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):
July 11, 1996
AMERICAN TOYS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-24742 13-3704059
State of Commission File IRS Employer
Incorporation Number. Identification
No.
448 West 16th Street
New York, New York 10011
Address of principal executive offices
Registrant's telephone number, including area code (212) 391-2272
None
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
In June 1996, European Ventures Corp. ("EVC"), a British Virgin
Island corporation, of which Moses Mika is the sole officer, director and
stockholder, acquired 3,106,005 shares of registrant's common stock, par
value $.01 per share (the "Common Stock") in exchange for 400,000 shares
of common stock of Multimedia Concepts International, Inc., a Delaware
corporation ("Media"), which shares are quoted on the Nasdaq SmallCap
Stock Market. Mr. Mika is the father of Ilan Arbel, the president and Chief
Executive Officer of the Registrant and a director of Media. The shares of
Common Stock issued to EVC will not be eligible to receive the spin-off
distribution referred to below. In May 1996, Media acquired 51% of the
outstanding shares of common stock of Video On-Line USA, Inc.
("Video"). Video was formed by EVC, which company retained 49% of the
outstanding shares of Video. In June 1996, EVC exchanged all of its shares
of Video for five year options to purchase 3,000,000 shares of the Common
Stock at an exercise price of $2.00 per share and 100,000 shares at an
exercise price of $2.50.
In addition, pursuant to the terms of a five year employment
agreement by and between the Registrant and Ilan Arbel dated as of June
1, 1996, the Registrant granted Mr. Arbel an option to purchase 1,000,000
shares of Common Stock at $1.00 per share for a period of five years and
2,250,000 shares at $1.33 exercisable until December 31, 1996. In July
1996, Ilan Arbel, exercised his option to purchase 1,000,000 shares at
$1.00 in full.
Presently, there are 5,000,000 shares of Registrant outstanding, of
which EVC owns 62%, Ilan Arbel owns 20%, and whereby Mr. Arbel
through his families ownership controls approximately 82% of the
outstanding shares of Common Stock, which does not include (i) 600,000
shares issuable pursuant to the Registrant's Private Placement (as described
in Item 2 below), (ii) 2,250,000 shares issuable upon the consummation of
the acquisition of Labyrinth Communications Technologies Group, Inc.
("Labyrinth"), (iii) 1,000,000 shares issuable upon the exercise of an option
to be delivered to Registrant upon the consummation of the acquisition of
Mantra Technologies, Inc. ("Mantra") or (iv) 7,400,000 shares issuable
upon the exercise of options to be issued to directors and consultants of the
Registrant, upon the consummation of the acquisitions of Labyrinth and
Mantra. The acquisitions of Labyrinth and Mantra are described in Item 2
below.
Item 2. Acquisition or Disposition of Assets
Registrant's Acquisition of Labyrinth Communications Technologies Group,
Inc. and Mantra Technologies, Inc.
Registrant, has entered into a stock purchase agreement with
Labyrinth (the "Labyrinth Agreement"), whereby the Registrant has agreed
to acquire 51% of the outstanding shares of common stock of Labyrinth.
Pursuant to the terms of the Labyrinth Agreement, the Registrant will
purchase 200,000 shares of Labyrinth's common stock or 20% of the
outstanding shares for $2,000,000 and shall exchange 2,250,000 of
Common Stock for 310,000 shares of Labyrinth's common stock from Dr.
Oliver Hilsenrath, the sole officer and director of Labyrinth. Upon
consummation of this agreement Dr. Oliver Hilsenrath, the founder of both
Labyrinth and Mantra, will become the president, chief executive officer
and a director of the Registrant. In addition, Registrant has entered into a
stock purchase agreement with Mantra (the "Mantra Agreement, to acquire
51% of the outstanding shares of Mantra for $500,000, with the right to
acquire the remaining 49% of the outstanding shares in exchange for an
aggregate of 1,000,000 shares of the Registrant's Common Stock.
Registrant shall be issued an option by the stockholders of Mantra upon the
consummation of the acquisition, which option may be initially exercised
only in the event that the closing bid price of the Common Stock for the
period of 30 consecutive trading days prior to the date of exercise shall
have been at least $5.00.
Labyrinth is a development stage company which is engaging
in the research and development of wireless communications technology.
Presently, Labyrinth is in the process of developing a series of products
geared to improving the efficiency of resource utilization in wireless base
stations by a mix of radio and software technologies. The technology,
through computerized programming, if developed, will provide for the
flexibility of allocating channels geographically by consumer demand.
Presently, Labyrinth is in the process of raising $948,000 through a private
placement offering. Mantra is a development stage company which is
developing an advanced user interface for the Internet and other databases.
The software acquaints itself with the user and probes the databases
gathering items which correlate to the users.
The Registrant has commenced a private placement offering
of its Common Stock consisting of the sale of 600,000 shares of Common
Stock for gross proceeds of $1,500,000.
Financial information regarding the Registrant, Labyrinth and
Mantra are provided as part of Item 7.
Spin-off of shares of Play Co. Toys & Entertainment Corp.
In June 1996, Registrant's Board of Directors, pursuant to
the consent of the majority stockholder of Registrant, which was Mister Jay
Fashions International, Inc., ("Mr. Jay") at such time, authorized the spin-
off of the shares of common stock of Play Co. Toys & Entertainment Corp.
("Playco") owned by the Registrant. The record date for stockholders of
the Registrant to receive the distribution of the shares of Playco is August
15, 1996. Presently, the Registrant owns 2,548,930 shares or approximately
66% of the outstanding shares of common stock of Playco. In addition,
Registrant, as majority stockholder of Playco has authorized the conversion
of its Series D Preferred Stock owned by the Registrant to be converted into
1,157,028 shares of Playco's common stock, based on the average closing
bid price ($1.21) of Playco's shares for the period from March 1, 1996 to
May 31, 1996. Initially, Playco was indebted to the Registrant in the
amount of $1,400,000, which was converted into one share of Playco's
Series D Preferred Stock, which share gave Registrant a preferential voting
right to vote to elect the majority of the board of directors of Playco. On
July 19, 1996, Playco mailed an information statement and annual report
was mailed to the stockholders of Playco, describing the conversion and
certain amendments to its certificate of incorporation, which action is
scheduled to take place on August 9, 1996.
Upon the conversion of the Series D Preferred Stock
Registrant would own 3,705,958 shares of Playco's common stock. The
record date for the stockholders entitled to the distribution is August 15,
1996, and the distribution is expected to be sent to stockholders on August
30, 1996. As of August 15, 1996, the Registrant expects that there will be
7,850,000 shares of Common Stock outstanding. This anticipates (i) the
consummation of the Labyrinth Agreement and the issuance of 2,250,000
shares of Common Stock to Dr. Oliver Hilsenrath and (ii) 600,000 shares
of Common Stock issuable pursuant to the Private Placement. Only the
holders of approximately 2,494,000 shares will be eligible for the
distribution, which includes (i) 893,995 shares which were outstanding
after the 1 for 4 reverse stock split in May 1996, (ii) 600,000 shares to be
issued in the Private Placement, assuming the consummation thereof, and
(iii) 1,000,000 shares issued to Ilan Arbel in June 1996 upon the exercise
of an option. The Spin-off distribution shall not include the 3,106,005
shares issued to EVC in June 1996 nor the 2,250,000 shares issuable to Dr.
Oliver Hilsenrath upon the consummation of the acquisition of Labyrinth.
Assuming the conversion of the Series D Preferred Stock, and Registrant
owning 3,705,958 shares of Playco's common stock, the rate of distribution
would be approximately 1.49 shares for each share of the Registrant owned.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of business being acquired. Shall be
filed by amendment.
(b) Pro Forma Financial Information. Shall be filed by
amendment.
(c) Exhibits. The following exhibits are filed herewith pursuant
to Item 601 of Regulation S-B of the Securities Act of 1933, as amended,
in connection with Registrant's report on Form 8-K dated July 11, 1996
under file No. O-24742.
2.1 - Stock Purchase Agreement Among Registrant,
Labyrinth Communications Technology Group, Inc.,
and the Stockholders of Labyrinth Communications
Technology Group, Inc., dated July 10, 1996.
2.2 - Stock Purchase Agreement Among Registrant,
Mantra Technologies, Inc., and the Stockholders of
Mantra Technologies, Inc., dated July 10, 1996.
4.7 - Form of Option from Stockholders of Mantra
Technologies, Inc., to the Registrant.
10.73 - Employment Agreement with Ilan Arbel.
10.74 - Form of Employment Agreement with Dr. Oliver
Hilsenrath.
10.75 - Form of Stockholders Agreement for Labyrinth
Communications Technology Group, Inc.
<PAGE>
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 hereunto duly authorized on the 24th day of July,
1996.
AMERICAN TOYS, INC.
By: /s/ Ilan Arbel
Ilan Arbel, President
STOCK PURCHASE AGREEMENT
AMONG
AMERICAN TOYS, INC.,
LABYRINTH COMMUNICATIONS TECHNOLOGY GROUP, INC.,
AND THE
STOCKHOLDERS OF
LABYRINTH COMMUNICATIONS TECHNOLOGY GROUP, INC.
July 10, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Terms of the Purchase . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Private Placement . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Stockholders Agreement . . . . . . . . . . . . . . . . . . . . 6
(f) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . 6
3. Representations and Warranties Concerning the
Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Representations and Warranties of Dr. Oliver Hilsenrath . . . . 6
(b) Representations and Warranties of the Purchaser . . . . . . . . 7
4. Representations and Warranties
Concerning the Target . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Organization, Qualification, and Corporate Power . . . . . . . 8
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Events Subsequent to Formation . . . . . . . . . . . . . . . . 10
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . 11
(h) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . 11
(i) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 12
(k) Intellectual Property . . . . . . . . . . . . . . . . . . . . . 12
(l) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . 13
(m) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(n) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(o) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . 14
(p) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . 14
(q) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(r) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(s) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . 14
(t) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 15
(v) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(w) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . .15
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Operation of Business . . . . . . . . . . . . . . . . . . . . . 15
(c) Preservation of Business. . . . . . . . . . . . . . . . . . . . 15
(d) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Notice of Developments . . . . . . . . . . . . . . . . . . . . 15
(f) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Amendment to the Target's By-Laws . . . . . . . . . . . . . . . 16
6. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . .16
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . 17
(d) Employment Agreement . . . . . . . . . . . . . . . . . . . . . 17
(e) Registration Right. . . . . . . . . . . . . . . . . . . . . . . 17
7. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . 17
(a) Conditions to Obligation of the Purchaser . . . . . . . . . . . 17
(b) Conditions to Obligation of Dr. Oliver Hilsenrath . . . . . . . 18
8. Survival of Representations and Warranties . . . . . . . . . . . . . 19
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Termination of Agreement. . . . . . . . . . . . . . . . . . . . 19
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . 20
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 20
(b) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Succession and Assignment . . . . . . . . . . . . . . . . . . . 20
(d) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(f) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 21
(h) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 21
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 21
(j) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(k) Construction . . . . . . . . . . . . . . . . . . . . . . . . . 21
(l) Incorporation of Exhibits and Schedules . . . . . . . . . . . . 21
(m) Specific Performance . . . . . . . . . . . . . . . . . . . . . 22
(n) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . 22
Exhibit A=Escrow Agreement with Gotham Bank of New York
Exhibit B=Employment Agreement of Dr. Oliver Hilsenrath
Exhibit C=Form of Amended By-Laws of the Target
Exhibit D=Form of Stockholders Agreement of Target
STOCK PURCHASE AGREEMENT
Agreement entered into as of July 10, 1996, by and among
American Toys, Inc., a Delaware corporation, with its principal
executive offices located at 448 West 16th Street, New York, New York
(the "Purchaser"), Labyrinth Communications Technology Group, Inc., a
Delaware corporation, with its principal executive offices located at 2694
Bishop Drive, Bldg. G, Suite 213, San Ramon California 94583 (the
"Target") and the stockholders of the Target, Dr. Oliver Dr. Oliver
Hilsenrath, an individual residing at 32 Essex Court, Alamo California
94507 and Janvrin Holdings Limited, a Channel Islands corporation,
with its offices located at Jardine House, 1 Wesley Street, St. Helier,
Jersey JE4 8UD, Channel Islands.
WHEREAS, Target as of the date hereof has 5,000,000 shares of its
common stock, par value $.001 per share (the "Common Stock")
authorized, of which there are 470,000 shares outstanding; and
WHEREAS, Dr. Oliver Hilsenrath owns all of the outstanding
shares of Common Stock; and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser shall purchase an aggregate of 510,000 shares of Common
Stock of the Target, 200,000 shares from the Target and 310,000 shares
from Dr. Oliver Hilsenrath; and
WHEREAS, the Target has commenced a private placement offering
to raise $948,000 for 79,000 shares of Target's Common Stock; and
WHEREAS, the purchase described by this Agreement, the
investment by Nathan Low and the financing to be provided by the
Private Placemet is pursuant to a plan to capitalize the Target and have it
become a subsidiary of the Purchaser; and
WHEREAS, Nathan Low has deposited $500,000 with the Company
to purchase 100,000 shares of Common Stock upon the consummation of
the Private Placemet and the transactions contemplated by this
Agreement; and
WHEREAS, Upon the closing of this transaction and the
consummation of the Private Placement, the Purchaser shall own 51% of
the outstanding shares of the Target; and
WHEREAS, there are no other options, warrants, purchase rights,
or other contracts or commitments that could require any of the Target
or Dr. Oliver Hilsenrath to sell, transfer, or otherwise dispose of any
capital stock of the Target, except pursuant to this Agreement and the
Target's Stockholder Agreement, attached as Exhibit D hereto.
