Document:

ex10-6.htm

 

THIS SUBSCRIPTION AGREEMENT RELATES TO AN OFFERING OF SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES TO WHICH THIS SUBSCRIPTION AGREEMENT (THE “SUBSCRIPTION AGREEMENT”) RELATES HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.

 

SUBSCRIPTION AGREEMENT

(Offshore Subscribers)

 

	
TO:

	
Anavex Life Sciences Corp. (the “Company”)

	
  

	
50 Harrison Street #315A

	
  

	
Hoboken, New Jersey

	
  

	
United States of America

 

	
  

	
Purchase of Shares

 

	
1.  

	
Subscription

 

1.1 On the basis of the representations and warranties and subject to the terms and conditions set forth herein, STONEHEDGE LIMITED (the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase 145,063 common shares (the “Shares”) in the capital of the Company (also called the “Securities”) of the Company’s common stock (the “Common Stock”), par value $0.001 at a purchase price per Share of US$2.75 (the subscription and agreement to purchase being the “Subscription”), for an aggregate purchase price of US$389,922.66. (the “Subscription Proceeds”).

 

1.2 On the basis of the representations and warranties and subject to the terms and conditions set forth herein, the Company hereby irrevocably agrees to sell the Shares to the Subscriber.

 

1.3 Subject to the terms hereof, the Subscription will be effective upon its acceptance by the Company.

 

	
2.  

	
Payment

 

2.1 The Company acknowledges that it has received loans (the “Loans”) from the Subscriber,  and that the balance currently due from the Company to the Subscriber pursuant to the Loans is an aggregate amount of US$398,922.66 (the “Indebtedness”).  The Company and the Subscriber agree to apply $372,890.42 in principal and $26,032.18 in accrued interest of the amount of the Indebtedness in payment of the Subscription Proceeds and, upon delivery of a signed copy of this Subscription Agreement to the Subscriber together with a certificate evidencing the Shares registered as provided in this Subscription Agreement (the “Share Certificate”), the Loans shall be paid in full as to outstanding interest owing and principal balance.

 

  

  

 

2.2 All dollar figures refer to $USD.

 

	
3.  

	
Documents Required from Subscriber

 

3.1 The Subscriber must complete, sign and return to the Company an executed copy of this Subscription Agreement prior to the Closing Date.

 

	
4.  

	
Closing

 

4.1 The sale of the Shares shall be completed (the “Closing”) on November 17, 2010 (the “Closing Date”) or such other date as the parties may agree upon.

 

	
5.  

	
Acknowledgements of Subscriber

 

5.1 The Subscriber acknowledges and agrees that:

 

	
(a)  

	
none of the Securities have been or will be registered under the 1933 Act, or under any state securities or “blue sky” laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to U.S. Persons, as that term is defined in Regulation S under the 1933 Act (“Regulation S”), except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with applicable state securities laws;

 

	
(b)  

	
the Company has not undertaken, and will have no obligation, to register any of the Securities under the 1933 Act or any other securities legislation;

 

	
(c)  

	
it has received and carefully read this Subscription Agreement;

 

	
(d)  

	
the decision to execute this Subscription Agreement and purchase the Shares agreed to be purchased hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based entirely upon a review of this Subscription Agreement and any public information which has been filed by the Company with the Securities and Exchange Commission (“SEC”) in compliance, or intended compliance, with applicable securities legislation;

 

	
(e)  

	
it and its advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the sale of the Shares hereunder, and to obtain additional information, to the extent possessed or obtainable by the Company without unreasonable effort or expense;

 

	
(f)  

	
the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Subscriber during reasonable business hours at its principal place of business and that all documents, records and books in connection with the sale of the Securities hereunder have been made available for inspection by it and its attorney and/or advisor(s);

 

	
(g)  

	
all information which the Subscriber has provided to the Company is correct and complete as of the date the Subscription Agreement is signed, and if there should be any change in such information prior to this Subscription Agreement being executed by the Company, the Subscriber will immediately provide the Company with such information;

 

	
(h)  

	
the Company is entitled to rely on the representations and warranties of the Subscriber contained in this Subscription Agreement and the Subscriber will hold the Company harmless from any loss

 

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(i)  

	
or damage it may suffer as a result of the Subscriber’s failure to correctly complete this Subscription Agreement;

 

	
(j)  

	
the Subscriber has been advised to consult the Subscriber’s own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions, and it is solely responsible (and the Company is not in any way responsible) for compliance with:

 

	
(i)  

	
any applicable laws of the jurisdiction in which the Subscriber is resident in connection with the distribution of the Securities hereunder, and

