto sets forth a
-------------
complete list and brief description of each employee pension
benefit plan, employee welfare benefit plan or arrangement
("Employee Benefit Plan" or "Plan") as defined in
--------------------- ----
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder ("ERISA"),
-----
and all other compensation, welfare, insurance, fringe benefit
or retirement plan, program, policy, understanding or
arrangement of any kind whatsoever, whether formal or
informal, maintained for current or former employees or agents
of Handi-Pac and their beneficiaries and dependents or
contributed to or by Handi-Pac. Handi-Pac is not a member of
a group which group is under common control within the meaning
of Section 414 of the Internal Revenue Code of 1986, as
amended and the regulations promulgated thereunder (the
"Code"). None of the Plans is a defined benefit plan
----
within the meaning of 414(j) of the Code nor a multiemployer
plan within the meanings of Section 3(37) of ERISA or as
defined in Section 413 of the Code.
(b) To the best knowledge of Handi-Pac and the
Shareholder, each Employee Benefit Plan and any related trust
agreement, annuity contract or any other funding or
implementing instrument complies in all material respects
currently and has complied in all material respects at all
times in the past, as to form, operation and administration,
- 8 -
<PAGE> 14
with the provisions of ERISA and all other applicable laws,
rules and regulations and has a current favorable
determination from the Internal Revenue Service as to the
qualification under the Code.
(c) To the best knowledge of the Shareholder and Handi-
Pac, neither Handi-Pac nor any fiduciary or administrator of
any Employee Benefit Plan has at any time engaged in any
transaction in material violation of Section 406(a) or (b) of
ERISA for which no exemption exists under Section 408 of ERISA
or any prohibited transaction (as defined under ERISA and the
Code) for which no exemption exists under Section 4975 (c) (2)
or 4975(d) of the Code. To the best knowledge of the
Shareholder and Handi-Pac, no event has occurred which will or
could subject any such Plan to a material income tax under
Section 511 of the Code or to a material excise tax under
Sections 4971 through 4981 of the Code. To the best knowledge
of the Shareholder and Handi-Pac, all employee elective
deferral and employer matching contributions have been timely
made through the Closing Date.
(d) Handi-Pac has delivered to Buyer a complete and
correct copy of (i) each Employee Benefit Plan (and related
trust agreement, annuity contract or other funding or
implementing instrument), including all amendments thereto;
(ii) all filings (including all attachments thereto) made or
required to be made (including but not limited to annual
reports and returns) with the Internal Revenue Service,
Department of Labor or the PBGC relative to any Employee
Benefit Plan for each of the three most recent plan years;
(iii) the most recent summary plan description (as defined in
ERISA) for each Employee Benefit Plan; and (iv) other relevant
documents in the possession of Handi-Pac, its employees or
agents, with respect to each Employee Benefit Plan.
3.16 TAXES AND RETURNS.
-----------------
(a) For purposes of this Agreement:
(i) The term "Returns" shall mean, collectively, all
-------
reports, declarations, estimates, returns, information
statements, and similar documents relating to, or required to
be filed in respect of, any Taxes; and any statements,
returns, reports, or similar documents required to be filed
pursuant to any similar income, excise, or other tax provision
of federal, state, local or foreign law; and the term
"Return" means any one of the foregoing Returns.
------
(ii) The term "Taxes" shall mean (A) all net income,
-----
gross income, gross receipts, sales, use, ad valorem,
franchise, profits, license, lease, service, service use,
withholding, employment, payroll, excise, severance, transfer,
documentary, mortgage, registration, stamp, occupation,
environmental, premium, property, windfall, profits, customs,
duties, and other taxes, fees, assessments or charges of any
kind whatever, together with any interest, penalties and other
additions with respect thereto, imposed by any federal, state,
local or foreign government; and (B) any penalties, interest,
or other additions to a Tax for the failure to collect,
withhold, or pay over any of the foregoing, or to accurately
file any Return; and the term "Tax" shall mean any one of the
foregoing Taxes.
- 9 -
<PAGE> 15
(b) (i) Handi-Pac has duly filed or caused to be filed,
on or before the due date thereof (including any valid
extensions), with the appropriate taxing authorities, all
Returns that it is required to file; (ii) each such Return
(including any amendment thereto) is true, correct, and
complete in all material respects; (iii) all Taxes of Handi-
Pac due with respect to, or shown to be due on, each such
Return (or amendment) or subsequent assessment with regard
thereto, have been timely paid; (iv) there is no valid basis
for the assessment of any deficiency with regard to any such
Return; and (v) there are no extensions of time to file which
are pending. Excluding any Taxes due solely as a result of
the cancellation or reduction of certain indebtedness and
payment obligations of Handi-Pac as of December 31, 1996 and
as more specifically described in Schedules 4.8(a) and (b)
------------------------
hereof, no other Taxes of Handi-Pac are due with respect to
any taxable periods or portions of periods ending on or before
the Closing Date. Handi-Pac and the Shareholder represent and
warrant that the net operating losses for the fiscal period
ended December 31, 1996 are in excess of $500,000. There are
no liens, attachments, or similar encumbrances on any of the
assets of Handi-Pac with respect to any Taxes, other than
liens for Taxes of Handi-Pac that are not yet due and payable.
(c) There are no (i) pending or, to the knowledge of
Handi-Pac or the Shareholder, threatened (either in writing or
verbally, formally or informally) audits, investigations,
claims, proposals or assessments for or relating to any Taxes
of Handi-Pac; (ii) no material deficiencies for Taxes of
Handi-Pac have been claimed, proposed or assessed by any
taxing or other governmental authority; (iii) there are no
matters under discussion with any governmental authorities
with respect to Taxes that could result in any additional
amount of Taxes of Handi-Pac; (iv) no extension of a statute
of limitations relating to Taxes is in effect; and (v) there
are no requests for rulings or determinations in respect of
Taxes of Handi-Pac pending with any governmental authority.
(d) To the knowledge of Handi-Pac or the Shareholder and
except as disclosed on Schedule 3.16 hereto, none of the
-------------
assets owned by Handi-Pac (i) is property which is required to
be treated as being owned by any other person or entity
pursuant to the so-called "safe harbor lease" provisions of
former Section 168(f)(8) of the Code; or (ii) directly or
indirectly secures any debt, the interest on which is tax
exempt under Section 103(a) of the Code. To the knowledge of
Handi-Pac or the Shareholder, the transactions contemplated by
this Agreement are not subject to the tax withholding
provisions of Code Section 3406, or of subchapter A of Chapter
3 of the Code, or of any other comparable provision of law.
3.17 CHANGES. Except as otherwise expressly contemplated
-------
by this Agreement or disclosed on the Schedules hereto, since
December 31, 1996, there has not been:
(a) any damage, destruction, or other casualty loss that
could, individually or in the aggregate, currently or after
lapse of time, have a material adverse effect on the assets,
business, condition or prospects of Handi-Pac;
- 10 -
<PAGE> 16
(b) any disposition of any asset of Handi-Pac other than
in the ordinary course of business;
(c) any amendment, modification or termination of any
existing, or entering into any new, contract, agreement,
lease, license, permit or franchise that could, individually
or in the aggregate, have a material adverse effect on the
assets, business, condition or prospects of Handi-Pac,
currently or after lapse of time;
(d) any direct or indirect redemption, purchase or other
acquisition of, or any declaration, setting aside or payment
of any dividend or other distribution on or in respect of, any
stock or other securities of Handi-Pac; or
(e) any changes in the accounting methods or practices
followed by Handi-Pac or any change in depreciation or
amortization policies or rates.
3.18 ACCOUNTS RECEIVABLE. The accounts receivable which
-------------------
are reflected in the Financial Statements or which arose subsequent
thereto were or will be, as the case may be, validly obtained in
the ordinary course of business of Handi-Pac. To the best
knowledge of the Shareholder and Handi-Pac, the reserves for
doubtful accounts reflected on the Financial Statements were
determined in accordance with generally accepted accounting
principles consistently applied.
3.19 NO ADVERSE ACTIONS. To the best knowledge of Handi-
------------------
Pac and the Shareholder, neither Handi-Pac nor any shareholder,
director, officer, agent, employee or other person associated with
or acting on behalf of any of the foregoing has used any corporate
funds, directly or indirectly, for unlawful contributions,
payments, gifts, entertainment or other unlawful expenses relating
to political activity, or made any direct or indirect unlawful
payments to governmental or regulatory officials or others.
3.20 LABOR MATTERS. Handi-Pac does not have any
-------------
obligations, contingent or otherwise, under any employment or
consulting agreement (except if and as set forth in Schedule
--------
3.10 attached hereto), collective bargaining agreement or other
- ----
contract with a labor union or other individual employee,
consultant or labor or employee group. To the best knowledge of
the Shareholder and Handi-Pac, there are no efforts presently being
made or threatened by or on behalf of any labor union with respect
to employees of Handi-Pac and no collective bargaining agreement is
currently being negotiated. To the best knowledge of the
Shareholder and Handi-Pac, there are no charges, claims or
accusations of discrimination based on sex, age, race, color,
religion, national origin, disability or any other factor
prohibited by applicable law.
3.21 MINUTE AND STOCK BOOKS; RECORDS. The minute books of
-------------------------------
Handi-Pac made available to Buyer contain the records of all
meetings and other corporate actions of the shareholders and
directors (and committees thereof) and accurately and completely
reflect all such actions. The Bylaws contained in or kept with
said minute books are true, complete and correct copies of the
Bylaws of Handi-Pac and all amendments thereto duly adopted and in
force. The stock books maintained by Handi-Pac and made available
to Buyer are complete and accurately disclose all issuances and
transfers of stock of Handi-Pac. All other records
- 11 -
<PAGE> 17
maintained by Handi-Pac accurately reflect the information
presented therein, including, but not limited to, records
pertaining to bank accounts and safe deposit boxes. Except as set
forth on Schedule 3.21 attached hereto, Handi-Pac does not have
-------------
any of its records or information recorded, stored, maintained or
held off the premises of Handi-Pac.
