AGREEMENT AND PLAN OF SHARE EXCHANGE
AGREEMENT (the "Agreement"), dated as of July 30, 1999, by and
between Xxxxxxx X. Xxxxx, an individual with an address x/x Xxxx Xxxxxx
Strategies, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000
("Seller"), and Vacation Emporium Corporation, a Nevada corporation with an
address at 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 ("Purchaser").
W I T N E S S E T H:
WHEREAS, Wall Street Strategies, Inc., a Delaware corporation (the
"Company") is engaged in the business of providing financial services (the
"Business");
WHEREAS, Seller owns of record and beneficially 100 shares (the
"Purchased Shares") of the Company's common stock, without par value (the
"Company Common Stock"), which shares represent all of the issued and
outstanding capital stock of the Company;
WHEREAS, Purchaser, a non-reporting company under the Securities
Exchange Act of 1934, as amended, with shares publicly quoted on the OTC
Electronic Bulletin Board (the "OTCBB"), is a "shell" company that has conducted
no business activities since March 31, 1999 (other than those associated with
the acquisition described herein and with seeking other potential business
opportunities ); and
WHEREAS, the Seller is desirous of selling the Purchased Shares to
the Company in exchange for 9,455,898 shares of Purchaser's common stock, par
value $.001 per share (the "Purchaser Common Stock"),
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereby agree as follows:
ARTICLE 1.
EXCHANGE OF PURCHASED SHARES
SECTION 1.1 Sale of Purchased Shares. On the terms and subject to
the conditions set forth in this Agreement, Seller hereby agrees to sell,
assign, transfer and deliver the Purchased Shares to Purchaser, free and clear
of all liens, claims, charges or encumbrances, and Purchaser hereby agrees to
purchase the Purchased Shares from Seller, at the Closing, for the consideration
set forth in Section 1.2 hereof.
SECTION 1.2 Purchase Price. In exchange for the Purchased Shares,
Purchaser shall issue and deliver to Seller, at the Closing, 9,455,898 shares of
the Purchaser Common Stock (the "Exchange Shares"), which shall represent
approximately 53.84% of the then total issued and outstanding shares of the
Purchaser Common Stock, free and clear of all liens, claims, charges or
encumbrances.
SECTION 1.3 Delivery of Shares. Subject to the terms and conditions
hereof, at the Closing (a) the Seller shall transfer to Purchaser the Purchased
Shares by delivering the stock certificate(s) evidencing the Purchased Shares,
accompanied by duly endorsed stock powers, with signatures guaranteed, in form
and substance satisfactory to Purchaser permitting the transfer of the Purchased
Shares to Purchaser; and (b) Purchaser shall deliver to Seller stock
certificate(s) registered in the name of Seller representing the Exchange
Shares.
SECTION 1.4. Supplemental Action. If at any time after the Closing
Date, Seller or Purchaser shall determine that any further conveyances,
agreements, documents, instruments, and assurances or any further action is
necessary or desirable to carry out the provisions of this Article 1, Seller or
Purchaser, as the case may be, shall execute and deliver any and all proper
conveyances, agreements, documents, instruments, and assurances and perform all
necessary or proper acts to carry out the provisions of this Article 1.
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ARTICLE 2.
CLOSING; CLOSING DATE
SECTION 2.1. The exchange of the Purchased Shares for the Exchange
Shares as contemplated hereby (the "Closing") shall take place at 10:00 a.m. on
such date as the parties mutually agree, but in no event later than September
30, 1999, at the offices of Xxxxx Xxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (or such other time or date as the parties hereto may mutually agree in
writing). The date upon which the Closing occurs is herein called the "Closing
Date."
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
SECTION 3.1 Due Incorporation and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, has all requisite power and authority to own, lease and
operate its assets, properties and business and to conduct the Business as now
being and as heretofore conducted. The Company is qualified to do business as a
foreign corporation in the jurisdictions listed on the annexed Schedule 3.1, and
is not doing business in any other jurisdiction where qualification is required
or the failure to qualify would have a material adverse effect on the business
or operations of the Company.
SECTION 3.2. Authority to Execute and Perform Agreements. Seller has
full power and capacity to execute and deliver this Agreement and any other
agreement or instrument contemplated by this Agreement (such other agreements
and instruments are hereinafter collectively referred to as the "Transaction
Documents") to consummate the
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transactions contemplated hereby and thereby (collectively, the "Transactions").
This Agreement has been duly executed and delivered and is the valid and binding
obligation of Seller enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in equity or at law.
The execution and delivery of this Agreement and the Transaction Documents, the
consummation of the Transactions and the performance by Seller of this Agreement
and each of the Transaction Documents in accordance with its respective terms
and conditions will not require the approval, consent of, waiver, order or
authorization of, notification to, or registration, declaration or filing with,
any federal, state, county, local or other governmental or regulatory body or
the approval or consent of any other person.
SECTION 3.3 Subsidiaries and Affiliates. The Company does not,
directly or indirectly, own any shares of stock or other equity interest
(including any form of profit participation) in, has not made any investment in,
and does not control or have any proprietary interest in any corporation,
partnership, joint venture or other business association or entity. Schedule 3.3
annexed hereto sets forth the name of each of the Company's affiliates (other
than subsidiaries), including joint venture affiliates (incorporated and
unincorporated), and the nature of the affiliation.
SECTION 3.4 Articles of Incorporation and By-Laws. Seller has
delivered to Purchaser true and complete copies of the certificate of
incorporation and by-laws of the Company as in effect on the date hereof, which
instruments shall not be or have been amended between the dates thereof and the
Closing Date.
SECTION 3.5 Capitalization. The total authorized capital stock of
the Company consists solely of 1,500 shares of common stock, without par value,
of which only the
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Purchased Shares are issued and outstanding. The Purchased Shares are validly
issued, fully paid and non-assessable. Except for the transactions contemplated
hereby, there are no authorized or outstanding options, warrants, subscription
calls, rights (including preemptive rights and rights to demand registration
under the Securities Act of 1993, as amended), commitments, conversion rights,
plans or other agreements of any character obligating the Company to authorize,
issue, deliver, sell or redeem any shares of its capital stock or any securities
convertible into or evidencing the right to purchase any shares of such stock..
SECTION 3.6 Officers and Directors. Attached hereto as Schedule 3.6
is a true and correct list of the officers and directors of the Company.
SECTION 3.7 Financial Statements; Financial Matters.
(a) Attached hereto as Schedule 3.7 (a) are the audited
balance sheets of the Company as at December 31, 1996, 1997 and 1998, and the
related audited statements of operations and retained earnings and cash flows as
at and for each of the years then ended, together with the unqualified report
thereon of Lilling & Company LLP ("Lilling"), certified independent accountants
(collectively, the "Company Audited Financials").
(b) Attached hereto as Schedule 3.7 (b) is the unaudited
balance sheet of the Company as at May 31, 1999, and the related unaudited
statements of profit and loss and changes in financial position as at and for
the five months ended May 31, 1999 (collectively the "Company Interim
Financials"; the unaudited balance sheet as at May 31, 1999 included therein is
sometimes referred to as the "Company Interim Balance Sheet").
(c) At or prior to the Closing Date, Seller will have
furnished Purchaser with the unaudited balance sheets of the Company as at March
31, 1999 and June 30, 1999 , and the unaudited statements of profit and loss and
changes in financial position as at and for the three
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months ended March 31, 1998 and March 31, 1999 and the six months ended June 30,
1998 and June 30, 1999 (collectively, the "Company Quarterly Financials").
(d) The Company Audited Financials and the Company Interim
Financials are, and the Company Quarterly Financials will be, (i) in accordance
with the books and records of the Company, (ii) correct and complete, (iii)
fairly present the financial position and results of operations of the Company
as of the dates indicated, and (iv) prepared in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") (except
that (x) unaudited financial statements may not be in accordance with GAAP
because of the absence of footnotes normally contained therein, and (y) interim
financials are subject to normal year-end audit adjustments which in the
aggregate will not have a material adverse effect on the business properties,
assets, operations, liabilities, financial condition or prospects of the
Company).
SECTION 3.8 Liabilities. Except as set forth on Schedule 3.8 annexed
hereto, as of the date hereof, the Company has no direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, known, or unknown, fixed or unfixed, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of taxes, other governmental charges
or lawsuits brought ("Liabilities"), other than (i) Liabilities fully and
adequately reflected or reserved against on the Company Interim Balance Sheet,
and (ii) Liabilities incurred since May 31, 1999 in the ordinary course of
business. Seller has no knowledge of any past or existing circumstance,
condition, event or arrangement that may hereafter give rise to any Liabilities
of the Company, or any successor to its business except in the ordinary course
of business or as otherwise set forth on Schedule 3.8. Seller will not cause or
permit the Company between the date hereof and the Closing Date, without the
prior written consent of Purchaser, to incur or become subject to, or agree to
incur or become subject to, any Liabilities except current liabilities
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and obligations incurred in the ordinary course of business or as contemplated
by this Agreement or any exhibit or schedule hereto.
SECTION 3.9 Absence of Certain Changes. Since May 31, 1999, there
has been no material adverse change in the condition, financial or otherwise, of
the Company, other than changes occurring in the ordinary course of business
which changes have not, individually or in the aggregate, had a material adverse
effect on the business, properties, assets, operations, liabilities, financial
condition or prospects of the Company.
SECTION 3.10 Tax Matters. The Company has filed all federal, state,
county and local income tax, franchise tax, real and personal property tax,
payroll tax, occupation tax, sales tax, excise tax, and other tax returns which
it is required to file, the failure to file which would materially adversely
affect the assets, properties, business, operations or financial condition or
prospects of the Company, taken as a whole, and has paid or provided for all
taxes shown on such returns, and all deficiencies or other assessments of tax,
interest or penalties which have been served on or delivered to the Company.