 

	
(ii)  

	
applicable resale restrictions;

 

	
(k)  

	
none of the Securities are listed on any stock exchange or automated dealer quotation system and no representation has been made to the Subscriber that any of the Securities will become listed on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the common shares of the Company on the OTC Bulletin Board operated by the Financial Industry Regulatory Authority (“FINRA”);

 

	
(l)  

	
none of the Securities may be offered or sold by the Subscriber to a U.S. Person (as defined in Section 6.2, below, or for the account or benefit of a U.S. Person (other than a distributor) prior to the end of the Distribution Compliance Period (as defined herein);

 

	
(m)  

	
the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act and in each case in accordance with applicable state securities laws;

 

	
(n)  

	
neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;

 

	
(o)  

	
no documents in connection with the sale of the Shares hereunder have been reviewed by the SEC or any state securities administrators;

 

	
(p)  

	
there is no government or other insurance covering any of the Securities;

 

	
(q)  

	
the issuance and sale of the Securities to the Subscriber will not be completed if it would be unlawful or if, in the discretion of the Company acting reasonably, it is not in the best interests of the Company;

 

	
(r)  

	
the Subscriber is purchasing the Securities pursuant to an exemption from the registration and the prospectus requirements of applicable securities legislation on the basis that the Subscriber is not a resident of either the United States or Canada and, as a consequence:

 

	
(i)  

	
is restricted from using most of the civil remedies available under securities legislation,

 

	
(ii)  

	
may not receive information that would otherwise be required to be provided under securities legislation, and

 

	
(iii)  

	
the Company is relieved from certain obligations that would otherwise apply under securities legislation;

 

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(iv)  

	
the statutory and regulatory basis for the exemption claimed for the offer and sale of the Securities, although in technical compliance with Regulation S, would not be available if the offering is part of a plan or scheme to evade the registration provisions of the 1933 Act; and

 

	
(s)  

	
this Subscription Agreement is not enforceable by the Subscriber unless it has been accepted by the Company.

 

	
6.  

	
Representations, Warranties and Covenants of the Subscriber

 

6.1 The Subscriber hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the Closing) that:

 

	
(a)  

	
the Subscriber is not a U.S. Person;

 

	
(b)  

	
the Subscriber is not acquiring the Securities for the account or benefit of, directly or indirectly, any U.S. Person;

 

	
(c)  

	
the Subscriber is resident in the jurisdiction set out under the heading “Name and Address of Subscriber” on the signature page of this Subscription Agreement and the sale of the Securities to the Subscriber as contemplated in this Subscription Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Subscriber;

 

	
(d)  

	
the Subscriber has the legal capacity and competence to enter into and execute this Subscription Agreement and to take all actions required pursuant hereto and, if the Subscriber is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Subscription Agreement on behalf of the Subscriber;

 

	
(e)  

	
if the Subscriber is a corporation or other entity, the entering into of this Subscription Agreement and the transactions contemplated hereby do not and will not result in the violation of any of the terms and provisions of any law applicable to, or the constating documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound;

 

	
(f)  

	
the Subscriber has duly executed and delivered this Subscription Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber;

 

	
(g)  

	
the Subscriber is acquiring the Securities as principal for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest in such Securities, and it has not subdivided its interest in the Securities with any other person;

 

	
(h)  

	
the Subscriber is outside the United States when receiving and executing this Subscription Agreement and is acquiring the Securities as principal for the Subscriber’s own account for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in the Securities;

 

	
(i)  

	
the Subscriber is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the entire investment and it has carefully read and considered the matters set forth under the heading “Risk Factors” appearing in the Company’s Forms 10-K, 10-Q, 8-K and any other filings filed with the SEC;

 

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(j)  

	
the Subscriber has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in any way whatsoever for the Subscriber’s decision to invest in the Securities and the Company;

 

	
(k)  

	
the Subscriber (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, and (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time;

 

	
(l)  

	
the Subscriber understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations and agreements contained in this Subscription Agreement and agrees that if any of such acknowledgements, representations and agreements are no longer accurate or have been breached, the Subscriber shall promptly notify the Company;

 

	
(m)  

	
the Subscriber has the legal capacity and competence to enter into and execute this Subscription Agreement and to take all actions required pursuant hereto;

 

	
(n)  

	
the Subscriber has duly executed and delivered this Subscription Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber in accordance with its terms;

 

	
(o)  

	
the Subscriber is not an underwriter of, or dealer in, the common shares of the Company, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of any of the Securities;