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
4.1 FURTHER ASSURANCES. At any time and from time to
------------------
time at or after the Closing, the parties agree to cooperate with
each other, to execute and deliver such other documents,
instruments of transfer or assignment, files, books and records and
do all such further acts and things as may be reasonably required
to carry out the transactions contemplated hereby.
4.2 PAYMENT OF TAXES. The Shareholder and Buyer each
----------------
agree to pay one-half of all sales taxes, other property transfer
taxes, all documentary or other stamp taxes and all similar taxes,
if any, arising out of or related to the transactions contemplated
by this Agreement. Each party hereto agrees to pay its own income
taxes arising out of or related to the transactions contemplated by
this Agreement.
4.3 DELIVERY. The parties shall cause the delivery of
--------
the respective documents required to be delivered or caused to be
delivered by them pursuant to Article VI below.
4.4 EMPLOYEES; EMPLOYMENT AGREEMENTS. Handi-Pac and the
--------------------------------
Shareholder hereby acknowledges that Handi-Pac has no obligation to
employ, or to continue the employment by Handi-Pac of any of the
employees of Handi-Pac. Neither Handi-Pac nor the Shareholder
shall make any representation to the contrary to any of such
employees; provided, however, Handi-Pac and/or its Affiliates may
interview or otherwise contact such employees regarding any future
employment.
Notwithstanding anything contained in this Section 4.4 to the
contrary, (i) Buyer shall cause Handi-Pac immediately after the
consummation of the transactions contemplated by this Agreement to
send to Liz Dalpe a letter dated the Closing Date setting forth its
intention to continue her employment, and (ii) Buyer shall be bound
by that certain Employment Agreement between Handi-Pac and Sam W.
Scott dated January 19, 1996, as amended by the First Amendment to
Employment Agreement.
4.5 CONFIDENTIALITY. Buyer, Handi-Pac and the
---------------
Shareholder each agree that the negotiations among the parties and
all information or documents furnished hereunder by any party shall
be kept strictly confidential by the party or parties to whom
furnished. Notwithstanding anything in this Section 4.5 to the
contrary, Buyer and/or its Affiliates may disclose any of the
foregoing matters or information in connection with (i) the
issuance of any press release or announcement (provided, however,
that with respect to any press release or announcement regarding
the negotiations among the parties, Buyer shall obtain the prior
consent of the Shareholder as to the contents thereof) or (ii) the
filing of a Form 8-K Report or other
- 12 -
<PAGE> 18
reports and/or filings with the Securities and Exchange Commission,
the American Stock Exchange as well as any other governmental
agency which it determines to be desirable or necessary. Handi-Pac
and the Shareholder shall cooperate with Buyer and provide such
information and documents as may be required in connection with any
such disclosure, report or filing made pursuant to this Section.
Buyer agrees that neither it nor its Affiliates shall issue any
press releases or announcements in the State of Missouri regarding
the terms of the Agreement or the negotiations among the parties.
4.6 NONCOMPETE AGREEMENT. For purposes of this Section
--------------------
4.6, the term "Business" means the manufacture, design,
--------
development, marketing, sale, or processing of toys or games.
(a) For valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Shareholder
hereby covenants and agrees that he will not for a period of
five (5) years from the Closing Date, directly or indirectly,
for himself, or as an agent of or on behalf of, or in
conjunction with, any person, firm, corporation, partnership
or other entity or otherwise in any manner or capacity:
(i) (x) own or control any person or entity engaged
in the Business, (y) be employed or engaged to do or assist
with, or actually do or assist with, the Business for any
person or entity, or (z) otherwise engage in the Business
anywhere in the United States, Canada or Mexico; or
(ii) otherwise solicit, divert, take away,
interfere, with or disrupt relationships with, or attempt to
do any of the foregoing with respect to, any customer,
supplier, employee, independent contractor, agent or
representative of Handi-Pac.
(b) It is expressly understood and agreed that, although
the parties consider the restrictions contained in Section
4.6(a) to be reasonable, if a final nonappealable
determination is made by a court of competent jurisdiction,
that the time or territory or any other restriction contained
in Section 4.6(a) is an unreasonable or otherwise
unenforceable restriction against the Shareholder, neither
this Agreement nor the provisions of Section 4.6(a) shall be
rendered void, but shall be deemed amended to apply as to such
maximum time, territory and scope and to such other extent as
permitted by law and as determined by such court under the
circumstances involved.
(c) Notwithstanding Section 4.6(a) above, Buyer, Handi-
Pac and the Shareholder agree that for a period beginning on
the Closing Date and ending on the fifth (5th) anniversary
thereof, Handi-Pac shall have a right of first refusal to
elect to acquire all rights to manufacture and sell the
Shareholder's ideas, concepts and designs for new toys, games,
novelties and related products (the "Proposed New Item").
-----------------
The Shareholder shall submit to Handi-Pac all of his Proposed
New Items by written proposal containing sufficient detail
regarding the Proposed New Items to permit Handi-Pac to begin
its analysis of the commercial potential for the Proposed New
Item. Within ninety (90) days following the submission of any
such written proposal, Handi-Pac shall provide a written
response to the Shareholder stating either (i)(a) that Handi-
Pac is not interested in the Proposed New Item or (b) that the
Proposed New Item is not a new item but rather
- 13 -
<PAGE> 19
constitutes a toy product the rights to which are already
owned by Handi-Pac or (ii) that Handi-Pac is interested in the
Proposed New Item and the terms on which they would agree to a
license of the Proposed New Item with the Shareholder (a
"Notice of Interest"). A failure of Handi-Pac to respond
------------------
within the ninety (90) day decision period shall constitute an
election under item (i)(a) above. Upon an election by
Handi-Pac under item (1)(a) above (or a deemed election
thereof in accordance with the preceding sentence), the
Shareholder shall have the right solely to market to other
companies the Proposed New Item notwithstanding the
restriction on marketing contained in Section 4.6(a) above.
If, upon a Notice of Interest, the Shareholder rejects in
writing the terms of the license offered in the Notice of
Interest, the Shareholder shall have the right solely to
market to other companies the Proposed New Item
notwithstanding the restriction on marketing contained in
Section 4.6(a) above; provided, however, that upon the
Shareholder's receipt of a bona fide, arms length offer to
license such Proposed New Item with an unrelated third party
(a "Third Party Offer"), the Shareholder shall provide
-----------------
Handi-Pac with written notice of the terms of said offer at
which time Handi-Pac shall have fifteen (15) days from its
receipt of the Third Party Offer notice to match the terms
thereof in writing. If Handi-Pac fails to match the Third
Party Offer within such fifteen (15) day period, the
Shareholder may enter into an agreement with such third party
so long as it is on the terms contained in the Third Party
Offer.
4.7 TERMINATION OF LEASE. Handi-Pac, as lessee, shall
--------------------
terminate the month-to-month lease with Betco Trust, as lessor,
with respect to the north warehouse located at Premises No. 3,
Section 9, Township 46 North, Range 5 West (North), McKittrick,
Missouri 65056 and pay any amounts due with respect thereto prior
to the Closing Date.
4.8 SHAREHOLDER AND AFFILIATE OBLIGATIONS AND/OR
--------------------------------------------
AGREEMENTS. Handi-Pac and the Shareholder hereby agree with and
- ----------
confirm to Buyer as follows:
(a) The liabilities or obligations identified (i) in
Part 1 of Schedule 4.8(a) hereof from Handi-Pac to the
---------------
Shareholder or any Affiliate of the Shareholder have been
terminated, cancelled, forgiven or otherwise satisfied as of
December 31, 1996 and (ii) in Part 2 of Schedule 4.8(a)
---------------
hereof have been reduced to the balances set forth thereon as
of December 31, 1996.
(b) Subject to Section 4.8(c) below, all agreements and
other liabilities and obligations of any kind or nature
whatsoever existing on or prior to the date hereof between the
Shareholder and/or an Affiliate of the Shareholder with Handi-
Pac (existing prior to the date hereof), have been terminated
or cancelled prior to or as of the Closing Date.
(c) Notwithstanding anything in this Agreement to the
contrary, the following liabilities, obligations and
agreements between Buyer, Handi-Pac and the Shareholder and/or
their respective Affiliates shall not be terminated or
cancelled and shall continue on and after the date hereof: (i)
the Assignment and all agreements and instruments referenced
therein, (ii) this Agreement, (iii) all indemnity obligations
granted from the Shareholder or its Affiliates to Handi-Pac or
Hi-Flier, Inc. with respect to lost stock
- 14 -
<PAGE> 20
certificates or lost promissory notes, and (iv) all agreements
executed in connection with the consummation of the
transactions contemplated hereby.
4.9 THE COMMERCE WARREN COUNTY BANK LOAN. Handi-Pac and
------------------------------------
the Shareholder represent and warrant that as of the date hereof,
the aggregate outstanding principal balance owed by Handi-Pac to
the Commerce Warren County Bank (the "Commerce Loan") is
-------------
$336,031.74 plus outstanding and accrued interest thereon in the
amount of $3,500.00 (the "Commerce Balance"). Buyer agrees that
----------------
after the Closing (i) no additional borrowings will be made under
the Commerce Loan, and (ii) it shall cause Handi-Pac to pay the
Commerce Loan by paying all amounts actually received by Handi-Pac
in respect of the accounts receivable securing the Commerce Loan in
accordance with past business practices consistently applied.
