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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE
13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
SALEX HOLDING CORPORATION
(Name of Issuer)
SERIES D PREFERRED STOCK, $.01 PAR VALUE PER SHARE
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
794668103 (COMMON STOCK)
(CUSIP Number)
MICHAEL J. NITA
SHANLEY & FISHER, P.C.
131 MADISON AVENUE
MORRISTOWN, NEW JERSEY 07962-1979
(973) 285-1000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
JULY 24, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box: |_|
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
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1 NAME(S) OF REPORTING PERSON(S)
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
PERSHING SUN
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/X/
(b)/ /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES OF AMERICA
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NUMBER OF (7) SOLE VOTING POWER .......................... 0
SHARES
BENEFICIALLY (8) SHARED VOTING POWER ............... 13,822,236*
OWNED BY
EACH (9) SOLE DISPOSITIVE POWER ..................... 0
REPORTING
PERSON (10) SHARED DISPOSITIVE POWER .......... 13,822,236*
WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,822,236*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
APPROXIMATELY 49.3%
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14 TYPE OF REPORTING PERSON
IN
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- --------
* Includes stock options to purchase 37,976 shares of Common Stock, 212 shares
of Series B Convertible Preferred Stock convertible into 436,531 shares of
Common Stock and also includes 125,000 shares of Series D Preferred Stock held
by Betty Sun, Mr. Sun's wife, convertible into 12,500,000 shares of Common
Stock.
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Item 1. Security and Issuer
The securities to which this statement relates are shares of the Series
D Preferred Stock, par value $.01 per share (the "Series D Preferred Stock") and
shares of common stock, par value $.01 per share (the "Common Stock"), of Salex
Holding Corporation, a Delaware corporation, formerly known as Synergistic
Holdings Corp. (the "Issuer").
The principal executive offices of the Issuer are located at 50 Laser
Court, Hauppauge, New York 11788.
Item 2. Identity and Background
Pershing Sun is currently employed as the President of the Issuer and
is a Director of the Issuer. Betty Sun is a consultant to the Issuer under a
consulting agreement (the "Consulting Agreement"). The business address of both
Pershing Sun and Betty Sun is 50 Laser Court, Hauppauge, New York 11788.
Pershing Sun and Betty Sun are husband and wife.
During the last five years, neither Mr. Sun nor Mrs. Sun has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction resulting in a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
Mr. Sun and Mrs. Sun are United States citizens.
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to a Stock Purchase Agreement executed on July 24, 1998,
between the Issuer and Betty Sun, Betty Sun acquired 125,000 shares of Series D
Preferred Stock of the Issuer (the "Shares") for an aggregate purchase price of
$126,250. The purchase price was paid by a payment in cash of $1,250 and a
Promissory Note (the "Sun Promissory Note") made by Betty Sun in favor of the
Issuer in the principal amount of $125,000. Said Sun Promissory Note accrues
interest at a rate of six percent (6.00%) and is payable in $10,000 monthly
installments of principal beginning August 1, 1998 with a final payment of all
remaining principal, and accrued interest, due on July 15, 1999. Payments on
the Sun Promissory Note will be paid from the personal funds of Betty Sun, but
may be offset against payments due Betty Sun from the Issuer under a Promissory
Note in the principal amount of $126,000 made by the Issuer in favor of Betty
Sun pursuant to the terms of the Consulting Agreement. The obligations of Betty
Sun under the Sun Promissory Note are secured by a Stock Pledge Agreement made
by Betty Sun pledging the Shares in favor of the Issuer. The Consulting
Agreement also provides for payments to Betty Sun of $7,000 per month for a
three year period.
The Series D Preferred Stock is not entitled to dividends and is
subordinate as to distribution of assets upon liquidation to the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. The
Series D Preferred Stock is convertible, at the option of the holder, into 100
shares of Common Stock for each share of Preferred Stock at a conversion price
of $.10 per share of Common Stock. The holders of the Series D Preferred Stock
are entitled to vote with the holders of the Common Stock on all matters to be
voted on by the Company's shareholders. Each share of Series D Preferred Stock
is entitled to one hundred votes per share. The Issuer entered into a
registration rights agreement with Betty Sun whereby the Issuer has agreed to
register on behalf of Betty Sun or any assignee or transferee thereof, on
demand, the Common Stock issuable as a result of any conversion thereof with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), and, applicable
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blue sky authorities, commencing at any time six months after July 24, 1998 and
expiring five (5) years after July 24, 1998. Demand registration rights are
exercisable once. The Issuer has also granted piggyback registration rights
exercisable on or before July 24, 2005, in the event the Issuer files a
registration statement under the Securities Act.
Item 4. Purpose of Transaction
Under the Consulting Agreement, Betty Sun is being compensated for her
substantial past services to the Issuer and will be compensated for services
going forward. In lieu of cash payments by the Issuer, Betty Sun agreed to
purchase the Shares.
On July 29, 1998, the Issuer and Hillcrest Holdings, L.L.C.
("Hillcrest"), a limited liability company controlled by Pershing and Betty Sun,
entered into a Letter of Intent whereby Hillcrest will purchase substantially
all of the assets of the Issuer. The Letter of Intent further provides that
Hillcrest will assume certain liabilities of Issuer; provided, however, that the
book value of liabilities to be assumed by Hillcrest shall not exceed the book
value of the assets purchased by Hillcrest by more than $1,756,000. In addition,
for each twelve month period commencing on the first day of the first month
after the closing of the transaction and ending on the last day of the sixtieth
month thereafter, Hillcrest shall pay Issuer 2% of the gross annual revenues
collected by Hillcrest above $30,000,000 during each such twelve month period.
Notwithstanding actual revenues, Hillcrest shall be liable to pay Issuer for
such sixty month period an aggregate minimum amount of $250,000.
The closing of the transaction is subject to the negotiation of a
formal agreement and the satisfaction by both parties of certain terms and
conditions.
Item 5. Interest in Securities of the Issuer
(a) Pershing and Betty Sun are the beneficial owners of 13,822,236
shares of Common Stock, which represents approximately 49.3% of the outstanding
shares of stock of the Issuer entitled to vote on matters submitted to
shareholders. The shares of Common Stock beneficially owned by Pershing and
Betty Sun include: (i) 847,729 shares of Common Stock held in the name of
Pershing Sun, (ii) 37,976 shares of Common Stock issuable upon exercise of stock
options held in the name of Pershing Sun, (iii) 436,531 shares of Common Stock
issuable upon exercise of 212 shares of Series B Convertible Preferred Stock
(current voting power equivalent to 436,531 shares of stock) held in the name of
Pershing Sun and (iv) 12,500,000 shares of Common Stock issuable upon exercise
of 125,000 shares of Series D Preferred Stock held in the name of Betty Sun
(current voting power equivalent to 12,500,000 shares of stock).
(b) Number of shares of Common Stock as to which Pershing Sun and Betty
Sun have:
(i) Sole power to vote or direct the vote: 0
(ii) Shared power to direct the vote: 13,822,236
(iii) Sole power to dispose or to direct the disposition: 0
(iv) Shared power to dispose or to direct the disposition:
13,822,236.
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(c) Except as described in this Statement of this Schedule 13D, neither
Pershing Sun nor Betty Sun has had any transactions in Common Stock of the
Issuer during the last 60 days.
(d) None.
(e) N/A
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of The Issuer
None, other than as described herein.
Item 7. Material to be Filed as Exhibits
Exhibit 1 Stock Purchase Agreement between Issuer and Betty Sun
Exhibit 2 Consulting Agreement between Issuer and Betty Sun
Exhibit 3 Registration Rights Agreement between Issuer and Betty Sun
Exhibit 4 Letter of Intent between Issuer and Hillcrest Holdings, LLC
Exhibit 5 Promissory Note made by Issuer
Exhibit 6 Promissory Note made by Betty Sun
Exhibit 7 Stock Pledge Agreement made between Issuer and Betty Sun
Exhibit 8 Certificate of Designation of Series D Preferred Stock
Exhibit 9 Statement as to Joint Filing
SIGNATURE
After reasonable inquiry and to the best knowledge and belief of the
undersigned, each of the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Dated: August 10, 1998
/s/ Pershing Sun
---------------------------------
Pershing Sun
/s/ Betty Sun
---------------------------------
Betty Sun
The original statement shall be signed by each person on whose behalf
the statement is filed or his authorized representative. If the statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of the filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statement, provided, however, that a power of attorney for his purpose which
is already on file with the Commission may be incorporated by reference. The
name of any title of each person who signed this statement shall be typed or
printed beneath his signature.
Attention: Intentional misstatements or omissions of fact constitute
federal criminal violations. (see 18 U.S.C. 1001).
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INDEX TO EXHIBITS
Exhibit Number Description
1 Stock Purchase Agreement between Issuer and Betty Sun
2 Consulting Agreement between Issuer and Betty Sun
3 Registration Rights Agreement between Issuer and Betty Sun
4 Letter of Intent between Issue and Hillcrest Holdings, LLC
5 Promissory Note by Issuer
6 Promissory Note made by Betty Sun
7 Stock Pledge Agreement between Issuer and Betty Sun
8 Certificate of Designation of Series D Preferred Stock
9 Statement as to Joint Filing
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EXHIBIT 1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT is made this 24th day of July, 1998 by and
between Betty Sun (the "Purchaser") and Salex Holding Corporation, a Delaware
corporation (the "Company").