 

	
(p)  

	
the Subscriber understands and agrees that none of the Securities have been or will be registered under the 1933 Act or under any state securities or “blue sky” laws of any state of the United States and, unless so registered, may not be offered or sold in the United States or directly or indirectly to U.S. Persons, except in accordance with the provisions of Regulation S (“Regulation “S” promulgated under the 1933 Act, pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with applicable state securities laws;

 

	
(q)  

	
the Subscriber understands and agrees that offers and sales of any of the Securities prior to the expiration of a period of six months after the date of original issuance of the Securities (the six month period hereinafter referred to as the “Distribution Compliance Period”) shall only be made in compliance with the safe harbor provisions set forth in Regulation S, pursuant to the registration provisions of the 1933 Act or an exemption therefrom, and that all offers and sales after the Distribution Compliance Period shall be made only in compliance with the registration provisions of the 1933 Act or an exemption therefrom and in each case only in accordance with applicable state securities laws;

 

	
(r)  

	
the Subscriber has not acquired the Securities as a result of, and it covenants that it will not itself engage in, any “directed selling efforts” (as defined in Regulation S) in the United States in respect of any of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of any of the Securities; provided, however, that the Subscriber may sell or otherwise dispose of any of the Securities pursuant to registration of any of the Securities pursuant to the 1933 Act and any applicable state securities laws or under an exemption from such registration requirements and as otherwise provided herein;

 

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-  -

 

	
(s)  

	
the Subscriber agrees not to engage in any hedging transactions involving any of the Securities unless such transactions are in compliance with the provisions of the 1933 Act and in each case only in accordance with applicable state securities laws;

 

	
(t)  

	
the Subscriber understands and agrees that the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act;

 

	
(u)  

	
the Subscriber (i) is able to fend for itself in the Subscription; (ii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Securities and the Company; and (iii) has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment;

 

	
(v)  

	
the Subscriber will indemnify the Company against, and will hold the Company and, where applicable, its respective directors, officers, employees, agents, advisors and shareholders harmless from, any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Company in connection therewith;

 

	
(w)  

	
the Subscriber is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; and

 

	
(x)  

	
no person has made to the Subscriber any written or oral representations:

 

	
(i)  

	
that any person will resell or repurchase any of the Securities,

 

	
(ii)  

	
that any person will refund the purchase price of any of the Securities,

 

	
(iii)  

	
as to the future price or value of any of the Securities, or

 

	
(iv)  

	
that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently the Company’s common shares are quoted on the over-the-counter market operated by the Over-The-Counter Bulletin Board operated by FINRA.

 

6.2 In this Subscription Agreement, the term “U.S. Person” shall have the meaning ascribed thereto in Regulation S.

 

	
7.  

	
Representations and Warranties will be Relied Upon by the Company

 

7.1 The Subscriber acknowledges that the representations and warranties contained herein are made by it with the intention that such representations and warranties may be relied upon by the Company and its legal counsel in determining the Subscriber’s eligibility to purchase the Securities under applicable securities legislation.  The Subscriber further agrees that by accepting delivery of the certificates representing the Shares, it will be

 

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7.2 representing and warranting that the representations and warranties contained herein are true and correct as at the Closing Date with the same force and effect as if they had been made by the Subscriber on the date of this Subscription Agreement and that they will survive the purchase by the Subscriber of the Shares and will continue in full force and effect notwithstanding any subsequent disposition by the Subscriber thereof.

 

	
8.  

	
Resale Restrictions

 

8.1 The Subscriber acknowledges that any resale of any of the Securities will be subject to resale restrictions contained in the securities legislation applicable to each Subscriber or proposed transferee.  The Subscriber acknowledges that the Securities have not been registered under the 1933 Act or the securities laws of any state of the United States and that none of the Securities may be offered or sold in the United States unless registered in accordance with United States federal securities laws and all applicable state securities laws or exemptions from such registration requirements are available.

 

8.2 The Subscriber acknowledges that restrictions on the transfer, sale or other subsequent disposition of the Securities by the Subscriber may be imposed by securities laws in addition to any restrictions referred to in Section 8.1 above, and, in particular, the Subscriber acknowledges and agrees that none of the Securities may be offered or sold to a U.S. Person or for the account or benefit of a U.S. Person (other than a distributor) prior to the end of the Distribution Compliance Period.

 

	
9.  

	
Acknowledgement and Waiver

 

9.1 The Subscriber has acknowledged that the decision to purchase the Securities was solely made on the basis of information available to the Subscriber on the EDGAR database maintained by the SEC at www.sec.gov.  The Subscriber hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Subscriber might be entitled in connection with the distribution of the Securities.