Buyer further agrees that until the earlier of (i) the payment of
the Commerce Balance in full or (ii) the release by the Commerce
Warren County Bank of the Shareholder and the Taylor Trust (as
defined in Section 6.1(a) hereof) from that certain Guarantee dated
March 15, 1996, Buyer shall (A) cause Handi-Pac on the Closing Date
to pledge to the Shareholder, subject to any pre-existing security
interests, the U.S.A. Hartland Molds to secure its performance of
the obligations set forth in the preceding sentence and to execute
a security agreement and financing statements in connection
therewith which are reasonably satisfactory in form and substance
to all parties hereto, and (B) not permit or cause Handi-Pac to pay
any cash, assets or property (in kind or otherwise), whether by
dividends on any class of its stock, stock redemption, salaries,
management or other fees or compensation, debt repayment (principal
or interest) or otherwise, to Buyer or its Affiliates or any of
their respective directors, officers or employees or any
transferees or assignees of any of them. Notwithstanding the
foregoing, (i) Handi-Pac shall be permitted to pay its officers and
employees so long as such officers and employees are not also
employed by or officers of Buyer or its other Affiliates and (ii)
Handi-Pac shall be permitted to pay one officer or employee who is
also an officer or an employee of Buyer so long as such officer or
employee is primarily engaged in the operations of Handi-Pac.
Buyer agrees after the Closing Date to cause Handi-Pac to pursue
collection of its accounts receivable in the ordinary course of
business consistent with past practices.
4.10 THE BAY-HERMANN-BERGER BANK LOAN. Handi-Pac and the
--------------------------------
Shareholder represent and warrant that as of the date hereof, the
aggregate outstanding principal balance owed by Handi-Pac to the
Bay-Hermann-Berger Bank (the "Bay-Hermann Loan") is $239,810.11
----------------
plus outstanding and accrued interest thereon in the amount of
$375.00 (the "Bay-Hermann Balance"). Buyer agrees that after
-------------------
the Closing Date, it shall not permit or cause Handi-Pac to pay any
cash, assets or property (in kind or otherwise), whether by
dividends on any class of its stock, stock redemption, salaries,
management or other fees or compensation, debt repayment (principal
or interest) or otherwise, to Buyer or its Affiliates or any of
their respective directors, officers or employees or any
transferees or assignees of any of them until the earlier of (i)
the payment of the Bay-Hermann Balance in full or (ii) the release
by the Bay-Hermann-Berger Bank of the Shareholder and the Taylor
Trust from those certain Guaranties dated July 28, 1996 and August
8, 1996. Notwithstanding the foregoing, (i) Handi-Pac shall be
permitted to pay its officers and employees so long as such
officers and employees are not also employed by or officers of
Buyer or its other Affiliates and (ii) Handi-Pac shall be permitted
to pay one officer or employee who is also an officer or an
employee of Buyer so long as such officer or employee is primarily
engaged in the operations of Handi-Pac.
- 15 -
<PAGE> 21
4.11 DEFENSE AND/OR INDEMNIFICATION OBLIGATIONS OF HANDI-PAC.
-------------------------------------------------------
Buyer agrees that after the Closing Date, it shall cause Handi-Pac
to defend the Shareholder on all suits and claims brought against
the Shareholder arising as a result of the Shareholder's position
as a director, officer or shareholder of Handi-Pac and indemnify
the Shareholder from all losses, expenses and costs associated
therewith; provided, however, that in no event shall Handi-Pac
indemnify the Shareholder for any losses, costs or expenses
incurred by the Shareholder as a result of any valid and
enforceable guaranty of the Shareholder of the performance of any
obligations or liabilities of Handi-Pac. Notwithstanding anything
to the contrary herein, the foregoing shall not constitute a waiver
of or otherwise limit the Shareholder's right of subrogation and/or
reimbursement against Handi-Pac with respect to any payments made
by the Shareholder under any such guaranty.
4.12 REQUESTED DOCUMENTATION. The parties hereto agree
-----------------------
that notwithstanding anything contained in this Agreement to the
contrary, Handi-Pac and the Shareholder have been unable to provide
copies of all documents and agreements as required by this
Agreement or as requested by Buyer as of the date hereof. After
the Closing Date, if Buyer is unable to locate a copy of any such
document or agreement from the records of Handi-Pac, the
Shareholder shall within no later than five (5) days after the
written request by Buyer therefor, provide Buyer with a copy of any
such document or agreement in the possession or control of the
Shareholder or the possession or control of any Affiliate of the
Shareholder and the Shareholder shall otherwise cooperate with
Buyer in obtaining a copy thereof.
4.13 INVESTMENT REPRESENTATIONS.
--------------------------
(a) This Agreement is made with the Shareholder in
reliance upon the Shareholder's representations to Buyer and EXX
INC, which by his acceptance hereof the Shareholder hereby
confirms, that the Assignment of Option Agreement and any option
shares acquired upon exercise thereof (all such securities for
purposes of this Section 4.13 are referred to as the
"Securities") to be received by him will be acquired for
----------
investment for his own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and
that the Shareholder has no present intention of selling, granting
participation in, or otherwise distributing the same. By executing
this Agreement, the Shareholder further represents that he does not
have any contract, undertaking, agreement or arrangement with any
person to sell, transfer, or grant participations to such person,
or to any third person, with respect to any of the Securities.
(b) The Shareholder understands that the Securities are
not registered under the Securities Act (as defined below) on the
ground that the sale provided for in this Agreement and the
issuance of Securities hereunder is exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act")
--------------
and that Buyer's and EXX INC's reliance on such exemption is
predicated on the Shareholder's representations set forth herein.
(c) The Shareholder represents that he is an "accredited
investor" within the meaning of Rule 501 under the Securities Act
and that the Shareholder is experienced in evaluating and investing
in companies such as EXX INC, is able to fend for himself in the
transactions contemplated by this Agreement, has such knowledge and
experience in the financial
- 16 -
<PAGE> 22
and business matters as to be capable of evaluating the merits and
risks of the Shareholder's investment and has the ability to bear
the economic risks of such investment. The Shareholder further
represents that he has had access, during the course of the
transaction and prior to his purchase of the Securities, to the
same kind of information that would be provided in a registration
statement filed by EXX INC under the Securities Act and that the
Shareholder has had, during the course of the transaction and prior
to his purchase of the Securities, the opportunity to ask questions
of, and receive answers from EXX INC concerning the terms and
conditions of the offering and to obtain additional information
necessary to verify the accuracy of any information furnished to
the Shareholder or to which it or he had access.
(d) The Shareholder understands that the Securities may
not be sold, transferred or otherwise disposed of without
registration under the Securities Act or an exemption therefrom,
and that in the absence of an effective registration statement
covering the Securities or an available exemption from registration
under the Securities Act, the Securities must be held indefinitely.
In particular, the Shareholder is aware that the Securities may not
be sold pursuant to Rule 144 promulgated under the Securities Act
unless all of the conditions of that Rule are met. The Shareholder
represents that, in the absence of an effective registration
statement covering the Securities, he will sell, transfer or
otherwise dispose of the Securities only in a manner consistent
with the Shareholder's representations set forth herein.
(e) The Shareholder agrees that in no event will the
Shareholder make a transfer or disposition of any of the Securities
(other than pursuant to an effective registration statement under
the Securities Act), unless and until the Shareholder shall have
notified EXX INC of the proposed disposition and shall have
furnished EXX INC with a statement of the circumstances surrounding
the disposition and reasonable assurance (which may include an
opinion of counsel, reasonably satisfactory to EXX INC at the
expense of the Shareholder or transferee) that the proposed
disposition is in compliance with all applicable laws.
4.14 VOLUNTARY PETITION IN BANKRUPTCY. Buyer agrees
--------------------------------
that on the Closing Date and for a period of forty five (45) days
thereafter, Handi-Pac shall use its best efforts not to file a
voluntary petition in bankruptcy.
4.15 REPORTING REQUIREMENTS. Buyer agrees that from the
----------------------
Closing Date until payment of the Commerce Loan, it shall cause
Handi-Pac to provide to the Shareholder a schedule of sales, a
schedule of cash receipts, an accounts receivable aging report and
a schedule of payments made to the Commerce Warren County Bank
simultaneously with the provision of such reports to the Commerce
Warren County Bank but in no event no less frequently than weekly.
4.16 RESEARCH AND DEVELOPMENT COMPUTER. The
---------------------------------
Shareholder agrees to timely pay in full when due all amounts due
the Bay-Hermann-Berger Bank with respect to the research and
development computer system referenced in the second item on
Schedule 3.6(b) hereof.