1. PURCHASE AND SALE. Purchaser hereby agrees to purchase, and
Company hereby agrees to sell, 125,000 shares (the "Shares") of the Company's
Series D Convertible Preferred Stock, par value $.01 (the "Preferred Stock")
upon the terms set forth herein. The powers, rights and preferences of the
Preferred Stock are set forth on the Certificate of Designation attached hereto
as Exhibit A.
2. PAYMENT. The consideration for the purchase of the Shares is
as follows: a promissory note in the principal amount of $125,000 made by
Purchaser in favor of the Company in the form attached hereto as Exhibit A.
Purchaser shall deliver said promissory note at Closing (as herein defined).
3. PURCHASER'S RIGHTS IN SHARES. Purchaser shall be entitled to
all of the rights as a holder of the Shares, including, but not limited to, the
right to vote the Shares, as of the date of this Agreement.
4. REPRESENTATIONS OF PURCHASER. Purchaser hereby makes the
following representations, warranties and agreements and confirms that each of
the following is true and correct in all respects:
(a) Purchaser has been furnished with copies of the Company's
Form 10-KSB for the fiscal year ended April 30,1997 and Form 10-QSB for each of
the fiscal quarters ended July 31, 1997, October 31, 1997 and January 31, 1998.
(b) There has been made available to Purchaser the opportunity
to obtain additional information about the Company. Purchaser has had the
opportunity to ask questions of, and has received satisfactory answers from,
representatives of the Company concerning the Company and the Preferred Stock.
(c) Purchaser understands and acknowledges the Shares, and the
Company's Common Stock, par value $.01 (the "Common Stock"), into which the
Shares are convertible, have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and applicable state securities laws
(collectively, the "Securities Laws"). The Shares are being
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offered and sold pursuant to exemptions from registration requirements under the
Securities Laws.
(d) Purchaser understands and acknowledges that no federal or
state agency has recommended or endorsed the purchase of the Shares.
(e) Purchaser is capable of evaluating the merits and risks of
an investment in the Shares by reason of Purchaser's own investment acumen and
business experience or Purchaser has retained a Purchaser Representative to
advise Purchaser with respect to his prospective investment and such Purchaser
Representative and Purchaser together, by virtue of their knowledge and
experience in business and financial matters, are capable of evaluating the
merits and risks of an investment in the Shares.
(f) Purchaser is acquiring the Shares solely for Purchaser's
own account, for investment, and not with a view to the distribution or resale
thereof.
(g) Purchaser is not acquiring the Shares as nominee, trustee,
agent or representative for any other person.
5. REPRESENTATIONS OF COMPANY.
(a) The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) Upon the execution of this Agreement, the Company shall
immediately cause to be filed with the Delaware Secretary of State the
Certificate of Designation attached hereto as Exhibit A.
(c) Upon execution and delivery by Purchaser of the promissory
note referred to in Section 2 above, the issuance of the Shares by the Company,
the Shares will be duly authorized, validly issued and fully paid and
nonassessable.
(d) The Common Stock into which the Shares are convertible
have been reserved for issuance and, upon conversion, and the issuance of the
shares of Common Stock by the Company, the shares of Common Stock will be duly
authorized, validly issued and fully paid and nonassessable.
6. ACCREDITED INVESTOR. Purchaser hereby represents and warrants
that she is an "accredited investor" as such term is defined in Rule 501 under
the Securities Act.
7. RESTRICTIONS ON TRANSFER. Purchaser recognizes that the Shares
have not been registered under the Securities Laws and
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are offered and sold in reliance upon an exemption from the registration
requirements of the Securities Act and exemptions available under applicable
state securities laws. The Shares may not be resold, transferred, pledged or
otherwise disposed of unless in a transaction registered under the Securities
Laws or pursuant to an opinion from Purchaser's counsel that there are
exemptions available under the Securities Laws. Any certificate or other
document evidencing the Shares will bear a legend stating that the Shares have
not been registered under the Securities Laws and referring to the foregoing
restrictions on their transferability and sale.
8. CLOSING. Closing shall occur simultaneously with the execution
of this Agreement. The Company shall promptly cause the Shares to be issued to
Purchaser.
9. BINDING AGREEMENT; SUCCESSORS AND ASSIGNS. The agreements and
representations herein set forth shall inure to and be binding upon Purchaser
and the Company and their respective successors, permitted assigns and legal
representatives.
10. NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, or on the fifth business day after mailing if mailed
to the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
If to Purchaser:
Betty Sun
765 Hillcrest Place
North Woodmere, New York 11581
If to the Company:
Salex Holding Corporation
50 Laser Court
Hauppauge, New York
With a copy to:
Levitt and Cohen
Two Hillside Avenue, Building F
Williston Park, New York 11596
Attn.: Steven L. Levitt, Esq.
Any party may establish or change its address for purposes of this
Section by giving the other party written notice of the
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new address in the manner set forth above as he may desire upon reasonable
advance notice.
11. ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This Agreement,
together with the exhibits hereto, constitutes the entire agreement among the
parties pertaining to the subject matter contained herein. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the party against whom enforcement is sought. No waiver of any of the
provisions of this Agreement shall constitute, or shall be deemed to constitute,
a waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making such waiver.
12. EFFECT OF HEADINGS. The subject headings of the sections and
subsections of this Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of the provisions
hereof.
13. FURTHER ASSURANCES. The parties hereto agree that, at any time
and from time to time, they will execute and deliver any and all further
instruments and take all further action that may be necessary or desirable in
order to carry out the purposes and provisions of this Agreement and the
transactions contemplated hereby.
14. COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. MUTUAL CONTRIBUTION. This Agreement has been drafted on mutual
contribution of language, and is not to be construed against any party hereto as
being the drafter hereof or causing the same to be drafted.
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16. GOVERNING LAW. This Agreement shall be deemed to be made in
New York and shall be interpreted under the laws thereof applicable to contracts
to be performed wholly therein.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the corporate officers set forth below as of the date first above written.
PURCHASER:
BETTY SUN
By: /s/ Betty Sun
---------------------------------
Betty Sun
COMPANY:
SALEX HOLDING CORPORATION
By: /s/ Andrew Lunetta
-------------------------------
Name: Andrew Lunetta
Title: Treasurer
Sworn to before me this
24th day of July, 1998.
/s/ Lorraine Costea
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EXHIBIT 2
CONSULTING AGREEMENT
AGREEMENT made as of July 24, 1998, between SALEX HOLDING CORPORATION,
a Delaware corporation with an address at 50 Laser Court, Hauppauge, New York
(the "Company"), and BETTY SUN, an individual having an address at 765 Hillcrest
Place, North Woodmere, New York (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant has provided and continues to provide the
Company with valuable consulting services; and
WHEREAS, the Company desires to compensate the Consultant for such
consulting services and engage the Consultant to provide future consulting
services to the Company, and the Consultant is willing to provide such services
to the Company, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual covenants
and agreements contained herein, the parties agree as follows:
1. Scope of Work. The Company acknowledges that the Consultant
has, beginning in January 1997, provided valuable consulting services to the
Company, including, but not limited to, preventing hostile takeovers of the
Company, engaging competent professionals and eliminating the threat of a going
concern qualification to the Company's financial statements. The Company hereby
further engages the Consultant for the furnishing of additional services in
connection with the operation of the business conducted by the Company. The
Consultant shall provide the Company with consulting services as may be
reasonably requested by the Company in connection with the marketing, sales and
support of the Company's business.
2. Consideration and Payment. As consideration for the consulting
services provided by the Consultant to the Company prior to the date hereof, the
Company is issuing to the Consultant simultaneously herewith a Promissory Note
in the amount of $126,000 in the form annexed hereto as Exhibit A. Payment shall
be made by way of an offset against any amounts payable by the Consultant to the
Company pursuant to the Promissory Note dated the date hereof made by the
Consultant in favor of the Company annexed hereto as Exhibit B. In addition, the
Company has agreed to extend the consultant's engagement for a period of three
(3) years from the date hereof and agrees to pay the Consultant a fee of $7,000
per month. The Company shall also pay the Consultant for all
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reasonable and documented expenses incurred by the Consultant in the performance
of her duties hereunder.
3. Termination. This Agreement shall terminate upon the earlier
of the third anniversary of the date hereof or the closing of a Transaction (as
defined herein), unless assumed by a successor in interest following a
Transaction. A "Transaction" as used herein shall mean a merger, consolidation,
reorganization, financing, or sale or transfer of all or substantially all of
the stock or assets of the Company, or similar commercial transaction entered
into by the Company. The Company shall have no right to terminate this Agreement
or suspend or terminate payments, except for cause and only after written notice
of such cause has been given by the Company to the Consultant and Consultant has
had thirty (30) days to cure same. If the cause has not been cured within said
thirty (30) days, Company shall be entitled to terminate this Agreement. "Cause"
as used herein shall mean gross incompetence, habitual intoxication, habitual
drug usage, gross insubordination, gross negligence, violations of material
proper and lawful express directions or any material proper and lawful express
rules or regulations established by Company in writing and provided to
Consultant regarding the conduct of its business, or material violations by
Consultant of the terms and conditions of this Agreement, in which event,
Company shall have no further obligations or liabilities hereunder after the
date of such termination, except for amounts previously owed to Consultant that
have not been paid as of such date.