 

	
10.  

	
Legending of Subject Securities

 

10.1 The Subscriber hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Securities will bear a legend in substantially the following form:

 

	
  

	
“THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  ACCORDINGLY, NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT.”

 

10.2 The Subscriber hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Subscription Agreement.

 

10.3 If the Subscriber is a resident of Canada, by executing and delivering this Subscription Agreement, each Purchaser will have directed the Issuer not to include a Canadian legend on any certificates representing the Securities to be issued to such Purchaser.  As a consequence, the Purchaser will not be able to rely on the resale provisions of National Instrument 45-102, as adopted by the securities commissions in Canada, and any subsequent trade in the Securities during or after the Canadian hold period described therein will be a distribution

 

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10.4 subject to the prospectus and registration requirements of Canadian securities legislation, to the extent that the trade is at that time subject to any such Canadian securities legislation.

 

	
11.  

	
Costs

 

11.1 The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the purchase of the Shares shall be borne by the Subscriber.

 

	
12.  

	
Governing Law

 

12.1 This Subscription Agreement is governed by the laws of the State of New Jersey and the federal laws of the United States applicable therein.

 

	
13.  

	
Survival

 

13.1 This Subscription Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the Securities by the Subscriber pursuant hereto.

 

	
14.  

	
Assignment

 

14.1 This Subscription Agreement is not transferable or assignable.

 

	
15.  

	
Severability

 

15.1 The invalidity or unenforceability of any particular provision of this Subscription Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Subscription Agreement.

 

	
16.  

	
Entire Agreement

 

16.1 Except as expressly provided in this Subscription Agreement and in the agreements, instruments and other documents contemplated or provided for herein, this Subscription Agreement contains the entire agreement between the parties with respect to the sale of the Securities and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute or common law, by the Company or by anyone else.

 

	
17.  

	
Notices

 

17.1 All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Subscriber shall be directed to the address on the signature page of this Subscription Agreement and notices to the Company shall be directed to it at Anavex Life Sciences Corp.,50 Harrison Street #315A, Hoboken, New Jersey, United States of America, Attention: President.

 

	
18.  

	
Counterparts and Electronic Means

 

18.1 This Subscription Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original and all of which together shall constitute one instrument.  Delivery of an executed copy of this Subscription Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Subscription Agreement as of the date hereinafter set forth.

 

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18.2 Delivery Instructions

18.3 The Subscriber hereby directs the Company to deliver the Share Certificate issued pursuant to this Subscription Agreement to:

 

18.4 The Subscriber hereby directs the Company to cause the Share Certificate issued pursuant to this Subscription Agreement to be registered on the books of the Company as follows:

STONEHEDGE LIMITED

 

18.5 The undersigned hereby acknowledges that it will deliver to the Company all such additional completed forms in respect of the Subscriber’s purchase of the Securities as may be required for filing with the appropriate securities commissions and regulatory authorities.

 

IN WITNESS WHEREOF the Subscriber has duly executed this Subscription Agreement as of the date of acceptance by the Company.

 

STONEHEDGE LIMITED

(Name of Subscriber – Please type or print)

 

 

___________________________________

(Signature and Office)

 

                                                                

___________________________________

(Address of Subscriber)

 

___________________________________

(City, State or Province, Postal Code of Subscriber)

 

___________________________________

(Country of Subscriber)

___________________________________

(Facsimile no.)

 

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A C C E P T A N C E

 

The above-mentioned Subscription Agreement in respect of the Shares is hereby accepted by Anavex Life Sciences Corp.

 

DATED at New Jersey as of the ____ day of November, 2010.

 

ANAVEX LIFE SCIENCES CORP.

 

 

 

Per:           

Authorized Signatory

 

10exh10_1.htm

 

EXHIBIT 10.1

 

TRANSITION AND RETIREMENT AGREEMENT

 

This Transition and Retirement Agreement is made and entered into by and between AMCOL International Corporation (“the Company”) and Lawrence E. Washow (“the Executive”), dated November 19, 2010 (“this Agreement”).