There are no claims with respect to federal, state, county, local, foreign or
other taxes. The federal income tax returns of the Company have never been
audited by the Internal Revenue Service. Seller knows of no unassessed tax
deficiency proposed or threatened against the Company. No audit of any tax
return of the Company is in progress. There are not in force any extensions of
time with respect to the date on which any tax return was or is due to be filed
by the Company or any waivers or agreements by the Company for an extension of
time for the assessment or payment of any tax.
SECTION 3.11 Real and Personal Property - Leased to the Company. Set
forth on Schedule 3.11(a) hereto is a description of each lease under which the
Company is the lessee of any real property, and on Schedule 3.11(b) hereto is a
description of each lease under which the Company is the lessee of any personal
property. The premises or property described in said leases are presently
occupied or used by the Company as lessee under the terms
7
of such leases. All rentals due under such leases have been paid and there exist
no defaults under the terms of such leases and no event has occurred which, upon
passage of time or the giving of notice, or both, would result in any events of
default or prevent the Company from exercising and obtaining the benefits of any
rights or options contained therein. The Company has the full right, title and
interest of the lessee under the terms of said leases, free of all liens, claims
or encumbrances and all such leases are valid and in full force and effect.
SECTION 3.12 Title. The Company Interim Balance Sheet reflects all
of the assets and properties of the Company, except to the extent the Company
has acquired or disposed of any assets and properties, in the ordinary course of
its business since May 31, 1999. The Company owns outright and has good and
marketable title to all of its assets and properties, in each case free and
clear of any lien or other encumbrance except for (i) immaterial assets and
properties; (ii) liens or other encumbrances securing taxes, assessments,
governmental charges or levies, or the claims of materialmen, carriers,
landlords and like persons, all of which are not yet due and payable and
purchase money interests and similar security interests for goods purchased by
the Company since May 31, 1999 in the ordinary course of business; (iii) defects
of title, liens or other encumbrances of a character that do not materially
impair the assets or properties of the Company or detract materially from the
Business, or (iv) liens, claims, encumbrances or security interests reflected in
the Company Interim Balance. The assets and properties owned by the Company, as
reflected on the Company Interim Balance Sheet, are adequate to permit the
Company to conduct the Business as presently conducted and to continue to
conduct the Business after the Closing.
SECTION 3.13 Intangible Property.
(a) Attached hereto as Schedule 3.13 is a list of patents, patent
applications, trademark and service xxxx registrations and registration
applications, U.S. copyright registrations and registration applications owned
by the Company and confidentiality, nondisclosure and license
8
agreements granting rights under one or more patents, patent applications,
trademark and service registrations and registration applications, U.S.
copyright registrations and registration applications by or to the Company.
(b) (i) The Company does not infringe a patent, U.S. trademark
registration, U.S. service xxxx registration or copyright of a third party and
(ii) no party has asserted a claim against the Company that the Company
infringes a patent, trademark, copyright, trade name or trade secret of a third
party.
SECTION 3.14 Contracts and Other Agreements. Schedule 3.14 hereto
sets forth, as of the date of this Agreement, all contracts, commitments,
understandings, arrangements and other agreements to which the Company is a
party or by or to which any of the Company's properties are bound or subject
(collectively, the "Contracts"), except (i) Contracts made in the ordinary
course of business of the Company and involving the payment to or by the Company
of less than $30,000 with respect to any one contract or $50,000 with respect to
any related Contracts and (ii) any Contract that is terminable by the Company
upon not more than 30 days notice and with the payment of a termination penalty,
if any, not exceeding $25,000. There have been delivered or made available to
Purchaser true and complete copies of all the Contracts and other agreements set
forth on Schedule 3.14 or on any other Schedule. All of the Contracts are valid,
subsisting, in full force and effect and binding upon the parties thereto in
accordance with their terms, and the Company has paid in full or accrued all
amounts due thereunder and has satisfied in full or provided for all of its
liabilities and obligations thereunder, and is not in default in any material
respect under any of them, nor, to Seller's knowledge, is any other party to any
Contract in default thereunder, nor, to Seller's knowledge, does any condition
exist that with notice or lapse of time or both would constitute a default
thereunder that would give the other party thereto the right to terminate such
Contract. Except as separately identified on Schedule 3.14, no approval or
consent of any person is needed in order that the Contracts set
9
forth on Schedule 3.14 or on any other Schedule continue in full force and
effect following the consummation of the Transactions. Seller will not cause or
permit the Company, between the date hereof and the Closing Date, without
Purchaser's prior written consent, to become a party to any Contract of the
types listed in this Section 3.14 (other than contracts with bona fide third
parties entered into in the ordinary course of the Company's business on terms
commercially reasonable within the industry or on terms similar to those
contained in Contracts currently in effect to which the Company is a party), or
make or permit the amendment or termination (other than in the ordinary course
and excluding the termination of Contracts by their terms) of any Contract
listed on Schedule 3.14.
SECTION 3.15 Insurance. Attached hereto as Schedule 3.15 is a list
of all policies of insurance covering the Company (specifying the insurer,
amount of coverage, type of insurance, policy number and any pending claims
thereunder). True copies of all such policies have been made available by the
Company to Purchaser. Such policies will be maintained in effect until and at
the Closing Date. To the best knowledge of Seller, the Company has not failed to
give any notice or present any material claim under any insurance policy in due
and timely fashion.
SECTION 3.16 Litigation; Actions and Proceedings. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental, administrative or regulatory body or arbitration or mediation
tribunal against or involving the Company. Except as set forth in Schedule 3.16
attached hereto, there are no actions, suits or claims or legal, administrative,
regulatory, governmental or arbitral proceedings or investigations (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending or threatened against or involving the Company or any of its
properties or assets or Seller, nor, to the knowledge of Seller, are there any
grounds therefor, that individually or in the aggregate, could have a material
adverse effect upon the transactions contemplated hereby or
10
upon the assets, properties, business, operations, or condition (financial or
otherwise) of the Company or Seller. There are no actions, suits or claims or
legal, administrative, regulatory, governmental or arbitral proceedings pending
or threatened that would give rise to any right of indemnification on the part
of any director or officer of the Company, or the heirs, executors or
administrators of such director or officer, against the Company or any successor
to the Business.
SECTION 3.17 Operations of the Company. (a) Except as set forth on
Schedule 3.17 hereto, since May 31, 1999, the Company has not:
(i) amended its Certificate of Incorporation or By-laws or merged
with or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its capital stock or changed or agreed to change in
any manner the rights of its outstanding capital stock or the character of its
business;
(ii) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(iii) entered into or amended any employment agreement (other than
employment agreements or at will employment arrangements entered into or amended
in the ordinary course of the Company's business), entered into or amended any
agreement with any labor union or association representing any employee,
adopted, entered into, or amended any employee benefit plan;
(iv) incurred any indebtedness for borrowed money;
(v) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(vi) materially reduced its cash or short term investments or their
equivalent;
(vii) waived any right of material value to its business;
11
(viii) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted by it;
(ix) materially changed any of its business policies;
(x) except for the Xxxxx Employment Agreement (as defined below) to
be executed at the Closing, approved, granted or paid any wage or salary
increase in excess of $25,000 per annum, or any bonus in excess of $5,000, or
any increase in any other direct or indirect compensation, for or to any of its
officers, directors, employees, consultants, agents, brokers, independent
contractors or other representatives, or any accrual for or commitment or
agreement to make or pay the same;
(xi) made any loan or advance to any of its shareholders, officers,
directors, employees, consultants, agents, brokers, independent contractors or
other representatives (other than travel, entertainment or business expense
advances made in the ordinary course of business), or made any other loan or
advance otherwise than consistently with past practice in the ordinary course of
business;
(xii) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, consultants, agents, brokers,
independent contractors or other representatives, other than payments or
commitments to pay persons other than its officers, directors or shareholders
made in the ordinary course of business;
(xiii) entered into any lease (as lessor or lessee); sold, abandoned
or made any other disposition of any of its assets or properties (except in the
ordinary course of business); granted or suffered any lien or other encumbrance
on any of its assets or properties; entered into (except in the ordinary course
of business) or amended any contract or other agreement to which it is a party,
or by or to which it or its assets or properties are bound or subject, or
pursuant to which it agrees to indemnify any party or to refrain from competing
with any party;
(xiv) except in the ordinary course of business and in amounts less
than $10,000 in each case, incurred or assumed any Liability;
12
(xv) made any acquisition of or entered into any agreement to
acquire all or any part of the assets, properties, capital stock or business of
any other person;
(xvi) failed to pay timely any of its material liabilities in
accordance with their terms or otherwise in the ordinary course of business; and
(xvii) except in the ordinary course of business, entered into any
other material contract or other agreement or other material transaction.
(b) The Company will not, between the date hereof and the
Closing, without the prior written consent of Purchaser, do any of the things
listed in clauses (i) through (xvii) of Section 3.17(a), except that on or
before the Closing Date Seller shall cause the Company to repay in full all
outstanding loans to shareholders and all employee loans, other than customary
business expense advances, shall be repaid to the Company or written- off as an
asset.
SECTION 3.18 Compliance with Laws. The Company is not in default
under or in violation of any applicable order, judgment, injunction, award or
decree, of any material applicable federal, state, or local statute, law,
ordinance, rule or regulation, including without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA",) or the provisions
of any franchise or license, or of any other material requirement of any
governmental, regulatory, administrative or industry body, court or arbitrator
applicable to the Company or the Business. The Company is not in default under
or in violation of any provisions of its certificate of incorporation or its
by-laws, or any material instrument, contract, mortgage, indebtedness, indenture
or other agreement to which the Company is a party or by or to which the Company
or any of its assets or properties may be bound or subject.