WHEREAS, the Purchaser shall pay $2,000,000 for the 200,000
shares purchased from the Target and shall exchange 2,250,000 of its
shares for 310,000 shares owned by Dr. Oliver Hilsenrath; and
NOW THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the
representations, warranties, and covenants herein contained, the Parties
agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including court costs and
attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the rules and
regulations promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Closing" has the meaning set forth in section 2(h) herein.
"Closing Date" has the meaning set forth in section 2(h) herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available
to the public.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976, and
the Occupational Safety and Health Act of 1970, each as amended,
together with all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow" means the escrow set up by the Escrow Agent for the
Target's Shares.
"Escrow Agent" means Gotham Bank of New York.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works
and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g)
all other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
<PAGE>
"Market Value" means the average of the closing bid price for a
share of Purchaser's common stock for the period of time specified, as
officially reported by the principal securities exchange on which the
common stock is quoted or admitted to trading or by the Nasdaq
National or SmallCap Stock Market ("Nasdaq"), or, if the Common
Stock is not listed or admitted to trading on any securities exchange or
quoted by Nasdaq, the average closing bid price as listed on the OTC
Bulletin Board, as determined in good faith by resolution of the Board of
Directors of the Purchaser, based on the best information available to it.
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
"Ordinary Course of Business" means the ordinary course of
business consistent with past customs and practice (including with respect
to quantity and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Private Placement" the private offering of 79,000 shares of the
Target's Common Stock for $948,000, the closing of which shall be
simultaneously with the Closing.
"Prohibited Transaction" has the meaning set forth in ERISA Sec.
406 and Code Sec. 4975.
"Purchaser" has the meaning set forth in the preface above.
"Purchaser's Shares" means the 2,250,000 shares of common stock
of Purchaser, issuable to Dr. Oliver Hilsenrath upon the closing of the
transactions pursuant to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security" has the meaning set forth in Section 2 of the Securities
Act.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and
payable (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Target" has the meaning set forth in the preface above.
"Target's Shares" means 510,000 shares or 51% of the outstanding
shares of Common Stock of the Target, of which 200,000 shares are
being sold by the Company and 310,000 shares are being exchanged by
Dr. Oliver Hilsenrath for the Purchaser's Shares.
"Target Stockholders" means the the founders of Target, Dr. Oliver
Hilsenrath and Janvrin Holdings Limited.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any
kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
2. Terms of the Purchase.
(a) Basic Transaction. The Purchaser shall purchase 200,000 of the
Target's Shares or 20% of the outstanding shares of Common Stock of
the Target for the purchase price of $2,000,000 from the Company. In
addition, and simultaneously therewith the Purchaser shall exchange the
Purchaser's shares for 310,000 Target's shares owned by Dr. Oliver
Hilsenrath. Dr. Oliver Hilsenrath shall deliver a certificate for the
310,000 shares together with a duly executed stock power in the form of
transfer.
(b) Private Placement. The Target is presently offering 79,000
shares of its Common Stock, to three subscribers pursuant to the terms
of a subscription agreement, the form of which is attached hereto as
Appendix A, pursuant to the planned capitalization of the Target. Upon
the receipt of subscriptions for the Private Placement, the subscription
proceeds shall be held in the Escrow Account pending the Closing. The
Closing is contingent on and shall occur simultaneously with the Closing
of the Private Placement.
(c) Escrow. Upon the execution of the Subscription Agreements and
the delivery of subscription proceeds pursuant to the Private Placement,
such proceeds shall be delivered to the Escrow Agent, to be held in
Escrow pursuant to the terms and conditions of the Escrow Agreement,
attached hereto as Exhibit A.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Lampert &
Lampert, 10 East 40th Street, New York, New York 10016 on July 19,
1996 at 9:30 a.m., or such other date and time as the parties hereto can
agree on (the "Closing Date"); provided, however, that in the event the
Closing shall not have occurred on or before August 2, 1996, this
Agreement may be terminated by either the Purchaser or Dr. Oliver
Hilsenrath by written notification to the other at anytime thereafter. In
the event, no such termination notification is delivered this Agreement
will continue in full force and effect.
(e) Stockholders Agreement. On the Closing Date the Purchaser, the
Target's Stockholders and the subscribers in the Private Placement, shall
execute a Stockholders Agreement in the form attached hereto as Exhibit
D. The agreement shall provide for the right of first refusal upon any
stockholder of the Target desiring to sell any shares of the Target, in
excess of 10% of the outstanding or in the aggregate more than 25% of
the outstanding shares during any 12 month period. In addition, if the
Company desires to seek additional financing by the issuance of
additional shares than the stockholders of the Company would have the
right to purchase such additional shares in proportion to their percentage
ownership.
(f) Deliveries at the Closing. The Closing of the purchase of the
Target's Shares pursuant to this Agreement is contingent on the
consummation and simultaneous closing of the Private Placement. At the
Closing, (i) the Target shall deliver to the Purchaser (a) a certificate
representing the Target's Shares, of which 200,000 shall be original
issue and 310,000 as transferred from Dr. Oliver Hilsenrath as referred
to in section 2(a), (b) a certified amended copy of the Company's by-
laws in the form attached hereto as Exhibit C and (c) the various
certificates, instruments, and documents referred to in section 7(a) below
shall deliver to the Purchaser (a) 310,000 of the Target's Shares to
Purchaser together with duly executed stock powers in the form of
transfer, (b) Stockholders Agreement executed by himself and all the
subscribers in the Private Placement and (c) an executed employment
agreement in the form annexed hereto as Exhibit B; (d) the Purchaser
will deliver to the Target $2,000,000.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Stockholders of TargetDr.
The Target's Stockholders. The Target's Stockholders as the stockholders
of the Target represents and warrants to the Purchaser that the statements
contained in this section 3(a) are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this section 3(a)) with respect
to himself or itself.
(i) Authorization of Transaction. This Agreement constitutes
the valid and legally binding obligation of the Target's Stockholders,
enforceable against each in accordance with its terms and conditions.
The Target's Stockholders do not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval in
order to consummate the transactions contemplated by this
Agreement.
(ii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which the Target or the Target's
Stockholders is a party or by which they or it is bound or to which
any of them or its assets are subject.
(iii) Brokers' Fees. The Target's Stockholders do not have
any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which the Purchaser could become liable or
obligated.
(iv) Investment. The Target's Stockholders understands that
the shares of Purchaser's common stock issued to them have not
been registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon
exceptions from the federal and state securities laws, in accordance
with transactions not involving any public offering.
(v) Target's Shares. Prior to the consummation of this
transaction and the Private Placement, the Target's Stockholders are
the sole stockholders of the Target which shares have been duly
authorized, validly issued, fully paid and non-assessable, free and
clear of any liens and encumbrances, restrictions on transfer (other
than any restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. Upon the
consummation of the Private Placement, the shares issued upon the
acceptance of subscriptions and payment therefore, shall be validly
issued, fully paid and non-assessable. Neither the Target's
Stockholders or the Target are a party to any option, warrant,
purchase right, or other contract or commitment that could require
either to sell, transfer, or otherwise dispose of any capital stock of
the Target (other than pursuant to this Agreement). Neither the
Target's Stockholders or any subscriber in the Private Placement is
or shall be a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of the
Target. The 310,000 Target's Shares, when exchanged for the
Purchaser's Shares, will confer good title to same upon the
Purchaser.
(b) Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Target's Stockholders that the statements
contained in this section 3(b) are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this section 3(b)).
(i) Organization of the Purchaser. The Purchaser is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
(ii) Authorization of Transaction. The Purchaser has full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms and conditions. The Purchaser need not
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which the Purchaser is a party or by which
it is bound or to which any of its assets is subject.
(iv) Purchaser's Shares. The Purchaser's Shares, when issued
and delivered to Dr. Oliver Hilsenrath, upon delivery of the Target's
to the Purchaser Shares, will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of all liens and
encumbrances and will confer good title to same upon Dr. Oliver
Hilsenrath.
4. Representations and Warranties Concerning the Target.
The Target's Stockholders represent and warrant to the Purchaser
that the statements contained in this section 4 are correct and complete as
of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this section 4).
Nothing in the annexed schedules shall be deemed adequate to disclose
an exception to a representation or warranty made herein, however,
unless the schedule identifies the exception with particularity and
describes the relevant facts in detail. Without limiting the generality of
the foregoing, the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item
itself).
(a) Organization, Qualification, and Corporate Power. The Target is
a corporation duly organized, validly existing, and in good standing
under the laws of the state of Delaware and the Target is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the failure
to so qualify does not materially adversely affect the business or financial
condition of the Target. The Target has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged, and to own and use the
properties, including but not limited to all Intellectual Property, owned
and used by it including that which is presently being developed.
Schedule 4(a) lists all of the Targets properties, inclusive of but not
limited to all real and personal properties and Intellectual Property
owned by Target and all which is presently being developed by Dr.
Oliver Hilsenrath and the Target. The Target has delivered to the
Purchaser correct and complete coies of the charter and by-laws of the
Target (as amended to date). The minute books containing the records of
meetings of the shareholders, the board of directors, and any committees
of the board of directors, the stock certificate books, and the stock
record books of the Target is correct and complete. The Target is not in
default under or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
shall consist of as of the Closing Date, 5,000,000 shares of Common
Stock, par value $.001 per share (the "Common Stock"), of which
1,000,000 shares will be issued and outstanding, assuring the closing of
the Private Placement, the investment by Nathan Low and the
consummation of the acquisition by Purchaser. All of the presently
issued and outstanding shares have been duly authorized, and have been
validly issued, fully paid, and nonassessable, and are held of record by
the Target Stockholders. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Target to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Target. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Target.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Target is
subject or any provision of the charter or bylaws of the Target or (ii)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Target is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets).
The Target does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) Title to Assets. The Target has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, as listed
on Schedule 4(a) located on its premises, free and clear of all Security
Interests.
(e) Subsidiaries. The Target does not have any Subsidiaries and does
not own or have the right or option to acquire any Security of any
Person.
(f) Events Subsequent to Formation. Since formation without limiting
the generality of the foregoing:
(i) the Target has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Target has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $1,000 or outside the
Ordinary Course of Business except as listed in Schedule 4(f)(ii);
(iii) no party has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) of the Target or
by which it is bound;
(iv) the Target has not imposed any Security Interest upon
any of its assets, tangible or intangible;
(v) the Target has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions);
(vi) the Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(vii) the Target has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims);
(viii) the Target has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property or
terminated a right it has acquired;
(ix) except as described in section 2(g), the Target has not
declared, set aside, or paid any dividend or made any distribution
with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(x) the Target has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property;
(xi) the Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees;
(xii) the Target has not entered into any employment contract
or collective bargaining agreement except as listed hereto as
Schedule 4(f)(iii), written or oral, and there are no such agreements
presently in effect;
(xiii) the Target has not granted any increase in the base
compensation of any of its directors, officers, and employees in the
past 12 months;
(xiv) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to
any other Employee Benefit Plan);
(v) the Target has not made or pledged to make any
charitable or other capital contribution;
(xvi) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Target; and
(xvii) the Target has not committed to any of the foregoing.
(g) Undisclosed Liabilities. The Target does not have any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability), except in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law).
(h) Legal Compliance. The Target and its respective predecessors
and Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply.
(i) Tax Matters. Since the Target has been recently organized, the
Target has not been required to file any Tax Returns.
(j) Real Property. The Target does not own any real property and
has not entered into any agreement to acquire any real property, except
as listed in Schedule 4(a).
(k) Intellectual Property.
(i) The Target owns or has the right to use pursuant to
license agreements, sublicense, agreements, or permission to use all
Intellectual Properties necessary for the operation of the businesses
of the Target as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the
Target immediately prior to the Closing hereunder will be owned or
available for use by the Target on identical terms and conditions
immediately subsequent to the Closing hereunder.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, neither the Target's
Stockholders nor the Target has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim
that the Target must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the
Target's Stockholders, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Target and the Target has taken all
necessary action to maintain and protect each item of Intellectual
Property that it owns or uses.
(iii) Schedule 4(k)(iii) identifies each patent or registration
which has been issued to the Target with respect to any of its
Intellectual Property, identifies each pending patent application or
application for registration which the Target has made with respect
to any of its Intellectual Property, identifies in detail each theory and
proposed technology being developed, and identifies each license,
agreement, or other permission which the Target has granted to any
third party with respect to any of its Intellectual Property (together
with any exceptions). The Target's Stockholders have delivered to
the Purchaser correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to the Purchaser correct
and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item.
Schedule 4(k)(iii) also identifies each trade name or unregistered
trademark used by the Target in connection with any of its
businesses including Intellectual Property owned by any third party
which the Target licenses or sublicenses. With respect to each item
of Intellectual Property required to be identified in Schedule
4(k)(iii):
(A) the Target possesses all right, title, and interest in
and to the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or to the
knowledge of the Target's Stockholders is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Target has not ever agreed to indemmnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(v) To the Knowledge of the Target's Stockholders the Target
will not interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of third
parties as a result of the continue operation of its business as
presently conducted (and as presently proposed to be conducted).