4. Independent Contractor. In all matters relating to this
Agreement, the Consultant shall be acting as an independent contractor and as
such the Company shall not deduct any withholdings from the amounts paid to the
Consultant. The Consultant is not an employee of the Company under the meaning
or application of any federal or state unemployment or insurance laws or
workers' compensation laws, or otherwise.
5. Confidential Information; Authorized Disclosure.
5(a) The Consultant recognizes and acknowledges that (i) all plans,
systems, methods, designs, programs, procedures, books and records relating to
the operations, practices and personnel of the Company, and of any subsidiary or
affiliate of the Company (whether instituted or commenced prior or subsequent to
the date hereof); and (ii) all other records, documents and information
concerning the Company's or any of its subsidiaries' or affiliates' business
activities, practices and procedures, as there may exist from time to time,
constitute and will constitute valuable, special and unique assets of the
Company's and of any such subsidiary's or affiliate's business. The Consultant
therefore covenants and agrees that the Consultant will not, at any time,
without the prior written consent of the Board of Directors of the Company or a
person authorized thereby, publish or disclose to any third party or use for the
Consultant's own benefits or advantage, or make
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available for others to use, any part of such confidential information which was
disclosed to the Consultant as a result of the Consultant's performance of this
Agreement with the Company, to the extent such information has theretofore
remained confidential (except for unauthorized disclosures) and except as
otherwise ordered or requested by a court of competent jurisdiction or any
governmental or regulatory authority.
5(b) The Consultant acknowledges that the restrictions contained in
this Section 5 are reasonable and necessary, in view of the nature of the
Company's and its subsidiaries and affiliates' business, in order to protect the
legitimate interests of the Company and its subsidiaries and affiliates, and
that any violation thereof would result in irreparable injury to the Company and
its subsidiaries and affiliates. The Consultant agrees, therefore, that in the
event of a breach of threatened breach by the Consultant of the provisions of
this Section 5, the Company or any of its subsidiaries or affiliates shall be
entitled to obtain from any court of competent jurisdiction, preliminary and
permanent injunctive relief restraining the Consultant from disclosing or using
any such confidential information.
5(c) Nothing herein shall be construed as prohibiting the Company or
its subsidiaries or affiliates from pursuing any other remedies available to
them or any of them for such breach or threatened breach, including recovery of
damages from the Consultant.
5(d) If, at the time of enforcement of this Section 5, a court shall
hold that the duration, scope or area of restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area then reasonable under such circumstances shall
be substituted for the stated duration, scope or area and that the court shall
be allowed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law.
5(e) Notwithstanding anything contained in this Agreement to the
contrary, the terms, covenants and restrictions contained in this Section 5
shall not be applicable to any activity engaged by the Consultant with respect
to the solicitation, negotiation, planning or entering into of a Transaction,
from time to time, and whether or not a Transaction is consummated.
6. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
7. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or
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delivered against receipt to the party to whom it is to be given at the address
of such party set forth in the preamble to this Agreement (or to such other
address as the party shall have furnished in writing in accordance with the
provisions of this Section). Any notice or other communication delivered shall
be deemed given on the date of delivery and any notice or other communication
given by certified mail shall be deemed given as at the fifth business day
following the date of mailing.
8. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term of any other term of this Agreement. Any waiver must be in writing.
9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without given
effect to the rules governing the conflicts of law.
10. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
SALEX HOLDING CORPORATION
By: /s/ Andrew Lunetta
---------------------------------
Name: Andrew Lunetta
Sworn to before me Title: Treasurer
this 24th day of July ,1998.
CONSULTANT:
/s/ Lorraine Costea
- ---------------------------- /s/ Betty Sun
------------------------------------
Betty Sun
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EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 24th day of July, 1998, by and between Salex Holding
Corporation, a Delaware corporation (the "Company"), and Betty Sun (the
"Shareholder").
R E C I T A L S
WHEREAS, the Shareholder is acquiring 125,000 shares of Series D
Preferred Stock, par value $.01 per share of the Company (the "Convertible
Stock") at a price of $1.00 per share, pursuant to the terms at a subscription
agreement by and between the Company and the shareholder, dated the date hereof
(the "Agreement") which shares of Convertible Stock are convertible into shares
of common stock, par value $.01 per share of the Company (the "Shares") at a
conversion rate of one hundred Shares for each share of Convertible Stock.
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the Shares and the Shareholder desires to obtain
such registration rights, subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agrees as follows:
1. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) the Shares, (ii) any shares of the common stock
of the Company, par value
<PAGE> 2
$.01 per share (the "Common Stock") issued as (or issuable upon the
conversion or exercise of any warrant, right, option or other
convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of,
the Shares, and (iii) any Common Stock issued by way of a stock split
of the Shares. For purposes of this Agreement, any Registrable Stock
shall cease to be Registrable Stock when (w) a registration statement
covering such Registrable Stock has been declared effective and such
Registrable Stock has been disposed of pursuant to such effective
registration statement, (x) such Registrable Stock is sold pursuant to
Rule 144 (or any similar provision then in force) under the 1933 Act,
(y) such Registrable Stock has been otherwise transferred, no stop
transfer order affecting such stock is in effect and the Company has
delivered new certificates or other evidences of ownership for such
Registrable Stock nor bearing any legend indicating that such shares
have not been registered under the 1933 Act, or (z) such Registrable
Stock is sold by a person in a transaction in which the rights under
the provisions of this Agreement are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of 1933,
as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with such Holder,
or the spouse or children (or a trust exclusively for the benefit of
the spouse and/or children) of such Holder, or, in the case of a Holder
that is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated
organization or association or other entity, including any governmental
entity.
(h) The term "Requesting Holders" shall mean a Holder or
Holders of in the aggregate of at least a majority of the Registrable
Stock.
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<PAGE> 3
(i) References in this Agreement to any rules, regulations or
forms promulgated by the Commission shall include rules, regulations
and forms succeeding to the functions thereof, whether or not bearing
the same designation.
2. Demand Registration
(a) Commencing at any time six months after the date hereof
and expiring five (5) years from the date hereof, the Holders
representing a majority of Registrable Stock shall have the right,
exercisable by written notice to the Company, to have the Company
prepare and file with the Commission, a registration statement and such
other documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the Holders, in
order to comply with the provisions of the 1933 Act, so as to permit a
public offering and sale by such holders of the Registrable Stock. In
such event, the Company shall (x) within ten (10) days thereafter
notify in writing all other Holders of Registrable Stock of such
request, and (y) use its best efforts to cause to be registered under
the 1933 Act all Registrable Stock that the Requesting Holders and such
other Holders have, within thirty (30) days after the Company has given
such notice, requested be registered. The Requesting Holders shall be
entitled to exercise their rights under this Section 2(a) once and only
once.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved by
the Company, which approval shall
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<PAGE> 4
not be unreasonably withheld; provided, that all of the representations
and warranties by, and the other agreements on the part of, the Company
to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holders and that any or all of the conditions
precedent to the obligations precedent to the obligations of such
Holders; and provided further, that no Holder shall be required to make
any representations or warranties to or agreements with the Company or
the underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to
the contrary, if the managing underwriter of an underwritten offering
of the Registrable Stock requested to be registered to this Section 2
advises the Requesting Holders in writing that in its opinion marketing
factors require a limitation of the number of shares to be
underwritten, the Requesting Holders shall so advise all Holders of
Registrable Stock that would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Stock that may be included in
such underwritten offering shall be allocated among such Holders,
including the Requesting Holders, in proportion (as nearly as
practicable) to the amount of Registrable Stock requested to be
included in such registration by each Holder at the time of filing the
registration statement; provided, that in the event of such limitation
of the number of shares of Registrable Stock to be underwritten, the
Holders shall be entitled to an additional demand registration pursuant
to this Section 2. If any Holder or Registrable Stock disapproves of
the terms of the underwriting, such Holder may elect to withdraw by
written notice to the Company, the managing underwriter and the
Requesting Holders. The securities so withdrawn shall also be withdrawn
from registration.
(d) The Company shall be obligated to effect and pay for a
total of only one (1) registration pursuant to this Section 2, unless
increased pursuant to Section 2(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2(d), unless (i) it
has been declared effective
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<PAGE> 5
by the Commission, (ii) the offering of Registrable Stock pursuant to
such registration is not subject to any stop order, injunction or other
order or requirement of the Commission (other than any such action
prompted by any act or omission of the Holders), and (iii) no
limitation of the number of shares of Registrable Stock to be
underwritten has been required pursuant to Section 2(c) hereof.