- ---------------
ARTICLE V
[RESERVED]
- 17 -
<PAGE> 23
ARTICLE VI
THE CLOSING
6.1 DELIVERIES BY HANDI-PAC AND THE SHAREHOLDER. At the
-------------------------------------------
Closing, Buyer shall receive from Handi-Pac and the Shareholder the
following:
(a) A certificate of good standing for Handi-Pac from
the Secretary of State of Missouri and the Secretary of State
of each of the states in which Handi-Pac is qualified as a
foreign corporation stating that it is a validly existing
corporation in good standing;
(b) Copies of duly adopted resolutions of the Board of
Directors of Handi-Pac and the sole Shareholder approving the
execution, delivery and performance of this Agreement and the
other instruments contemplated hereby certified by the
Secretary of Handi-Pac;
(c) A First Amendment to Employment Agreement between
Handi-Pac and Sam Scott dated the date hereof in the form of
Exhibit B attached hereto and incorporated herein
---------
("First Amendment to Employment Agreement") duly executed
---------------------------------------
by Sam W. Scott;
(d) An Assignment Agreement duly executed by (1) the
trustee(s) of the Bev Taylor Revocable Trust U/I dated
November 25, 1987, as amended January 17, 1990, February 26,
1992 and February 20, 1996, (2) the trustee(s) of the Frances
K. Taylor Revocable Trust U/I dated November 25, 1987, as
amended January 17, 1990 and February 26, 1992 (the "Taylor
------
Trust") and (3) by the Shareholder in the form of Exhibit C
----- ------- -
attached hereto and incorporated herein (the "Assignment")
----------
in consideration for the aggregate payment thereunder of Three
Hundred Fifty Thousand Dollars ($350,000) by treasurer's check
drawn on Summit Bank;
(e) Consent and Acknowledgements duly executed and
notarized by Brent Taylor, Kay Barrath, Barbara Fleming and
Deborah Johnson in form and substance acceptable to Buyer;
(f) A certificate of the chief financial officer of
Handi-Pac and the Shareholder attaching a list of (i) Handi-
Pac's bank accounts, authorized persons and safety deposit
boxes and other items of similar nature and (ii) all material
liabilities of Handi-Pac as of the date hereof other than
those reflected or reserved against in the Financial
Statements;
(g) [RESERVED];
(h) A true, correct and complete copy of the Articles of
Incorporation, as amended, of Handi-Pac, certified by the
Secretary of State of Missouri, and a true, correct and
complete copy of the bylaws, as amended, of Handi-Pac,
certified by the corporate secretary;
- 18 -
<PAGE> 24
(i) Certificates representing the Shares with duly
executed, valid stock powers attached in form for transfer to
Buyer and duly executed letters of transmittal in the form
provided by Buyer with respect thereto;
(j) The resignations of any officers or directors of
Handi-Pac as requested by Buyer;
(k) An original or photostatic copy duly certified as
accurate and complete of all requisite governmental or
regulatory approvals of the transactions contemplated hereby,
if any;
(l) The Assignment of Option Agreement duly executed by
Bev Taylor;
(m) Evidence of termination of the lease of the north
warehouse referenced in Section 4.7 duly executed by the Betco
Trust; and
(n) Such other documents and instruments as Buyer may
reasonably request.
6.2 BUYER'S DELIVERIES. At the Closing, the Shareholder
------------------
shall receive from Buyer the following:
(a) A certificate of good standing from the Secretary of
State of the State of Missouri stating that Buyer is a validly
existing corporation in good standing;
(b) Copies of duly adopted resolutions of Buyer's Board
of Directors approving the execution, delivery and performance
of this Agreement, certified by its Secretary or Assistant
Secretary;
(c) Payment of the amount of the Purchase Price payable
by treasurer's check drawn on Summit Bank pursuant to Section
1.1(b) above;
(d) [RESERVED];
(e) The Assignment duly executed by Hi-Flier, Inc., a
Nevada corporation, and payment by treasurer's check drawn on
Summit Bank in the amount of Three Hundred Fifty Thousand
Dollars ($350,000) as consideration therefor to the
Shareholder and/or his Affiliates;
(f) A letter dated as of the Closing Date executed on
behalf of Handi-Pac simultaneously with the consummation of
the transactions contemplated by the Agreement addressed to
Liz Dalpe stating its intention to continue her employment;
(g) A letter agreement dated as of the Closing Date
between Handi-Pac and Betco Trust providing for a lease of (i)
Premises No. 2, Section 9, Township 46 North, Range 5 West
(Middle), McKittrick, Mo 65056 and (ii) Premises No. 1,
Section 9,
- 19 -
<PAGE> 25
Township 46 North, Range 5 West (South) McKittrick, MO 65056
on terms acceptable to Buyer; and
(h) The Assignment of Option Agreement duly executed by
Buyer.
ARTICLE VII
INDEMNIFICATION
7.1 GENERAL INDEMNIFICATION.
-----------------------
(a) By the Shareholder. By execution of this
------------------
Agreement, the Shareholder agrees to indemnify Buyer, its
Affiliates (including, but not limited to, Handi-Pac following
the Closing) and their respective successors and assigns and
hold them harmless against and in respect of:
(1) any and all loss, liability, cost, expense
or damage (including judgments and settlement payments)
incurred by them incident to, arising in connection with
or resulting from any misrepresentation, breach,
nonperformance or inaccuracy of any representation,
warranty or covenant of Handi-Pac or the Shareholder
contained in this Agreement (including the Schedules
hereto);
(2) any and all loss, liability, cost, expense
or damage (including judgments and settlement payments)
incurred by them incident to, arising in connection with
or resulting from any failure of the Shares to be legally
and validly issued, fully paid and nonassessable;
(3) any and all costs, expenses and all other
actual damages incurred by them in claiming, contesting
or remedying any breach, misrepresentation,
non-performance or inaccuracy described above, or in
enforcing their rights to indemnification hereunder
including, by way of illustration and not limitation, all
legal and accounting fees, other professional expenses
and all filing fees and collection costs incident thereto
and all such fees, costs and expenses incurred in
defending claims which, if successfully prosecuted would
have been meritorious and would have resulted in Damages
(as defined herein).
(b) By Buyer. By execution of this Agreement, Buyer
--------
agrees to indemnify the Shareholder and his respective
successors and assigns and hold them harmless against and in
respect of:
(1) any and all loss, liability, cost, expense
or damage (including judgments and settlement payments)
incurred by them incident to, arising in connection with
or resulting from any misrepresentation, breach,
- 20 -
<PAGE> 26
nonperformance or inaccuracy of any representation,
warranty or covenant of Buyer contained in this
Agreement; and
(2) any and all costs, expenses, and all other
actual damages incurred by them in claiming, contesting,
or remedying any breach, misrepresentation,
non-performance, or inaccuracy described above, or in
enforcing their rights to indemnification hereunder
including, by way of illustration and not limitation, all
legal and accounting fees, other professional expenses
and all filing fees and collection costs incident thereto
and all such fees, costs and expenses incurred in
defending claims which, if successfully prosecuted would
have been meritorious and would have resulted in Damages.
(c) Damages. Any and all of the items set forth in
-------
Section 7.1(a) and (b) for which a party is entitled to be
indemnified hereunder are collectively called "Damages."
-------
7.2 NOTICE OF, AND PROCEDURES FOR, COLLECTING INDEMNIFICATION.
---------------------------------------------------------
(a) Initial Claim Notice. When a party becomes
--------------------
aware of a situation which may result in Damages for which it
would be entitled to be indemnified hereunder, such party (the
"Indemnitee") shall submit a written notice (the
----------
"Initial Claim Notice") to the Shareholder or Buyer, as
--------------------
applicable (the "Indemnitor"), to such effect with
----------
reasonable promptness after it first becomes aware of such
matter and shall furnish the Indemnitor with such information
as it has available demonstrating its right or possible right
to receive indemnity. If the potential claim is predicated
on, or later results in, the filing by a third party of any
action at law or in equity (a "Third Party Claim"), the
-----------------
Indemnitee shall provide the Indemnitor with a supplemental
Initial Claim Notice promptly not later than twenty (20) days
prior to the date on which a responsive pleading must be
filed, and shall also furnish a copy of such claim (if made in
writing) and of all documents received from the third party in
support of such claim. Every Initial Claim Notice shall, if
feasible, contain a reasonable estimate by the Indemnitee of
the losses, costs, liabilities and expenses (including, but
not limited to, costs and expenses of litigation and
attorneys' fees) which the Indemnitee may incur. In addition,
each Initial Claim Notice shall name, when known, the person
or entity making the assertions which are the basis for such
claim. Failure by the Indemnitee to deliver an Initial Claim
Notice or an update thereof in a timely manner shall not
preclude Indemnitee from being indemnified hereunder, except
to the extent that the Indemnitor can demonstrate actual
monetary prejudice resulting from such delay.
(b) Rights of the Indemnitor. If, prior to the
------------------------
expiration of thirty (30) days from the mailing of an Initial
Claim Notice (the "Claim Answer Period"), the Indemnitor
-------------------
shall request in writing that such claim not be paid, the same
shall not be paid, and the Indemnitor shall settle,
compromise, or litigate in good faith such claim, and employ
attorneys of its choice to do so; provided, however, that
Indemnitee shall not be required to refrain from paying any
claim which has matured by court judgment or decree, unless
appeal is taken therefrom and proper appeal bond posted by the
Indemnitor, nor shall it be required to refrain from paying
any claim where such action would result in
- 21 -
<PAGE> 27
the foreclosure of a lien upon any of its assets or a default
in a lease or other contract except a lease or other contract
which is the subject of the dispute. If the Indemnitor elects
to settle, compromise, or litigate such claim, all expenses,
including but not limited to all amounts paid in settlement or
to satisfy judgments or awards and attorneys' fees and costs,
incurred by the Indemnitor in settling, compromising, or
litigating such claim shall be paid by the Indemnitor.
Indemnitee shall cooperate fully to make available to the
Indemnitor and its attorneys, representatives, and agents, all
pertinent information under its control. Indemnitee shall
have the right to elect to settle or compromise all other
contested claims with respect to which the Indemnitor has not,
within the Claim Answer Period, acknowledged in writing
(i) that such claim is a matter covered by the indemnification
provisions of this Agreement, and (ii) its election to assume
full responsibility for the settlement, compromise,
litigation, and payment of such claim.