 

WHEREAS, the Executive is employed as Chief Executive Officer of the Company and is serving as a member of the Company’s Board of Directors; and

 

WHEREAS, the Executive and the Company entered into an employment agreement dated as of March 25, 2009 (“the Employment Agreement”); and

 

WHEREAS, the Executive has determined that he wishes to retire from the Company effective as of December 31, 2010; and

 

WHEREAS, the Executive and the Company wish to set forth the terms and conditions under which the Executive will serve during the Company’s transition to a new Chief Executive Officer on January 1, 2011, and of his retirement;

 

NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties agree as follows:

 

1. Resignation.  The Executive hereby resigns and retires from his position as President and Chief Executive Officer of the Company, from the Board of Directors of the Company, and from all other positions and offices with the Company and any affiliate of the Company, all effective as of the close of business on December 31, 2010 (“the Retirement Date”).

 

2. Transition Period.  From the date of this Agreement through the Retirement Date, the Executive shall continue to serve as the Company’s President and Chief Executive Officer, pursuant to the terms of the Employment Agreement, and as a member of its Board of Directors.

 

 

  

  

  

 

3. Consultation and Assistance.  The Executive agrees to provide reasonable assistance to aid in management transition following the Retirement Date and to consult with the successor CEO of the Company, if requested, in regard to business matters for 24 months from the Retirement Date.  In addition, the Executive agrees to consult with the Company in regard to any litigation brought by or against the Company.  Such cooperation will include, but not be limited to, reviewing documents, providing the Company and/or its attorneys with accurate and complete information, and appearing at any meeting, hearing or trial and testifying truthfully regarding matters about which the Executive has personal knowledge.  The Company will reimburse the Executive for reasonable out of pocket expenses incurred in connection with his duties under this Section.

 

4. Additional Compensation.

 

(a) If the Executive is employed by the Company on the Retirement Date, subject to Section 6 below, he will be entitled to receive his Annual Bonus for 2010, as determined pursuant to the Annual Cash Incentive Plan (“the Cash Plan”), on or before March 15, 2011.

 

(b) If the Executive is employed by the Company on the Retirement Date, subject to Section 6 below, he will receive $670,000 per year, for 24 months following the Retirement Date, payable pursuant to Employer’s regular payroll practices, except that no amount shall be paid between the Retirement Date and the six-month anniversary of the Retirement Date (“the Suspension Period”), at which time all payments suspended during the Suspension Period will be paid in a lump sum without interest and the normal payment schedule will resume.

 

 

  

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(c) If the Executive is employed by the Company on the Retirement Date, subject to Section 6 below, and if permitted by the plan documents, the Executive and his dependents will continue to be eligible for coverage, at the Company’s cost and expense, under the Company’s group health, dental and prescription group plans for a period commencing on the Retirement Date and ending on the earlier of (i) 24 months after the Retirement Date and (ii) the date on which the Executive accepts a position with another employer.  The Executive acknowledges that under the Internal Revenue Code (“the Code”), these amounts will be treated as imputed income to him for income tax purposes.

 

(d) If the Executive’s group health, dental and prescription coverage continues for 24 months under subsection (c) above, then following the expiration of that 24-month period, if the Executive is still living, and if permitted by the plan documents, the Executive and his dependents will continue to be eligible for coverage, at the Executive’s cost and expense, under the Company’s group health, dental and prescription group plans until the earliest of (i) the Executive’s eligibility for Medicare benefits, (ii) the date on which the Executive accepts a position with another employer, or (iii) the date the Executive ceases paying for such coverage.  If the coverage otherwise required to be provided under this subsection (d) or subsection (c) above is not permitted by the terms of the applicable plan documents, the Executive may independently obtain comparable coverage and the Company shall reimburse the Executive for the cost of such comparable coverage under subsection (c) above that is otherwise not permitted, or in the case of comparable coverage in lieu of coverage under this subsection (d), the cost of such comparable coverage in excess of the cost of coverage under this subsection (d).

 

(e) Notwithstanding any provisions of this Section 4 to the contrary, if Executive breaches any provision of this Agreement, the payment of the Annual Bonus pursuant to Section 4(a), any payments due under Section 4(b) and the continuation or eligibility for benefits under Section 4(c) or 4(d) shall cease immediately upon such breach and the Executive shall have no right to further payments or benefits under this Agreement.  In addition to the foregoing, and to protect and compensate the Company in the event of such breach by the Executive, the Company shall be entitled to any and all remedies at law and equitable relief as described in Section 7.3 of the Employment Agreement.

 

  

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(f) Except as provided in this Agreement, the Executive will not receive any other severance payments or other benefits from the Company in connection with his resignation and retirement.

 

5. Stock Options.

 

(a) Attached hereto as Exhibit A is a schedule of all outstanding stock options previously granted to the Executive by the Company as of the date hereof (“the Stock Options”).  From the date hereof through the Retirement Date, the Stock Options shall continue to vest in accordance with the governing terms of the applicable stock plan and/or the option agreement or other award documentation governing such Stock Options.

