Exhibit 10.21
EXCHANGE AGREEMENT
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Exchange Agreement (this "Agreement") dated as of __________, 2007
(this "Agreement"), by and between FreeHand Systems International, Inc., a
Delaware corporation (the "Company"), and each of the persons whose signatures
appear on the signature pages attached hereto (each a "Stockholder" and
collectively the "Stockholders").
Recitals
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WHEREAS, pursuant to a series of separate transactions occurring during
2003, 2004 and 2005 between the one or more Stockholders and FreeHand Systems,
Inc., a Nevada corporation ("FHS"), FHS agreed to issue shares of its Series B
Preferred Stock, par value $0.001 per share ("FHS Series B Preferred") to
certain of the Stockholders;
WHEREAS, pursuant to that certain Exchange Agreement, dated September
14, 2005, by and between U.S. Environmental, Inc., a Delaware corporation
("USEV"), and FHS (the "Exchange Agreement"), USEV acquired 100% of the issued
and outstanding securities of FHS in exchange for the issuance of certain shares
of USEV to all of the stockholders of FHS, FHS became a wholly-owned subsidiary
of the Company and USEV subsequently changed its name to "Freehand Systems
International, Inc.";
WHEREAS, subsequent to the consummation of the transactions under the
Exchange Agreement, FHS acquired all of the outstanding shares of Sheet Music
Now A/S, a Danish corporation ("SMN"), from the shareholders of SMN (the "SMN
Acquisition") in exchange for the issuance of additional shares of FHS Series B
Preferred to the former SMN shareholders;
WHEREAS, in connection with the transactions contemplated by the
Exchange Agreement, holders of the FHS Series B Preferred (including the former
SMN shareholders) were to receive shares of the Series B Preferred Stock, par
value $0.001 per share of the Company (the "Series B Stock"), having voting
power, designations, preferences, limitations, restrictions and relative rights
(including conversion rights) substantially identical to those of the FHS Series
B Preferred;
WHEREAS, pursuant to the terms of the FHS Series B Preferred and the
Series B Stock agreed upon by the Company and the Stockholders, each share of
the Company's Series B Stock was to be convertible into one share of the common
stock of the Company, par value $0.001 per share (the "Common Stock") and each
Stockholder has advised the Company of such Stockholder's willingness to convert
all Series B Stock which the Company agreed to issue to such Stockholder into
Common Stock; and
WHEREAS, due to inadvertent ministerial errors by FHS and the Company,
neither FHS nor the Company took all the required steps to authorize the
issuance of the FHS Series B Preferred under Nevada law (in the case of FHS) or
the Series B Stock under Delaware law (in the case of the Company) and, in light
of the expressed willingness of the Stockholders to convert the Series B Stock
issuable to them into Common Stock, the Company now desires to exchange one
share of the Common Stock for each share of Series B Stock issuable by the
Company to each Stockholder as set forth in Schedule I attached hereto, and each
Stockholder is willing to exchange its rights to the issuance of FHS Series B
Preferred and/or Series B Stock (collectively, "Preferred Stock Rights") for
such Common Stock.
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby agreed and acknowledged, the parties
hereto hereby agree as follows:
Agreement
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1. Securities Exchange.
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(a) Upon the following terms and subject to the
conditions contained herein, the Company agrees to issue and deliver to
Stockholder the number of shares of Common Stock set forth beside such
Stockholder's name on Schedule I hereto. By the execution and delivery of this
Agreement, each Stockholder agrees to the irrevocable and unconditional
termination and cancellation of such Preferred Stock rights and to surrender
such Stockholder's certificates or other evidence of its Preferred Stock Rights
and to receive such Common Stock in exchange therefore and in full and complete
settlement and satisfaction of such Preferred Stock Rights.
(b) This Agreement shall be effective as between the
Company and any Stockholder, and the closing of the exchange contemplated by
this Agreement shall occur with respect to such Stockholder, upon execution of
this Agreement by the Company and such Stockholder. As soon as practicable
following effectiveness of this Agreement as to any
(c) This Agreement and the rights and obligations
hereunder may not be assigned by any party hereto without the prior written
consent of the other parties hereby. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
(whether by merger, consolidation, recapitalization sale of substantially of all
of the assets of such party or other similar transaction) and permitted assigns.