(l) Tangible Assets. The Target owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the
conduct of its business as presently conducted and as presently proposed
to be conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice,
is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used and
presently is proposed to be used.
(m) Inventory. There is no inventory of the Target.
(n) Contracts. Schedule 4(n) is a list of all oral and written
agreements to which the Target is a party.
The Target's Stockholders have delivered to the Purchaser a correct
and complete copy of each written agreement listed in Schedule 4(n) (as
amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to therein. With respect to
each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby; (C) no party is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a
breach or default, or permit <PAGE>
termination, modification, or acceleration,
under the agreement; and (D) no party has repudiated any provision of the
agreement.
(o) Notes and Accounts Receivable. There are no notes outstanding
and the accounts receivable of the Target are reflected properly on its
books and records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts.
(p) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Target or any Target Stockholder.
(q) Insurance. There are no insurance policies or agreements to
which the Target is a party.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) neither the Target nor any other
party to any policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration,
under the policy; and (D) no party to the policy has repudiated any
provision thereof.
(r) Litigation. The Target (i) is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge nor (ii) is it a
party or to the best Knowledge of the Target's Stockholders threatened to
be made a party to or has any reason to believe that there may be the
commencement of any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator.
(s) Product Warranty. The Target has not manufactured or sold any
products to date.
(t) Employees. Dr. Oliver Hilsenrath is presently the sole officer and
director of the Target, his employment agreement is annexed hereto as
Exhibit B.
(u) Employee Benefits. The Target does not contribute or maintain
and has never contributed or maintained any Employee Benefit Plan.
(v) Guaranties. The Target is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(w) Disclosure. The representations and warranties contained in this
section 4 do not contain any material untrue statement of a fact or omit
to state any material fact necessary in order to make the statements and
information contained in this section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his/her or its best efforts to
take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated
by this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in section 7 below).
(b) Operation of Business. The Target's Stockholders will not cause
or permit the Target to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Target's Stockholders will
not cause or permit the Target to declare, set aside, or pay any dividend
or make any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire or sell any of its capital stock.
(c) Preservation of Business. The Target's Stockholders will cause
the Target to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions,
and relationships with lessors, licensors, suppliers, customers, and
employees.
(d) Full Access. the Target's Stockholders will permit and cause the
Target to permit, representatives of the Purchaser to have full access, at
all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Target to all premises, properties,
personnel, books, records (including Tax records), contracts, and
documents of or pertaining to the Target.
(e) Notice of Developments. The Target's Stockholders will give
prompt written notice to the Purchaser of any material adverse
development causing a breach of any of the representations and
warranties in section 4 above. Each Party will give prompt written notice
to the others of any material adverse development causing a breach of
any of his or its own representations and warranties in section 3 above.
No disclosure by any Party pursuant to this section 5(e), however, shall
be deemed an amendment or supplement to this Agreement, to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
(f) Exclusivity. The Target's Stockholders will not cause or permit
the Target to (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of the Target or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate
in, or facilitate in any other manner any effort or attempt by any Person
to do or seek any of the foregoing. The Target's Stockholders will not
vote his Target Shares in favor of any such acquisition structured as a
merger, consolidation, or share exchange, except pursuant hereto. The
Target's Stockholders will notify the Purchaser immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any
of the foregoing.
(g) Amendment to the Target's By-laws. The board of directors and
sole stockholder of the Target shall have approved an amendment to the
Target's By-laws in the form annexed hereto as Exhibit C, which shall
provide that, no designations, rights or preferences for the issuance of
any series or class of preferred stock shall be determined without the
consent of all the members of the board of directors of the Target.
6. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution
and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification therefor under section 8 below). The Target's
Stockholders acknowledge and agree that from and after the Closing the
Purchaser will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort
relating to the Target.
(b) Confidentiality. The Target's Stockholders will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and
deliver promptly to the Purchaser or destroy, at the request and option of
the Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in his/her possession. In the event
that any of the Target's Stockholders are requested or required (by oral
question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that the
Target's Stockholders will notify the Purchaser promptly of the request
or requirement so that the Purchaser may seek an appropriate protective
order or waive compliance with the provisions of this section 6(b). If, in
the absence of a protective order or the receipt of a waiver hereunder,
the Target's Stockholders are, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable
for contempt, the Target's Stockholders may disclose the Confidential
Information to the tribunal; provided, however, that the Target's
Stockholders shall use their best efforts to obtain, at the request of the
Purchaser, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Purchaser shall designate. The foregoing provisions shall
not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure.
(c) Covenant Not to Compete. For a period of two years from the
termination of his employment agreement, he will not engage directly or
indirectly in any business that the Target conducts or is in the process of
forming, as of such date; provided, however, that no owner of less than
1% of the outstanding stock of any publicly traded corporation shall be
deemed to engage solely by reason thereof in any of its businesses. If the
final judgment of a court of competent jurisdiction declares that any term
or provision of this section 6(c) is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(d) Employment Agreement. Dr. Oliver Hilsenrath shall enter into an
employment agreement with the Purchaser, in the form as annexed
hereto as Exhibit B. The agreement shall be for a term of five years at a
salary of $160,000 per annum, with annual increases, stock options and
covenants requiring confidentiality and not to compete. The Agreement
requires that all patents filed by Dr. Oliver Hilsenrath pursuant to
technology developed by himself with respect to the research and
development performed by the Target, shall be filed in a timely manner
and immediately upon filing assigned to the Target upon their filing.
(e) Registration Right. Within 90 days of the Closing the Purchaser
shall use its best efforts to file a registration statement with the Securities
and Exchange Commission (the "SEC") with respect to the sale by Dr.
Oliver Hilsenrath of 350,000 shares of Purchaser's common stock, and
Purchaser shall use its best efforts to have such registration statement
declared effective by the SEC and the appropriate state securities
agencies.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in section 3(a)
and section 4 above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Target' Stockholders shall have performed and
complied with all of their covenants hereunder in all material
respects through the Closing;
(iii) the Target shall have procured all third party consents
specified in section 4(l) and 4(p) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of
the transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the
Purchaser to own the Target Shares and to control the Target, or (D)
affect adversely the right of the Target to own its assets and to
operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the Target's Stockholders shall have delivered to the
Purchaser a certificate to the effect that each of the conditions
specified above in section 7(a)(i)-(iv) is satisfied in all respects;
(vi) the Target has received paid subscriptions for 79,000
shares of Common Stock for an aggregate of $948,000, pursuant to
the terms of the Private Placement, as the subscription proceeds
have been deposited in the Escrow Account, which funds have
cleared and are ready for disbursement.
(vii) all actions to be taken by the Target's Stockholders in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
will be satisfactory in form and substance to the Purchaser; and
(viii) all matters referred to in section 2(f) shall have been
completed.
The Purchaser may waive any condition specified in this section 7(a)
if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target's Stockholders. The
obligation of the Target's Stockholders to consummate the transactions to
be performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3(b)
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending [or
threatened] before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction [or before
any arbitrator] wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of
the transactions contemplated by this Agreement or (B) cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) the Purchaser shall have delivered to the Target's
Stockholders a certificate to the effect that each of the conditions
specified above in Section 7(b) (i)-(iii) are satisfied in all respects;
(v) all actions to be taken by the Purchaser in connection
with the consummation of the transaction contemplated hereby and
all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be satisfactory in
form and substance to the Target's Stockholders;
(vi) all matters referred to in Section 2(f) shall have been
completed.
The Target's Stockholders may waive any condition specified in this
section 7(b) if they execute a writing so stating at or prior to the
Closing.
8. Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of two
years from the Closing Date, except that the representations of Target's
Stockholders set forth in section 3(a)(v) and section 4(b) and (j), and
Purchaser's representations set forth in section 3(b)(iv) shall survive
subject to the applicable statutes of limitations.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Purchaser and Dr. Oliver Hilsenrath may terminate
this Agreement by mutual written consent at any time prior to the
Closing;
(ii) either the Purchaser or Dr. Oliver Hilsenrath may
terminate this Agreement by giving written notice to the other party
at any time prior to the Closing or in the event the Purchaser or Dr.
Oliver Hilsenrath has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, said party has notified the other parties of the breach, and
the breach has continued without cure for a period of 5 days after
the notice of breach, the other party may terminate this Agreement;
(iii) the Purchaser may terminate this Agreement by written
notice to the other party, in the event subscriptions for the
aggregate amount of the Private Placement and the subscription
proceeds therefrom have not been received into Escrow prior to
August 2, 1996.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other
Party, except for the liability of any Party then in breach.
10. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by
or among the Parties, written or oral, to the extent they related in any
way to the subject matter hereof.
<PAGE>
(c) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of his or its rights, interests, or obligations
hereunder without the prior written approval of the Purchaser and the
Target's Stockholders; provided, however, that the Purchaser may (i)
assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Purchaser
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to
the intended recipient as set forth herein. Any Party may send any
notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set
forth.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New
York without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of New York.
(h) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by the Purchaser and the Target's Stockholders. No waiver by any
Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(j) Expenses. Each of the Parties, the Target will bear his/her or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby. The Target's Stockholders agree that the Target has not borne
and will not bear any of The Target's Stockholders' costs and expenses
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
(k) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of
the authorship of any of the provisions of this Agreement. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of
the relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
(l) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(m) Specific Performance. The Target Stockholders acknowledges
and agrees that the Purchaser would be damaged irreparably in the event
the Purchaser wants to consummate the transaction contemplated herein
and the either the Target or the Target Stockholders do not comply with
the specific terms and conditions of this Agreement. The parties agree
that the Purchaser shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the
provisions set forth in section 10(n) below) in addition to any other
remedy to which they may be entitled, at law or in equity.
(n) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the County of New
York, State of New York, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court.
Each Party also agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto.
Any Party may make service on any other Party by sending or delivering
a copy of the process (i) to the Party to be served at the address and in
the manner provided for the giving of notices in section 10(f) above.
Nothing in this section 10(n), however, shall affect the right of any Party
to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other
manner permitted by law or at equity. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive and
may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
AMERICAN TOYS, INC.
By: ____________________________
Name:
Address:
LABYRINTH COMMUNICATIONS
TECHNOLOGY GROUP, INC.
By: ____________________________
Name:
Title:
By: ____________________________
Dr. Oliver Hilsenrath
Individual
JANVRIN HOLDINGS LIMITED
By: ____________________________
Name:
Title:
STOCK PURCHASE AGREEMENT
AMONG
AMERICAN TOYS, INC.,
MANTRA TECHNOLOGIES, INC.,
AND THE
STOCKHOLDERS OF
MANTRA TECHNOLOGIES, INC.
July 10, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Terms of the Purchase . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Purchaser Option. . . . . . . . . . . . . . . . . . . . . . . . 5
(c) The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . 6
3. Representations and Warranties Concerning the
Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Representations and Warranties of Target's Stockholders . . . . 6
(b) Representations and Warranties of the Purchaser . . . . . . . . 7
4. Representations and Warranties Concerning the Target . . . . . . . . 7
(a) Organization, Qualification, and Corporate Power . . . . . . . 8
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Events Subsequent to Formation . . . . . . . . . . . . . . . . 9
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . 10
(h) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(j) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 11
(k) Intellectual Property . . . . . . . . . . . . . . . . . . . . . 11
(l) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . 12
(m) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(n) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(o) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . 12
(p) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . 13
(q) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(r) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(s) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . 13
(t) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . 13
(v) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(w) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . .13
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Operation of Business . . . . . . . . . . . . . . . . . . . . . 14
(c) Preservation of Business. . . . . . . . . . . . . . . . . . . . 14
(d) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Notice of Developments . . . . . . . . . . . . . . . . . . . . 14
(f) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 14
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . 15
(d) Employment Agreement . . . . . . . . . . . . . . . . . . . . . 15
(e) Registration Right. . . . . . . . . . . . . . . . . . . . . . . 16
7. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . 16
(a) Conditions to Obligation of the Purchaser . . . . . . . . . . . 16
(b) Conditions to Obligation of Dr. Oliver Hilsenrath . . . . . . . 17
8. Survival of Representations and Warranties . . . . . . . . . . . . . 18
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Termination of Agreement. . . . . . . . . . . . . . . . . . . . 18
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . 18
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 18
(b) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Succession and Assignment . . . . . . . . . . . . . . . . . . . 18
(d) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 19
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Construction . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Incorporation of Exhibits and Schedules . . . . . . . . . . . . 20
(m) Specific Performance . . . . . . . . . . . . . . . . . . . . . 20
(n) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . 20
Exhibit A=Form of Employment Agreement of Dr. Oliver Hilsenrath
Exhibit B=Form of Purchaser's Option
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement entered into as of July 10, 1996, by and among American
Toys, Inc., a Delaware corporation, with its principal executive offices
located at 448 West 16th Street, New York, New York (the "Purchaser"),
Mantra Technologies, Inc., a Delaware corporation, with its principal
executive offices located at 2694 Bishop Drive, Bldg. G, Suite 213, San
Ramon California 94583 (the "Target") and the stockholders of the Target,
Dr. Oliver Hilsenrath, an individual residing at 32 Essex Court, Alamo
California 94507 and Janvrin Holdings Limited, a British Virgin Islands
corporation, with its offices located at Jardine House, 1 Wesley Street, St.