(c) Final Claims Statement. At such time as Damages
----------------------
for which the Indemnitor is liable hereunder are incurred by
Indemnitee by actual payment thereof or by entry of a final
judgment, Indemnitee shall forward a Final Claims Statement to
the Indemnitor setting forth the amount of such Damages in
reasonable detail on an itemized basis. Indemnitee shall
supplement the Final Claims Statement with such supporting
proof of loss (e.g. vouchers, cancelled checks, accounting
summaries, judgments, settlement agreement, etc.) as the
Indemnitor may reasonably request in writing within thirty
(30) days after receipt of a Final Claims Statement. All
amounts reflected on Final Claims Statements shall be paid
promptly by the Indemnitor, and if not paid in full within
thirty (30) days after delivery of the Final Claims Statement
relating thereto and the proof of loss referred to above,
shall bear interest at the rate of ten percent (10%) per annum
until paid, compounded annually.
(d) Survival of Indemnification; Remedies. The
-------------------------------------
parties agree that the representations and warranties of the
parties contained in this Agreement shall survive until April
1, 1998 for purposes of this Article VII, regardless of any
investigation made by any party prior to the date hereof.
Buyer and its Affiliates, on the one hand, and the
Shareholder, on the other hand, shall only be entitled to
indemnification under this Article VII for breaches of
representations and warranties if an Initial Claim Notice
describing the claim for which indemnification is sought is
signed by an officer of Buyer, its Affiliates or by the
Shareholder, as the case may be, and is submitted to Buyer, on
the one hand, or the Shareholder, on the other hand, as the
case may be, not later than April 1, 1998. The
indemnification rights under this Article VII shall be the
sole and exclusive remedy with respect to breaches of the
representations and warranties of Handi-Pac, the Shareholder
and the Buyer contained herein. Notwithstanding the foregoing
or anything else contained in this Agreement to the contrary,
the representations and warranties of the Shareholder and
Buyer shall survive the Closing Date and April 1, 1998 to the
extent and only to the extent that the Shareholder or the
Buyer has committed fraud and/or acts of intentional willful
misconduct for which the Shareholder or Buyer, respectively,
may pursue all applicable remedies and damages at law or in
equity.
(e) Minimum Dollar Limitation. The parties hereto
-------------------------
agree that no violations or breaches under any one or more of
the representations and warranties of the
- 22 -
<PAGE> 28
Shareholder or Handi-Pac, on the one hand, or Buyer, on the
other hand, set forth in this Agreement shall support a claim
for Damages unless and until Damages attributable to all
violations and breaches of representations and warranties of
the Shareholder and Handi-Pac, on the one hand, or Buyer, on
the other hand, exceed on a cumulative and aggregate basis the
sum of Twenty Five Thousand Dollars ($25,000) and then only
for cumulative Damages in excess of Ten Thousand Dollars
($10,000) may be sought and recovered.
(f) Limit of Indemnification. The obligation of the
------------------------
Shareholder to indemnify Buyer and its Affiliates for breaches
of representations and warranties under Section 7.1(a) and the
obligation of Buyer to indemnify Seller for breaches of
representations and warranties under Section 7.1(b) for
Damages shall be limited to $400,000 in the aggregate.
ARTICLE VIII
[RESERVED]
ARTICLE IX
MISCELLANEOUS
9.1 EXPENSES. The Shareholder and Handi-Pac, jointly and
--------
severally, represent and warrant that other than amounts due
Turnaround and Crisis Management, Inc., no broker, agent or other
person acting on their behalf is or will be entitled to a fee,
commission or other payment as a result of or arising out of this
Agreement or the transactions contemplated hereby. The Shareholder
and Buyer shall each bear their own respective expenses, fees and
commissions (including, but not limited to, all compensation and
expenses of counsel, financial advisors, brokers, consultants,
actuaries and accountants) incurred in connection with the
preparation, negotiation and execution of this Agreement and the
performance of the transactions contemplated hereby.
Notwithstanding the foregoing, the parties hereto agree that (i)
all outstanding amounts due Bryan Cave as of the date hereof shall
be paid by the Shareholder for legal services, (ii) all outstanding
amounts due Turnaround and Crisis Management, Inc. shall be paid by
the Shareholder except that Handi-Pac shall make a payment of
$5,192.05 thereto on the date hereof which payment by Handi-Pac
constitutes payment for business consultations received by it, and
(iii) all outstanding amounts due Lopata, Flegel, Hoffman & Co. as
of the date hereof shall be paid by the Shareholder except that
Handi-Pac shall make a payment of $5,000 thereto on the date hereof
which payment by Handi-Pac constitutes payment for accounting and
financial services received by it.
9.2 [RESERVED.]
- 23 -
<PAGE> 29
9.3 GOVERNING LAW. This Agreement shall be deemed to be
-------------
made in, and in all respects shall be interpreted, construed and
governed by and in accordance with the internal laws of, the State
of Missouri, without reference to the conflict of law provisions
thereof.
9.4 NOTICES. Any notices or other communications
-------
required under this Agreement shall be in writing, shall be deemed
to have been given when delivered in person, by telex or facsimile
transmission with evidence of confirmation, when delivered to a
recognized next business day courier, or, if mailed, when deposited
in the United States first class mail, registered or certified,
return receipt requested, with proper postage prepaid, addressed as
follows or to such other address as notice shall have been given
pursuant hereto:
If to the Shareholder:
Mr. Bev Taylor
Route 2
Box 198
Hermann, MO 65041
With a copy to:
William F. Seabaugh, Esq.
Bryan Cave
One Metropolitan Square
211 N. Broadway, Ste. 3600
St. Louis, MO 63102-2750
Facsimile: (314) 259-2020
If to Buyer and/or to Handi-Pac:
c/o Mr. David A. Segal
Chairman
Steven Toy Inc
3527 Oak Lawn Ave.
Suite 507
Dallas, Texas 75219
Facsimile: (214) 522-4668
With a copy to:
Mark L. Kaltenrieder, Esq.
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
Facsimile: (314) 552-7000
- 24 -
<PAGE> 30
9.5 ASSIGNMENT. This Agreement may not be assigned, by
----------
operation of law or otherwise.
9.6 SECTION HEADINGS; SCHEDULES AND EXHIBITS. The
----------------------------------------
section headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. The Schedules and Exhibits
hereto are incorporated herein by this reference and made a part
hereof.
9.7 COUNTERPARTS. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
9.8 AMENDMENT. Except as hereinafter provided, this
---------
Agreement may not be amended except by a writing signed by the
party to be charged.
9.9 ENTIRE AGREEMENT. This Agreement constitutes the
----------------
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof.
9.10 BINDING EFFECT. This Agreement shall be binding upon
--------------
and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns.
9.11 SURVIVAL. The respective covenants and agreements of
--------
Buyer, Handi-Pac and the Shareholder made in or pursuant to this
Agreement shall survive the Closing.
9.12 SEVERABILITY. In case any provision in this
------------
Agreement shall be held invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
9.13 THIRD PARTIES. Nothing contained in this Agreement
-------------
or in any instrument or document executed by any party in
connection with the transactions contemplated hereby shall create
any rights in, or be deemed to have been executed for the benefit
of, any person or entity that is not a party hereto or a successor
or permitted assign of such a party.
9.14 EQUITABLE REMEDIES. Since damages, in the event of
------------------
breach of any term or condition of this Agreement, would be
difficult, if not impossible, to ascertain, the parties hereto may
obtain in addition to any other remedy available to it, and no such
party hereto shall oppose, an injunction restraining such breach
and specific performance of any such breached term or condition. No
bonds or other securities shall be required in connection
therewith.
9.15 KNOWLEDGE. As used in this Agreement, the terms
---------
"knowledge" and "best knowledge" shall, as to Handi-Pac, Inc.,
refer to all facts of which any of Frank R. Mack, Bev Taylor or Sam
W. Scott had actual knowledge.
- 25 -
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
The Shareholder executes this Agreement in his individual capacity
as the sole shareholder of Handi-Pac.
STEVEN TOY INC, a Missouri corporation HANDI-PAC, INC., a Missouri corporation
By: /s/ David A. Segal By: /s/ Bev Taylor
---------------------------------- -----------------------------------
David A. Segal, Chairman Bev Taylor, President
SHAREHOLDER:
/s/ Bev Taylor
---------------------------------------
Bev Taylor
- 26 -
<PAGE> 1
ASSIGNMENT AGREEMENT
--------------------
THIS ASSIGNMENT AGREEMENT (this "Assignment") is made and
entered into this 3rd day of February, 1997, by and between Bev
Taylor as sole Trustee of the Bev Taylor Revocable Trust dated
November 25, 1987, as amended January 17, 1990, February 26, 1992
and February 20, 1996, Bev Taylor as sole Trustee of the Frances K.
Taylor Revocable Trust dated November 25, 1987, as amended January
17, 1990 and February 26, 1992, and Bev Taylor, an individual
(collectively the "Assignors"), and HI-FLIER, INC., a Nevada
corporation ("Assignee").
WHEREAS, the Bev Taylor Revocable Trust dated November
25, 1987, as amended January 17, 1990, February 26, 1992 and
February 20, 1996 (the "Trust") is the holder of certain promissory
notes of Handi-Pac, Inc., d/b/a Steven Manufacturing Company,
described on Exhibit A attached hereto and incorporated herein by
reference hereto (the "Secured Obligations"); and
WHEREAS, the Trust proposes to assign without recourse to
Assignee all of its rights, title and interest in and to the
Secured Obligations on the terms and conditions set forth herein,
the Assignors propose to assign without recourse to Assignee all of
their rights, title and interest with respect to the other
documents identified on Exhibit A attached hereto and incorporated
herein by reference (the "Loan Documents"), and Assignee proposes
to accept the assignment of such rights, title and interest from
Assignors on such terms and subject to such conditions;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
SECTION 1. ASSIGNMENT. On the terms and
--------- ----------
conditions set forth herein, the Trust hereby sells, assigns and
transfers to Assignee without recourse all of its rights, title and
interest in, to and under the Secured Obligations, and Assignors
hereby sell, assign and transfer to Assignee without recourse all
of their respective rights, title and interest with respect to the
Secured Obligations and the other Loan Documents; and Assignee
accepts such sale, assignment and transfer.