 

(b) Notwithstanding any provision of the Employment Agreement or any award agreement evidencing a Stock Option, if the Executive is employed by the Company on the Retirement Date, upon the Retirement Date (and immediately prior to the termination of the Executive’s employment) each Stock Option shall, to the extent not theretofore vested, become fully vested and exercisable.

 

(c) Notwithstanding any provision of the Employment Agreement or any award agreement evidencing a Stock Option, following the Retirement Date and the effective date of the Mutual Release pursuant to Section 6, the Executive shall be entitled to exercise each Stock Option, in whole or in part, until the Option Expiration Date set forth in Exhibit A with respect to such Stock Option.  If not exercised, the options will terminate.  This Agreement shall constitute an amendment to any award agreement evidencing a Stock Option to the extent such an amendment is necessary to reflect the extended period for exercising the Stock Option pursuant to the provisions of this Section 5(c).

 

 

  

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6. Mutual Release.  No amounts will be paid pursuant to Section 4(a), (b), (c) or (d), and the accelerated vesting and extended exercise period for Stock Options pursuant to Section 5 shall not apply, if the Executive does not sign a Mutual Release in the form set forth at Exhibit B on or after December 31, 2010, but before January 5, 2011.

	  

7. SEC Section 16 Requirements.  For six (6) months after the Retirement Date, the Executive agrees to: (1) notify and receive advance approval from the Company’s Chief Financial Officer or Secretary at least one business day before the Executive engages in any transaction relating to any Company securities, and (2) deliver (or cause to be delivered to him) sales prices and related details promptly after the transaction.  This will assist the Company in timely filing Form 4s on the Executive’s behalf (under the Power of Attorney previously signed by Executive) with the U.S. Securities and Exchange Commission (“SEC”) within the two business day period specified by applicable SEC rules.

 

8. Covenants.

 

(a) Non-Disclosure and Non-Solicitation.  The Executive acknowledges that the successful marketing and development of the Company’s products requires substantial time and expense.  Such efforts utilize and generate valuable confidential and proprietary information, and Executive obtained and will obtain knowledge during the course of his employment with the Company.  

 

  

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	 As used herein, “Confidential Information” means any information of the Company that the Company considers to be proprietary and treats as confidential or information of any third party that the Company is under an obligation to keep confidential, including but not limited to the following: (i) trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, (ii) employment status, salaries and other personnel information, decisions to offer employment, pre-employment testing and screening results, citizenship status, disability status, performance issues, executive evaluations, medical problems of executives and executives’ families, garnishments and levies against wages, contents of employment agreements, statements regarding the financial condition of the Company or any subsidiary or affiliated entity, payments made to or expenses incurred by the Company or any of its executives, shareholders or directors, discounts given by the Company, vendors and other parties, minutes of Board meetings of the Company or any subsidiary or affiliated entities, contents of contracts, legal matters by or against the Company or any subsidiary or affiliated entities, business strategies, plans, proposals, names of customers and potential customers; and (iii) other information or materials of the Company marked or noticed by the Company as being confidential, whether constituting a trade secret or not, and whether proprietary or not, which are of value to the Company.  For purposes of this Agreement, Confidential Information includes the foregoing and other information protected under the Illinois Trade Secrets Act.  Confidential Information does not include: (i) information that at the time of disclosure is in the public domain through no fault of the Executive; (ii) information received from a third party outside of the Company that was disclosed without a breach of any confidentiality obligation; (iii) information approved for public release by written authorization of the Company; or (iv) information that is required by law or an order of any court, agency or proceeding to be disclosed.  The Executive acknowledges and agrees that the Company shall retain exclusive ownership of all right, title, and interest in the Confidential Information, 

 

 

  

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	 including any and all worldwide copyrights, trade secrets, patent, and confidential and proprietary information rights.  The Executive agrees to undertake the following obligations, which Executive acknowledges to be reasonably designed to protect the Company’s legitimate business interests without unnecessarily or unreasonably restricting Executive’s post-employment opportunities:

 

(i) Executive agrees that he will not at any time, whether during or after the cessation of his employment, reveal or permit any other person or entity to reveal, any of the Confidential Information to any person or any entity, except, and only to the extent, as may be required in the ordinary course of performing Executive’s assigned duties as an executive of the Company, and Executive agrees to keep secret, and take all necessary precautions against disclosure of, all Confidential Information and all matters entrusted to him and not to use or attempt to use any Confidential Information in any manner that may cause injury or loss, or may be calculated to cause injury or loss, whether directly or indirectly, to the Company or its customers;