SECTION 3.19 Licenses, Permits and Certificates. The Company has all
material licenses, permits, certificates, authorizations, approvals and consents
required by any governmental authority to legally operate the Business and such
licenses, permits, certificates, authorizations, approvals and consents are
listed on Schedule 3.19. No governmental, regulatory
13
or industry permits, consents, waivers, approvals or authorizations are
necessary in connection with the consummation of the Transactions or to permit
the Company to conduct the Business after the Closing in the manner and to the
extent presently conducted.
SECTION 3.20 No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Seller and the consummation by the Seller of
the Transactions will not (a) result in a violation of the Company's Certificate
of Incorporation or By-laws, (b) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company is a party, or (c) result in a violation of any law, rule, regulation,
by-law, directive, order, judgment or decree (including federal, state,
provincial and municipal securities laws and regulations) applicable to the
Company or by which any of its property or assets is bound or affected, except
to the extent that matters within clauses (b) and (c) immediately above would
not have a material adverse effect on the business properties, assets,
operations, liabilities, financial condition or prospects of the Company, or the
ability of the Seller to perform this Agreement and the other Transaction
Documents.
SECTION 3.21 Labor Agreements, Employee Benefit Plans, and
Employment Agreements. Except as set forth on Schedule 3.21 attached hereto and
except for the Wall Street Strategies, Inc. Profit Sharing Plan and Trust,
effective as of January 1, 1996, a true and correct copy of which has been
provided to Purchaser (the "Company Profit Sharing Plan"), the Company is not a
party to (a) any union collective bargaining, works council, or similar
agreement or arrangement, (b) any qualified or non-qualified pension,
retirement, severance, profit-sharing, deferred compensation, bonus, stock
option, stock purchase, retainer, consulting, health, welfare or incentive plan
or agreement, (c) any plan or policy providing for employee benefits, including
but not limited to vacation, disability, sick leave, medical,
14
hospitalization, life and other insurance plans, and related benefits, or (d)
any employment agreement. The Company is not presently a party to any "employee
leasing" agreement or arrangement, nor does the Company have any liability in
respect of any such agreement or arrangement to which it was, at any time, a
party, but which is no longer in effect.
SECTION 3.22 Books and Records. The books of account and other
corporate records of the Company made or to be made available to Purchaser in
connection with the Transactions and the due diligence inquiries made by
Purchaser in connection herewith, are in all respects complete and correct, have
been maintained in accordance with good business practices and the matters
contained therein are accurately reflected on the financial statements of the
Company furnished or to be furnished hereunder by Seller to Purchaser..
SECTION 3.23 Accounts Receivable. All accounts receivable of the
Company that are reflected on the Company Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable"), represent or will represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. The reserves shown on the Company Interim Balance Sheet or on the
accounting records of the company as of the Closing Date with respect to the
Accounts Receivable are adequate consistent with past practice. There is no
contest, claim, or right of set-off in any agreement with any maker of an
Account Receivable relating to the amount or validity of such Account
Receivable.
SECTION 3.24 Stock Restrictions. Seller acknowledges and understands
that: (a) the Exchange Shares shall not be registered under either United States
federal or state securities laws or other securities laws of any other
jurisdiction, but are expected to be issued under and in reliance upon
exemptions from registration provided by Section 4(2) and other provisions of
the Securities Act of 1933, as amended (the "Act"), and regulations promulgated
thereunder; (b) while Purchaser may undertake to register certain of its
Purchaser Common Stock
15
for public sale in the future, it has made no decision or commitment to do so,
has no present intention either to do so or to consider such a registration,
and, in any event, is under no obligation to do so with respect to the Exchange
Shares, except as contemplated in that certain Registration Rights Agreement
between Purchaser and Seller to be entered into at the Closing in accordance
with Section 7.9 hereof; (c) if in fact Purchaser undertakes to register any of
its Purchaser Common Stock for public sale in the future, there would be no
assurance that it would be successful in causing such registration to occur; (d)
an exemption from registration with respect to the Exchange Shares may not be
available under the Securities Act or may not permit Seller to transfer the
Exchange Shares in the amounts or at the times desired by Seller; (e) and, as a
result of the foregoing, the Exchange Shares may be required to be held by
Seller indefinitely. Seller further acknowledges that each certificate
evidencing Exchange Shares shall contain a legend identical to or substantially
to the effect of the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING THE SHARES OR OF AN OPINION OF
COUNSEL TO THE CORPORATION THAT SUCH TRANSFER WILL NOT REQUIRE
REGISTRATION OF SUCH SHARES UNDER THE ACT.
SECTION 3.25 Purchase for Investment, Etc.. Seller represents and
warrants that: (a) Seller is acquiring and will acquire the Exchange Shares for
his own account for investment only and not with a view to, or for sale in
connection with, a distribution within the meaning of the Securities Act; (b) he
has no present intention of selling or otherwise disposing of any portion of the
Exchange Shares; (c) he has had access to all information regarding Purchaser
and its present and prospective business, assets, liabilities and financial
16
condition and the backgrounds of the principals of Purchaser, as he has deemed
material to making the decision to acquire the Exchange Shares and has been
afforded the opportunity to ask questions of and receive answers from senior
management of Purchaser concerning present and prospective business prospects of
Purchaser; (d) he has fully considered this information in valuing Purchaser and
assessing the merits of the Transactions and is satisfied with the consideration
he is receiving hereunder for the Purchased Shares; (e) he recognizes that there
may be no future market for resale of the Exchange Shares; (f) he has knowledge
in business and financial matters and accordingly is capable of evaluating and
has evaluated the merits of the Transactions; (g) he has made the determination
to enter into the Transactions based upon his own independent evaluation and
assessment of the value of Purchaser and its present and prospective business
prospects and has not relied on, or been induced to enter into this Agreement on
account of, any representation or warranty of any kind or nature, whether oral
or written, express or implied, except for such representations and warranties
of Purchaser as are specifically set forth in this Agreement; and (h) he is
financially capable of bearing a total loss of his investment in the Exchange
Shares.
SECTION 3.26 Ownership of the Purchased Shares. (a) Seller owns the
Purchased Shares, both legally and beneficially, free and clear of any and all
liens, charges or encumbrances of any kind or nature whatsoever; (b) Seller is
not bound by or subject to any voting trust arrangement, proxy, voting
agreement, shareholder agreement, purchase agreement or other agreement or
understanding (i) granting any option, warrant or other right to purchase all or
any of the Purchased Shares to any person, (ii) restricting the right of Seller
to sell or convey the Purchased Shares, or (iii) otherwise restricting any
rights of Seller with respect to the Purchased Shares (including restrictions as
to the voting or disposition of the Purchased Shares); (c) Seller has the
absolute and unrestricted right, power and capacity to sell, assign and transfer
the Purchased Shares; and (d) upon transfer to Purchaser of the Purchased Shares
hereunder,
17
Purchaser will acquire good and valid title to the Purchased Shares, free and
clear of any liens, charges or encumbrances.
SECTION 3.27 Finders and Investment Bankers. Seller has not employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
SECTION 3.28 Full Disclosure. All documents and other papers
delivered by or on behalf of Seller relating to Seller and the Company in
connection with this Agreement and the Transactions are, to the best of Seller's
knowledge, authentic and true and complete in all material respects. No
representation or warranty of Seller contained in this Agreement, and no
document or other paper furnished by or on behalf of Seller or the Company
pursuant to this Agreement or in connection with the Transactions, contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements made in the context in
which made, not false or misleading. To Seller's best knowledge, there is no
fact that Seller has not disclosed to Purchaser that materially adversely
affects, or so far as Seller can now foresee, will materially adversely affect,
the Business or the assets, properties, operations or condition (financial or
otherwise) of the Company or the ability of Seller to perform this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 4.1 Due Incorporation and Qualification. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of Nevada, and has all requisite power and authority to own, lease and
operate its assets, properties and
18
business and to conduct its business as now being and as heretofore conducted.
Purchaser is not qualified to do business as a foreign corporation in any
jurisdiction, and is not doing business in any jurisdiction, where qualification
is required or the failure to qualify would have a material adverse effect on
the business or operations of Purchaser.
SECTION 4.2 Authority to Execute and Perform Agreements. Purchaser
has full authority to execute and deliver this Agreement and the other
Transaction Documents, and the consummation of the Transactions have been duly
authorized by all necessary corporate action of Purchaser. This Agreement has
been duly executed and delivered and is the valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in equity or at law.
The execution and delivery of this Agreement, the consummation of the
Transactions and the performance by Purchaser of this Agreement in accordance
with its terms and conditions will not require the approval, consent of, waiver,
order or authorization of, notification to, or registration, declaration or
filing with, any federal, state, county, local or other governmental or
regulatory body or the approval or consent of any other person.
SECTION 4.3 Subsidiaries and Affiliates. Purchaser does not,
directly or indirectly, own any shares of stock or other equity interest
(including any form of profit participation) in, has not made any investment in,
and does not control or have any proprietary interest in any corporation,
partnership, joint venture or other business association or entity. Schedule 4.3
annexed hereto sets forth the name of each of Purchaser's affiliates (other than
subsidiaries), including joint venture affiliates (incorporated and
unincorporated), and the nature of the affiliation.
19
SECTION 4.4 Officers and Directors. Attached hereto as Schedule 4.4
is a true and correct list of the officers and directors of Purchaser.
SECTION 4.5 Articles of Incorporation and By-Laws. Purchaser has
delivered to Seller true and complete copies of its certificate of incorporation
and by-laws as in effect on the date hereof, which instruments shall not be or
have been amended between the dates thereof and the Closing Date.