SECTION 2. PAYMENT. As consideration for the
--------- -------
sale, assignment and transfer of all of the rights, title and
interest of the Assignors with respect to the Secured Obligations,
Assignee hereby agrees to pay to Assignors on the date hereof the
sum of Three Hundred Fifty Thousand Dollars ($350,000.00) by
Treasurer's check drawn upon the Summit Bank, receipt of which is
hereby acknowledged. The consideration paid for the Secured
Obligations shall be allocated as set forth on Schedule 1
hereto. ----------
SECTION 3. PRECONDITIONS. The payment required
--------- -------------
under Section 2 above is expressly conditioned upon and has been
made in reliance upon Assignors' assurances that (i) all original
Notes which have not, on their face, been made payable to or
endorsed over to the Trust, have been endorsed on the face of such
Notes pay to the order of the Trust by all prior holders of such
Notes, (ii) each such Note evidencing any of the Secured
Obligations has been amended by Handi-Pac, Inc. and the Assignors
prior to their assignment hereunder to delete any prohibition of
assignability from the face of such Notes, (iii) the Trust has
contemporaneously
<PAGE> 2
with this assignment endorsed the original Notes
under the endorsement "Pay to the order of Hi-Flier, Inc." and has
delivered the originals thereof to Assignee, or for each Note which
Assignors have lost and cannot locate the original thereof, the
Trust shall have given Handi-Pac, Inc. a lost instrument affidavit
in favor of Handi-Pac, Inc. in form and substance acceptable to
Assignee and shall have caused Handi-Pac, Inc. to issue a
replacement note for each such missing Note in the present
outstanding principal amount of each such missing Note and
otherwise in form and substance acceptable to Assignee, and (iv)
Assignors have delivered to Assignee contemporaneously with this
assignment the originals of the other Loan Documents identified on
Exhibit A attached hereto and incorporated herein by reference,
together with such UCC-3 Assignments duly executed by Assignors in
the form of Group Exhibit B attached hereto and incorporated herein
by reference.
SECTION 4. FURTHER ASSURANCES. Assignors
--------- ------------------
covenant and agree to execute and deliver to Assignee such other
and further documents of transfer as Assignee may reasonably
require in order to carry out the assignment of the Secured
Obligations contemplated hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
--------- ------------------------------
Assignors hereby expressly represent and warrant to Assignee the
following:
(a) The original signatures on each of the
Loan Documents are genuine;
(b) That prior to this assignment Assignors
hold title to the Loan Documents and have the right to assign each
of them to Assignee as set forth herein, and Assignors have made no
prior assignment of any of the Secured Obligations except for the
assignment of Redemption Note I (as identified on Exhibit A) by the
Frances K. Taylor Revocable Trust dated November 25, 1987, as
amended January 17, 1990 and February 26, 1992 to Bev Taylor as
sole trustee of the Frances K. Taylor Marital Trust following the
death of Frances K. Taylor, and the further assignment thereof by
the Frances K. Taylor Marital Trust to Bev Taylor as sole trustee
of the Bev Taylor Revocable Trust dated November 25, 1987, as
amended January 17, 1990, February 26, 1992 and February 20, 1996
pursuant to an Assignment dated January 30, 1997;
(c) That Assignors have not subordinated or
otherwise agreed to any limitation on payment of any of the Secured
Obligations or any collateral therefor pursuant to any agreements
with any third parties, except for the Subordination Agreement
dated March 15, 1996 made by Assignors in favor of Commerce Warren
County Bank to subordinate the Secured Obligations and Assignors'
security interest in Handi-Pac, Inc.'s accounts receivable to the
debt and security interest in favor of Commerce Warren County Bank;
(d) As of the date of this assignment, the
aggregate outstanding principal balance due under the Notes on the
date hereof is as set forth on Exhibit A, that all accrued and
unpaid interest on the Notes has been written off up to and
including the date of this Agreement; and
- 2 -
<PAGE> 3
(e) Bev Taylor is presently the sole Trustee
of the Bev Taylor Revocable Trust dated November 25, 1987, as
amended January 17, 1990, February 26, 1992 and February 20, 1996
and of the Frances K. Taylor Revocable Trust dated November 25,
1987, as amended January 17, 1990 and February 26, 1992, and as
such Bev Taylor is authorized and empowered to execute this
Assignment Agreement on behalf of each such trust and to endorse
each of the Notes on behalf of each such trust.
Assignors make no representations or warranties with
respect to the financial condition of Handi-Pac, Inc. or any other
maker, obligor, guarantor or any other party to or liable under any
of the Loan Documents or the collectibility of any amount due under
the Loan Documents.
SECTION 6. AGENT FEES. Assignors and Assignee
--------- ----------
agree that neither has contracted with any agent or broker for
purposes of this Assignment, and that no fee is owed to any party
by Assignors or Assignee with respect to the transactions
contemplated hereunder.
SECTION 7. GOVERNING LAW. This Assignment shall
--------- -------------
be governed by and construed in accordance with the internal laws
of the State of Missouri.
SECTION 8. BINDING EFFECT. This Assignment
--------- --------------
shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, personal
representatives, successors and assigns.
SECTION 9. ENTIRE AGREEMENT. This Assignment
--------- ----------------
and Exhibit A and Group Exhibit B attached hereto constitute the
entire agreement between the parties hereto relating to the subject
matter hereof and supersede all oral statements or other writings
with respect to the subject matter hereof.
SECTION 10. INDEPENDENT EXAMINATION AND APPRAISAL.
---------- -------------------------------------
Assignee acknowledges and agrees that:
(a) Assignee has had the opportunity to review
and inspect the Loan Documents and to ask any questions and to
obtain any information available to Assignors which may be
disclosed to Assignee under applicable law or regulation;
(b) Assignee has had the opportunity to make
his own independent investigation and appraise all of the facts and
circumstances relevant to determine the creditworthiness and
financial affairs of any maker, obligor, guarantor or other party
to or liable under any of the Loan Documents and with respect to
any real or personal property purporting to be secured by any of
the Loan Documents;
(c) Assignee is a sophisticated investor with
knowledge and understanding of the risks inherent in purchasing
obligations evidenced by documents such as the Loan Documents; and
- 3 -
<PAGE> 4
(d) The Assignee understands that certain of
the Secured Obligations have matured and that payments which are
due under the Loan Documents have not been paid when due and are
substantially overdue as of the Closing Date.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment Agreement this 3rd day of February, 1997.
"Assignors"
/s/ Bev Taylor
-------------------------------------------------
Bev Taylor, Sole Trustee of the Bev Taylor
Revocable Trust dated November 25, 1987, as
amended January 17, 1990, February 26, 1992 and
February 20, 1996
/s/ Bev Taylor
-------------------------------------------------
Bev Taylor, Sole Trustee of the Frances K. Taylor
Revocable Trust dated November 25, 1987, as
amended January 17, 1990 and February 26, 1992
/s/ Bev Taylor
-------------------------------------------------
Bev Taylor, in his individual capacity
"Assignee"
HI-FLIER, INC.
By: /s/ David A. Segal
----------------------------------------------
Name: David A. Segal
Title: President
-------------------------------------------
- 4 -
<PAGE> 5
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
On this 3rd day of February, 1997, before me personally
appeared Bev Taylor, to me personally known, who, being by me duly
sworn, did say that he is the sole trustee of the Bev Taylor
Revocable Trust dated November 25, 1987, as amended January 17,
1990, February 26, 1992 and February 20, 1996, and that said
instrument was signed by said trustee on behalf of said trust by
authority of the instrument establishing such trust, and said Bev
Taylor acknowledged said instrument to be the free act and deed of
said trustee and such trust.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal in the City and State aforesaid, the day
and year first above written.
(Seal)
/s/ Denise A. DeRouen
-----------------------------------
Notary Public
My Commission Expires:
November 18, 1997
- ----------------------
- 5 -
<PAGE> 6
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
On this 3rd day of February, 1997, before me personally
appeared Bev Taylor, to me personally known, who, being by me duly
sworn, did say that he is the sole trustee of the Frances K. Taylor
Revocable Trust dated November 25, 1987, as amended January 17,
1990 and February 26, 1992, and that said instrument was signed by
said trustee on behalf of said trust by authority of the instrument
establishing such trust, and said Bev Taylor acknowledged said
instrument to be the free act and deed of said trustee and such
trust.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal in the City and State aforesaid, the day
and year first above written.
(Seal)
/s/ Denise A. DeRouen
-----------------------------------
Notary Public
My Commission Expires:
November 18, 1997
- ----------------------
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
On this 3rd day of February, 1997, before me personally
appeared Bev Taylor, to me personally known, who, being by me duly
sworn, did say that he signed the foregoing instrument as his free
act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal in the City and State aforesaid, the day
and year first above written.
(Seal)
/s/ Denise A. DeRouen
-----------------------------------
Notary Public
My Commission Expires:
November 18, 1997
- ----------------------
- 6 -
<PAGE> 7
STATE OF MISSOURI )
) SS.