3. Obligations of the Company. Whenever required under Section 2
to use is best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to a file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in accordance
with the intended method of distribution thereof, and use its best
efforts to cause such registration statement to become effective as
promptly as practicable thereafter; provided that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to one counsel selected by the
Requesting Holders copies of all such documents proposed to be filed,
and (ii) notify each such Holder of any stop order issued or threatened
by the Commission and take all reasonable action required to prevent
the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than one hundred twenty
(120) days or such shorter period which will terminate when all
Registrable Stock covered by such registration statement has been sold
(but not before the expiration of the forty (40) or ninety (90) day
period referred to in Section 4(3) of the 1933 Act and Rule 174
thereunder, is applicable), and comply with the provisions of the 1933
Act with respect to the disposition of all securities covered by such
period in accordance with the intended methods of disposition by
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<PAGE> 6
the sellers thereof set forth in such registration statements;
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such
registration statement as filed and each amendment and supplement
thereof (in each case including all exhibits thereof), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Stock
owned by such Holder;
(d) use is best effort to register or qualify such Registrable
Stock under such other securities or blue sky laws or such
jurisdictions as any selling Holders or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdiction of the Registrable Stock owned by
such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) hereof, (ii)
subject itself to taxation in any such jurisdiction, or (iii) consent
to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act (even if such time is
after the period referred to in Section 3(b)), of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances being made
not misleading,
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<PAGE> 7
and prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Stock, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances
being made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector, as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement. Records
or other information which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of
such Records or other information is necessary to avoid or correct a
misstatement or omission in the registration statement, or (ii) the
release of such Records or other information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
selling Holder shall, upon learning that disclosure of such Records or
other information is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense,
to undertake appropriate action to prevent disclosure of the Records or
other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect o such share of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold
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<PAGE> 8
through underwriters, then to the Requesting Holders as to such matters
as such underwriters or the Requesting Holders, as the case may be, may
reasonably request and as would be customary to such a transaction; and
(2) a letter dated such date, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and
if such Registrable Stock is not being sold through underwriters, then
to the Requesting Holders and, if such accountants refuse to deliver
such letter to such Holder, then to the Company (i) stating that they
are independent certified public accountants within the meaning of the
1933 Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act, an (ii) covering
such other financial matters (including information as to the period
ending not more than five (5) business days prior to the date of such
letter) with respect to the registration in respect of which such
letter is being given as the Requesting Holders may reasonably request
and as would be customary in such a transaction;
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement.
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonable practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of at
least twelve (12) months beginning with the first full month after the
effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933
Act; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on the New York Stock Exchange and/or any other securities
exchange on which
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<PAGE> 9
similar securities issued by the Company are then listed, or traded on
the National Association of Securities Dealers Automated Quotations
System, if such listing or trading is then permitted under the rules of
such exchange or system, respectively.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as to the
Company may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(f) hereof, such
Holder with forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemental or amended prospectus contemplated by
Section 3(f) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3(b)) by the number of days during the period from and including the
date of the giving such notice pursuant to Section 3(f) hereof to and including
the date when each selling Holder of Registrable Stock covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3(f) hereof.
4. Piggyback Registration. If, at any time on or before July ,
2005 (the "Expiration Date"), the Company determines that it shall file a
registration statement under the 1933 Act (other than (i) a registration
statement on a Form S-4 or S-8 or filed in connection with an exchange offer, or
(ii) an offering of securities solely to the Company's existing stockholders on
any form that would also permit the registration of the Registrable Stock, the
Company shall promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than forty (40) days from the date of
such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. Upon the written request of any Holder, received
by the Company no later than twenty (20) days after the date of the Company's
9
<PAGE> 10
notice, the Company shall use its best efforts to cause to be registered under
the 1933 Act all of the Registrable Stock that each such Holder has be requested
to be registered. If, in the written opinion of the managing underwriter or
underwriters (or, in the case of a non-underwritten offering, in the written
opinion of the placement agent, or if there is none, the Company), the total
amount of such securities to be so registered, including such Registrable Stock,
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to the then current market value of such
securities, or (ii) without otherwise materially and adversely affecting the
entire offering, then the amount of Registrable Stock to be offered for the
accounts of Holders shall be reduced pro rata to the extent necessary to reduce
the total amount of securities to be included in such offering to the
recommended amount; provided, that if securities are being offered for the
account of other Persons as well as the Company, such reduction shall not
represent a greater fraction of the number of securities intended to be offered
by Holders than the fraction of similar reductions imposed on such other Persons
other than the Company over the amount of securities they intended to offer.
5. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each
Holder whose Registrable Stock is included in a registration statement
agrees not to effect any public sale or distribution of the issue being
registered or a similar security of the Company, or any securities
convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 under the 1933 Act, during the
fourteen (14) days prior to, and during the ninety (90) day period
beginning on, the effective date of such registration statement (except
as part of the registration), if and to the extent requested by the
Company in the case of a non-underwritten public offering or if and to
the extent requested by the managing underwriters in the case of an
underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others. The
Company agrees (i) not to effect any public sale or distribution of any
securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities,
during the fourteen (14) days prior
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<PAGE> 11
to, and during the ninety (90) day period beginning on, the effective
date of any registration statement in which Holders are participating
(except as part of such registration), if and to the extent requested
by the Holders in the case of a non-underwritten public offering or if
and to the extent requested by the managing underwriter or underwriters
in the case of an underwritten public offering; and (ii) that any
agreement entered into after the date of this Agreement pursuant to
which the Company issues or agrees to issue any securities convertible
into or exchangeable or exercisable for such securities (other than
pursuant to an effective registration statement) shall contain a
provision under which holders of such securities agree not to effect
any public sale or distribution of any such securities during the
periods described in (i) above, in each case including a sale pursuant
to Rule 144 under the 1933 Act.
6. Expenses of Registration. All expenses incurred in connection
with each registration pursuant to Sections 2 and 4 if this Agreement, excluding
underwriters' discounts and commissions, but including, without limitation, all
registration, filing and qualification fees, word processing, duplicating,
printers' and accounting fees (including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance), exchange listing fees or National Association of Securities Dealers
fees, messenger and delivery expenses, all fees and expenses of complying with
securities or blue sky laws, fees and disbursements of counsel for the Company,
and the reasonable fees and disbursements of one (1) counsel for the selling
Holders shall be paid by the Company. The selling Holders shall bear and pay the
underwriting commissions and discounts applicable to the Registrable Stock
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Agreement.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such Holder
(within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged
untrue statement or material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein (in case of a prospectus or
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<PAGE> 12
preliminary prospectus, in the light of the circumstances under which
they were made) not misleading. The Company will also indemnify any
underwriters of the Registrable Stock, their officers and directors and
each Person who controls such underwriters (within the meaning of the
1933 Act) to the same extent as provided above with respect to the
indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company (within
the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission alleged omission of a
material fact required to be stated in the registration statement,
prospectus or preliminary prospectus of any amendment thereof or
supplement thereto or necessary to make the statements therein (in the
case of a prospectus or preliminary prospectus, in light of the
circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information with respect to such Holder so
furnished in writing by such Holder. Notwithstanding the foregoing, the
liability of each such Holder under this Section 7(b) shall be limited
to any amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises out
of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement, and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified
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<PAGE> 13
party and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonable satisfactory to such indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to the indemnifying party
shall itself not create liability except to the extent of any injury
caused thereby. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation. If the indemnifying party is not entitled to,
or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one (1) counsel
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay
the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnity provided for
in this Section 7 is unavailable to, or is insufficient to hold
harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether an action in question, including any untrue alleged
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<PAGE> 14
untrue statements of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties; and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 7(c), any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Section 7(a) and (b) without regard to the relative
fault of said indemnifying party or indemnifying party or any other
equitable consideration provided for in this Section 7.
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting agreements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonable
required under the terms of such underwriting agreements.
9. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such
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<PAGE> 15
Holder to sell Registrable Stock without registration under the 1933 Act within
the limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
10. Transfer of Registration Rights. The registration rights of
any Holder under this Agreement with respect to any Registrable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this Section
10, no transfer of Registrable Stock shall cause such Registrable Stock to lose
such status.
11. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive (to the extent
permitted by law) the defense in any action for specific performance
that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers and consents
to departures
15
<PAGE> 16
from the provisions hereof may not be given unless the Company has
obtained the written consent of the Holders of at a least a majority of
the Registrable Stock then outstanding affected by such amendment,
modification, supplement, waiver or departure.
(d) Successor and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties
hereto to their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by the reason of this Agreement,
except as expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed wholly within the
state, without regard to the conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be giving in writing and shall be delivered in person
or by telecopy or by overnight courier guaranteeing no later than
second business day delivery, directed to (i) the Company at the
address set forth below its signature hereof or (ii) to a Holder at the
address therefor as set forth in the Company's records. Any party may
change its address for notice by giving ten (10) days advance written
notice to the other parties. Every notice or other communication
hereunder shall be deemed to have been duly given or served on the date
on which personally delivered, or on the date actually received, if
sent by telecopy or overnight courier service, with receipt
acknowledged.
16
<PAGE> 17
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any
provision in every other respect and of the remaining provisions
contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect to the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full force
and effect notwithstanding any breach of purported breach of, or
relating to, the Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
SALEX HOLDING CORPORATION
By: /s/ Andrew Lunetta
------------------------------------
Name: Andrew Lunetta
Title: Treasurer
SHAREHOLDER:
By: /s/ Betty Sun
------------------------------------
Betty Sun
17
<PAGE> 1
EXHIBIT 4
HILLCREST HOLDINGS, L.L.C.