Helier, Jersey JE4 8UD, Channel Islands (collectively referred to as the
"Target's Stockholders").
WHEREAS, Target was formed on July 2, 1996 by Dr. Oliver
Hilsenrath and Janvrin Holdings Limited, and as of the date hereof has 200
shares of its common stock, no par value per share (the "Common Stock")
authorized, whereby there are 49 shares outstanding, 39 shares owned by
Dr. Oliver Hilsenrath and 10 shares owned by Janvrin Holdings Limited;
and
WHEREAS, this Agreement contemplates a transaction in which the
Purchaser shall purchase 51 shares from the Target for the purchase price
of $500,000, which shall represent 51% of the issued and outstanding
shares of Common Stock of the Target upon the consummation of the
purchase; and
WHEREAS, the Purchaser has undertaken a private placement of its
securities, of which $500,000 is designated to be invested in the Target for
51% of the Target; and
WHEREAS, the Target's Stockholders have agreed to grant to the
Purchaser an option, pursuant to the terms of this Agreement and an option
agreement, the form of which is annexed hereto as Exhibit B, exercisable
solely at Purchaser's option, for a period of five years, to purchase all of
the Target's Shares, for an aggregate of 1,000,000 shares of Purchaser's
common stock (the "Purchaser's Shares") in the event that the Market
Value of Purchaser's common stock is at least $5.00 for a period of thirty
continuous days prior to the exercise thereof; and
WHEREAS, there are no other options, warrants, purchase rights, or
other contracts or commitments that could require any of the Target or Dr.
Oliver Hilsenrath to sell, transfer, or otherwise dispose of any capital stock
of the Target, except pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows:
<PAGE>
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the rules and
regulations promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Closing" has the meaning set forth in section 2(c) herein.
"Closing Date" has the meaning set forth in section 2(c) herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available
to the public.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow" means the escrow set up by the Escrow Agent for the
Target's Shares.
"Escrow Agent" means the law firm of Gotham Bank of New York.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations- in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-
how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"Market Value" means the average of the closing bid price for a share
of Purchaser's Common Stock for the period of time specified, as officially
reported by the principal securities exchange on which the common stock
is quoted or admitted to trading or by the Nasdaq National or SmallCap
Stock Market, or, if the Common Stock is not listed or admitted to trading
on any securities exchange or quoted by Nasdaq, the average closing bid
price as listed on the OTC Bulletin Board, as determined in good faith by
resolution of the Board of Directors of the Purchaser, based on the best
information available to it.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Purchaser" has the meaning set forth in the preface above.
"Purchaser's Shares" means the 1,000,000 shares of Purchaser,
issuable to the Target's Stockholders, pro rata, upon the Purchaser's
exercise of the Purchaser's Option. The term Purchaser's Shares may define
a portion of such shares in the event that the Purchaser's Option is not
exercised in full.
"Purchaser's Option" means the option granted by Dr. Oliver
Hilsenrath to the Purchaser to purchase the Target's Shares, in exchange for
the Purchaser's Shares, which option may be exercised at Purchaser's
discretion, in whole or in part, for a period of five years from the Closing
Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security" has the meaning set forth in Section 2 of the Securities Act.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or
has the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Target" has the meaning set forth in the preface above.
"Target's Shares" means the 49 shares of the Target, which comprises
all of the issued and outstanding shares of Common Stock of the Target
prior to the consummation of this Agreement, comprising 39 shares owned
by Dr. Oliver Hilsenrath and 10 shares are owned by Janvrin Holdings
Limited.
"Target's Stockholders" means the founders of Target, Dr. Oliver
Hilsenrath and Janvrin Holdings Limited.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
2. Terms of the Purchase.
(a) Basic Transaction. The Purchaser shall purchase 51 shares,
representing 51% of the outstanding shares of Common Stock of the Target
for the purchase price of $500,000.
(b) Purchaser Option. Target's Stockholders shall grant to the
Purchaser an option, in the form attached hereto as Exhibit B, which option
in the aggregate shall be exercisable to purchase the Target's Shares in
exchange for the Purchaser's Shares. The Purchaser's Option may be
exercised in whole or in part at the sole discretion of the Purchaser, during
the five year period commencing on the Closing Date, on the condition that
the Market Value for the Purchaser's Shares has been at least $5.00 for a
period of 30 days prior to the date of the initial exercise of the option.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Lampert &
Lampert, 10 East 40th Street, New York, New York 10016 on July 19,
1996 at 9:30 a.m., or such other date and time as the parties hereto can
agree on (the "Closing Date"); provided, however, that in the event the
Closing shall not have occurred on or before August 2, 1996, this
Agreement may be terminated by either the Purchaser or Dr. Oliver
Hilsenrath by written notification to the other at anytime thereafter. In the
event, no such termination notification is delivered this Agreement will
continue in full force and effect.
(d) Deliveries at the Closing. At the Closing, (i) the Target shall deliver
to the Purchaser (a) 51 shares of Common Stock, (b) the various
certificates, instruments, and documents referred to in section 7(a) below,
and (c) the consents referred to in section 5, (ii) Dr. Oliver Hilsenrath shall
deliver an executed employment agreement in the form annexed hereto as
Exhibit A, (iii) the Target's Stockholder shall deliver an executed Purchaser
Option and (iv) the Purchaser will deliver to the Target $500,000.
<PAGE>
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Target's Stockholders. The
Target's Stockholders represent and warrant to the Purchaser that the
statements contained in this section 3(a) are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this section 3(a)) with respect to
himself or itself.
(i) Authorization of Transaction. This Agreement constitutes the
valid and legally binding obligation of each of Target's Stockholders,
enforceable against each Target's Stockholders in accordance with its
terms and conditions. No Target's Stockholders either individually or
collectively needs to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any other Target's
Stockholders or Person, in order to consummate the transactions
contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Target or any Target's Stockholders is a
party or by which he/she or it is bound or to which any of his/her or
its assets are subject.
(iii) Brokers' Fees. No Target Stockholder has any Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Purchaser could become liable or obligated.
(iv) Investment. The Target's Stockholders understand that the
shares of Purchaser's Common Stock issuable upon the exercise of the
Purchaser's Option have not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are being offered
and sold in reliance upon exceptions from the federal and state
securities laws, in accordance with transactions not involving any
public offering.
(v) Target's Shares. Each Target Stockholder holds of record
and owns beneficially the number of Target Shares set forth herein
which have been duly authorized, validly issued, fully paid and non-
assessable, free and clear of any liens and encumbrances, restrictions
on transfer (other than any restrictions under the Securities Act and
state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. Neither Target Stockholder is not a party to any option,
warrant, purchase right, or other contract or commitment that could
require either Target Stockholder to sell, transfer, or otherwise dispose
of any capital stock of the Target (other than this Agreement). Neither
Target Stockholder is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital
stock of the Target. The Target's Shares, when exchanged for the
Purchaser's Shares, will confer good title to same upon the Purchaser.
(b) Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Target's Stockholders that the statements
contained in this section 3(b) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this section 3(b)).
(i) Organization of the Purchaser. The Purchaser is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
(ii) Authorization of Transaction. The Purchaser has full power
and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its
terms and conditions. The Purchaser need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Purchaser is a party or by which it is bound
or to which any of its assets is subject.
(iv) Purchaser's Shares. The Purchaser's Shares, when issued
and delivered to the Target's Stockholders upon the exercise of the
Purchaser's Option, will be duly authorized, validly issued, fully paid
and non-assessable, free and clear of all liens and encumbrances and
will confer good title to same upon the Target's Stockholders.
4. Representations and Warranties Concerning the Target.
Each Target Stockholder represents and warrants to the Purchaser that
the statements contained in this section 4 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this section 4). Nothing in the
annexed schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the schedule
identifies the exception with particularity and describes the relevant facts in
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence
of the document or other item itself).
(a) Organization, Qualification, and Corporate Power. The Target is
a corporation duly organized, validly existing, and in good standing under
the laws of the state of Delaware and the Target is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to so qualify
does not materially adversely affect the business or financial condition of
the Target. The Target has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged, and to own and use the properties, including but not
limited to all Intellectual Property, owned and used by it. Schedule 4(a) lists
all of the Targets properties, inclusive of but not limited to all real and
personal properties and Intellectual Property. The Target has delivered to
the Purchaser correct and complete coies of the charter and bylaws of the
Target (as amended to date). The minute books containing the records of
meetings of the shareholders, the board of directors, and any committees
of the board of directors, the stock certificate books, and the stock record
books of the Target is correct and complete. The Target is not in default
under or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
shall consist of as of the Closing Date, 200 shares of Common Stock, no
par value per share (the "Common Stock"), of which 49 shares are
outstanding, not including the 51 shares issuable pursuant to the terms of
this Agreement. All of the issued and outstanding shares have been duly
authorized, and will be validly issued, fully paid, and nonassessable, and
are held of record by the respective Target's Stockholders. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Target to issue, sell, or otherwise cause
to become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Target. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Target.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Target is subject
or any provision of the charter or bylaws of the Target or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Target is a party or by which
it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). The Target does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated
by this Agreement.
(d) Title to Assets. The Target has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, as listed on
Schedule 4(d) located on its premises, free and clear of all Security
Interests, except those set forth in Schedule 4(d) and except for properties
and assets disposed of in the Ordinary Course of Business.
(e) Subsidiaries. The Target does not have any Subsidiaries and does
not own or have the right or option to acquire any Security of any Person.
(f) Events Subsequent to Formation. Since formation without limiting
the generality of the foregoing:
(i) the Target has not sold, leased, transferred, or assigned any
of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(ii) the Target has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $1,000 or outside the Ordinary
Course of Business except as listed in Schedule 4(f)(ii);
(iii) no party has accelerated, terminated, modified, or canceled
any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) of the Target or by which
it is bound;
(iv) the Target has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) the Target has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions);
(vi) the Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation;
(vii) the Target has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims);
(viii) the Target has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property or terminated
a right it has acquired;
(ix) the Target has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of
its capital stock;
(x) the Target has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xi) the Target has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees;
(xii) the Target has not entered into any employment contract
or collective bargaining agreement except as listed hereto as Schedule
4(f)(xii), written or oral, and there are no such agreements presently
in effect;
(xiii) the Target has not granted any increase in the base
compensation of any of its directors, officers, and employees in the
past 12 months;
(xiv) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(v) the Target has not made or pledged to make any charitable
or other capital contribution;
(xvi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Target; and
(xvii) the Target has not committed to any of the foregoing.
(g) Undisclosed Liabilities. The Target does not have any Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability), except in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
(h) Legal Compliance. The Target and its respective predecessors and
Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments
(and all agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed
or commenced against any of them alleging any failure so to comply.
(i) Tax Matters. Since the Target has been recently organized, the
Target has not been required to file any Tax Returns.
(j) Real Property. The Target does not own any real property and has
not entered into any agreement to acquire any real property. Schedule 4(j)
is a copy of all lease agreements which the Target has entered into, and any
extensions and amendments thereto.
(k) Intellectual Property.
(i) The Target owns or has the right to use pursuant to a
license, sublicense or other agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Target as
presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Target immediately
prior to the Closing hereunder will be owned or available for use by
the Target on identical terms and conditions immediately subsequent to
the Closing hereunder.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, Dr. Oliver Hilsenrath and the directors
and officers of the Target has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Target must
license or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of any of the Target's Stockholders and
the directors of the Target, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Target and the Target has taken all
necessary action to maintain and protect each item of Intellectual
Property that it owns or uses.
(iii) Schedule 4(k)(iii) identifies each patent or registration
which has been issued to the Target with respect to any of its
Intellectual Property, identifies each pending patent application or
application for registration which the Target has made with respect to
any of its Intellectual Property, and identifies each license, agreement,
or other permission which the Target has granted to any third party
with respect to any of its Intellectual Property (together with any
exceptions). The Target's Stockholders have delivered to the Purchaser
correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to
date) and have made available to the Purchaser correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Schedule 4(k)(iii) also
identifies each trade name or unregistered trademark used by the Target
in connection with any of its businesses including Intellectual Property
owned by any third party which the Target licenses or sublicenses.
With respect to each item of Intellectual Property required to be
identified in Schedule 4(k)(iii):
(A) the Target possesses all right, title, and interest in
and to the item, free and clear of any Security Interest, license,
or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or to the
Knowledge of any of the Target's Stockholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Target is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Target has not ever agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(v) To the Knowledge of any of the Target's Stockholders and
the directors and officers of the Target, the Target will not interfere
with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result of the
continue operation of its business as presently conducted (and as
presently proposed to be conducted).
(l) Tangible Assets. The Target owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.
Each such tangible asset is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(m) Inventory. There is no inventory of the Target.
(n) Contracts. Schedule 4(n) is a list of all oral and written agreements
to which the Target is a party.
The Target's Stockholders have delivered to the Purchaser a correct
and complete copy of each written agreement listed in Schedule 4(n) (as
amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to therein. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable, and
in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C)
no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement.
(o) Notes and Accounts Receivable. All notes and accounts receivable
of the Target are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts.
(p) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Target or either of the Target's Stockholders.
(q) Insurance. There are no insurance policies or agreements to which
the Target is a party.
(r) Litigation. The Target (i) is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge nor (ii) is it a party
or to the best Knowledge of any of the Target's Stockholders and the
directors and officers of the Target threatened to be made a party to or has
any reason to believe that there may be the commencement of any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.