 

(ii) The Executive agrees that during and after his employment he shall not remove, copy, duplicate or otherwise reproduce, use or permit to be used any notes, memoranda, reports, lists, records, drawings, sketches, specifications, software programs, data, documentation or other materials of any nature relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs except as required to perform the Executive’s duties for the Company; and

 

(iii) Upon cessation of his employment relationship with the Company, the Executive shall immediately deliver to the Company all Confidential Information and other materials relating to the Company in his possession or delivered to him by the Company, including computer programs, files, notes, records, memoranda, reports, lists, drawings, sketches, specifications, data, charts, and other documents, materials and things (“Materials”), whether or not containing Confidential Information, whether or not prepared by the Executive, it being agreed that all Materials shall be and remain the sole and exclusive property of the Company.

 

(b) Non-Solicitation.  Without limiting the obligations of Section 8(a) the Executive agrees that while he is employed by the Company prior to the Retirement Date and for a period of one year following his Retirement Date he will not, whether alone or as employee, owner, partner, officer, director, consultant, agent, executive, independent contractor, or stockholder of any firm, corporation or other commercial enterprise, directly or indirectly solicit business from: (x) any customer of the Company with which Executive had contact,  participated in the contact, 

 

 

  

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	 or about which Executive had knowledge of Confidential Information by reason of Executive’s employment with the Company within the one year period preceding the Date of Termination, or (y) any current customer prospect of the Company for whom Executive directly or indirectly assisted in the preparation or submission of a proposal made by the Company to such customer prospect during the one year period preceding the Retirement Date, unless the Company acknowledges in writing its intent not to further pursue such customer prospect; provided, further, that the Executive shall, however, be permitted to own securities of any public company not in excess of 5% of any class of such securities and to own stock, partnership interests or other securities of any non-public entity not in excess of 5% of any class of such securities, and such ownership shall not be considered to be in competition with the Company; and except as may be required in the ordinary course of performing his duties as an employee of the Company, while employed prior to the Retirement Date and during the one year period immediately following the Retirement Date, Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company to work for any person, partnership or entity other than the Company, or engage in any activity that would cause any such employee to violate any agreement with the Company, or dissuade, or attempt to dissuade, any such employee from faithfully discharging such employee’s contractual and fiduciary obligations to serve the Company’s interests with undivided loyalty.

 

(c) Non Competition.  Without limiting the obligation imposed by Section 8(a) and (b), and to more fully protect the Confidential Information, Executive hereby agrees that while he is employed by the Company prior to the Retirement Date and for a period of one year following the Retirement Date, he will not, directly or indirectly, anywhere in the world where the Company conducts business, 

 

  

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	 render services to any Conflicting Organization in any capacity in which the Confidential Information of the Company would reasonably be considered to be useful to the Conflicting Organization; provided, however, that the Executive may render services to a Conflicting Organization (and which has separate and distinct divisions), as long as such services are being rendered solely to a part of the business that is separate and distinct from the part of the business that renders such person or entity a Conflicting Organization.

 

(d) If, at the time of enforcement of Sections 8(a), (b) and (c), a court shall hold that the duration, scope, area or activity restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, area or activity restrictions reasonable and enforceable under such circumstances shall be substituted for the stated duration, scope, area or activity restrictions.

 

(e) Remedies.  Executive recognizes and agrees that a breach of any or all of the provisions of Sections 8(a), (b) and (c) will constitute immediate and irreparable harm to the Company for which damages cannot be readily calculated and for which damages are an inadequate remedy.  Accordingly, the Executive acknowledges that in addition to any and all remedies at law, the Company shall be entitled, without bond, to specific performance or injunctive or other equitable relief to prevent the breach or threatened breach of Executive’s obligations under this Agreement.

 

(f) Intellectual Property.  The Executive shall disclose immediately to the Company all ideas, inventions and business plans that he makes, conceives, discovers or develops during the course of his employment with the Company, including any inventions, modifications, discoveries, developments, improvements, computer programs, processes, products or procedures (whether or not protectable 

 

  

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	 upon application by copyright, patent, trademark, trade secret or other proprietary rights) (“Work Product”) that: (i) relate to the business of the Company or any customer or supplier to the Company or any of the products or services being developed, manufactured, sold or otherwise provided by the Company or that may be used in relation therewith; (ii) result from tasks assigned to Executive by the Company; or (iii) result from the use of the premises or personal property (whether tangible or intangible) owned, leased or contracted for by the Company.  The Executive agrees that any Work Product shall be the property of the Company and, if subject to copyright, shall be considered a “work made for hire” within the meaning of the Copyright Act of 1976, as amended (the “Act”).  If and to the extent that any such Work Product is found as a matter of law not to be a “work made for hire” within the meaning of the Act, Executive expressly assigns to the Company all right, title and or interest in and to the Work Product, and all copies thereof, and the copyright, patent, trademark, trade secret and all their proprietary rights in the Work Product, without further consideration, free from any claim, lien for balance due or rights of retention thereto on the part of the Executive.