July 24, 1998
Board of Directors
Salex Holding Corporation
50 Laser Court
Hauppauge, New York 11788-3912
Ladies and Gentlemen:
Subject to the terms of this letter of intent, Hillcrest Holding, LLC,
or its assignee or designee (together, "Buyer") offers to acquire the operating
businesses (the "Business") and substantially all of the assets of Salex Holding
Corporation and its subsidiaries and affiliates (collectively, "Seller"). Buyer
is controlled by Pershing and Betty Sun and will have at closing an initial
capitalization of at least $1,000,000.
Pursuant to the Transaction (as defined below), Buyer will acquire
substantially all tangible and intangible assets of Seller, assume substantially
all known operating liabilities of Seller, and will provide Seller with income
as provided herein. Moreover, Buyer intends to rehire substantially all current
employees of Seller and assume documented executory contracts (including
employment agreements) as it deems necessary and appropriate to the operation of
the Business.
The purpose of this letter of intent is to state certain binding
agreements between Buyer and Seller with respect to the purchase by Buyer of all
of the assets of Seller relating to the Business (the "Transaction").
In recognition and consideration of the mutual promises of Buyer and
Seller that are stated in this Letter of Intent, and the significant costs to be
borne by Buyer and Seller in pursuing this transaction, the parties hereby agree
as follows.
Section 1. Agreement. Immediately after the execution of this Letter of
Intent, Buyer and Seller will enter into a definitive, legally binding, written
contract pursuant to which Buyer will purchase from Seller, and Seller will sell
to Buyer, all of the tangible and intangible assets of Seller that are used or
useable in the conduct of the Business (the "Agreement"). The
<PAGE> 2
Board of Directors
July , 1998
Page 2
parties shall enter into the Agreement on or before August 1, 1998.
Section 2. Assets to be Purchased.
2(a) The assets to be purchased by Buyer shall specifically include all
tangible assets used or useable in the Business, including, but not be limited
to, the following tangible personal property:
(i) All valid and collectible accounts receivable, claims, settlements,
and notes due, including all amounts held in escrow, including but not limited
to the insurance settlement with Alex Gianoplus, Seller and Salvatore Crimi. For
the purposes of this letter of intent, "accounts receivable" mean all invoiced
and properly accrued obligations of customers to pay for goods and services.
(ii) All names, trade names, trademarks and servicemarks of Seller,
including but not limited to, the name "Salex".
(iii) All real estate assets including building and land located at 50
Laser Court, Hauppauge, New York.
(iv) All of the Seller's office equipment (including computer systems)
and telephone numbers, office furniture, and other tangible personal property
used or useable in the conduct of the Business.
(v) All books and records relating to the Business excluding original
tax records.
2(b) The assets to be purchased by Buyer shall specifically include all
intangible assets used or useable in the Business including, but not be limited
to, the following intangible personal property:
(i) All purchase orders received by Seller relating to the Business
that are unfilled and outstanding as of the closing date.
(ii) All proposals, quotations, and bids made to the Seller's customers
that are outstanding as of the closing date.
(iii) All contracts with customers and suppliers, and all other
contracts required for the operation of the Business.
(iv) All manufacturers' warranties for the tangible personal property
that is included in the Transaction, and all
<PAGE> 3
Board of Directors
July , 1998
Page 3
other instruction manuals, service manuals, maintenance records and other
documents, if any, for the tangible personal property that is included in the
Transaction.
(v) Seller's goodwill associated with the Business.
(vi) All cash on hand and in bank accounts.
(vii) All prepaid insurance and other prepaid items.
2(c) Ownership of the assets included in the Transaction will be
transferred by Seller to Buyer on the closing date free and clear of all liens
and other encumbrances, except as properly documented and expressly approved by
Buyer in writing.
Section 3. Non-competition agreement. At the closing, Buyer will enter
into an appropriate non-competition and non-solicitation agreement with Seller,
under which Seller, for 5 years after the date of the closing, will not (either
directly or indirectly through any business entity whether owned or controlled
by Seller or not) solicit any customers (current or former) or employees of, or
compete with, the Business.
Section 4. Assumption of liabilities.
4(a) Buyer will assume substantially all trade liabilities of Seller
with current vendors incurred in the ordinary course of business. Buyer will
also assume substantially all non-operational liabilities as deemed by Buyer to
be necessary to the operation of the Business provided that they were properly
authorized by Seller's board of directors, properly documented and executed and
fully disclosed to Buyer. Notwithstanding the foregoing, at closing, the book
value of liabilities to be assumed by Buyer will not exceed the book value of
the assets purchased by Buyer by more than $1,765,000.
4(b) Buyer will assume none of Seller's debts, obligations, or other
liabilities of any kind or nature whatsoever, except for those liabilities
described in Section 4(a) and specifically assumed by Buyer in writing pursuant
to the Agreement. Buyer will also not assume responsibility for obligations to
current and former shareholders of Seller, Synergistic Holdings Corp. or
Dickinson Holding Corp., and employees of Seller (except for contractual
obligations to current employees that Buyer elects to assume). Buyer will not
assume Seller's obligations for former professional services provided to Seller
or for personal obligations incurred by Salvatore Crimi or his family. All sales
commitments and vendor obligations, as well as any executory
<PAGE> 4
Board of Directors
July , 1998
Page 4
contracts, leases, and other agreements, are to be scheduled and reviewed for
possible assumption, but only upon full and timely disclosure of all terms and
obligations according to a predetermined schedule.
Section 5. Purchase price. The purchase price for the tangible and
intangible property described in Section 2 above and for the non-competition
covenants described in paragraph 3 shall be as follows:
For each twelve month period commencing on the first day of the first
month after closing and ending on the last day of the sixtieth month thereafter,
Buyer will pay Seller 2% of the gross annual revenues collected by Buyer above
$30,000,000 during each such twelve month period. Amounts payable shall be paid
within 120 days of the end of each twelve month period. Buyer shall,
notwithstanding actual revenues, be liable to pay Seller for such sixty month
period an aggregate minimum amount of $250,000. Any purchase price payable by
Buyer shall be off-set by any indemnification or other obligations of Seller to
Buyer.
Section 6. Other Agreement Terms and Conditions
The Agreement shall contain the following additional terms and
conditions:
6(a) Seller's obligation to close under the Agreement shall be
contingent upon Buyer being capitalized at closing with at least $1,000,000 in
cash and/or cash equivalents.
6(b) Seller shall change its name at closing to a name approved by
Buyer that does not include the word "Salex" or any names used by Seller in the
past.
6(c) The Agreement shall contain representations and warranties of
Seller customary for transactions of this nature. Seller shall indemnify Buyer
for any breach by Seller of any of Seller's representations or warranties, or
for any failure of Seller to perform any of its obligations under this Letter of
Intent or the Agreement, or for any liabilities of Buyer arising out of any
non-assumed liabilities.
6(d) If Buyer is sold in its entirety within twelve months after the
closing, Seller will receive 50% of the net proceeds in excess of the "Buyer's
Capitalization" (as defined herein). The "Buyer's Capitalization" will be
computed as the greater of the initial capitalization of Buyer or its
capitalization at the time of a subsequent sale, as adjusted for any dividends
or capital
<PAGE> 5
Board of Directors
July , 1998
Page 5
distributions, plus $1,020,000.00 (which represents the cash invested
by the Suns into Seller prior to the Transaction, plus 6% annual interest and
expenses).
6(e) Upon execution of this Letter of Intent, Seller shall immediately
cause to be prepared a proxy statement and other proxy materials soliciting, on
behalf of the Board of Directors of the Company, the approval of the Transaction
of the stockholders of the Company. Said proxy materials shall be filed with the
Securities and Exchange Commission on or before August 28, 1998.
6(f) Seller shall diligently proceed to take all actions necessary to
close the Transaction on or before October 31, 1998, unless such closing date is
extended in writing by Buyer.
6(g) Time is of the essence as to all dates.
6(h) All documents shall be drafted by counsel to Buyer.
6(i) Seller shall obtain, at its expense, a fairness opinion from a
mutually acceptable investment bank.
6(j) Seller shall obtain all consents and permits required to effect
the Transaction.
6(k) Each party will pay its own professional fees and other expenses.
6(l) Seller shall postpone its Annual Meeting of Stockholders while the
Transaction is pending.
Section 7. Break-up Fee. Seller acknowledges that the time, effort and
expenses expended and to be expended by the Buyer in the negotiation and
consummation of the Transaction are and will be substantial and non-revocable
and that the same involve considerable risk on their part. Accordingly, in
consideration of the foregoing, if the Board of Directors of Seller subsequently
decides to accept an alternate proposal for a sale, lease, merger, acquisition,
partnership, strategic alliance or financing or like transaction from a third
party, including, but not limited to, any prior or existing shareholder or
consultant of Seller, Buyer, as a preferred bidder, will immediately upon
acceptance of such proposal be entitled to a $800,000.00 break-up fee plus all
expenses (the "Break-Up Fee") to be payable to Buyer at closing of the alternate
transaction.
Section 8. Sale to be contingent on satisfactory due diligence
investigation. Buyer will conduct a due diligence
<PAGE> 6
Board of Directors
July , 1998
Page 6
investigation of the assets and the Business after the execution of this Letter
of Intent, and Buyer will have right to terminate this Letter of Intent and/or
the Agreement if the results of Buyer's due diligence investigation are not
satisfactory to the Buyer in its sole and absolute discretion.
Section 9. No brokers.