(s) Product Warranty. The Target has not manufactured or sold any
products to date.
(t) Employees. To the Knowledge of any of the Target's Stockholders
and the directors and officers of the Target no executive, key employee or
group of employees has any plans to terminate employment with the Target.
The Target is not bound by any employment agreement or collective
bargaining agreement, nor has it experienced any strikes, grievances, claims
of unfair labor practices, or other collective bargaining disputes. Neither the
Target nor any of its officers or directors have committed any unfair labor
practice.
(u) Employee Benefits. The Target does not contribute or maintain and
has never contributed or maintained any Employee Benefit Plan.
(v) Guaranties. The Target is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(w) Disclosure. The representations and warranties contained in this
section 4 do not contain any material untrue statement of a fact or omit to
state any material fact necessary in order to make the statements and
information contained in this section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in section 7 below).
(b) Operation of Business. The Target's Stockholders will not cause or
permit the Target to engage in any practice, take any action, or enter into
any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, the Target's Stockholders will not cause or
permit the Target to declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire or sell any of its capital stock.
(c) Preservation of Business. The Target's Stockholders will cause the
Target to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
(d) Full Access. The Target's Stockholders will permit, and cause the
Target to permit, representatives of the Purchaser to have full access, at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Target to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Target.
(e) Notice of Developments. The Target's Stockholders will give prompt
written notice to the Purchaser of any material adverse development causing
a breach of any of the representations and warranties in section 4 above.
Each Party will give prompt written notice to the others of any material
adverse development causing a breach of any of his or its own
representations and warranties in section 3 above. No disclosure by any
Party pursuant to this section 5(e), however, shall be deemed an amendment
or supplement to this Agreement, to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(f) Exclusivity. The Target's Stockholders will not and will not cause
or permit the Target to (i) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of the Target or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any Person to do
or seek any of the foregoing. Neither Dr. Oliver Hilsenrath or Janvrin
Holdings Limited will vote their Shares in favor of any such acquisition
structured as a merger, consolidation, or share exchange, except pursuant
hereto. The Target's Stockholders will notify the Purchaser immediately if
any Person makes any proposal, offer, inquiry, or contact with respect to
any of the foregoing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under section 8 below). The Dr. Oliver Hilsenrath acknowledge and agree
that from and after the Closing the Purchaser will be entitled to possession
of all documents, books, records (including Tax records), agreements, and
financial data of any sort relating to the Target.
(b) Confidentiality. Each of the Target's Stockholders will treat and
hold as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Purchaser or destroy, at the request and option of
the Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in his/her possession. In the event that any of the
Target's Stockholders is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Target's Stockholders will notify the
Purchaser promptly of the request or requirement so that the Purchaser may
seek an appropriate protective order or waive compliance with the
provisions of this section 6(b). If, in the absence of a protective order or
the receipt of a waiver hereunder, any of the Target's Stockholders is, on
the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, that Target's Stockholders
may disclose the Confidential Information to the tribunal; provided,
however, that the disclosing Target's Stockholders shall use his/her best
efforts to obtain, at the request of the Purchaser, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Purchaser shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to
the time of disclosure.
(c) Covenant Not to Compete. For a period of five years from and after
the Closing Date, the Target's Stockholders, except for Oliver Hilsenrath,
who for the greater of five years from the date hereof and two years from
the termination of his employment agreement, the form of which is annexed
hereto as Exhibit A, will not engage directly or indirectly in any business
that the Target conducts or is in the process of forming, as of the Closing
Date; provided, however, that no owner of less than 1% of the outstanding
stock of any publicly traded corporation shall be deemed to engage solely
by reason thereof in any of its businesses. If the final judgment of a court
of competent jurisdiction declares that any term or provision of this section
6(c) is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be appealed.
(d) Employment Agreement. Dr. Oliver Hilsenrath shall enter into an
employment agreement in the form as annexed hereto as Exhibit B. The
agreement shall be for a term of five years at a salary of $160,000 per
annum, with annual increases, stock options and covenants requiring
confidentiality and not to compete. The Agreement requires that all patents
filed by Dr. Oliver Hilsenrath pursuant to technology developed by himself
with respect to the research and development performed by the Target, shall
be filed in a timely manner and immediately upon filing assigned to the
Target upon their filing.
(e) Registration Right. The Purchaser shall permit the Target to seek
an underwriter in order to engage in an initial public offering of the
Target's securities, as long as the securities to be offered are the same
securities owned by the Purchaser (ie. The Purchase shall own shares of
Target's Common Stock upon the consummation of this Agreement,
therefore, the Target may only sell shares of Common Stock in an initial
public offering).
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in section 3(a)
and section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Target's Stockholders shall have performed and
complied with all of their covenants hereunder in all material respects
through the Closing;
(iii) the Target shall have procured all third party consents
specified in section 4(k) and 4(o) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Purchaser to own
the Target Shares and to control the Target, or (D) affect adversely the
right of the Target to own its assets and to operate its businesses (and
no such injunction, judgment, order, decree, ruling, or charge shall be
in effect);
(v) the Target's Stockholders shall have delivered to the
Purchaser a certificate to the effect that each of the conditions specified
above in section 7(a)(i)-(iv) is satisfied in all respects;
(vi) all actions to be taken by the Target's Stockholders in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
satisfactory in form and substance to the Purchaser; and
(vii) all matters referred to in section 2(d) and section 7(a) shall
have been completed.
The Purchaser may waive any condition specified in this section 7(a)
if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target's Stockholders. The
obligation of the Target's Stockholders to consummate the transactions to
be performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending [or
threatened] before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction [or before any
arbitrator] wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(iv) all actions to be taken by the Purchaser in connection with
the consummation of the transaction contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be satisfactory in form
and substance to the Target's Stockholders;
(v) all matters referred to in Section 2(d) and 7(b) shall have
been completed.
The Target's Stockholders may waive any condition specified in this
section 7(b) if they execute a writing so stating at or prior to the Closing.
8. Survival of Representations and Warranties. All of the representations
and warranties of the Parties contained in this Agreement shall survive the
Closing hereunder (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of two years from the Closing
Date, except that the representations of Dr. Oliver Hilsenrath set forth in
section 3(a)(v) and section 4(b) and (j), and Purchaser's representations set
forth in section 3(b)(iv) shall survive subject to the applicable statutes of
limitations.
<PAGE>
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Purchaser and Dr. Oliver Hilsenrath may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) either the Purchaser or Dr. Oliver Hilsenrath may terminate
this Agreement by giving written notice to the other party at any time
prior to the Closing or in the event the Purchaser or any of the
Target's Stockholders has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, said party has notified the other parties of the breach, and the
breach has continued without cure for a period of 5 days after the
notice of breach, the other party may terminate this Agreement;
(iii) either the Purchaser or either Target Stockholder may
terminate this Agreement by written notice to the other party, in the event
the Closing does not occur by August 2, 1996.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other
Party, except for the liability of any Party then in breach.
10. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Purchaser and the Target's
Stockholders; provided, however, that the Purchaser may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Purchaser nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth herein. Any Party may send any notice, request,
demand, claim, or other communication hereunder to the intended recipient
at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary
mail, or electronic mail), but no such notice, request, demand, claim, or
other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Purchaser and the Target's Stockholders. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(i) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Expenses. Each of the Parties, the Target will bear his/her or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
The Target's Stockholder agree that the Target has not borne and will not
bear any of the costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
(k) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. The Parties
intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty, or covenant.
(l) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made
a part hereof.
(m) Specific Performance. The Target and the Target's Stockholders
acknowledge and agree that the Purchaser would be damaged irreparably
in the event the Purchaser wants to consummate the transaction
contemplated herein and the Target or the Target's Stockholders does not
comply with the specific terms and conditions of this Agreement. The
parties agree that the Purchaser shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the provisions
set forth in section 10(n) below) in addition to any other remedy to which
they may be entitled, at law or in equity.
(n) Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in the County of New York,
State of New York, in any action or proceeding arising out of or relating
to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each party also
agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the parties waives any defense
of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be
required of any other party with respect thereto. Any party may make
service on any other party by sending or delivering a copy of the process
(i) to the party to be served at the address and in the manner provided for
the giving of notices in section 10(f) above. Nothing in this section 10(n),
however, shall affect the right of any party to bring any action or
proceeding arising out of or relating to this Agreement in any other court
or to serve legal process in any other manner permitted by law or at equity.
Each Party agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment
or in any other manner provided by law or at equity.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
AMERICAN TOYS, INC. MANTRA TECHNOLOGIES,
INC.
By: ____________________________ ___________________________
Name: Name:
Address: Address:
JANVRIN HOLDINGS LIMITED
By: ____________________________ ____________________________
Name: Dr. Oliver Hilsenrath
Title: Individual
STOCK PURCHASE OPTION AGREEMENT
This Stock Purchase Option Agreement is made this _____
day of July, 1996 by and between American Toys, Inc., a Delaware
corporation, with its offices located at 448 West 16th Street, New York,
New York (hereinafter "Optionee") and Dr. Oliver Hilsenrath, an
individual residing at 32 Essex Court, Alamo California 94507 and Janvrin
Limited, a British Virgin Islands corporation, with its offices located at
Jardine House, 1 Wesley Street, St. Helier, Jersey JE4 8UD, Channel
Islands (collectively referred to herein as the "Optionors").
W I T N E S S E T H:
WHEREAS, Mantra Technologies, Inc., a Delaware
corporation (the "Target"), was formed on July 2, 1996 by Dr. Oliver
Hilsenrath and Janvrin Holdings Limited, and as of the date hereof has
200 shares of its common stock, no par value per share (the "Common
Stock") authorized, whereby there are 49 shares outstanding, 39 shares
owned by Dr. Oliver Hilsenrath and 10 shares owned by Janvrin
Holdings Limited (collectively referred to as the "Target's Shares"); and
WHEREAS, the Optionors and the Optionee have entered
into a stock purchase agreement dated July 10, 1996 (the "Purchase
Agreement") which contemplates a transaction in which the Optionee
shall purchase from the Target 51 shares of the outstanding shares of
common stock of the Target for the purchase price of $500,000, which
shall represent 51% of the issued and outstanding shares of Common
Stock of the Target upon the consummation of the purchase; and
WHEREAS, the Optionors have agreed to grant to the
Purchaser an option (the "Option"), pursuant to the terms of the Purchase
Agreement, exercisable solely at Purchaser's option, for a period of five
years, to purchase all of the Target's Shares, for an aggregate of 1,000,000
shares of Purchaser's common stock (the "Purchaser's Shares") in the event
that the market value of Purchaser's common stock is at least $5.00 for a
period of thirty continuous days prior to the exercise thereof on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual
covenants, conditions and promises contained herein, the parties herein
agree as follows:
ARTICLE 1
TERMS OF THE OPTION
1.1 Optionors do hereby grant to the Optionee the right
and option to acquire the Target's Shares, on a pro rata basis, on or before
______________, 2001.
1.2 The Option is exercisable to acquire the Target's
Shares for the Purchaser's Shares, and is exercisable only in the event that
the Market Value (as defined in subparagraph 1.3 below) of Purchaser's
common stock is at least $5.00 per share for a period of thirty continuous
days prior to the exercise thereof.
1.3 The term "Market Value" means the average of the
closing bid price for a share of Purchaser's common stock for the period
of time specified, as officially reported by the principal securities exchange
on which the common stock is quoted or admitted to trading or by the
Nasdaq National or SmallCap Stock Market, or, if the Common Stock is
not listed or admitted to trading on any securities exchange or quoted by
Nasdaq, the average closing bid price as listed on the OTC Bulletin Board,
as determined in good faith by resolution of the Board of Directors of the
Purchaser, based on the best information available to it.
1.4 Upon written notice, accompanied by the
consideration specified in subparagraph 1.2 above, to the Optionors, the
Option may be exercised in whole or in part, on a pro rata basis, in
accordance with all other terms and conditions hereof. Upon receipt by
each of the Optionors of the (i) notice of exercise; and (ii) delivery to the
Optionors of the Option Certificates duly endorsed by the Optionee; and
(iii) the issuance of the Purchaser's Shares to the Optionors, on a pro rata
basis, for the number of Target's Shares exercised, the Optionors shall (i)
deliver certificates for the Target's Shares to the Optionee together with
duly executed stock powers in the form of transfer together with signature
guarantees and (ii) letters to the Target requesting the transfer and delivery
of said Target's Shares to the Optionee, as soon as practicable.
1.5 In the event that only a portion of the Option is
exercised at any given time, the Optionors shall, upon surrender of the
Option Certificates by the Optionee pursuant to subparagraph 1.4, deliver
to the Optionee new Option Certificates representing the unexercised
portion of the Option.
1.6 All of the rights granted hereunder shall terminate on
______________, 2001, on which date the Option granted hereunder shall
expire.
1.7 Unless and until the Option is exercised, Optionee shall
have no rights of ownership with respect to the target's Shares, including
voting rights, dividend and liquidation rights and any and all other rights
inherent in the ownership of the Stock.
1.8 The number of Target's Shares subject to the Option
and the exercise price thereof shall be proportionately adjusted for any
change in the capital stock structure of Target, whereby, no shares of
Target's common stock or securities exchangeable or convertible into shares
of Target's common stock shall be issued, except pursuant to the Purchase
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
2.1 Optionors represent and warrant that they have the
right to grant the Option to Optionee.