 

To the extent applicable, pursuant to the Illinois Employee Patent Act, the Company hereby notifies the Executive that the preceding paragraph does not apply to any inventions for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive’s own time, unless: (i) the invention relates (a) to the Company’s business, or (b) to the Company’s actual or demonstrably anticipated research or development, or (ii) the invention results from any work performed by the Executive for the Company.

 

 

  

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Executive agrees that upon disclosure of Work Product to the Company, the Executive will, during his employment and at any time thereafter, at the request and cost of the Company execute and deliver all such documents and perform all such acts as the Company or its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world, and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection.

 

In the event that the Company is unable, after reasonable effort, to secure Executive’s signature on any letters patent, copyright or other analogous protection relating to Work Product, whether because of Executive’s physical or mental incapacity or for any other reason whatsoever, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and on his behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright and other analogous protection with the same legal force and effect as if personally executed by Executive.

 

9. Clawback.  The Executive shall be subject to the clawback provisions of Section 9.1 of the Employment Agreement and any clawback required by law.

 

10. Mutual Non-Disparagement.  The Executive will not make statements about the Company or its affiliates, directors, officers or employees, or engage in conduct which could reasonably be expected to adversely affect the reputation or business of the Company or its affiliates, directors, officers or employees.  The Company shall direct the members of its Board of Directors and its executive officers not to make any statements about the Executive which could reasonably be expected to adversely affect the reputation of the Executive.  For avoidance of doubt, “Company” for purposes of the preceding sentence shall mean only AMCOL International Corporation.

 

 

  

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11. Section 409A Compliance.

 

(a) To the extent applicable, it is intended that this Agreement comply with the provisions of Code Section 409A, so as to prevent inclusion in gross income of any amounts payable or benefits provided hereunder in a taxable year that is prior to the taxable year or years in which such amounts or benefits would otherwise actually be distributed, provided or otherwise made available to Employee.  This Agreement shall be construed, administered, and governed in a manner consistent with this intent and the following provisions of this paragraph shall control over any contrary provisions of this Agreement.

 

(b) For purposes of Code Section 409A, each payment under this Agreement shall be treated as a right to a separate payment for purposes of Code Section 409A.

 

(c) All reimbursements and in kind benefits provided under this Agreement, including, but not limited to, payments under Section 4, shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

 

 

  

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(d) References in this Agreement to Code Section 409A include both that Section of the Code itself and any guidance promulgated thereunder.

 

(e) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any  provisions of this Agreement, or the provision of payments or benefits thereunder, are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

 

12. Enforcement.  If the Company fails to pay any amount provided under this Agreement when due, the Company shall pay interest on such amount at an annual rate equal to the lesser of (i) (A) the highest rate of interest charged by the Company’s principal lender on its revolving credit agreements plus 200 basis points, or (B) in the absence of such a lender, 200 basis points over the prime commercial lending rate announced by The Wall Street Journal in effect from time to time during the period of such nonpayment, or (ii) the highest legally-permissible interest rate allowed to be charged under applicable law.

 

13. Governing Law.  The interpretation and enforcement of this Agreement shall be governed by and construed, interpreted and enforced in accordance with Illinois law, without giving effect to the conflicts of law provisions thereof.

 

14. Headings.  The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

15. Executive’s Acknowledgment.  The Executive understands that this Agreement fully sets forth all separation benefits he will receive from the Company, and it supersedes any offers or promises, whether oral or written, which may have been made at any time.

 

 

  

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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth below.

 

 

 

 

 

 

	 DATED:  November 19, 2010 	              /s/   Lawrence E. Washow
	 	 Lawrence E. Washow
	 	 
	 	 
	 	 AMCOL INTERNATIONAL
	 	 CORPORATION
	 	 
	 	 
	DATED:  November 19, 2010 	              /s/   James W. Ashley, Jr.
	 	 By:  James W. Ashley, Jr.
	 	 
	 	Its:   Secretary

 

 

 

 

 

 

 

 

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