9(a) Buyer represents that the Buyer has not dealt with any brokers,
and has not made any agreements to pay any third party a brokerage commission or
similar compensation, in connection with the transactions described in this
letter of intent. Buyer will indemnify and hold the Seller harmless from and
against any claim or liability arising from any breach of this representation by
Buyer.
9(b) Seller represents that Seller has not dealt with any brokers, and
has not made any agreements to pay any third party a brokerage commission or
similar compensation, in connection with the transactions described in this
letter of intent. Seller will indemnify and hold Buyer harmless from and against
any claim or liability arising from any breach of this representation by Seller.
Section 10. Access. Seller will provide Buyer with unfettered,
unrestricted access to Seller's employees, the assets, Seller's facilities and
the books and records relating thereto from the date hereof to the Closing, and
key vendors, customers, and creditors.
Section 11. Best Efforts. Seller will use its best efforts to cause the
Transaction to be effected in accordance with the time schedule set forth
herein. In the event the Transaction does not close, and Seller is deemed to
have breached its obligations set forth in the preceding sentence, Seller shall
be obligated to pay Buyer, as liquidated damages, the Break-Up Fee.
Section 12. Confidentiality. Seller, nor any of its officers,
directors, employees, agents, consultants or anyone acting in Seller's behalf,
will disclose to any third party the existence of this Letter of Intent or any
of the terms hereof except to those employees and professional advisors with an
absolute need to know and as may be required by applicable law. Seller
acknowledges that the money damages will not be sufficient to compensate Buyer
in the event of a breach of this Section. Accordingly, Buyer shall also be
entitled to equitable relief in the event of such breach.
<PAGE> 7
Board of Directors
July , 1998
Page 7
Section 13. Governing Law. This Letter of Intent, the Agreement and any
other agreement resulting here from shall be deemed to be made in Delaware and
shall be interpreted under the laws applicable to contracts to be performed
wholly therein.
Section 14. Integration. The terms and conditions contained in this
Letter of Intent supersede all prior oral and/or written understandings between
the parties and constitutes the entire agreement between them concerning the
subject matter hereof. This Letter of Intent shall not be modified or amended
except in writing signed by an authorized representative of the party to be
charged.
Section 15. Further Assurances. The parties hereto agree that, at any
time and from time to time, they will execute and deliver any and all further
instruments and take all further action that may be necessary or desirable in
order to carry out the purposes and provisions of this Letter of Intent and the
transactions contemplated hereby.
Section 16. Counterparts. This Letter of Intent and the Agreement, may
be executed simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 17. Binding Effect. This Letter of Intent shall be binding upon
and insure to the benefit of the parties hereof, their transferees, assigns,
heirs and legal representatives.
Section 18. Drafting. This Letter of Intent has been drafted on mutual
contribution of language, and is not be construed against any party hereto as
being the drafter hereof or causing the same to be drafted.
<PAGE> 8
Board of Directors
July , 1998
Page 8
Section 19. Acceptance. The offer contained herein is contingent upon
the Board accepting the offer on or before July 28, 1998.
Section 20. No Shopping. From the date hereof through and until the
earlier of termination of this agreement or closing, neither Salex nor any of
its affiliates (Seller), employees, officers, agents or advisors shall, directly
or indirectly, (a) solicit, initiate or encourage any inquiries, proposals or
offers from any person, party or entity (Person) relating to any acquisition (or
sublease as the case may be) of the acquired assets or the business or any
portion thereof, or any securities of, or any merger, consolidation or business
combination with Seller, or (b) with respect to any effort or attempt by any
other Person to do or seek any of the foregoing, (i) participate in any
discussions or negotiations, (ii) furnish to any other Person any information
with respect to, or afford access to the properties, books or records of or
relating to, Seller, the acquired assets or the business, or (iii) otherwise
cooperate in any way with, or assist or participate in, or facilitate or
encourage any such effort, Seller shall promptly notify Buyer and the board if
any such proposal or offer or any inquiry or contact with any Person with
respect thereto is made.
Section 21. Acceptance of final offer is subject to approval of Buyer's
counsel.
Very truly yours,
HILLCREST HOLDING, L.L.C.
By: /s/ Betty Sun
------------------------------
The undersigned corporation
agrees to the foregoing on this
day of July, 1998.
Salex Holding Corporation
By: /s/ Andrew Lunetta
---------------------------
Name: Andrew Lunetta
Title: Treasurer
Sworn to before me
this 29th day of July, 1998.
/s/ Lorraine Costea
------------------------------
<PAGE> 1
EXHIBIT 5
PROMISSORY NOTE
$126,000 Hauppauge, New York
July 24, 1998
FOR VALUE RECEIVED, SALEX HOLDING CORPORATION ("Maker"),
hereby promises to pay to the order of BETTY SUN, (together with any subsequent
holder(s) of this Note, "Payee"), at 765 Hillcrest Place, North Woodmere, New
York 11581 or such other address as may be designated by Payee in writing, the
principal sum of ONE HUNDRED TWENTY-SIX THOUSAND AND 00/100 DOLLARS
($126,000.00), in lawful money of the United States, together with interest on
the unpaid balance thereof at the rate hereinafter set forth.
The outstanding balance of this Note shall bear interest from
the date of this Note until the maturity hereof at the rate of 6.00% per annum.
Interest on this Note shall be computed on the actual number of days elapsed
over a 360-day year.
Payments of principal on this Note shall be made monthly in
the amount of $10,000, the first such payment being due on August 1, 1998, and
the additional payments of principal due and payable on the same day of each
successive month thereafter until July 15, 1999, whereupon the entire
outstanding balance of principal, plus all accrued interest thereon, shall be
due and payable.
Maker hereby waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and all other notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note. Maker shall pay all costs and expenses of collection incurred by
Payee, including reasonable attorneys' fees and expenses.
Maker shall have the right, at any time or from time to time,
without penalty or premium, to prepay the principal balance of this Note, in
whole or in part. Upon each prepayment, Maker shall pay the interest accrued on
that portion of principal so prepaid to the date of prepayment.
This Note shall be governed by and construed in accordance
with the internal laws of the State of New York. No modification or waiver of
any provision of this Note, nor any departure by Maker therefrom, shall in any
event be effective unless the same shall be in writing and then such
modification or waiver shall be effective only in the specific instance for the
specific purpose given. This Note shall inure to the benefit of
<PAGE> 2
Payee and its endorsees, successors and assigns, and shall be binding upon
Maker, and his or her heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, this Note has been executed as of the date
first above written.
SALEX HOLDING CORPORATION
/S/ Andrew Lunetta
By:________________________________
Name: Andrew Lunetta
Title:
Sworn to before me this
24th day of July, 1998
/s/ Lorraine Costea
_______________________
Lorraine Costea
2
<PAGE> 1
EXHIBIT 6
PROMISSORY NOTE
$125,000 Hauppauge, New York
July 24, 1998
FOR VALUE RECEIVED, BETTY SUN ("Maker"), hereby promises to
pay to the order of SALEX HOLDING CORPORATION, a Delaware corporation (together
with any subsequent holder(s) of this Note, "Payee"), at 50 Laser Court,
Hauppauge, New York 11788 or such other address as may be designated by Payee in
writing, the principal sum of ONE HUNDRED TWENTY-FIVE THOUSAND AND 00/100
DOLLARS ($125,000.00), in lawful money of the United States, together with
interest on the unpaid balance thereof at the rate hereinafter set forth.
The outstanding balance of this Note shall bear interest from
the date of this Note until the maturity hereof at the rate of 6.00% per annum.
Interest on this Note shall be computed on the actual number of days elapsed
over a 360-day year.
Payments of principal on this Note shall be made monthly in
the amount of $10,000, the first such payment being due on August 1, 1998, and
the additional payments of principal due and payable on the same day of each
successive month thereafter until July 15, 1999, whereupon the entire
outstanding balance of principal, plus all accrued interest thereon, shall be
due and payable.
Maker waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note. Maker shall pay all costs and expenses of collection incurred by
Payee, including reasonable attorneys' fees and expenses.
Maker shall have the right, at any time or from time to time,
without penalty or premium, to prepay the principal balance of this Note, in
whole or in part. Upon each prepayment, Maker shall pay the interest accrued on
that portion of principal so prepaid to the date of prepayment.
All obligations of Maker under this Note shall be offset, and
Maker shall receive a credit, against all amounts due Maker from Payee pursuant
to a Note and Consulting Agreement both dated the date hereof between Maker and
Payee.
This Note shall be governed by and construed in accordance
with the internal laws of the State of New York. No
<PAGE> 2
modification or waiver of any provision of this Note, nor any departure by Maker
therefrom, shall in any event be effective unless the same shall be in writing
and then such modification or waiver shall be effective only in the specific
instance for the specific purpose given. This Note shall inure to the benefit of
Payee and its endorsees, successors and assigns, and shall be binding upon
Maker, and his or her heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, this Note has been executed as of the date
first above written.
/S/ Betty Sun
-----------------------------------
Betty Sun
Sworn to before me this
24th day of July, 1998
/s/ Lorraine Costea
_______________________
Lorraine Costea
2
<PAGE> 1
EXHIBIT 7
STOCK PLEDGE AGREEMENT
AGREEMENT, dated as of the 24th day of July, 1998, by BETTY
SUN ("Pledgor") to SALEX HOLDING CORPORATION, a Delaware corporation
("Pledgee").