SECTION 4.6 Capitalization. (a) The total authorized capital stock
of Purchaser consists of (i) 50,000,000 shares of Common Stock, par value $0.001
per share, of which 15,358,205 shares are issued and outstanding, validly
issued, fully paid and non-assessable, and (ii) 5,000,000 shares of preferred
stock, par value $.001 per share, of which no shares are issued and outstanding.
Except as set forth in Schedule 4.6 annexed hereto, there are no authorized or
outstanding options, warrants, subscription calls, rights (including preemptive
rights and rights to demand registration under the Securities Act), commitments,
conversion rights, plans or other agreements of any character obligating
Purchaser to authorize, issue, deliver, sell or redeem any shares of its capital
stock or any securities convertible into or evidencing the right to purchase any
shares of such stock.
(b) The Exchange Shares to be issued pursuant to this Agreement, in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
SECTION 4.7 Financial Statements.
(a) Annexed hereto as Schedule 4.7 (a) are the audited balance
sheets of the Company as at June 30, 1998 and 1997, and the related combined
statements of operations, shareholders' equity (deficit) and cash flows for the
year ended June 30, 1998 and the period from December 12, 1996 through June 30,
1997, together with the report thereon (qualified with respect
20
to continuation as a going concern) of Xxxxxxx Xxxxxxxxx Xxxxxxxx & Co.
("GHPC"), certified public accountants (collectively, the "Purchaser's Audited
Financials").
(b) Annexed hereto as Schedule 4.7 (b) is the unaudited
balance sheet of Purchaser as at June 30, 1999 ( the "Purchaser Unaudited
Balance Sheet"). Since March 31, 1999, Purchaser has been inactive except for
maintaining its corporate existence, seeking business opportunities and
negotiating this Agreement.
(c) At or prior to the Closing Date, Purchaser will have
furnished Seller with the audited balance sheet of Purchaser as at June 30, 1999
and the related statements of operations, shareholders' equity (deficit) and
cash flow as at and for the year then ended, together with the unqualified
opinion thereon (except with respect to being a "going concern") of GHPC
(collectively, the "Purchaser 1999 Financials)."
(d) The Purchaser Audited Financials and the Purchaser
Unaudited Balance Sheet are, and the Purchaser 1999 Financials will be, (i) in
accordance with the books and records of Purchaser, (ii) correct and complete,
(iii) fairly present the financial position and results of operations of
Purchaser as of the dates indicated, and (iv) prepared in accordance with GAAP
(except that (x) unaudited financial statements may not be in accordance with
GAAP because of the absence of footnotes normally contained therein, and (y)
interim and unaudited year-end financials are subject to normal year-end audit
adjustments which in the aggregate will not have a material adverse effect on
the business properties, assets, operations, liabilities, financial condition or
prospects of Purchaser).
SECTION 4.8 Liabilities. Except as set forth on Schedule 4.8 annexed
hereto, as of the date hereof, Purchaser has no direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known,
or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, including, without limitation,
liabilities on account of taxes, other governmental charges or
21
lawsuits brought ("Liabilities"), other than (i) Liabilities fully and
adequately reflected or reserved against on the Purchaser Unaudited Balance
Sheet, and (ii) Liabilities incurred since June 30, 1999 in the ordinary course
of business. Purchaser has no knowledge of any past or existing circumstance,
condition, event or arrangement that may hereafter give rise to any Liabilities
of the Purchaser, or any successor to its business except in the ordinary course
of business or as otherwise set forth on Schedule 4.8. Purchaser will not
between the date hereof and the Closing Date, without the prior written consent
of Seller, incur or become subject to, or agree to incur or become subject to,
any Liabilities except current liabilities and obligations incurred in the
ordinary course of business or as contemplated by this Agreement or any exhibit
or schedule hereto.
SECTION 4.9 Tax Matters. Purchaser has filed all federal, state,
county and local income tax, franchise tax, real and personal property tax,
payroll tax, occupation tax, sales tax, excise tax, and other tax returns which
they are required to file, the failure to file which would materially adversely
affect the assets, properties, business, operations or financial condition or
prospects of Purchaser, and has paid or provided for all taxes shown on such
returns, and all deficiencies or other assessments of tax, interest or penalties
which have been served on or delivered to Purchaser. There are no claims against
Purchaser with respect to federal, state, county, local, foreign or other taxes.
The federal income tax returns of Purchaser have never been audited by the
Internal Revenue Service. Purchaser knows of no unassessed tax deficiency
proposed or threatened against it. No audit of any tax return of Purchaser is in
progress. There are not in force any extensions of time with respect to the date
on which any tax return was or is due to be filed by Purchaser or any waivers or
agreements by Purchaser for an extension of time for the assessment or payment
of any tax.
SECTION 4.10 Real and Personal Property - Leased to Purchaser.
Purchaser is not a party to or otherwise bound by any lease of real or personal
property.
22
SECTION 4.11 Title. Purchaser does not own any assets other than
cash or cash equivalents.
SECTION 4.12 Intangible Property.
(a) Purchaser does not own any patents, patent applications,
trademark and service xxxx registrations or registration applications, U.S.
copyright registrations or registration applications. Purchaser is not a party
to or otherwise bound by any confidentiality, nondisclosure or license
agreements granting rights under one or more patents, patent applications,
trademark or service registrations and registration applications, U.S. copyright
registrations or registration applications by or to Purchaser.
(b) (i) Purchaser does not infringe a patent, U.S. trademark
registration, U.S. service xxxx registration or copyright of a third party and
(ii) no party has asserted a claim against Purchaser that Purchaser infringes a
patent, trademark, copyright, trade name or trade secret of a third party.
SECTION 4.13 Contracts and Other Agreements. Schedule 4.13 annexed
hereto sets forth, as of the date of this Agreement, all contracts, commitments,
understandings, arrangements and other agreements to which Purchaser is a party
or by or to which any of Purchaser's properties are bound or subject
(collectively also referred to herein as the "Contracts"). There have been
delivered or made available to Seller true and complete copies of all the
Contracts and other agreements set forth on Schedule 4.13 or on any other
Schedule. All of the Contracts are valid, subsisting, in full force and effect
and binding upon the parties thereto in accordance with their terms, and
Purchaser has paid in full or accrued all amounts due thereunder and has
satisfied in full or provided for all of its liabilities and obligations
thereunder, and is not in default in any material respect under any of them,
nor, to Purchaser's knowledge, is any other party to any Contract in default
thereunder, nor, to Purchaser's knowledge, does any condition exist that with
notice or lapse of time or both would constitute a default thereunder that
23
would give the other party thereto the right to terminate such Contract. Except
as separately identified on Schedule 4.13, no approval or consent of any person
is needed in order that the Contracts set forth on Schedule 4.13 or on any other
Schedule continue in full force and effect following the consummation of the
Transactions. Purchaser will not, between the date hereof and the Closing Date,
without Seller's prior written consent, become a party to any Contract or make
or permit the amendment or termination (other than in the ordinary course and
excluding the termination of Contracts by their terms) of any Contract listed on
Schedule 4.13.
SECTION 4.14 Litigation; Actions and Proceedings. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental, administrative or regulatory body or arbitration or mediation
tribunal against or involving Purchaser. There are no actions, suits or claims
or legal, administrative, regulatory, governmental or arbitral proceedings or
investigations (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or threatened against or involving
Purchaser or any of its properties or assets, nor, to the knowledge of
Purchaser, are there any grounds therefor, that individually or in the
aggregate, could have a material adverse effect upon the transactions
contemplated hereby or upon the assets, properties, business, operations, or
condition (financial or otherwise) of Purchaser. There are no actions, suits or
claims or legal, administrative, regulatory, governmental or arbitral
proceedings pending or threatened that would give rise to any right of
indemnification on the part of any director or officer of Purchaser, or the
heirs, executors or administrators of such director or officer, against
Purchaser or any successor to its business.
SECTION 4.15 Operations of Purchaser. (a) Except as set forth on
Schedule 4.15 hereto, since June 30, 1999, Purchaser has not:
(i) amended its Certificate of Incorporation or By-laws or merged
with or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its
24
capital stock or the character of its business;
(ii) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(iii) entered into or amended any employment agreement (other than
employment agreements or at will employment arrangements entered into or amended
in the ordinary course of the Company's business), entered into or amended any
agreement with any labor union or association representing any employee,
adopted, entered into, or amended any employee benefit plan;
(iv) incurred any indebtedness for borrowed money;
(v) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(vi) materially reduced its cash or short term investments or their
equivalent;
(vii) waived any right of material value to its business;
(viii) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted by it;
(ix) materially changed any of its business policies;
(x) approved, granted or paid any wage or salary increase in excess
of $25,000 per annum, or any bonus in excess of $5,000, or any increase in any
other direct or indirect compensation, for or to any of its officers, directors,
employees, consultants, agents, brokers, independent contractors or other
representatives, or any accrual for or commitment or agreement to make or pay
the same;
(xi) made any loan or advance to any of its shareholders, officers,
directors, employees, consultants, agents, brokers, independent contractors or
other representatives (other
25
than travel, entertainment or business expense advances made in the ordinary
course of business), or made any other loan or advance otherwise than
consistently with past practice in the ordinary course of business;
(xii) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, consultants, agents, brokers,
independent contractors or other representatives, other than payments or
commitments to pay persons other than its officers, directors or shareholders
made in the ordinary course of business;
(xiii) entered into any lease (as lessor or lessee); sold, abandoned
or made any other disposition of any of its assets or properties (except in the
ordinary course of business); granted or suffered any lien or other encumbrance
on any of its assets or properties; entered into (except in the ordinary course
of business) or amended any contract or other agreement to which it is a party,
or by or to which it or its assets or properties are bound or subject, or
pursuant to which it agrees to indemnify any party or to refrain from competing
with any party;
(xiv) except in the ordinary course of business and in amounts less
than $10,000 in each case, incurred or assumed any Liability;
(xv) made any acquisition of or entered into any agreement to
acquire all or any part of the assets, properties, capital stock or business of
any other person;
(xvi) failed to pay timely any of its material liabilities in
accordance with their terms or otherwise in the ordinary course of business; and
(xvii) except in the ordinary course of business, entered into any
other material contract or other agreement or other material transaction.