CITY OF ST. LOUIS )
On this 3rd day of February, 1997, before me personally
appeared David A. Segal, to me personally known, who, being by me
duly sworn, did say that he is the President of Hi-Flier, Inc., a
Nevada corporation, and that said instrument was signed on behalf
of said corporation by authority of its Board of Directors; and
said David A. Segal acknowledged said instrument to be the free act
and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal in the City and State aforesaid, the day
and year first above written.
(Seal)
/s/ Denise A. DeRouen
-----------------------------------
Notary Public
My Commission Expires:
November 18, 1997
- ----------------------
600680.11
- 7 -
<PAGE> 8
Schedule 1
----------
Settlement Note $131,859.46
Redemption Note I 161,598.58
Redemption Note II 56,541.96
-----------
$350,000.00
- 8 -
<PAGE> 9
Exhibit A
---------
Secured Obligations:
- -------------------
1. Promissory Note dated November 1, 1993, made by
Handi-Pac, Inc. payable to the order of Bev Taylor and Frances K.
Taylor, Trustees of the Bev Taylor Revocable Trust as amended
January 17, 1990, in the original principal amount of $400,000.00
(the "Settlement Note"). As of the date of this Assignment
Agreement, the outstanding principal balance of the Settlement Note
is $131,859.46. Interest on the Settlement Note has been paid or
written off through February 3, 1997.
2. Redemption Note dated April 30, 1992, made by
Handi-Pac, Inc. payable to the order of Bev Taylor and Frances K.
Taylor, Trustees of the Frances K. Taylor Revocable Trust as
amended January 17, 1990, in the original principal amount of
$666,711.00 (the "Redemption Note I"). As of the date of this
Assignment Agreement, the outstanding principal balance of
Redemption Note I is $161,598.58. Interest on Redemption Note I
has been paid or written off through February 3, 1997.
3. Redemption Note dated April 30, 1992, made by
Handi-Pac, Inc. payable to the order of Bev Taylor and Frances K.
Taylor, Trustees of the Bev Taylor Revocable Trust as amended
January 17, 1990, in the original principal amount of $233,289.00
(the "Redemption Note II"). As of the date of this Assignment
Agreement, the outstanding principal balance of Redemption Note II
is $56,541.96. Interest on Redemption Note II has been paid or
written off through February 3, 1997.
Loan Documents:
- --------------
1. The Settlement Note, Redemption Note I and Redemption Note II
(collectively, the "Notes").
2. Security Agreement dated April 30, 1992 made by Handi-Pac,
Inc. in favor of Bev Taylor and Frances K. Taylor, Trustees of
the Bev Taylor Revocable Trust as amended January 17, 1990,
Bev Taylor and Frances K. Taylor, Trustees of the Frances K.
Taylor Revocable Trust as amended January 17, 1990, and Bev
Taylor, individually, as secured parties.
3. Two certain UCC-1 financing statements, numbers 2127521 and
16565, filed respectively with the Missouri Secretary of State
and the Gasconade County Recorder of Deeds, executed by
Handi-Pac, Inc., as debtor, and the Bev Taylor Revocable Trust
as amended January 17, 1990 and the Frances K. Taylor
Revocable Trust as amended January 17, 1990, as secured
parties.
- 9 -
<PAGE> 10
Group Exhibit B
---------------
(Forms of UCC-3 Assignments Attached)
- 10 -
<PAGE> 1
EXHIBIT A
---------
NEITHER THIS OPTION NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS OPTION NOR
ANY OF THE STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED
AND QUALIFIED IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR BASED ON AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED.
STOCK OPTION AGREEMENT
----------------------
EXX INC, a Nevada corporation (the "Company"), and Steven
Toy Inc, a Missouri corporation or registered assigns (the
"Optionee"), hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms and
---------------
conditions set forth herein, the Company hereby grants to the
Optionee an option (the "Option") to purchase up to Fifty Thousand
(50,000) shares (the "Option Shares") of the Class A Common Stock,
par value $.01 per share, of the Company (the "Company Common
Stock") at a price per share equal to Five Dollars ($5.00) (the
"Purchase Price"), subject to adjustment as hereinafter provided.
The Option shall be exercisable by the Optionee upon payment of the
Purchase Price in cash as provided in Section 3 hereof.
2. TERM OF OPTION. The Option may be exercised as
--------------
to the Option Shares not theretofore purchased during the five (5)
year period ending February 3, 2002 (the "Expiration Date").
3. EXERCISE OF OPTION. This Option is exercisable
------------------
in whole or in part (in increments of not less than 1,000 shares)
at any time or from time to time on or after February 3, 1997 and
prior to the Expiration Date. In order to exercise this Option,
the Optionee shall complete the Subscription Form attached hereto,
and deliver this Stock Option Agreement, the Subscription Form, an
executed investment letter in customary form containing such
representations by the Optionee regarding the Optionee's investment
intent and experience as the Company may reasonably request, and a
cashier's check or wire transferred funds in an amount equal to the
aggregate Purchase Price of the Option Shares being purchased, to
the Company, 1350 East Flamingo Road, Las Vegas, Nevada 89119, (or
at such other location as the Company may designate by notice in
writing to the Optionee). Upon the Company's receipt thereof, such
holder shall be deemed a holder of record of the shares of Company
Common Stock specified in said Subscription Form, and the Company
shall, as promptly as practicable, and in any event within twenty
(20) business days thereafter, execute and deliver to the Optionee
a certificate or certificates representing the aggregate number of
shares of Common Stock specified in said Subscription Form. Each
certificate so delivered shall be registered in the name of such
Optionee or such other name as shall be designated by such
Optionee. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation,
<PAGE> 2
execution and delivery of certificates pursuant to this Section,
except that, in case such certificates shall be registered in a name
or names other than the name of the registered holder of this Option,
funds sufficient to pay all stock transfer taxes which shall be
payable upon the execution and delivery of such certificate or
certificates shall be paid by the Optionee to the Company at the time
of delivering this Option to the Company as mentioned above.
4. ADJUSTMENT OF NUMBER OF SHARES AND PURCHASE PRICE.
-------------------------------------------------
(a) ADJUSTMENTS FOR STOCK DIVIDENDS, STOCK SPLITS
---------------------------------------------
OR CONSOLIDATION OR COMBINATION OF SHARES. In the event of any
- -----------------------------------------
increase or decrease in the number of the issued shares of the
Company Common Stock by reason of a stock dividend, stock split,
reverse stock split or consolidation or combination of shares or
any similar transaction at any time or from time to time after the
date hereof such that the holders of the Company Common Stock shall
have had an adjustment made, without payment therefor, in the
number of shares of the Company Common Stock owned by them or, on
or after the record date fixed for the determination of eligible
stockholders, shall have become entitled or required to have had an
adjustment made in the number of shares of the Company Common Stock
owned by them, without payment therefor, there shall be a
proportionate adjustment as to the number of Option Shares (and to
the Purchase Price) so that Optionee shall be entitled to receive,
upon exercise of this Option, the aggregate number and kind of
shares of Company Common Stock for the same aggregate consideration
which, if such Option had been exercised immediately prior to such
time, Optionee would have owned upon such exercise and been
entitled to receive upon such event. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) ADJUSTMENTS FOR RECAPITALIZATION,
---------------------------------
RECLASSIFICATION, REORGANIZATION OR OTHER LIKE CAPITAL
- ------------------------------------------------------
TRANSACTIONS OR FOR MERGER AND CONSOLIDATION. In the event the
- --------------------------------------------
Company (or any other corporation the securities of which are
receivable at the time upon exercise of the Option) shall effect a
plan of recapitalization, reclassification, reorganization or other
like capital transaction or shall merge or consolidate with or into
another corporation or convey all or substantially all of its
assets to another corporation at any time or from time to time on
or after the date hereof, then in each such case the Optionee upon
the exercise of this Option at any time after the consummation of
such recapitalization, reclassification, reorganization or other
like capital transaction or of such merger, consolidation or
conveyance shall be entitled to receive (in lieu of the securities
or other property to which such holder would have been entitled to
receive upon exercise prior to such consummation), the securities
or other property to which the Optionee would have been entitled to
have received upon consummation of the subject transaction if the
holder hereof had exercised this Option immediately prior to such
consummation without adjustment to the aggregate Purchase Price set
forth in this Option and all subject to further adjustment pursuant
to Section 4(a) hereof.
5. LEGENDS; STOP TRANSFER.
----------------------
(a) All certificates for the shares of Company
Common Stock issued to the Optionee pursuant to the exercise of the
Option shall bear the following legend:
- 2 -
<PAGE> 3
"THE SHARES OF STOCK
REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS.
NEITHER THESE SHARES, NOR ANY
PORTION THEREOF OR INTEREST THEREIN,
MAY BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THE
SAME IS REGISTERED AND QUALIFIED IN
ACCORDANCE WITH SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR
BASED ON AN OPINION OF COUNSEL OR
OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY, SUCH
REGISTRATION AND QUALIFICATION ARE
NOT REQUIRED."
(b) In addition, the Company shall make a notation
regarding the restriction on transfer of the shares of Company
Common Stock issued pursuant to the exercise of the Option and such
Company Common Stock shall be transferred on the books of the
Company only if transferred or sold pursuant to an effective
registration statement under the 1933 Act covering such shares.
6. OWNERSHIP, ASSIGNMENT AND REPLACEMENT.
-------------------------------------
(a) OWNERSHIP OF THIS OPTION. The Company may
------------------------
deem and treat the Optionee as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made
by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this
Stock Option Agreement for registration or transfer as provided in
this Section 6.
(b) ASSIGNMENT, EXCHANGE AND REPLACEMENT.