WITNESSETH:
WHEREAS, currently herewith, Pledgor has purchased 125,000
shares (the "Shares") of Series D Preferred Stock of Pledgee for a purchase
price of $1,250 in cash and a promissory note (the "Note") in the principal
amount of $125,000 made by Pledgor in favor of Pledgee; and
WHEREAS, in order to secure the obligations of Pledgor under
the Note (the "Obligations"), Pledgor agrees to pledge and grant a security
interest in the Shares to Pledgee.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, and for good and valuable
consideration to Pledgor, the receipt and sufficiency of which is hereby
acknowledged by Pledgor, the parties hereby agree as follows:
1. Pledge.
(a) As security for the full and punctual payment and
performance of the Obligations, Pledgor does hereby pledge, assign, transfer,
set over and grant to Pledgee as collateral, and grants to Pledgee a security
interest in the Shares, all dividends and distributions on or in respect of, and
all securities and other property issued in exchange or substitution for
(whether pursuant to merger, consolidation, recapitalization or otherwise), the
Shares, and all proceeds thereof (all of the foregoing collateral being referred
to herein as the "Pledged Securities").
(b) So long as there exists no Default (as defined in
paragraph 4(a) hereof), Pledgor shall have all the rights, privileges, powers
and remedies appurtenant to and arising from its ownership of the Pledged
Securities, specifically including the right to vote the Pledged Securities and
the right to receive and retain all cash dividends and other cash distributions,
if any, made thereon.
2. Delivery of Shares. Pledgor has delivered, or will deliver
upon Pledgor's receipt of same, to Pledgee certificates for the Shares, together
with all necessary endorsements or stock powers related thereto duly executed in
blank, in sufficient form for valid transfer thereof to Pledgee. At the request
of Pledgee as may be required by law, Pledgor agrees to join Pledgee in the
execution of UCC Financing Statements.
<PAGE> 2
3. Representations and Warranties. Pledgor hereby represents
and warrants to Pledgee that:
(a) Pledgor is and will remain the lawful owner of
the Shares and has full legal and equitable title to them, free and clear of all
liens, charges, security interests, pledges, equities and other encumbrances and
restrictions of any kind or nature (other than the pledge to Pledgee hereunder)
and has full right, capacity, power and authority to execute and deliver this
Agreement and to pledge the Shares, and no consent or approval of, or notice to
or filing with, any governmental authority or third party is or will be
necessary to effect the pledge made hereunder or to enable Pledgee to exercise
its rights hereunder;
(b) This Agreement constitutes Pledgor's legal, valid
and binding obligation, enforceable against it in accordance with its terms; and
(c) The execution and delivery of this Agreement by
Pledgor will not result in a breach or violation of or a default under any
mortgage, indenture, agreement, instrument, judgment, decree, order, statute,
rule or regulation to which either Pledgor is a party or may be bound.
4. Defaults.
(a) The failure by the Pledgor to perform any
obligation or to pay any indebtedness or other amounts payable by her which are
a part of the Obligations under the Note when required or due or the failure of
Pledgor to fulfill or comply with any obligation or representation under this
Agreement, each after written notice by Pledgee to Pledgor of such failure and
the subsequent failure by Pledgor to cure same within a reasonable time shall
constitute a "Default" for purposes of this Agreement.
(b) Upon the occurrence of a Default, all rights of
Pledgor to receive and retain cash dividends and, at Pledgee's option, to
exercise voting or consensual rights and powers which it is authorized to
exercise hereunder shall cease and shall thereupon be vested in Pledgee, and
Pledgee may thereupon, at its option, from time to time after the occurrence of
a Default, cause the Pledged Securities to be registered in its name or the name
of its nominee or assignee and/or exercise such voting or consensual rights and
powers as appertain to the ownership of the Pledged Securities, and to that end
Pledgor hereby appoints Pledgee as its proxy, with full power of substitution,
to vote and exercise all other rights as a shareholder with respect to the
Shares upon the occurrence of any Default, which proxy is coupled with an
interest
2
<PAGE> 3
and is irrevocable prior to termination of this Agreement, and Pledgor
hereby agrees to provide such further proxies as Pledgee may request; provided,
however, that Pledgee in its discretion from time to time may refrain from
exercising, and shall not be obligated to exercise, any such voting or
consensual rights or such proxy.
5. Additional Remedies. In addition to any rights and remedies
otherwise available in law or equity, Pledgee shall be entitled to all of the
rights and remedies of a secured party provided in the Uniform Commercial Code
of the State of New York. Pledgor agrees that any notice to be given to it
hereunder or otherwise with respect to the Obligations may be given by mailing
or delivering a copy thereof to it at the address set forth below its signature
hereto (or such other address which they have specified in writing actually
received by Pledgee), such notice to be effective upon the earlier of the
mailing or delivery thereof.
6. Power of Attorney. Pledgor hereby appoints Pledgee as
Pledgor's attorney-in-fact for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument which Pledgee
may deem necessary or advisable to accomplish the purposes hereof, including,
but not limited to, UCC Financing Statements and continuation statements, which
appointment is irrevocable and coupled with an interest.
7. No Waiver. No failure on the part of Pledgee to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by Pledgee preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law.
8. Termination. This Agreement shall terminate when all
Obligations secured hereby and all obligations of Pledgor hereunder have been
fully paid and performed. At such time Pledgee shall reassign and redeliver (or
cause to be reassigned or redelivered) to Pledgor, or to such person or persons
as Pledgor shall designate (subject to applicable law), against receipt, the
Pledged Securities, together with appropriate instrument(s) of reassignment and
release.
9. Further Acts. Pledgor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as Pledgee
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may at any time request in connection with the administration or enforcement of
this Agreement or related to the Pledged Securities or any part thereof or in
order better to assure and confirm unto Pledgee his rights, powers and remedies
hereunder.
10. Binding Effect. This Agreement, and the terms, covenants
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto, to the holder or holders of the Obligations secured hereby, and
to their respective heirs, legal representatives and assigns, except that
Pledgor shall not be permitted to assign this Agreement or any interest herein
or in the Pledged Securities, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Pledged Securities, or any part thereof,
or any cash or property held by Pledgee as Pledged Securities under this
Agreement.
11. Amendment. Neither this Agreement nor any provision hereof
may be amended, supplemented, modified, waived, discharged or terminated orally
nor may any of the Pledged Securities be released or the pledge or the security
interest created hereby extended, except by an instrument in writing duly signed
by or on behalf of Pledgee.
12. Severability. In case any lien, security interest or other
right of Pledgee shall be held to be invalid, illegal or unenforceable, such
invalidity, illegality and/or unenforceability shall not affect any other lien,
security interest or other right granted hereby.
13. Governing Law. This Agreement shall be deemed to be made
under and shall be governed by the laws of the State of New York in all
respects, including matters of construction, validity and performance.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be
duly executed, and Pledgee has accepted this Agreement, all as of the date first
above written.
/s/ Betty Sun
-------------------------------
Betty Sun
765 Hillcrest Place
North Woodmere, New York 11581
ACCEPTED:
SALEX HOLDING CORPORATION
By:/s/ Andrew Lunetta
------------------------------
Andrew Lunetta
Treasurer
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EXHIBIT 8
CERTIFICATE OF DESIGNATION OF
SERIES D PREFERRED STOCK
OF
SALEX HOLDING CORPORATION
Salex Holding Corporation (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
that, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company, and pursuant to the provisions of
Section 151 of Title 8 of the Delaware Code of 1953, said Board of Directors,
adopted a resolution on July 17, 1998 providing for the issuance of a series of
shares of Series D Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be, and hereby is
created, such series of Preferred Stock to be designated Series D Preferred
Stock, to consist of shares of the par value of $.01 per share, and shall
possess the rights and preferences set forth below:
Section 1. Designation and Amount. The shares of such series shall have a
par value of $.01 per share and shall be designated as Preferred Stock (Series
D) (the "Series D Preferred Stock") and the number of shares constituting the
Series D Preferred Stock shall be One Hundred Twenty-Five Thousand (125,000).
The Series D Preferred Stock shall be issued for and shall be deemed to have an
original issue price per share of $1.00 per share.
Section 2. Rank. The Series D Preferred Stock shall rank: (i) prior to all
of the Company's common stock, $.01 par value per share (the "Common Stock");
(ii) prior to any class or series of capital stock of the Company hereafter
created not specifically ranking by its terms senior to or on parity with any
Preferred Stock of whatever subdivision (collectively, with the Common Shares,
"Junior Securities"); (iii) on parity with any class or series of capital stock
of the Company hereafter created specifically ranking by its terms on parity
with the Series D Preferred Stock ("Parity Securities"); and (iv) junior and
subordinate to all of the Company's Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock ("Senior Securities") in each case as to
dividends and distributions of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary (all such distributions
being referred to collectively as "Distributions").