(b) Purchaser will not, between the date hereof and the
Closing, without the prior written consent of Seller, do any of the things
listed in clauses (i) through (xvii) of Section 4.15(i).
SECTION 4.16 Compliance with Laws. Purchaser is not in default under
or in violation of any applicable order, judgment, injunction, award or decree,
of any material
26
applicable federal, state, or local statute, law, ordinance, rule or regulation
including, without limitation, ERISA or the provisions of any franchise or
license, or of any other material requirement of any governmental, regulatory,
administrative or industry body, court or arbitrator applicable to Purchaser.
Purchaser is not in default under or in violation of any provisions of its
certificate of incorporation or its by-laws, or any material instrument,
contract, mortgage, indebtedness, indenture or other agreement to which
Purchaser is a party or by or to which Purchaser or any of its assets or
properties may be bound or subject.
SECTION 4.17 Licenses, Permits and Certificates. Purchaser has all
material licenses, permits, certificates, authorizations, approvals and consents
required by any governmental authority to legally operate and such licenses,
permits, certificates, authorizations, approvals and consents are listed on
Schedule 4.17. No governmental, regulatory or industry permits, consents,
waivers, approvals or authorizations are necessary in connection with the
consummation of the Transactions
SECTION 4.18 No Conflicts. The execution, delivery and performance
of the Transaction Documents by Purchaser and the consummation by Purchaser of
the Transactions will not (a) result in a violation of Purchaser's Certificate
of Incorporation or By-laws, (b) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which
Purchaser is a party, or (c) result in a violation of any law, rule, regulation,
by-law, directive, order, judgment or decree (including federal, state,
provincial and municipal securities laws and regulations) applicable to
Purchaser or by which any of its property or assets is bound or affected, except
to the extent that matters within clauses (b) and (c) immediately above would
not have a material adverse effect on the business properties, assets,
operations, liabilities, financial
27
condition or prospects of Purchaser, or the ability of Purchaser to perform this
Agreement and the other Transaction Documents.
SECTION 4.19 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Except as set forth on Schedule 4.19 attached hereto, Purchaser is
not a party to (a) any union collective bargaining, works council, or similar
agreement or arrangement, (b) any qualified or non-qualified pension,
retirement, severance, profit-sharing, deferred compensation, bonus, stock
option, stock purchase, retainer, consulting, health, welfare or incentive plan
or agreement, oral or written, whether legally binding or not, (c) any plan or
policy providing for employee benefits, including but not limited to vacation,
disability, sick leave, medical, hospitalization, life and other insurance
plans, and related benefits, or (d) any employment agreement. Purchaser is not
presently a party to any "employee leasing" agreement or arrangement, nor does
Purchaser have any liability in respect of any such agreement or arrangement to
which it was, at any time, a party, but which is no longer in effect.
SECTION 4.20 Books and Records. The books of account and other
corporate records of Purchaser made or to be made available to Seller in
connection with the Transactions and the due diligence inquiries made by Seller
in connection herewith, are in all respects complete and correct, have been
maintained in accordance with good business practices and the matters contained
therein are accurately reflected on the financial statements furnished or to be
furnished hereunder by Purchaser to Seller.
SECTION 4.21 Stock Restrictions. Purchaser acknowledges and
understands that the Purchased Shares shall not be registered under either
United States federal or state securities laws or other securities laws of any
other jurisdiction, but are expected to be transferred to Purchaser under and in
reliance upon exemptions from registration provided by Section 4(2) and other
provisions of the Securities Act, as amended and regulations promulgated
thereunder. Purchaser further acknowledges that the certificate(s) evidencing
its ownership of
28
shares in the Company following the acquisition of the Purchased Shares in
accordance herewith, shall contain a legend identical to or substantially to the
effect of the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE
SHARES OR OF AN OPINION OF COUNSEL TO THE CORPORATION THAT
SUCH TRANSFER WILL NOT REQUIRE REGISTRATION OF SUCH SHARES
UNDER THE ACT.
SECTION 4.22 Purchase for Investment. Purchaser: (a) is acquiring
and will acquire the Purchased Shares for its own account for investment only
and not with a view to, or for sale in connection with, a distribution within
the meaning of the Securities Act; (b) has no present intention of selling or
otherwise disposing of any portion of the Purchased Shares; (c) has had access
to all information regarding the Company and its present and prospective
business, assets, liabilities and financial condition and the backgrounds of its
principals, as it has deemed material to making the decision to acquire the
Purchased Shares and has been afforded the opportunity to ask questions of and
receive answers from senior management of the Company concerning present and
prospective business prospects of the Company; (d) has fully considered this
information in valuing the Company and assessing the merits of the Transaction
and is satisfied with the consideration it is receiving hereunder for the
Exchange Shares; (e) has knowledge in business and financial matters and
accordingly is capable of evaluating and has
29
evaluated the merits of the transactions contemplated hereby, and (f) has made
the determination to enter into the Transactions based upon its own independent
evaluation and assessment of the value of the Company and its present and
prospective business prospects and has not relied on, or been induced to enter
into this Agreement on account of, any representation or warranty of any kind or
nature, whether oral or written, express or implied, except for such
representations and warranties of Seller as are specifically set forth in this
Agreement.
SECTION 4.23 Ownership of the Exchange Shares. (a) Purchaser is not
bound by or subject to any voting trust arrangement, proxy, voting agreement,
shareholder agreement, purchase agreement or other agreement or understanding,
except as contemplated hereunder, (i) granting any option, warrant or other
right to purchase all or any of the Exchange Shares to any person, (ii)
restricting the right of Purchaser to sell or convey the Exchange Shares, or
(iii) otherwise restricting any rights of Purchaser with respect to the Exchange
Shares (including restrictions as to the voting or disposition of the Exchange
Shares); (b) Seller has the absolute and unrestricted right, power and capacity
to issue and sell the Exchange Shares, and (c) upon issuance to Seller of the
Exchange Shares hereunder, Seller will acquire good and valid title to the
Exchange Shares, free and clear of any liens, charges or encumbrances except as
contemplated hereunder.
SECTION 4.24 Finders and Investment Bankers. Purchaser has not
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
SECTION 4.25 Absence of Certain Changes. Since June 30, 1999, there
has been no material adverse change in the condition, financial or otherwise, of
Purchaser, other than changes occurring in the ordinary course of business which
changes have not, individually or in the aggregate, had a material adverse
effect on the business properties, assets, operations,
30
liabilities, financial condition or prospects of Purchaser and other than as set
forth in Schedule 4.15 annexed hereto.
SECTION 4.26 Insurance. Purchaser does not maintain any insurance.
SECTION 4.27 Full Disclosure. All documents and other papers
delivered by or on behalf of Purchaser in connection with this Agreement and the
Transactions are, to the best of Purchaser's knowledge, authentic and true and
complete in all material respects. No representation or warranty of Purchaser
contained in this Agreement, and no document or other paper furnished by or on
behalf of Purchaser pursuant to this Agreement or in connection with the
Transactions, contains an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements made in the context in which made, not false or misleading. To
Purchaser's best knowledge, there is no fact that Purchaser has not disclosed to
Seller that materially adversely affects, or so far as Purchaser can now
foresee, will materially adversely affect, the assets, properties, business,
operations or condition (financial or otherwise) of Purchaser or the ability of
Purchaser to perform this Agreement.
ARTICLE 5.
COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 5.1 Conduct of Business. (a) Between the date hereof and the
Closing Date, except as otherwise contemplated in this Agreement, Seller shall
cause the Company to conduct its business in the ordinary and usual course, and
the Seller shall cause the Company to, without the prior consent of Purchaser,
change in any material respect any business policy or practice or take any
action which would violate Section 3.17 hereof.
(b) Between the date hereof and the Closing Date, except as
otherwise contemplated in this Agreement, Purchaser shall conduct its business
in the ordinary and usual
31
course, and shall not, without the prior consent of Seller, change in any
material respect any business policy or practice or take any action which would
violate Section 4.15 hereof.
SECTION 5.2 Access and Investigation. (a) Between the date hereof
and the Closing Date, Seller will afford, and will cause the Company to afford,
Purchaser and its directors, officers, employees, agents, consultants, advisors,
or other representatives, including legal counsel, accountants, and financial
advisors (collectively, "Representatives") full and free access, during normal
business hours and at such other reasonable times as otherwise may be required
under the circumstances, to the Company's personnel, properties, contracts,
books, records and other existing documents and data as Purchaser may reasonably
request.
(b) Between the date hereof and the Closing Date, Purchaser will
afford Seller and its Representatives full and free access, during normal
business hours and at such other reasonable times as otherwise may be required
under the circumstances, to Purchaser's personnel, properties, contracts, books,
records and other existing documents and data as Seller may reasonably request.
SECTION 5.3 Litigation. Between the date hereof and the Closing
Date, Seller and Purchaser will promptly notify each other of any lawsuits,
claims, proceedings or investigations which are threatened or commenced against
either, or against any officer, employee, agent, consultant or director thereof,
which may relate to, or affect the Business of the Company, the Purchaser, their
respective assets, this Agreement or the Transactions.