2.2 This Agreement constitutes the valid and legally
binding obligation of each of the Optionors, enforceable against each them
in accordance with its terms and conditions. Neither Optionor either
individually or collectively needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any other party
or Person, in order to consummate the transactions contemplated by this
Agreement.
2.3 Each Optionor holds of record and owns beneficially
the number of Target Shares set forth herein which have been duly
authorized, validly issued, fully paid and non-assessable, free and clear of
any liens and encumbrances, restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Neither Optionor is not a
party to any option, warrant, purchase right, or other contract or
commitment that could require either Optionor to sell, transfer, or
otherwise dispose of any capital stock of the Target (other than this
Agreement). Neither Optionor is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of any capital
stock of the Target. The Target's Shares, when exchanged for the
Purchaser's Shares, will confer good title to same upon the Purchaser.
2.4 The Option and the stock issuable upon exercise thereof
will not be assigned or distributed except by registration under the
Securities Act of 1933 (the "Act") or an exemption therefrom. The
Optionee will not distribute the Option or the shares underlying the option
in such a manner as to cause the Optionors to be deemed an underwriter.
The Optionee understands that the grant of the Option is not a registered
transaction and the Option and the stock issuable upon exercise of the
Option could be deemed "Restricted Securities."
ARTICLE 3
MISCELLANEOUS
3.1 If any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application
of such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby,
and each such term and provision of this Agreement shall be valid and shall
be enforced to the fullest extent permitted by law.
3.2 No waiver of any breach of any covenant or provision
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof, or of any other covenant or provision herein contained. No
extension of time for performance of any obligation or act shall be deemed
an extension of the time for performance of any other obligation or act.
3.3 All notices or other communications required or
permitted hereunder shall be in writing, and shall be sent by registered or
certified mail, postage prepaid, return receipt requested, and shall be
deemed received upon mailing to the above addresses. Notices of change
of address shall be given by written notice in the manner detailed in this
subparagraph 3.3.
3.4 This Agreement shall be binding upon and shall inure
to the benefit of the permitted successors and assigns of the parties hereto.
3.5 In the event of the bringing of any action or suit by
a party hereto against another party hereunder by reason of any breach of
any of the covenants, agreements or provisions on the part of the other
party arising out of this Agreement, then in that event the prevailing party
shall be entitled to have and recover from the other party all costs and
expenses of the action or suit, including actual attorneys' fees, accounting
fees, and any other professional fees resulting therefrom.
3.6 This Agreement is the final expression of, and
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto.
This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by his agent duly
authorized in writing or as otherwise expressly permitted herein.
3.7 The parties hereby acknowledge and agree that time
is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that failure to timely perform any of the
terms, conditions, obligations or provisions hereof by either party shall
constitute a material breach of and non-curable (but waivable) default under
this Agreement by the party so failing to perform.
3.8 Heading at the beginning of each paragraph are solely
for the convenience of the parties and are not a part of the Agreement.
Whenever required by the context of this Agreement, the singular shall
include the plural and the masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to paragraphs and subparagraphs are to
this Agreement. In the event the date on which any party is required to
take any action under the terms of this Agreement is not a business day, the
action shall be taken on the next succeeding day.
<PAGE>
3.9 This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which taken
together shall constitute one instrument.
3.10 The parties hereto expressly agree that this Agreement
shall be governed by, interpreted under, and construed and enforced in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed as of the ____
day of July, 1996.
AMERICAN TOYS, INC. Optionors
By: _______________________ ________________________
David Cohen, President Dr. Oliver Hilsenrath
JANVRIN HOLDINGS
LIMITED
________________________
Name:
Title:<PAGE>
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND
THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (II) TO THE EXTENT APPLICABLE,
RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER,
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE OPTIONS
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN
ACCORDANCE WITH THE OPTION AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, __________, 2001
OPTION CERTIFICATE
This Option Certificate certifies that AMERICAN TOYS, INC., or
registered assigns, is the registered holder of an Option to purchase from
__________________ up to ____________ fully-paid and non-assessable
shares of common stock, par value $.001 per share ("Common Stock") of
Mantra Technologies, Inc. (the "Company") at any time from July __, 1996
until 5:30 p.m. New York time on ___________, 2001 (the "Expiration
Date"), for shares of American Toys, Inc.'s common stock pursuant to the
terms of the Option Agreement dated as of July __, 1996 between the
Company, Dr. Oliver Hilsenrath and Janvrin Holdings Limited (the "Option
Agreement"), upon surrender of this Option Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Option Agreement.
No Option may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Options evidenced hereby, unless
exercised prior thereto, shall become void.
The Options evidenced by this Option Certificate are pursuant the
Option Agreement, which agreement is hereby incorporated by reference
in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Optionee.
Upon due presentment for registration of transfer of this Option
Certificate at an office or agency of the Company, a new Option Certificate
or Option Certificates of like tenor and evidencing in the aggregate a like
number of Options shall be issued to the transferee(s) in exchange for this
Option Certificate, subject to the limitations provided herein and in the
Option Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Options evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Option Certificate representing such numbered unexercised Options.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Option Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the holder(s)
hereof, and for all other purposes, and the Company shall not be affected
by any notice to the contrary.
All terms used in this Option Certificate which are defined in the
Option Agreement shall have the meanings assigned to them in the Option
Agreement.
IN WITNESS WHEREOF, the Company has caused this Option
Certificate to be duly executed under its corporate seal.
Dated: July __, 1996
[SEAL] By:
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase _______________ shares
of Common Stock of Mantra Technologies, Inc., from ____________, and
herewith tenders in payment for such securities a certificate issued to
___________________ in the amount of shares of American Toys, Inc.,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such securities be registered in the name of
______________________________ whose address is
___________________________________ and that such Certificate be
delivered to _________________________ whose address is
____________________________________.
Dated:
_______________________________________
Signature
(Signature must conform in all
respects to name of holder as specified
on the face of the Option Certificate.)
_______________________________
Insert
Social Security or Other
Identifying Number of Optionee)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of June, 1996, by and
between Ilan Arbel, residing at 106 Central Park South, New York, NY
10019 (hereinafter referred to as the "Employee") and American Toys, Inc.
(the "Company").
W I T N E S S E T H :
WHEREAS, Atoy is negotiating to enter into stock purchase
agreements (the "Agreements"), to acquire 51% of the outstanding shares
of each of Labyrinth Communication Technologies Group, Inc.
("Labyrinth") and Mantra Technologies, Inc. ("Mantra"); and
WHEREAS, Employee has been the Chief Executive Officer of the
Company and as such has been seeking business development activities for
the Company; and
WHEREAS, Employees shall resign as the President and Chief
Executive Officer of the Company upon the consummation of the
Agreements; and
WHEREAS, Employee shall become the Vice-President of strategic
business development for the Company and its subsidiaries; and
WHEREAS, Atoy is redirecting its corporate strategy include the
development of wireless technology, the development of internet software,
the manufacture and development of multimedia products; and
WHEREAS, the Company desires to employ the Employee and
desires to secure the experience, ability and services of the Employee for
the Company; and
WHEREAS, the Employee desires to be employed by the Company
for a period of five years, pursuant to the terms and conditions herein set
forth, superseding all prior agreements between the Company, its
subsidiaries and/or predecessors and Employee;
NOW, THEREFORE, it is mutually agreed by and between the
parties hereto as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs and agrees to continue the employment of the
Employee, and the Employee hereby accepts such continued employment
in his capacity as Vice-President of strategic Business Development. In this
capacity, Employee will report to the Board of Directors.
ARTICLE II
DUTIES
(A) The Employee shall, during the term of his employment with
the Company, and subject to the direction and control of the Company's
Board of Directors, perform such duties and functions related to his position
as he may be called upon to perform by the Company's Board of Directors
during the term of this Agreement.
(B) The Employee agrees to devote a portion of his business time
and best efforts to the performance of his duties for the Company and its
subsidiaries and to render such services as the board of directors of such
companies shall require.
(C) The Employee shall perform, in conjunction with the
Company's Senior Management, to the best of his ability the following
services and duties for the Company (by way of example, and not by way
of limitation):
(i) Those duties attendant to the position with the
Company for which he is hired;
(ii) Corporate and business development;
(iii) Seek the acquisition businesses for the Company in
the fields of wireless communications, internet
software and multimedia product development;
(iv) Promotion of the relationships of the Company and
its subsidiary corporations with their respective
employees, customers, suppliers and others in the
business community;
(v) Seek the investment of additional capital in the
Company
(D) Employee shall be based in the New York, and shall undertake
such occasional travel, within or without the United States as is or may be
reasonably necessary in the interests of the Company.
ARTICLE III
COMPENSATION
(A) The Company shall not receive any monetary compensation
during the term of this agreement.
ARTICLE IV
BENEFITS
(A) During the term hereof, (i) the Company shall provide
Employee with Blue Cross/Blue Shield or equivalent health insurance
benefits and major medical insurance; (ii) Employee shall be reimbursed
by the Company upon presentation of appropriate vouchers for all business
expenses incurred by the Employee on behalf of the Company; (iii) the
Company shall provide the Employee with an automobile suitable for his
position and reimburse reasonable automobile expenses including repairs,
maintenance, gasoline charges, mobile phone, etc. via receipted expense
reports.
(B) In the event the Company wishes to obtain Key Man life
insurance on the life of Employee, Employee agrees to cooperate with the
Company in completing any applications necessary to obtain such insurance
and promptly submit to such physical examinations and furnish such
information as any proposed insurance carrier may request.
ARTICLE V
NON-DISCLOSURE
The Employee shall not, at any time during or after the termination
of his employment hereunder except when acting on be half of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret
or other confidential information concerning the Company's business,
finances, proposed and current services and pricing, and any information
relating to the Company's business (collectively referred to as the
"Proprietary Information"). For the purposes of this Agreement, trade
secrets and confidential information shall mean information disclosed to the
Employee or known by him as a consequence of his employment by the
Company, whether or not pursuant to this Agreement, and not generally
known in the industry, concerning the business, finances, methods,
operations, marketing information, pricing and information relating to
proposed expansion of the Company or the Company's business plans. The
Employee acknowledges that trade secrets and other items of confidential
information, as they may exist from time to time, are valuable and unique
assets of the Company, and that disclosure of any such information would
cause substantial injury to the Company. The foregoing is intended to be
confirmatory of the common law of the state of New York relating to trade
secrets and confidential information.
ARTICLE VI
RESTRICTIVE COVENANT
(A) In the event of the voluntary termination of employment with
the Company or Employee's discharge in accordance with Article IX
paragraph (C), Employee agrees that he will not, for a period of two years
following such termination, directly or indirectly enter into or become
associated with or engage in any other business (whether as a partner,
officer, director, shareholder, employee, consultant, or otherwise), which
business is primarily engaged in by the Company or any of its subsidiaries.
(B) If any court shall hold that the duration of non-competition or
any other restriction contained in this paragraph is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed
amended to delete therefrom such provision or portion adjudicated to be
invalid or unenforceable or in the alternative such judicially substituted term
may be substituted therefor.
ARTICLE VII
TERM
This Agreement shall be for a term of five years commencing on the
date first set forth above and terminating May 31, 2001, unless sooner
terminated pursuant to the terms hereof.
ARTICLE VIII
DISABILITY DURING TERM
In the event that the Employee becomes totally disabled so that he
is unable or prevented from performing any one or all of his usual duties
hereunder for a period of four (4) consecutive months then, and in that
event, the Company shall continue to compensate him and he shall receive
his Base Salary as provided under Article III of this Agreement for a period
of twenty-four (24) months commencing from the date of such total
disability. The aforesaid obligations of the Company shall not extend
beyond the term of this Agreement. The obligation of the Company to
make the aforesaid payments shall be modified and reduced and the
Company shall receive a credit for all disability insurance payments which
Employee may receive or to which he may become entitled; and provided
further that the payments herein provided shall not extend beyond the term
of this Agreement.
ARTICLE IX
TERMINATION OR RESIGNATION
The Company may terminate this Agreement:
(A) Upon the death of Employee during the term hereof, except that
the Employee's legal representatives, successors, assigns and heirs shall
have those rights and interests as other wise provided in this Agreement,
including the right to receive accrued but unpaid bonus compensation, if
any.
(B) Subject to the terms of Article VIII herein, upon written notice
from the Company to the Employee, if Employee becomes totally disabled
and as a result of such total disability, has been prevented from and unable
to perform all of his duties hereunder for a consecutive period of four (4)
months.
(C) If the Employee engages in fraud, misappropriation or
embezzlement of Company funds or gross negligence in the performance
of his duties.
(D) If the Employee engages in the misappropriation of corporate
opportunities.
ARTICLE X
STOCK OPTIONS
As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee options to purchase shares of the
Company's Common Stock, $.01 par value, upon and subject to the
following conditions:
(A) Subject to the terms and conditions of a stock option agreement
the Employee is hereby granted options, to purchase 1,000,000 shares of
the Company's Common Stock, all of which options shall be vested and
exercisable as of the dates hereof for a term of five years. The option shall
contain such other terms and conditions as set forth in the stock option
agreement. The exercise price of the options shall be $1.00 per share,
subject to adjustment. The foregoing options are not intended to qualify as
incentive stock options.