<PAGE> 2
Section 3. Dividends. The Series D Preferred Stock will not bear dividends.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the holders of Series D Preferred
Stock (the "Holders") shall be entitled to receive, prior in preference to any
distribution to Junior Securities but in parity with any distribution to Parity
Securities, an amount per share equal to the original preferred stock issue
price. If upon the occurrence of such event, and after payment in full of the
preferential amounts with respect to the Senior Securities, the assets and funds
available to be distributed among the Holders of the Series D Preferred Stock
and Parity Securities shall be insufficient to permit the payment to such
Holders of the full preferential amounts due to the Holders of the Series D
Preferred Stock and the Parity Securities, respectively, then the entire assets
and funds of the Company legally available for distribution shall be distributed
among the Holders of the Series D Preferred Stock and the Parity Securities, pro
rata, based on the respective liquidation amounts to which each such series of
stock is entitled by the Company's Certificate of Incorporation and any
certificate(s) of designation relating thereto.
(b) Upon the completion of the distribution required by Section 4(a),
if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyanceor disposition of all
or substantially all the assets of the Company to a private entity, the common
stock of which is not publicly traded, shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 4; provided,
however, that an event described in the prior clause that the Holder does not
elect to treat as a liquidation and a consolidation, merger, acquisition, or
other business combination of the Company with or into any other company or
companies shall not be treated as a liquidation, dissolution or winding up
within the meaning of this Section 4, but instead shall be treated pursuant to
Section 5(c) hereof (a Holder who elects to have the transaction treated as a
liquidation is herein referred to as a "Liquidating Holder").
(d) Prior to the closing of a transaction described in Section 4(c)
which would constitute a liquidation event, the Company shall either (i) make
all cash distributions it is
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required to make to the Liquidating Holders pursuant to the first sentence of
Section 4(a), (ii) set aside sufficient funds from which the cash distributions
required to be made to the Liquidating Holders can be made, or (iii) establish
an escrow or other similar arrangement with a third party pursuant to which the
proceeds payable to the Company from a sale of all or substantially all the
assets of the Company will be used to make the liquidating payments to the
Liquidating Holders immediately after the consummation of such sale. In the
event that the Company has not fully complied with either of the foregoing
alternatives, the Company shall either: (x) cause such closing to be postponed
until such cash distributions have been made, or (y) cancel such transactions,
in which event the rights of the Holders or other arrangements shall be the
same as existing immediately prior to such proposed transaction.
Section 5. Conversion. The record Holders of the Series D Preferred Stock
shall have conversion rights as follows:
(a) Right to Convert. Each record Holder of Series DPreferred Stock
shall be entitled to convert whole shares of Series D Preferred Stock into
Common Shares issuable upon conversion of the Series D Preferred Stock, as
follows: each outstanding share of Series D Preferred Stock is convertible at
any time into one hundred (100) fully-paid and non-assessible Common Shares of
the Company at a conversion price of $.10 per share of Common Stock (the
"Conversion Price"). The number of Commons Shares issuable upon the conversion
of one share of Series D Preferred Stock is hereinafter referred to as the
"Conversion Rate."
(b) Mechanics of Conversion. In order to convert Series D Preferred
Stock into full Common Shares, the Holder shall (i) fax, on or prior to 6:00
p.m., New York City time on the Date of Conversion, a copy of a fully executed
notice of conversion ("Notice of Conversion") to the Company at the office of
the Company or to the Company's designated transfer agent (the "Transfer
Agent") for the Series D Preferred Stock stating that the Holder elects to
convert, which notice shall specify the date of conversion and the number of
shares of Series D Preferred Stock to be converted, and (ii) surrender to a
common courier for either overnight or two (2) day delivery to the office of
the Company or the Transfer Agent, the original certificates representing the
Series D Preferred Stock being converted (the "Series D Preferred Stock
Certificates"), duly endorsed for transfer, together with payment to the
Company in the amount of the Conversion Price multiplied by the number of
shares of Common Stock being converted therefor, provided, however, that the
Company shall not be obligated to issue certificates evidencing the Common
Shares issuable upon such conversion unless the Series D Preferred Stock
Certificates are delivered to the Company or the Transfer Agent as provided
above, or the Holder notifies the Company or
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the Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subparagraph (i) below).
(i) Lost or Stolen Certificates. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Series D
Preferred Stock Certificates representing shares of Series D Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity or security
reasonably satisfactory to the Company, and upon surrender and cancellation of
the Series D Preferred Stock Certificate(s), if mutilated, the Company shall
execute and deliver new Series D Preferred Stock Certificate(s) of like tenor
and date.
However, the Company shall not be obligated to re-issue
such lost or stolen Series D Preferred Stock Certificates if Holder
contemporaneously requests the Company to convert such Series D Preferred Stock
into Common Shares.
(ii) Delivery of Common Shares Upon Conversion. The Company no
later than 6:00 p.m. (New York City time) on the third (3rd) business day after
receipt by the Company or its Transfer Agent of all necessary documentation
duly executed and in proper form required for conversion, including the
original Series D Preferred Stock Certificates to be converted (or after
provision for security or indemnification in the case of lost, stolen or
destroyed certificates, if required), shall issue and deliver to the Holder as
shown on the stock records of the Company a certificate for the number of
Common Shares to which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion of the Series D
Preferred Stock would create a fractional Common Share or a right to acquire a
fractional Common Share, such fractional share shall be disregarded and the
number of Common Shares issuable upon conversion, in the aggregate, shall be
the next higher number of shares.
(iv) Date of Conversion. The date on which conversion occurs (the
"Date of Conversion") shall be deemed to be the date such Notice of Conversion
is faxed to the Company or the Transfer Agent, as the case may be, provided an
advance copy of the Notice of Conversion is faxed to the Company on or prior to
6:00 p.m., New York City time, on the Date of Conversion. The original Series D
Preferred Stock Certificates representing the shares of Series D Preferred
Stock to be converted shall be surrendered by depositing such certificates with
a common courier for either overnight or two (2) day delivery, as soon as
possible following the Date of Conversion. The person or persons entitled to
receive the shares of Common Shares issuable upon such
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conversion shall be treated for all purposes as the record Holder of Holders of
such Common Shares on the Date of Conversion.
(c) Merger or Sale of Assets. If at any time or from time to time
there shall be a merger, acquisition, or other business combination of the
Company with or into any other company or companies or a sale, conveyance or
disposition of all or substantially all the assets of the Company, then, as
part of such occurrence, provision shall be made so that the holders of the
Series D Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series D Preferred Stock the number of shares of stock or
other securities or property of the Company, or of the successor corporation
resulting from such merger, consolidation or sale, to which such holder would
have been entitled if such holder had converted its shares of Series D
Preferred Stock into Common Stock upon such occurrence.
Section 6. Voting Rights. The Holders of the Series D Preferred Stock shall
be entitled to vote with holders of the Common Shares on all matters to be voted
on by the Company's shareholders with each share of Series D Preferred Stock
entitled to one hundred votes per share. Holders of the Series D Preferred Stock
shall be entitled to notice of all shareholders meeting or written consents with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Company's by-laws and applicable statutes.
To the extent that under Delaware Law the vote of the Holders of the Series
D Preferred Stock, voting separately as a class, is required to authorize a
given action of the Company, the affirmative vote or consent of the Holders of
at least a majority of the shares of the Series D Preferred Stock, represented
at a duly held meeting at which a quorum is present or by written consent of a
majority of the shares of the Series D Preferred Stock (except as otherwise may
be required under Delaware Law) shall constitute the approval of such action by
the class. To the extent that under Delaware Law the Holders of the Series D
Preferred Stock are entitled to vote on a matter with holders of Common Shares,
voting together as one (1) class, each share of Series D Preferred Stock shall
be entitled to a number of votes equal to the number of Common Shares into which
it is then convertible using the record date for the taking of such vote of
stockholders as the date of which the Conversion Rate is calculated. Holders of
the Series D Preferred Stock also shall be entitled to notice of all
shareholders meetings or written consents with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Company's
by-laws and applicable statutes.
Section 7. Protective Provision. So long as shares of Series D Preferred
Stock are outstanding, the Company shall not
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without first obtaining the approval (by vote or written consent, as provided by
Delaware Law) of the Holders of at least sixty-six and two-thirds percent (66
2/3%) of the then outstanding Series D Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series D Preferred Stock or any Senior Securities so as to affect adversely the
Series D Preferred Stock;
(b) create any new class or series of stock having a preference
over the Series D Preferred Stock or increase the size of the authorized number
of Series D Preferred Stock; or
(c) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series D Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or any comparable provision of the Internal
Revenue Code as hereafter from time to time amended).
Section 8. Status of Converted Stock. In the event any Series D Preferred
Stock shall be converted pursuant to Section 5 hereof, the shares so converted
shall be cancelled, shall return to the status of authorized but unissued
Preferred Shares of no designated series, and shall not be issuable by the
Company as Series D Preferred Stock.
Section 9. Preference Rights. Nothing contained herein shall be construed
to prevent the Board of Directors of the Company from issuing one (1) or more
series of Series D Preferred Shares with dividend and/or liquidation preferences
junior to or in parity with the dividend and liquidation preferences of the
Series D Preferred Stock.
Signed on July 24, 1998
/s/ Andrew Lunetta
--------------------------------
Andrew Lune Ha
Treasurer
Attest:
- -------------------
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EXHIBIT 9
Statement
The undersigned hereby agree that the Schedule 13-D, to which this
Statement is an exhibit, is filed on behalf of each of us.
/s/ Pershing Sun
------------------------------
Pershing Sun
/s/ Betty Sun
------------------------------
Betty Sun
Dated: August 10, 1998