SECTION 5.4 Actions with Respect to Closing. Each of the parties
hereto agrees to use its best efforts to bring about the satisfaction of the
conditions precedent to the obligation of the other party hereto to effect the
Closing (to the extent that such satisfaction is dependent on the actions on the
part of the initial party of commission or omission) and to cause its covenants
and agreements contained in this Agreement to be satisfied and performed
hereunder.
32
SECTION 5.5 Public Statement. Neither party hereto shall, without
the prior consent of the other, make any public statement, announcement or
release to trade publications or to the press, or make any statements to any
competitor, customer or any third party, with respect to this Agreement except
to the extent that either party is advised by its counsel that a public
statement is required by law and then only upon prior notice to the other party.
SECTION 5.6 Consent to Jurisdiction and Service of Process. Any
legal action, suit or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby shall be instituted in any state or federal
court of competent jurisdiction located in Xxx Xxxx Xxxxxx, Xxxxx xx Xxx Xxxx,
Xxxxxx Xxxxxx, and each party agrees not to assert, by way of motion, as a
defense, or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of such court, that its property
is exempt or immune from attachment or execution, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court. Each party further irrevocably
submits to the exclusive jurisdiction of any such court in any such action, suit
or proceeding. Purchaser hereby appoints Xxxxx Xxxx LLP (Attn: Xxxxxx X. Xxxxx,
Esq.), at its offices at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and Seller
hereby appoints Gusrae, Xxxxxx & Xxxxx (Attn.: Xxxx Xxxxxxxx, Esq.), at its
offices at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 (or at each such person's or
entity's office at such other address as such person or entity hereafter
furnishes to the other parties), as such party's authorized agent to accept and
acknowledge on such party's behalf service of any and all process that may be
served in any such action, suit or proceeding. Any and all service of process
and any other notice in any such action, suit or proceeding shall be effective
against any party if given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided
33
SECTION 5.7 Expenses. Each of the parties to this Agreement shall,
except as otherwise specifically provided herein, bear his and its respective
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby, including without
limitation, all fees and expenses of agents, representatives, counsel and
accountants.
SECTION 5.8 Purchaser 1999 Financials. Purchaser hereby undertakes
and agrees to cause to be prepared, at its sole cost and expense, and deliver to
Seller as soon as reasonably practicable after the date hereof, but in any
event, not later than three (3) business days prior to the Closing, the
Purchaser 1999 Financials as provided in Section 4.7 (c) hereof.
SECTION 5.9 Closing Date Balance Sheet; Closing Date Net Worth.
(a) As soon as practicable following the Closing, but in any event
within ninety (90) days after the Closing, Seller shall deliver to Purchaser the
audited balance sheet of the Company as of the Closing Date (the "Closing Date
Balance Sheet"), together with Seller's calculation of the net worth (i.e.,
total assets, net of allowances for doubtful accounts, accumulated depreciation
and loans receivable from employees, minus total liabilities) of the Company as
of the Closing Date as derived from the Closing Date Balance Sheet (the "Closing
Date Net Worth"). The Closing Date Balance Sheet (i) shall be accompanied by the
unqualified report thereon of Lilly, (ii) shall be in accordance with the books
and records of the Company and (iii) shall present fairly the financial position
of the Company as at the Closing Date in accordance with GAAP, with the
application of GAAP to be consistent with its application in the financial
statements of the Company furnished by Seller to Purchaser pursuant to this
Agreement
(b) The Closing Date Net Worth shall be determined from the Closing
Date Balance sheet and shall be as proposed by Seller unless Purchaser within
fifteen (15) days after receipt of the Closing Date Balance Sheet delivers to
Seller a statement signed by Purchaser proposing adjustments to the Closing Date
Net Worth. If Lilly and Purchaser's accountants,
34
GHPC, are unable to resolve the dispute regarding the Closing Date Net Worth
within ten (10) days after Seller receives the written notice of proposed
adjustments, Seller and Purchaser shall, as soon as reasonably possible
thereafter, employ a firm of independent public accountants that is mutually
acceptable to Seller and Purchaser, to examine the items about which a dispute
exists. The determination of the disputed items by such firm shall be binding
upon Seller and Purchaser. The cost of employing such firm shall be prorated
between Seller and Purchaser in proportion to the amounts in dispute resolved
against each of them.
ARTICLE 6.
CONDITIONS TO PURCHASER OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Purchaser to waive any one or more of such conditions:
SECTION 6.1 Representations and Warranties of Seller. The
representations and warranties of Seller contained in this Agreement, including
the Schedules hereto, and in the certificates to be delivered to Purchaser
pursuant hereto and in connection herewith shall be true and correct in all
material respects (except to the extent any such representations and warranties
is already qualified as to materiality in Article 3, in which case, such
representations and warranties shall be true and correct without further
qualifications as to materiality under this Section 6.1) on the date hereof and
on the Closing Date as though such representations and warranties were made on
the Closing Date, except for representations and warranties made as of a
specific date which shall be true and correct on the Closing Date as of such
specific date.
35
SECTION 6.2 Performance of this Agreement. Seller shall have duly
performed or complied in all material respects with all of the obligations to be
performed or complied with by him under the terms of this Agreement on or prior
to the Closing Date.
SECTION 6.3 Certificate of Seller. Purchaser shall have received a
certificate signed by Seller, dated as of the Closing Date and subject to no
qualification, certifying that the conditions set forth in Sections 6.1 and 6.2
hereof have been fully satisfied. Such certificate shall be deemed
representations and warranties of Seller under this Agreement.
SECTION 6.4 No Material Adverse Change. Purchaser shall have
received a certificate signed by Seller to the effect that as of the Closing
Date there has been no material adverse change in the financial condition,
results of operations, business or prospects of the Company since May 31, 1999
or any material adverse change in the nature of the Business, the manner of
conducting the Business or the prospects of the Business since such date, except
as for the execution, delivery and performance of this Agreement and the other
Transaction Documents.
SECTION 6.5 Satisfactory Business Review. Purchaser shall have
satisfied itself, after receipt and consideration of the Schedules and after
Purchaser and its Representatives have completed the review of the Business and
the Company contemplated by this Agreement, that none of the information
revealed thereby or in the Company Audited Financials or the Company Interim
Balance Sheet has resulted in, or in the opinion of Purchaser, may result in, a
material adverse change in the assets, properties, business or condition
(financial or otherwise) of the Company.
SECTION 6.6 Governmental Permits and Approvals. All permits,
including any environmental or regulatory consents or permits required for the
lawful consummation of the Closing, shall have been obtained.
36
SECTION 6.7 Third Party Consents. All consents, permits and
approvals from parties to contracts or other agreements with the Company or with
Seller that may be required in connection with the performance by Seller of his
obligations under this Agreement or the continuance of such contracts or other
agreements after the Closing shall have been obtained.
SECTION 6.8 Voting Agreement. Seller shall have executed and
delivered to Purchaser a Voting Agreement (the "Voting Agreement") in the form
annexed hereto as Exhibit A, among Purchaser, Seller, Sigma Limited S.A.
("Sigma") Xxx Xxxx ("Xxxx") and Corporate Communications Network, Inc. ("CNN").
SECTION 6.9 Employment Agreement. Seller shall have executed and
delivered an Employment Agreement (the "Xxxxx Employment Agreement") in the form
annexed as Exhibit B.
SECTION 6.10 Charter Documents. Seller shall have delivered to
Purchaser copies of the Company's Certificate of Incorporation, certified as
true and complete as of a recent date by the appropriate governmental authority
of the Company's jurisdiction of incorporation, and certified as true and
complete as of the Closing Date by Seller.
SECTION 6.11 By-Laws. Seller shall have delivered to Purchaser a
copy of the Company By-Laws as in effect on the date of the Closing certified by
Seller.
SECTION 6.12 Good Standing. Seller shall have delivered to Purchaser
certificates of good standing, existence or its equivalent with respect to the
Company, certified as of a recent date by the appropriate governmental authority
of the Company's jurisdiction of incorporation, and each other jurisdiction in
which the failure to so qualify and be in good standing would have a material
adverse effect on the Company and its Business.
37
SECTION 6.13 Litigation. At the Closing Date no suit, action or
other proceeding shall be pending or threatened before any court or governmental
agency in which it is sought (i) to restrain, prohibit, invalidate or set aside
(in whole or in part) the Transactions contemplated by this Agreement, (ii) to
affect the right of Seller or the Company to operate or control, after the
Closing Date, its respective assets, properties and businesses (in whole or in
part) or (iii) to obtain damages or a discovery order in connection with this
Agreement or the consummation of the Transactions contemplated hereby. On or
before the Closing Date, the pending action brought by the Securities Exchange
Commission against Members Service Corporation, the Company, Seller, et. al.
shall have been settled or otherwise terminated with prejudice with respect to
Seller and the Company and, as a result thereof, neither Seller nor the Company
shall be suspended, barred or prohibited from engaging in the securities
industry or acting as a investment advisor for any period of time.
SECTION 6.14 Consulting Agreements. Purchaser shall have entered
into a consulting agreement with each of Sigma and Corporate Communications
Network Inc. substantially in the form of Exhibits C and D, respectively,
attached hereto.
SECTION 6.15 Company Profit Sharing Plan. On or prior to the closing
Date, Seller shall have caused the Company to adopt an Adoption Agreement for
the Datair Mass-Submitter Prototype Non-Standardized Profit Sharing Plan and
Trust as a complete restatement of the Company Profit Sharing Plan and Seller
shall have provided to Purchaser a true and correct copy of such restatement.
SECTION 6.16 Company Quarterly Financials. Seller shall have
provided Purchaser with the Company Quarterly Financials.
ARTICLE 7.