(B) Subject to the terms and conditions of a stock option agreement
the Employee is hereby granted options, to purchase 2,250,000 shares of
the Company's Common Stock, all of which options shall be vested and
exercisable as of the dates hereof until December 31, 1996. The option
shall contain such other terms and conditions as set forth in the stock option
agreement. The exercise price of the options shall be $1.33 per share,
subject to adjustment. The foregoing options are intended to qualify as
incentive stock options.
The Options provided for herein are not transferable by Employee
and shall be exercised only by Employee, or by his legal representative or
executor, as provided under the terms of the stock option agreement. Such
Option shall terminate as provided under the terms of the stock option
agreement.
ARTICLE XI
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the parties
and supersedes all prior agreements between the parties, whether oral or
written, without prejudice to Employee's right to all accrued compensation
prior to the effective date of this Agreement.
ARTICLE XII
ARBITRATION
Any dispute arising out of the interpretation, application and/or
performance of this Agreement with the sole exception of any claim, breach
or violation arising under Articles V or VI hereof shall be settled through
final and binding arbitration before a single arbitrator in the City of New
York, the State of New York in accordance with the rules of the American
Arbitration Association. The arbitrator shall be selected by the Association
and shall be an attorney at law experienced in the field of corporate law.
Any judgment upon any arbitration award may be entered in any court,
federal or state, having competent jurisdiction of the parties.
ARTICLE XIII
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force
and effect. If any provision is held invalid or unenforceable with respect
to particular circumstances, it shall remain in full force and effect in all
other circumstances.
ARTICLE XIV
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person or mailed by certified mail, return
receipt requested, to the address as included in the company's records or
to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
ARTICLE XV
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and
personal representatives of the Employee.
ARTICLE XVI
WAIVER
The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach of construction and validity.
ARTICLE XVII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of
New York, and New York law shall govern its construction and validity.
ARTICLE XVIII
JURISDICTION
Any or all actions or proceedings which may be brought by the
Company or Employee under this Agreement shall be brought in courts
having a situs within the State of New York and Employee hereby consents
to the jurisdiction of any local, state or federal court located within the
State of New York.
ARTICLE XIX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition or amendment shall be made hereto, except
by written agreement signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and affixed their hands and seals the day and year first above
written.
(Corporate Seal)
AMERICAN TOYS, INC.
By:
_________________________________
Name:
Title:
___________________________________
(Employee)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 10th day of July, 1996, by and
between Dr. Oliver Hilsenrath, residing at 32 Essex Court, Alamo CA
94507 (hereinafter referred to as the "Employee") and Labyrinth
Communications Technology Group, Inc. ("Labyrinth"), Mantra
Technologies, Inc. ("Mantra") and American Toys, Inc. ("Atoys"),
(hereinafter collectively referred to as the "Company").
W I T N E S S E T H :
WHEREAS, Atoy has entered into stock purchase agreements dated
July 10,1996 (the "Agreements"), to acquire 51% of the outstanding shares
of each of Labyrinth and Mantra ("Mantra"); and
WHEREAS, Prior to the closing of the Agreements, Employee is the
sole stockholder of both Labyrinth and Mantra; and
WHEREAS, Atoy is redirecting its corporate strategy include the
development of wireless technology, the development of internet software,
the manufacture and development of multimedia products; and
WHEREAS, Employee is experienced in these fields; and
WHEREAS, the Company desires to employ the Employee and
desires to secure the experience, ability and services of the Employee for
the Company, Mantra and Labyrinth; and
WHEREAS, the Employee desires to be employed by the Company
for a period of five years, pursuant to the terms and conditions herein set
forth, superseding all prior agreements between the Company, its
subsidiaries and/or predecessors and Employee;
NOW, THEREFORE, it is mutually agreed by and between the
parties hereto as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement,
the Company hereby employs and agrees to continue the employment of the
Employee, and the Employee hereby accepts such continued employment
in his capacity as President and Chief Executive Officer of the Atoy and
Labyrinth and acting president of Mantra. In this capacity, Employee will
report to the Board of Directors. It is understood between the parties that
Mantra, once an operating entity may seek to replace Dr. Hilsenrath as its
president, which shall have no affect on this Agreement.
ARTICLE II
DUTIES
(A) The Employee shall, during the term of his employment with
the Company, and subject to the direction and control of the Company's
Board of Directors, perform such duties and functions related to his position
as he may be called upon to perform by the Company's Board of Directors
during the term of this Agreement.
(B) The Employee agrees to devote 100% of his business time and
best efforts to the performance of his duties for the Company, Mantra and
Labyrinth and to render such services as the board of directors of such
companies shall require.
(C) The Employee shall perform, in conjunction with the
Company's Senior Management, to the best of his ability the following
services and duties for the Company, Mantra and Labyrinth (by way of
example, and not by way of limitation):
(i) Those duties attendant to the position with the
Company for which he is hired;
(ii) Corporate development;
(iii) Formulation of the Company's business plans and
implementation of such plans subject to the direction
of the Board of Directors;
(iv) Promotion of the relationships of the Company and
its subsidiary corporations with their respective
employees, customers, suppliers and others in the
business community;
(v) Research and development.
(D) Employee shall be based in the New York and California area,
and shall undertake such occasional travel, within or without the United
States as is or may be reasonably necessary in the interests of the Company.
ARTICLE III
COMPENSATION
(A) Commencing with the commencement date hereof, the
Company shall pay to Employee a salary at the rate of $160,000 per annum
until July 10, 1998 and increasing by 10% on each of July 10, 1998, 1999
and 2000, thereafter that this Agreement shall be in effect (payable in equal
weekly installments or pursuant to such regular pay periods adopted by the
Company) (the "Base Salary").
(B) The Company shall deduct from Employee's compensation all
federal, state and local taxes which it may now or may hereafter be
required to deduct, however, in the event that the non-accountable expense
allowance, or any portion thereof, described in Article III Paragraph (C) is
deemed to subject to any taxes, then, the Company shall pay all taxes due
on said expense allowance at such time as said taxes are due.
ARTICLE IV
BENEFITS
(A) During the term hereof, (i) the Company shall provide
Employee with Blue Cross/Blue Shield or equivalent health insurance
benefits and major medical insurance; (ii) Employee shall be reimbursed
by the Company upon presentation of appropriate vouchers for all business
expenses incurred by the Employee on behalf of the Company; (iii) the
Company shall provide the Employee with an automobile suitable for his
position and reimburse reasonable automobile expenses including repairs,
maintenance, gasoline charges, mobile phone, etc. via receipted expense
reports.
(B) In the event the Company wishes to obtain Key Man life
insurance on the life of Employee, Employee agrees to cooperate with the
Company in completing any applications necessary to obtain such insurance
and promptly submit to such physical examinations and furnish such
information as any proposed insurance carrier may request.
(C) For each year of the term hereof, Employee shall be entitled to
four weeks paid vacation.
ARTICLE V
NON-DISCLOSURE
The Employee shall not, at any time during or after the termination
of his employment hereunder except when acting on be half of and with
the authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret
or other confidential information concerning the Company's business,
finances, proposed and current services and pricing, and any information
relating to the Company's business (collectively referred to as the
"Proprietary Information"). For the purposes of this Agreement, trade
secrets and confidential information shall mean information disclosed to the
Employee or known by him as a consequence of his employment by the
Company, whether or not pursuant to this Agreement, and not generally
known in the industry, concerning the business, finances, methods,
operations, marketing information, pricing and information relating to
proposed expansion of the Company or the Company's business plans. The
Employee acknowledges that trade secrets and other items of confidential
information, as they may exist from time to time, are valuable and unique
assets of the Company, and that disclosure of any such information would
cause substantial injury to the Company. The foregoing is intended to be
confirmatory of the common law of the state of New York relating to trade
secrets and confidential information.
ARTICLE VI
RESTRICTIVE COVENANT
(A) In the event of the voluntary termination of employment with
the Company or Employee's discharge in accordance with Article X
paragraph (A), Employee agrees that he will not, for a period of two years
following such termination, directly or indirectly enter into or become
associated with or engage in any other business (whether as a partner,
officer, director, shareholder, employee, consultant, or otherwise), which
business is in competition with that of the Company, including but not
exclusively any business in the field of wireless communications.
(B) If any court shall hold that the duration of non-competition or
any other restriction contained in this paragraph is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed
amended to delete therefrom such provision or portion adjudicated to be
invalid or unenforceable or in the alternative such judicially substituted term
may be substituted therefor.
ARTICLE VII
TERM
This Agreement shall be for a term of five years commencing on the
date first set forth above and terminating July , 2001, unless sooner
terminated pursuant to the terms hereof.
ARTICLE VIII
PATENTS, COPYRIGHTS AND TRADEMARKS
All research and development which is undertaken by the Company
and its employees as well as all products and services developed therefrom,
including but not exclusively all patentable technology and products
developed by Employee in the field of Wireless Communications and all
software developed shall be patented, copyrighted and trademarked, as
applicable, as soon as practicable and all patents, copyrights and trademarks
filed shall be accompanied by an assignment where a patent application has
been filed, to either Labyrinth, Mantra or Atoy as appropriate. The
Company shall own outright all the technology, products and tradenames
and trademarks used by the Company.
ARTICLE IX
DISABILITY DURING TERM
In the event that the Employee becomes totally disabled so that he
is unable or prevented from performing any one or all of his usual duties
hereunder for a period of four (4) consecutive months then, and in that
event, the Company shall continue to compensate him and he shall receive
his Base Salary as provided under Article III of this Agreement for a period
of twenty-four (24) months commencing from the date of such total
disability. The aforesaid obligations of the Company shall not extend
beyond the term of this Agreement. The obligation of the Company to
make the aforesaid payments shall be modified and reduced and the
Company shall receive a credit for all disability insurance payments which
Employee may receive or to which he may become entitled; and provided
further that the payments herein provided shall not extend beyond the term
of this Agreement.
ARTICLE X
TERMINATION OR RESIGNATION
(a) The Company may terminate this Agreement:
(i) Upon the death of Employee during the term hereof,
except that the Employee's legal representatives, successors, assigns and
heirs shall have those rights and interests as other wise provided in this
Agreement, including the right to receive accrued but unpaid bonus
compensation, if any.
(ii) Subject to the terms of Article IX herein, upon written
notice from the Company to the Employee, if Employee becomes totally
disabled and as a result of such total disability, has been prevented from
and unable to perform all of his duties hereunder for a consecutive period
of four (4) months.
(iii) If the Employee engages in fraud, misappropriation or
embezzlement of Company funds or gross negligence in the performance
of his duties.
(iv) If the Employee engages in the misappropriation of
corporate opportunities.
(B) The Employee may only terminate this Agreement:
(i) In the event Employee is totally disabled and as a result
of such total disability, has been prevented from and unable to perform all
of his duties hereunder for a consecutive period of four (4) months.
(ii) In the event the Employee's duties are inconsistent with
the Employee's position, duties, responsibilities and status with the
Company immediately prior to a change in control of the Company.
ARTICLE XI
STOCK OPTIONS
As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee options to purchase shares of the
Company's Common Stock, $.01 par value, upon and subject to the
following conditions:
(a) Subject to the terms and conditions of a stock option agreement
the Employee is hereby granted options, to purchase 1,500,000 shares of
the Atoy's common stock, all of which options shall be vested and
exercisable as of the dates hereof for a term of five years. The option shall
contain such other terms and conditions as set forth in the stock option
agreement. The exercise price of the options shall be $2.00 per share,
subject to adjustment. The foregoing options are intended to qualify as
incentive stock options.
The Options provided for herein are not transferable by Employee
and shall be exercised only by Employee, or by his legal representative or
executor, as provided under the terms of the stock option agreement. Such
Option shall terminate as provided under the terms of the stock option
agreement.
ARTICLE XII
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the parties
and supersedes all prior agreements between the parties, whether oral or
written, without prejudice to Employee's right to all accrued compensation
prior to the effective date of this Agreement.
ARTICLE XIII
ARBITRATION
Any dispute arising out of the interpretation, application and/or
performance of this Agreement with the sole exception of any claim, breach
or violation arising under Articles V or VI hereof shall be settled through
final and binding arbitration before a single arbitrator in the City of New
York, the State of New York in accordance with the rules of the American
Arbitration Association. The arbitrator shall be selected by the Association
and shall be an attorney at law experienced in the field of corporate law.
Any judgment upon any arbitration award may be entered in any court,
federal or state, having competent jurisdiction of the parties.
ARTICLE XIV
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force
and effect. If any provision is held invalid or unenforceable with respect
to particular circumstances, it shall remain in full force and effect in all
other circumstances.
ARTICLE XV
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person or mailed by certified mail, return
receipt requested, to the address as included in the company's records or
to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
ARTICLE XVI
BENEFIT
This Agreement shall inure to, and shall be binding upon, the
parties hereto, the successors and assigns of the Company, and the heirs
and personal representatives of the Employee.
ARTICLE XVII
WAIVER
The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach of construction and validity.
ARTICLE XVIII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of
New York, and New York law shall govern its construction and validity.
ARTICLE XIX
JURISDICTION
Any or all actions or proceedings which may be brought by the
Company or Employee under this Agreement shall be brought in courts
having a situs within the State of New York and Employee hereby consents
to the jurisdiction of any local, state or federal court located within the
State of New York.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition or amendment shall be made hereto, except
by written agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and affixed their hands and seals the day and year first above
written.
(Corporate Seal)
AMERICAN TOYS, INC.