Nothing herein is intended or shall be construed to confer upon or give to any
person, any rights, privileges or remedies under or by reason of this Agreement,
Stockholder, the Company shall issue or cause the issuance to such Stockholder
of one or more certificates representing, in the aggregate, the number of shares
of Common Stock set forth beside the Stockholder's name on Schedule I and shall
mail such certificate or certificates to the address of such Stockholder set
forth next to such Stockholder's signature herein. Closing hereunder shall be
deemed to occur with respect to any Stockholder upon the Company's mailing of
the certificate or certificate(s) issued to such Stockholder as required by this
Section 1(b).
(d) The shares of Common Stock to be exchanged for
Preferred Stock Rights pursuant to this Agreement are sometimes collectively
referred to herein as the "Securities".
2. Previously Issued Certificates. As promptly as practicable
following the execution and delivery of this Agreement by a Stockholder, such
Stockholder will deliver to the Company any certificates in such Stockholder's
possession purporting to represent shares of FHS Series B Preferred or shares of
Series B Stock. Notwithstanding the preceding sentence, (i) the Company agrees
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that a Stockholder's failure to deliver any such certificates shall not affect
the Company's obligations to issue Common Stock to such Stockholder hereunder
and (ii) retention of any such certificates by a Stockholder shall not limit or
otherwise affect the obligations of such Stockholder under this Agreement or the
cancellation of such Stockholder's Preferred Stock Rights. By executing and
delivering this Agreement, each Stockholder authorizes the Company to xxxx the
applicable stock transfer or other records of the Company maintained with
respect to such Stockholder's Preferred Stock Rights "cancelled."
3. Representations, Warranties and Covenants of the Stockholder.
Each Stockholder hereby severally makes the following representations and
warranties to the Company, and covenants for the benefit of the Company:
(a) The Stockholder has all the requisite power,
authority and capacity to execute and deliver this Agreement and to perform
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
on the part of the Stockholder. This Agreement has been duly executed and
delivered by the Stockholder and constitutes the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms.
(b) The Stockholder is the legal and beneficial owner of
the Preferred Stock Rights and has the right to exchange Preferred Stock Rights
for the Securities free an clear of any liens, security interests or other
encumbrances of any nature whatsoever, and the Preferred Stock Rights may be
exchanged by the Stockholder without obtaining the consent or approval of any
other person or entity. The Stockholder has not sold, transferred, assigned,
pledged, granted a security interest in or otherwise disposed of the Preferred
Stock Rights or any interest therein or granted any option, warrant, put, call,
proxy or power of attorney with respect to such Preferred Stock Rights.
(c) The Stockholder understands that the Securities are
being issued to it in the exchange herein provided for in reliance on specific
provisions of Federal and state securities laws and that the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Stockholder set forth herein for
purposes of qualifying for exemptions from registration under the Securities Act
of 1933, as amended (the "Securities Act"), and applicable state securities
laws.
(d) The Stockholder is an "accredited investor" (as
defined in Rule 501 of Regulation D promulgated under the Securities Act), and
the Stockholder has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Securities.
The Stockholder acknowledges that an investment in the Securities is speculative
and involves a high degree of risk. The Stockholder acknowledges that it (i) has
such knowledge and experience in financial and business matters such that
Stockholder is capable of evaluating the merits and risks of Stockholder's
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities and (iii) by virtue of such Stockholder's
Preferred Stock Rights has been the owner of securities issued by the Company.
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(e) The Stockholder is acquiring the Securities solely
for its own account and not with a view to or for sale in connection with the
distribution thereof. The Stockholder does not have a present intention to sell
any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to or
through any person or entity; provided, however, that by making the
representations herein, the Stockholder does not agree to hold the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition.