CONDITIONS TO SELLER OBLIGATIONS
38
The obligations of Seller to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Seller to waive any one or more of such conditions:
SECTION 7.1 Representations and Warranties of Purchaser. The
representations and warranties of Purchaser contained in this Agreement,
including the Schedules hereto, and in the certificates to be delivered to
Seller pursuant hereto and in connection herewith shall be true and correct in
all material respects (except to the extent any such representations and
warranties is already qualified as to materiality in Article 4, in which case,
such representations and warranties shall be true and correct without further
qualifications as to materiality under this Section 7.1) on the date hereof and
on the Closing Date as though such representations and warranties were made on
the Closing Date except for representation and warranties made as of a specific
date which shall be the and correct on the Closing Date as of such specific
date..
SECTION 7.2 Performance of this Agreement. Purchaser shall have duly
performed or complied in all material respects with all of the obligations to be
performed or complied with by them under the terms of this Agreement on or prior
to the Closing Date.
SECTION 7.3 Certificate of Purchaser. Seller shall have received a
certificate signed by Purchaser, dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 7.1 and 7.2
hereof have been fully satisfied. Such certificate shall be deemed
representations and warranties of Purchaser under this Agreement.
SECTION 7.4 No Material Adverse Change. Seller shall have received a
certificate, signed by a duly authorized officer of Purchaser, to the effect
that as of the Closing Date there has been no material adverse change in the
financial condition, results of operations, business or prospects of Purchaser
since June 30, 1999 or any material adverse change in the nature of Purchaser's
business, the manner of conducting such business or the prospects of the
39
business since such date, except as associated with the execution, delivery and
performance of this Agreement and the other Transaction Documents.
SECTION 7.5 Satisfactory Business Review. Seller shall have
satisfied himself, after Seller and his Representatives have completed the
review of the Purchaser's business contemplated by this Agreement, that none of
the information revealed thereby has resulted in, or in the opinion of Seller,
may result in, a material adverse change in the assets, properties, business or
condition (financial or otherwise) of Purchaser.
SECTION 7.6 Governmental Permits and Approvals. All permits,
including any environmental or regulatory consents or permits required for the
lawful consummation of the Closing, shall have been obtained.
SECTION 7.7 Third Party Consents. All consents, permits and
approvals from parties to contracts or other agreements with Purchaser that may
be required in connection with the performance by Purchaser of their respective
obligations under this Agreement or the continuance of such contracts or other
agreements after the Closing shall have been obtained.
SECTION 7.8 Cancellation of Certain Outstanding Shares. On or before
the Closing Date Purchase shall have delivered to Seller evidence reasonably
satisfactory to Seller that an aggregate of 7,850,000 shares of the Purchaser
Common Stock issued and outstanding as of the date hereof has been canceled.
SECTION 7.9 Registration Rights Agreement. Purchaser shall have
executed and delivered a Registration Rights Agreement (the "Registration Rights
Agreement") in substantially the form annexed as Exhibit E.
SECTION 7.10 Financing. Purchaser shall have cash reserves of not
less than $3,000,000, and total assets exceeding total liabilities by at least
$3,000,000. Purchaser
40
shall have delivered to Seller a certificate, signed by a duly authorized
officer of Purchaser, confirming such cash reserves and surplus, and such other
documents or records as Seller may reasonably request to establish compliance
with first sentence of this Section 7.10.
SECTION 7.11 Certified Resolutions. Purchaser shall have delivered
to Seller copies of board resolutions approving and adopting this Agreement and
the other Transaction Documents and authorizing the Transactions, certified as
true and correct by the Secretary of Purchaser.
SECTION 7.12 Charter Documents. Purchaser shall have delivered to
Seller copies of its Certificate of Incorporation, certified as true and
complete as of a recent date by the appropriate governmental authority of
Purchaser's jurisdiction of incorporation, and certified as true and complete as
of the Closing Date by the Secretary of Purchaser.
SECTION 7.13 By-Laws. Purchaser shall have delivered to Seller a
copy of the By-Laws certified by the secretary of Purchaser as of the Closing
Date to be true and correct and in full force and effect as of the Closing Date.
SECTION 7.14 Good Standing. Purchaser shall have delivered to Seller
certificates of good standing, existence or its equivalent with respect to
Purchaser, certified as of a recent date by the appropriate governmental
authority of Purchaser's jurisdiction of incorporation, and each other
jurisdiction in which the failure to so qualify and be in good standing would
have a material adverse effect on Purchaser and its business.
SECTION 7.15 Purchaser Deliveries. Purchaser shall have delivered to
Seller all shareholder records of Purchaser and a true and complete copy of
Purchaser's corporate minute books.
SECTION 7.16 Litigation. At the Closing Date no suit, action or
other proceeding shall be pending or threatened before any court or governmental
agency in which it is
41
sought (i) to restrain, prohibit, invalidate or set aside (in whole or in part)
the Transactions contemplated by this Agreement, (ii) to affect the right of
Purchaser to operate or control, after the Closing Date, its assets, properties
and businesses (in whole or in part) or (iii) to obtain damages or a discovery
order in connection with this Agreement or the consummation of the Transactions
contemplated hereby.
SECTION 7.17 Voting Agreement. Purchaser, Sigma, Rice and CCN shall
have executed and delivered the Voting Agreement to Seller.
SECTION 7.18 Employment Agreement. Purchaser and the Company shall
have executed and delivered the Xxxxx Employment Agreement to Seller.
ARTICLE 8.
INDEMNIFICATION; SURVIVAL
SECTION 8.1 Obligation of Seller to Indemnify. (c) Seller agrees to
indemnify, defend and hold harmless Purchaser and its stockholders as of the
date of this Agreement and their respective directors, officers, heirs, legal
representatives, successors and assigns, from and against all losses,
liabilities, damages, deficiencies, actions, suits, proceedings, claims,
demands, orders, assessments, amounts paid in settlement, fines, and reasonable
costs and expenses (including interest, penalties and reasonable attorneys' fees
and disbursements and reasonable investigative costs) (collectively, "Losses")
based upon, arising out of or otherwise in respect of (i) any breach in any of
the representations and warranties of Seller set forth in Article 3 hereof, (ii)
any breach in any of the representations and warranties of Seller set forth in
any other provision hereof, and (iii) any breach or non-fulfillment of any of
the covenants or agreements of Seller contained in this Agreement.
42
SECTION 8.2 Obligation of Purchaser to Indemnify. Purchaser agrees
to indemnify, defend and hold harmless Seller, and his heirs, legal
representatives, successors and assigns, from and against any Losses based upon,
arising out of or otherwise in respect of (i) any breach in any of the
representations and warranties of Purchaser set forth in Article 4 hereof, (ii)
any breach in any of the representations and warranties of Purchaser set forth
in any other provision hereof and (iii) any breach or nonfulfillment of any
covenant or agreement of Purchaser contained in this Agreement.
SECTION 8.3 Claims Notice. Each party hereto (an "Indemnified
Party") shall, promptly upon becoming aware of any event or circumstance (an
"Indemnifiable Event") which, in his or its reasonable judgment, may result in a
Loss for which the Indemnified Party could assert a right of indemnification
against any other party (or parties) hereto (the "Indemnifying Party") under
this Article 8, give notice thereof (the "Claims Notice") to the Indemnifying
Party (but the obligations of the Indemnifying Party under this Article 8 shall
not be impaired by the Indemnified Party's failure to give such notice, except
to the extent that said failure actually prejudices the rights of the
Indemnifying Party). The Claims Notice shall describe the Indemnifiable Event in
reasonable detail, shall indicate whether the Indemnifiable Event involves a
"Third Party Claim" (defined below), and shall indicate the amount (estimated,
if necessary) of the Loss that has been or may be suffered by the Indemnified
Party. In such event, the Indemnifying Party shall, within fifteen (15) business
days after receipt of the Claims Notice, give notice to the Indemnified Party of
whether he or it intends to dispute the claim described in the Claims Notice
(the "Response Notice"). If the Indemnifying Party timely disputes the Claims
Notice as provided above, the Indemnified Party shall, for a period of not more
than fifteen (15) business days after receipt of the Response Notice (or less,
if the nature of the Indemnifiable Event so requires), seek out a negotiated
settlement of the dispute with the Indemnifying Party and shall refrain during
that period from commencing any judicial proceeding or other action to enforce
this Article 8. If, despite their good faith negotiations, the
43
parties are unable to resolve the dispute within the aforesaid period (or if the
Indemnifying Party fails to timely give the Response Notice), the Indemnified
Party shall be free to exercise all rights and remedies available to him or it
hereunder, at law in equity or otherwise to enforce his or its rights under this
Article 8. As used herein, "Third Party Claim" means any demand, claim or
circumstance which, with the lapse of time or otherwise, would give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation against the Indemnified Party by any other person.
SECTION 8.4 Opportunity to Defend Against Third Party Claims. If the
Claims Notice relates to a Third Party Claim, the Indemnifying Party may elect
to compromise or defend, at its own expense and by its own counsel, such Third
Party Claim. If the Indemnifying Party elects to compromise or defend such Third
Party Claim, it shall within 30 business days (or sooner, if the nature of the
Third Party Claim so requires) after his or its receipt of the Claims Notice,
notify the Indemnified Party of its intent to do so, and the Indemnified Party
shall cooperate, at the expense of the Indemnifying Party, in the compromise of,
or defense against, such Third Party Claim. If the Indemnifying Party elects not
to compromise or defend such Third Party claim, fails to notify the Indemnified
Party of its election as herein provided or contests its obligation to indemnify
under this Agreement, the Indemnified Party may pay, compromise or defend such
Third Party Claim. Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnified Party may settle or compromise any claim over the objection
of the other, provided, however, that consent to settlement or compromise shall
not be unreasonably withheld. In any event, the Indemnified Party and the
Indemnifying Party may participate, at their own expense, in the defense of such
Third Party Claim. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense. The Indemnifying Party shall be subrogated to all rights and
44
remedies of the Indemnified Party to the extent of any indemnification provided
by the Indemnifying Party to the Indemnified Party.