By:
_________________________________
Name:
Title:
___________________________________
(Employee)
AGREEMENT OF STOCKHOLDERS
OF
LABYRINTH COMMUNICATIONS TECHNOLOGIES GROUP, INC.
AGREEMENT, dated July __, 1996 among American Toys,
Inc., a Delaware corporation ("Atoy"), with its executive offices located at
448 West 16th Street, New York, New York; Dr. Oliver Hilsenrath, an
individual residing at 32 Essex Court, Alamo California 94507; Janvrin
Holdings Limited, a Channel Islands corporation with its principal executive
offices located at Jardine House, 1 Wesley Street, St. Helier, Jersey JE4
8UD Channel Islands; Enderlea Limited ("Enderlea"), a Channel Islands
corporation with its principal executive offices located at Jardine House, 1
Wesley Street, St. Helier, Jersey JE4 8UD Channel Islands; Saffray
Limited ("Saffray"), a Channel Islands corporation with its principal
executive offices located at Jardine House, 1 Wesley Street, St. Helier,
Jersey JE4 8UD Channel Islands; Ashline Limited ("Ashline"), a Channel
Islands corporation with its principal executive offices located at Jardine
House, 1 Wesley Street, St. Helier, Jersey JE4 8UD Channel Islands; (the
aforesaid parties, together with all subsequent owners of the capital stock
of Labyrinth Communications Technologies Group, Inc., being hereinafter
referred to collectively as "Stockholders" and individually as a
"Stockholder"); and Labyrinth Communications Technologies Group, Inc.,
a Delaware corporation, having its principal place of business at ADP One,
Suite 270, Crow Canyon Place, San Ramon, CA 94583-1300 (the
"Corporation").
W I T N E S S E T H :
WHEREAS, the Stockholders are the owners of the shares
of the capital stock of the Corporation listed in Exhibit A hereto, being all
of the issued and outstanding stock of the Corporation (said shares, together
with any other shares of capital stock of the Corporation hereafter issued
and outstanding, being hereinafter referred to as the "Shares"); and
WHEREAS, Dr. Oliver Hilsenrath, the Corporation and
American Toys, Inc., have entered into a stock purchase agreement dated
July 10, 1996 (the "Purchase Agreement"); and
WHEREAS, Enderlea, Saffray and Ashline have subscribed
to purchase an aggregate of 79,000 shares of the Corporation, pursuant to
subscription agreements (the "Subscription Agreements") for aggregate
proceeds of $948,000; and
WHEREAS, pursuant to the Purchase Agreement and the
Subscription Agreements, the Parties have agreed to execute a stockholders
agreement; and
WHEREAS, the parties hereto desire to set forth their
agreement with respect to the Shares.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Restrictions on Transfers of Shares
(a) No Stockholder shall, directly or indirectly, sell, donate,
pledge, hypothecate, encumber or otherwise transfer all or any part of the
Shares now or hereafter owned by him without complying with the
provisions of this Agreement.
(b) Notwithstanding any other provision of this Agreement to the
contrary, no sale, donation, pledge, hypothecation, encumbrance or other
transfer of Shares shall be recognized or deemed effective unless the
transferee shall execute and agree to be bound by this Agreement.
(c) Any sale, donation, pledge, hypothecation, encumbrance or
other transfer which is not in compliance with the provisions of this
Agreement shall be null and void, and shall be recognized by the
Corporation or the Stockholders.
2. Voluntary Transfers of Shares.
(a) The parties agree that there is no restriction on any
Stockholder selling, donating, pledging, hypothecating, encumbering or
otherwise transferring any Shares in an amount equal to or less than 10%
of the outstanding Shares, on the date of sale, except that in the event such
sale, combined with prior sales in any 12-month period aggregates 25% of
the outstanding shares on the date of the latest proposed sale, than
subparagraph (b) below shall apply.
(b) If a Stockholder desires to sell or transfer any Shares, not in
compliance with subparagraph (a) such Stockholder (the "offeror") shall
give written notice thereof to the Corporation and the other Stockholders
(the "offeror's notice"), which notice shall set forth the name of the
proposed transferee, the proposed price or consideration to be paid or
given, and all other pertinent details of the proposed sale or transfer. The
offeror's notice also shall contain an offer to sell such Shares to the
Corporation and the other Stockholders, in accordance with the provisions
of this Article 2.
(c) For a period of ten days after receipt of offeror's notice, the
Corporation shall have the right to purchase all or a portion of the Shares
offered, subject to subparagraph (e) below, for the price and upon the terms
and conditions provided forin the offeror's notice, by giving notice of its
intention to purchase to offeror and to the other Stockholders during the
option period. The Corporation shall have the right to assign and transfer
this option.
(d) If the Corporation fails, refuses or is legally unable to
exercise its option to purchase all or any part of the Shares offered within
the initial option period, the Stockholders shall have the right to purchase
all or a portion of the Shares offered, subject to subparagraph (e) below,
not purchased by the Corporation, for the price and upon the terms and
conditions provided for in the offeror's notice, by giving notice of intention
to purchase to the offeror and all other parties hereto within ten days after
the expiration of the initial option period. Each of the other Stockholders
shall have the right to purchase that portion of the Shares offered and not
purchased by the Corporation as the number of Shares owned by each bears
to the total number of Shares owned by all of the Stockholders (other than
the offeror). If a Stockholder does not elect to purchase his full portion of
such Shares within ten days after the expiration of the initial option period,
the remaining Stockholders shall have the right to purchase, in the aforesaid
proportions, all of the Shares not purchased, by giving notice of intention
to purchase to the offeror and all other parties hereto on or before the date
which is twenty days after the expiration of the initial option period.
(e) In the event the Corporation, the Stockholders or a
combination thereof, have not agreed to purchase all the Shares offered by
the offeree, then the offeree shall be allowed to sell the Shares to the
offeror and not to the Corporation and Stockholders.
(f) In the event the Corporation and/or the Stockholders agree
to purchase all of the Shares offered, the consummation of the sale and the
terms thereof shall comply completely with the terms of the offeror's
notice, inclusive of the form of and time required for payment. In the
event any of such terms are not complied with, the offeror may sell the
shares to the offeree.
(g) If the Corporation and/or the other Stockholders do not elect
to purchase all of the Shares which are the subject of the offeror's notice,
the offeror (subject to the provisions of Article 8 hereof) may sell, donate,
pledge, hypothecate, encumber or otherwise transfer the Shares not
purchased to the transferee designated in offeror's notice, for the
consideration and upon the terms and conditions set forth therein. If the
transfer of all Shares is not completed within the time frame specified by
the offeror's notice, such Shares may not thereafter be transferred unless
they again are offered to the Corporation and the other Stockholders in
accordance with this Article 2.
3. Involuntary Transfers of Shares
(a) If the Shares of any Stockholder are involuntarily transferred
to a pledgee, judgment creditor, assignee for the benefit of creditors,
receiver, trustee in bankruptcy or other person, such transfer shall be
deemed to constitute a notice to the corporation and the other Stockholders,
as of the date of such transfer offering to sell all of the Shares effected
upon the terms and conditions provided in Article 2 for a price to be
determined in accordance with the provisions of subparagraph (b) below.
No pledgee, judgment creditor, assignee for the benefit of creditors,
receiver, trustee in bankruptcy or other holder of Shares, without regard to
the manner of acquisition of the Shares or the nature of the interest therein,
shall sell, donate, pledge, hypothecate, encumber or otherwise transfer any
Shares without complying with the provisions of this Agreement in the same
manner as if such holder or person asserting the interest in such Shares was
named as a Stockholder herein.
(b) For purposes of purchases of Shares pursuant to the
provisions of this Agreement, the purchase price for each Share shall be the
fair value of each Share as determined by the Board of Directors. If the
court or parties selling the Shares do not agree with the Board's decision,
the parties shall appoint one appraiser to determine the value of such
shares, which appraiser shall be agreed upon between the parties or
appointed by a court of competent jurisdiction. All costs of any such
appraisal shall be borne equally by the parties and the final decision of the
appraiser shall be final.
4. Special Provisions.
(a) Atoys shall have the right to approve a Chief Financial
Officer, which officer shall be required to countersign all checks drawn by
the Corporation in excess of $5,000.
(b) Prior to the engagement by the Corporation in any
transactions with any officer, director or affiliate of the Corporation, the
transaction must first be approved by a majority of the disinterested
members of the Board of Directors.
(c) No designations, rights or preferences for the issuance of any
series or class of preferred stock shall be determined without the consent
of all the members of the Board of Directors. The by-laws of the Company
shall be amended to reflect this provision.
5. Transactions with the Corporation
No director or officer of the Corporation shall be disqualified
by such directorship or office from dealing or contracting with the
Corporation as vendor, purchaser or otherwise. No contract, transaction
or act of the Corporation shall be void or voidable or affected by reason of
the fact that any such director or officer, or any person, corporation,
partnership or other entity in which any such director or officer has an
interest or is an officer, director, stockholder or employee, whether or not
such interest is adverse to the Corporation. No director or officer having
such interest shall be liable to the Corporation or to any Stockholder, or
creditor thereof, or to any other person or entity, for any loss incurred by
it under or by reason of any such contract, transaction or act; nor shall any
such director or officer be accountable for any gains or profits realized
thereon. No interested director can vote to approve a contract in which
they have an interest. Nothing in this Article 5 shall be deemed or
construed to protect any director or officer of the Corporation against any
liability to the Corporation or the holders of its Shares to which he would
otherwise be subject by reason of willful misfeasance, fraud, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his directorship or office.
6. Covenant Not To Compete
Each of the Stockholders covenants and agrees not to
establish, open, be engaged in, nor in any manner whatsoever become
interested, directly or indirectly, as employee, owner, partner, agent,
stockholder, director or officer, or otherwise, in any business, trade or
occupation which competes with the business of the Corporation for a
period of two years after the sale of his/her Shares.
7. Legend on Certificates
Every certificate representing the Shares shall bear the
following legend:
"The stock represented by this certificate is subject to, and
may not be transferred except in accordance with, the provisions of that
certain Agreement of Stockholders, dated as of July __, 1996 to which the
Corporation and its Stockholders are parties, a copy of which Agreement
of Stockholders is on file at the principal office of the Corporation."
8. Issuance or Sale of Additional Shares
The Corporation agrees that all sales of stock by the
Corporation after the date hereof, whether by way of original issue or sale
of treasury shares, shall first be offered to the Shareholders in proportion
to their then present holdings of the Shares.
Any additional stock issued by the Corporation shall be
subject to all of the provisions of this Agreement, and shall be deemed to
be included within the terms "Shares" as used herein. All sales of stock by
the Corporation after the date hereof, whether by way of original issue or
sale of treasury shares, shall be made upon the condition that the purchaser
thereof shall agree in writing to be bound by this Agreement.
9. Notices
Any notice or other communication required or permitted to
be given pursuant to this Agreement shall be in writing and shall be deemed
to have been properly given when delivered by hand, by fax or telex, or by
registered or certified mail, return receipt requested, with postage prepaid,
to the party or parties to whom such notice is intended to be given at the
address of such party first above written or such other address as such party
may designate by notice given hereunder.
10. Miscellaneous
(a) This Agreement shall be governed by the laws of the State
of New York. If any provision or provisions of this Agreement is found
to be void or unenforceable, the remaining provisions of this Agreement
shall remain binding and in full force and effect.
(b) Wherever appropriate, the singular shall include the plural,
and vice versa, and the male gender shall include the female and neuter.
The captions in this Agreement are for convenience only, and shall not
affect the construction of the provisions hereof.
(c) This Agreement may be terminated, waived or modified only
by a written agreement executed by the party against which enforcement of
such termination, waiver or modification is sought. This Agreement
merges all prior understandings of the parties hereto with respect to the
subject matter hereof.
(d) This Agreement may be executed in several counterparts,
each of which shall constitute an original, but all counterparts shall
constitute but one and the same agreement. The Corporation agrees that a
copy of this Agreement shall be kept at the principal office of the
Corporation, for inspection by the Stockholders. Any Stockholder shall
have the right to inspect said copy of this Agreement and the books and
records of the Corporation at reasonable times after reasonable notice.
(e) The execution and performance of this Agreement has been
duly authorized and approved by the Board of Directors of the Corporation.
(f) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement shall
apply to all stock and equity securities of the Corporation now or hereafter
acquired by the Stockholders or any of their successors in interest.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
American Toys, Inc.
By: _____________________ _____________________
Name: Dr. Oliver Hilsenrath
Title: Individual
Saffray Limited Ashline Limited
By: _____________________ By: _____________________
Name: Name:
Title: Title:
Enderlea Limited Janvrin Holdings Limited
By: ______________________
_______________________
Name: Name:
Title: Title:
<PAGE>
EXHIBIT A
Name Number of Percentage
Shares of Outstanding
Oliver Hilsenrath (1) 160,000 16.0%
American Toys, Inc. 510,000 51.0%
Enderlea Limited 33,000 3.3%
Saffray Limited 4,000 .4%
Ashline Limited 42,000 4.2%
Janvrin Holdings Limited 100,000 10.0%
Employees (1) 151,000 15.1%
_________________________________
(1) The Board of Directors has authorized 151,000 shares to be issued
to executive officers which are hired by the Corporation pursuant to
its initial formation. In the event all such shares are not distributed
to such officers which are hired, the balance of such shares shall be
issued to Dr. Oliver Hilsenrath.