------------------------------------
Neither this Stock Option Agreement nor any rights hereunder are
assignable or exchangeable in whole or in part without the prior
written consent of the Company. Optionee agrees that in no event
will Optionee make transfer or disposition of any of the Securities
(other than pursuant to an effective registration statement under
the Securities Act of 1933), unless and until (i) Optionee shall
have notified the Company of the proposed disposition by executing
and delivering the attached Form of Assignment and (ii) shall have
furnished the Company with a statement of the circumstances
surrounding the disposition and reasonable assurance (which may
include an opinion of counsel, reasonably satisfactory to the
Company, at the expense of the Optionee or transferee) that the
proposed disposition is in compliance with all applicable laws, in
which event the Company shall acknowledge said Assignment as
indicated and cause the books and records of the Company to reflect
such assignee as the owner of this Option. This Stock Option
Agreement shall be promptly cancelled by the Company upon such
surrender in connection with any such exchange, transfer or
replacement. In case of loss, theft or destruction, upon receipt
by the Company of
- 3 -
<PAGE> 4
evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Stock Option Agreement, and of
indemnity or security reasonably satisfactory to the Company, the
Company will make and deliver a new Stock Option Agreement of like
tenor, in lieu of this Stock Option Agreement. The Optionee shall pay
all expenses, taxes (other than the costs of indemnity and stock
transfer taxes) and other charges payable in connection with the
preparation, execution and delivery of the new Option Agreement
pursuant to this Section 6(b).
7. CALL RIGHT. In the event that the Optionee has
----------
not exercised the Option in full on or prior to February 3, 2000,
the Company shall have the right (but not the obligation) at any
time after February 3, 2000 through February 3, 2002, to purchase
for cash or equivalent bank check, to the extent the Option remains
unexercised, in whole or in part (in increments of not less than
1,000 Shares), the Option from the Optionee at a price equal to Two
Dollars ($2.00) for each Option Share (the "Call Purchase Price").
Such right is hereinafter referred to as the "Call Right." The
Call Purchase Price shall be adjusted proportionately for any stock
dividends, stock splits, recapitalizations relative to the Company
Common Stock and the like occurring after February 3, 1997. The
Company may exercise the Call Right at any time or from time to
time after February 3, 2000 through February 3, 2002 by completing
the Call Right Form attached hereto and delivering such form to the
Optionee. The Optionee shall, as promptly as practicable, and in
any event within ten (10) business days after delivery of the Call
Right Form, deliver to the Company this Stock Option Agreement,
accompanied by such duly executed instruments of assignment as the
Company may reasonably request in order to effect the purchase of
the Option, against payment by the Company of the Call Purchase
Price.
8. SPECIAL AGREEMENTS OF THE COMPANY. The Company
---------------------------------
covenants and agrees that:
(a) RESERVATION OF SHARES. The Company will
---------------------
reserve and set apart and have at all times, free from preemptive
rights, a number of shares of authorized but unissued Company
Common Stock deliverable upon the exercise of the Option, and it
will have at all times any other rights or privileges sufficient to
enable it at any time to fulfill all of its obligations hereunder.
(b) AVOIDANCE OF CERTAIN ACTIONS. The Company
----------------------------
will not, by amendment of its Articles of Incorporation or through
any reorganization, transfer of assets, consolidation, merger,
issue or sale of securities or otherwise, avoid or take any action
which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in carrying out all of the provisions of this Stock Option
Agreement and in taking all of such action as may be necessary or
appropriate in order to protect the rights of the Optionee against
impairment.
(c) SUCCESSORS. This Stock Option Agreement
----------
shall be binding upon any corporation succeeding to the Company by
merger or consolidation.
(d) AUTHORIZATION; ISSUANCE OF OPTION SHARES.
----------------------------------------
The Company represents and warrants that this Option Agreement has
been duly authorized, executed and
- 4 -
<PAGE> 5
delivered by the Company. Option Shares deliverable upon exercise of
this Option shall, at such delivery and upon payment of the Purchase
Price to the Company, be fully paid and non-assessable, free from
taxes, liens and charges with respect to their purchase. The Company
shall take necessary steps to assure that the par value per share of
the Company Common Stock is at all times equal to or less than the
price per Option Share, as adjusted hereunder.
9. NOTIFICATIONS BY THE COMPANY. In case at any
----------------------------
time while the Option is exercisable: (i) the Company shall pay
any dividend payable in stock upon Company Common Stock or make any
distribution (other than cash dividends payable out of net earnings
after taxes for the prior fiscal year) to the holders of Company
Common Stock; (ii) there shall be any capital reorganization,
reclassification of the capital stock of the Company, consolidation
or merger of the Company with, or sale of all or substantially all
of its assets to, another corporation; or (iii) there shall be a
voluntary or involuntary dissolution, liquidation or winding-up of
the Company, then, in any one or more of such cases, the Company
shall give written notice to the Optionee of the date on which
(a) the books of the Company shall close, or a record shall be
taken for such dividend or distribution, or (b) such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up shall take place, as the
case may be. Such notice shall also specify the date as of which
the holders of Company Common Stock of record shall participate in
such dividend or distribution and any adjustment of the kind and
number of Option Shares and of the Purchase Price required by any
such event, or shall be entitled to exchange their Company Common
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up, as the case may be. Such
written notice shall be given not less than 20 days and not more
than 90 days prior to the action in question and not less than 20
days and not more than 90 days prior to the record date or the date
on which the Company's transfer books are closed in respect thereto
and such notice may state that the record date is subject to the
effectiveness of a registration statement under the Securities Act
of 1933, or to a favorable vote of stockholders, if either is
required.
10. NOTICES. Any notice or other document required
-------
or permitted to be given or delivered to the Optionee shall be
delivered at, or sent by certified or registered mail to the
Optionee at, the most recent address of the Optionee shown on the
stock records of the Company, or to such other address as shall
have been furnished to the Company in writing by such Optionee.
Any notice or other document required or permitted to be given or
delivered to the Company shall be sent by certified or registered
mail to the Company at its address set forth in Section 3, or such
other address as shall have been furnished to the Optionee by the
Company.
11. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY.
--------------------------------------- ---------
Except to the extent that the Option Shares are exercised, this
Option shall not entitle the Optionee to any of the rights of a
stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Optionee to purchase shares of Company
Common Stock hereunder, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability
of such holder for the Purchase Price or any rights of such holder as
a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
- 5 -
<PAGE> 6
12. MISCELLANEOUS. This Stock Option Agreement
-------------
shall be governed by, and construed and enforced in accordance
with, the laws of the State of Nevada. This Stock Option Agreement
and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party (or
any predecessor in interest thereof) against which enforcement of
the same is sought. The headings in this Stock Option Agreement
are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company and the Optionee
have caused this Stock Option Agreement to be executed by their
duly authorized representatives as of February 3, 1997.
EXX INC
By /s/ David A. Segal
-------------------------------------
Name: David A. Segal
---------------------------------
Title: Chairman
--------------------------------
STEVEN TOY INC
By /s/ David A. Segal
------------------------------------
Name: David A. Segal
----------------------------------
Title: Chairman
--------------------------------
- 6 -
<PAGE> 7
FORM OF ASSIGNMENT
To Be Executed by the Optionee if It Desires to Transfer the Option
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
- ----------------------------------
(Name)
- ----------------------------------
(Address)
- ----------------------------------
the right to purchase ---------------------- shares of EXX INC
Class A Common Stock subject to the Stock Option Agreement, as said
shares were constituted at the date of said Stock Option Agreement,
and does hereby irrevocably constitute and appoint -----------------
- --------------------- Attorney to make such transfer on the books
of the Company maintained for the purpose, with full power of
substitution.
- ----------------------------------
Signature
Printed Name:
---------------------
Dated:
---------------------------
In the presence of
- ----------------------------------
NOTICE: The signature to the foregoing Assignment must correspond
to the name as written upon the face of the Stock Option Agreement
in every particular, without alteration or enlargement or any
change whatsoever.
Acknowledgment and Consent
--------------------------
EXX INC hereby acknowledges and consents to the foregoing
assignment.
EXX INC
By
----------------------------
Name:
-------------------------
Title:
------------------------
<PAGE> 8
SUBSCRIPTION FORM
To Be Executed by the Optionee if It Desires to Exercise
the Option
The undersigned hereby exercises the right to purchase
- ------------ shares of EXX INC Class A Common Stock subject to the
Option at the date of this subscription and herewith makes payment
of the sum of $-------------------- representing the aggregate
Purchase Price with respect to such shares in effect at this date.
Certificates for such shares shall be issued in the name of and
delivered to the undersigned, unless otherwise specified by written
instructions, signed by the undersigned and accompanying this
subscription.
Dated
---------------------------------
- ---------------------------------------
Signature
Printed Name:
--------------------------
Address:
- ---------------------------------------
- ---------------------------------------
<PAGE> 9
CALL RIGHT FORM
To Be Executed by the Company if It Desires to purchase the Option
The Company hereby notifies the Optionee named below of the
Company's exercise of its right to purchase the Option in whole or
in part (in increments of not less than 1,000 shares) pursuant to
Section 7 of the Stock Option Agreement. Such Optionee shall, as
promptly as practicable, and in any event within ten (10) business
days after delivery of this Call Right Form, deliver to the Company
the Stock Option Agreement, accompanied by such duly executed forms
of assignment as the Company may reasonably request in written
instructions accompanying this Call Right Form, against payment by
the Company of the Call Purchase Price.
Dated
---------------------------------
EXX INC
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Optionee:
Name:
----------------------------------
Address:
- ---------------------------------------
- ---------------------------------------