(f) The Stockholder understands that the Securities being
issued to the Stockholder in exchange for the Preferred Stock Rights hereunder
have not been, and may never be, registered under the Securities Act and that
none of the Securities can be sold or transferred unless they are first
registered under the Securities Act and such state and other securities laws as
may be applicable or the Company receives an opinion of counsel reasonably
acceptable to the Company that an exemption from registration under the
Securities Act is available (and then the Securities may be sold or transferred
only in compliance with such exemption and all applicable state and other
securities laws). The Stockholder acknowledges that such person is familiar with
Rule 144 of the rules and regulations of the Securities and Exchange Commission,
as amended, promulgated pursuant to the Securities Act ("Rule 144"), and that
the Stockholder has been advised that Rule 144 permits resales only under
certain circumstances. The Stockholder understands that to the extent that Rule
144 is not available, the Stockholder will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
4. Representations, Warranties and Covenants of the Company. The
Company represents and warrants to the Stockholder, and covenants for the
benefit of the Stockholder, as follows:
(a) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the state of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is duly registered and
qualified to conduct its business.
(b) The Securities have been duly authorized by all
necessary corporate action and, when paid for or issued in accordance with the
terms hereof, the Securities shall be validly issued and outstanding, fully paid
and nonassessable, free and clear of all liens, encumbrances and rights of
refusal of any kind.
(c) This Agreement has been duly authorized, validly
executed and delivered on behalf of the Company and is a valid and binding
agreement and obligation of the Company enforceable against the Company in
accordance with its terms, subject to limitations on enforcement by general
principles of equity and by bankruptcy or other laws affecting the enforcement
of creditors' rights generally, and the Company has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
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5. Notices. All notices, demands, consents, requests,
instructions and other communications to be given or delivered or permitted
under or by reason of the provisions of this Agreement or in connection with the
transactions contemplated hereby shall be in writing and shall be deemed to be
delivered and received by the intended recipient as follows: (a) if personally
delivered, on the business day of such delivery (as evidenced by the receipt of
the personal delivery service), (b) if mailed certified or registered mail
return receipt requested (with all costs prepaid), four (4) business days after
being mailed, or (c) if delivered by a recognized overnight courier service of
recognized standing (with all charges having been prepaid), on the business day
of such delivery (as evidenced by the receipt of the overnight courier service).
If any notice, demand, consent, request, instruction or other communication
cannot be delivered because of a changed address of which no notice was given
(in accordance with this Section 5), or the refusal to accept same, the notice,
demand, consent, request, instruction or other communication shall be deemed
received on the second business day the notice is sent (as evidenced by a sworn
affidavit of the sender). All such notices, demands, consents, requests,
instructions and other communications will be sent to the following addresses as
applicable:
If to the Company:
FreeHand Systems International, Inc.
00 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxx XX 00000
Attn: Xx. Xxx X. Xxxx
Chief Executive Officer
with a copy to:
Xxxxx & XxXxxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
If to a Stockholder:
At the address set forth on the signature page signed by such
Stockholder.
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 5.
6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in that State, without regard to any of its
principles of conflicts of laws or other laws which would result in the
application of the laws of another jurisdiction.
7. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties relating to the subject matter hereof
and it supersedes all prior and/or contemporaneous understandings and agreements
of any kind and nature (whether written or oral) between the Company and the
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Stockholders, or any of them, with respect to such subject matter, all of which
are merged herein. This Agreement may not be amended or any provision hereof
waived in whole or in part, except by a written amendment signed by all of the
parties.
8. Binding Effect; Assignment. This Agreement and the rights and
obligations hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors (whether by merger, consolidation, recapitalization sale of
substantially of all of the assets of such party or other similar transaction)
and permitted assigns. Nothing herein is intended or shall be construed to
confer upon or give to any person, any rights, privileges or remedies under or
by reason of this Agreement.
9. Counterparts. This Agreement may be executed in two (2) or
more counterparts, and by the different parties hereto in separate counterparts,
each of which, when executed, shall be deemed to be an original, and all of
which, when taken together, shall constitute one and the same document. This
Agreement may be executed by facsimile signature which shall constitute a legal
and valid signature for purposes hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.
FREEHAND SYSTEMS INTERNATIONAL, INC.
By:____________________________________
Name:
Title:
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Agreed and accepted this ___ day of
_____ 2007.
[Stockholder]
By: ________________________________
Name:
Title:
Address for delivery of Common
Stock Certificates and Notices
____________________________________
____________________________________
____________________________________
Schedule I
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Name of Stockholder Series B Stock Securities
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