SECTION 8.5 Limitation on Indemnification. Indemnified Parties
hereunder shall be entitled to receive indemnification under this Article 8 only
if and to the extent the aggregate amount of indemnification due to such
Indemnified Parties hereunder exceeds the lesser of $150,000 or the Closing Date
Net Worth in the case where Purchaser is the Indemnified Party, and $20,000 in
the case where Seller is the Indemnified Party. The maximum aggregate liability
of Seller on the one hand, and Purchaser on the other hand, shall be $ 350,000.
SECTION 8.6 Survival. Notwithstanding the investigations by the
parties hereto of each other's affairs, and notwithstanding any knowledge of
facts determined or determinable by such parties pursuant to such investigation,
each of Seller and Purchaser shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement. The representations and warranties of the parties
contained herein shall survive the Closing (i) to the extent contained in
Section 3.24, 3.25, 3.26, 4.21 and 4.22 and 4.23 hereof, for the duration of the
applicable statute of limitations, (ii) to the extent relating to any other
matter, for twelve (12) months following the Closing. A claim for
indemnification hereunder must be asserted by a party seeking indemnification
within the respective period of survival.
SECTION 8.7 Indemnification Exclusive Remedy. The parties hereto
acknowledge and confirm that, except in the event of fraud, the indemnification
procedures described in this Article 8 shall be the sole and exclusive remedies
available to them for any breach or non-fulfillment of the representations,
warranties, covenants, agreements and other provisions of this Agreement.
45
ARTICLE 9.
TERMINATION
SECTION 9.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) By mutual consent of Seller and Purchaser; or
(b) By Seller if any of the conditions set forth in Section 7 hereof
shall have become incapable of fulfillment, and shall not have been waived by
Seller; or
(c) By Purchaser if any of the conditions set forth in Section 6
hereof shall have become incapable of fulfillment, and shall not have been
waived by Buyer; or
(d) By Purchaser or Seller if the Closing has not occurred on or
before September 30, 1999.
SECTION 9.2 Effects of Termination. If this Agreement is terminated
and the transactions contemplated hereby are not consummated as described above,
this Agreement shall become void and of no further force and effect, except for
the provisions of Section 5.7 relating to expenses.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.1 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or
46
sent by facsimile transmission or, if mailed, three (3) days after the date of
deposit in the mails, as follows:
(i) if to Seller, to:
Xxxxxxx X. Xxxxx
000 Xxx Xxxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxx Xxxxxxxx, Esq.
Gusrae, Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No. (000) 000-0000
(ii) if to Purchaser, to:
Vacation Emporium Corporation
00 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No. (000) 000-0000
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
SECTION 10.2 Entire Agreement. This Agreement (including the
schedules and exhibits) and the agreements referred to herein and/or executed in
connection with the consummation of the Transactions contemplated herein contain
the entire agreement among
47
the parties with respect to the exchange of the Purchased Shares for the
Exchange Shares and the related transactions, and supersede all prior
agreements, written or oral, with respect thereto.
SECTION 10.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the parties
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof. Nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
inaccuracy or breach is based may also be the subject of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy
or breach.
SECTION 10.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, applicable to
agreements made and to be performed entirely within such State (without giving
effect to conflicts of law principles thereof).
SECTION 10.5 Binding Effect; No Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal representatives. Nothing
contained herein is intended or
48
shall be construed as creating third party beneficiaries to this Agreement. This
Agreement is not assignable except by operation of law.
SECTION 10.6 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
SECTION 10.7 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
SECTION 10.8 Exhibits and Schedules. The Exhibits and Schedules are
a part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require.
SECTION 10.9 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
VACATION EMPORIUM CORPORATION
By: /s/ Xxx Xxxx
----------------------
/s/ Xxxxxxx X. Xxxxx
--------------------------
Xxxxxxx X. Xxxxx
49
TABLE OF CONTENTS
ARTICLE 1. Exchange of Purchased Shares.....................................2
Section 1.1. Sale of Purchased Shares.................................2
Section 1.2 Purchase Price............................................2
Section 1.3 Delivery of Shares........................................2
Section 1.4 Supplemental Action.......................................2
ARTICLE 2. Closing; Closing Date............................................3
ARTICLE 3. Representations and Warranties of Seller.........................3
Section 3.1 Due Incorporation and Qualification.......................3
Section 3.2 Authority to Execute and Perform Agreements...............3
Section 3.3 Subsidiaries and Affiliates...............................4
Section 3.4 Articles of Incorporation and By-Laws.....................4
Section 3.5 Capitalization............................................4
Section 3.6 Officers and Directors....................................5
Section 3.7 Financial Statements; Financial Matters...................5
Section 3.8 Liabilities...............................................6
Section 3.9 Absence of Certain Changes................................7
Section 3.10 Tax Matters..............................................7
Section 3.11 Real and Personal Property - Leased to the Company.......7
Section 3.12 Title....................................................8
Section 3.13 Intangible Property......................................8
Section 3.14 Contracts and Other Agreements...........................9
Section 3.15 Insurance...............................................10
Section 3.16 Litigation; Actions and Proceedings.....................10
Section 3.17 Operations of the Company...............................11
Section 3.18 Compliance with Laws....................................13
Section 3.19 Licenses, Permits and Certificates......................13
Section 3.20 No Conflicts............................................14
Section 3.21 Labor Agreements, Employee Benefit Plans, and Employment
Agreements......................................................14
Section 3.22 Books and Records.......................................15
Section 3.23 Accounts Receivable.....................................15
Section 3.24 Stock Restrictions......................................15
Section 3.25 Purchase for Investment, Etc............................16
Section 3.26 Ownership of the Purchased Shares.......................17
Section 3.27 Finders and Investment Bankers..........................18
Section 3.28 Full Disclosure.........................................18
ARTICLE 4. Representations and Warranties of Purchaser.....................18
Section 4.1 Due Incorporation and Qualification......................18
Section 4.2 Authority to Execute and Perform Agreements..............19
Section 4.3 Subsidiaries and Affiliates..............................19
Section 4.4 Officers and Directors...................................20
Section 4.5 Articles of Incorporation and By-Laws....................20
Section 4.6 Capitalization...........................................20
Section 4.7 Financial Statements.....................................20
Section 4.8 Liabilities..............................................21
Section 4.9 Tax Matters..............................................22
Section 4.10 Real and Personal Property - Leased to Purchaser........22
Section 4.11 Title...................................................23
Section 4.12 Intangible Property.....................................23
Section 4.13 Contracts and Other Agreements..........................23
Section 4.14 Litigation; Actions and Proceedings.....................24
Section 4.15 Operations of Purchaser.................................24
Section 4.16 Compliance with Laws....................................26
Section 4.17 Licenses, Permits and Certificates......................27
Section 4.18 No Conflicts............................................27
Section 4.19 Labor Agreements, Employee Benefit Plans, and Employment
Agreements......................................................28
Section 4.20 Books and Records.......................................28
Section 4.21 Stock Restrictions......................................28
Section 4.22 Purchase for Investment.................................29
Section 4.23 Ownership of the Exchange Shares........................30
Section 4.24 Finders and Investment Bankers..........................30
Section 4.25 Absence of Certain Changes..............................30
Section 4.26 Insurance...............................................31
Section 4.27 Full Disclosure.........................................31
ARTICLE 5. Covenants and Agreements of the Parties.........................31
Section 5.1 Conduct of Business......................................31
Section 5.2 Access and Investigation.................................32
Section 5.3 Litigation...............................................32
Section 5.4 Actions with Respect to Closing..........................32
Section 5.5 Public Statement.........................................33
Section 5.6 Consent to Jurisdiction and Service of Process...........33
Section 5.7 Expenses.................................................34
Section 5.8 Purchaser 1999 Financials................................34
Section 5.9 Closing Date Balance Sheet; Closing Date Net Worth.......34
ARTICLE 6. Conditions To Purchaser Obligations.............................35
Section 6.1 Representations and Warranties of Seller.................35
Section 6.2 Performance of this Agreement............................36
Section 6.3 Certificate of Seller....................................36
Section 6.4 No Material Adverse Change...............................36
Section 6.5 Satisfactory Business Review.............................36
Section 6.6 Governmental Permits and Approvals.......................36
Section 6.7 Third Party Consents.....................................37
Section 6.8 Voting Agreement.........................................37
Section 6.9 Employment Agreement.....................................37
Section 6.10 Charter Documents.......................................37
Section 6.11 By-Laws.................................................37
Section 6.12 Good Standing...........................................37
Section 6.13 Litigation..............................................38
Section 6.14 Consulting Agreements...................................38
Section 6.15 Company Profit Sharing Plan.............................38
2
Section 6.16 Company Quarterly Financials.............................38
ARTICLE 7. Conditions To Seller Obligations................................38
Section 7.1 Representations and Warranties of Purchaser..............39
Section 7.2 Performance of this Agreement............................39
Section 7.3 Certificate of Purchaser.................................39
Section 7.4 No Material Adverse Change...............................39
Section 7.5 Satisfactory Business Review.............................40
Section 7.6 Governmental Permits and Approvals.......................40
Section 7.7 Third Party Consents.....................................40
Section 7.8 Cancellation of Certain Outstanding Shares...............40
Section 7.9 Registration Rights Agreement............................40
Section 7.10 Financing...............................................40
Section 7.11 Certified Resolutions...................................41
Section 7.12 Charter Documents.......................................41
Section 7.13 By-Laws.................................................41
Section 7.14 Good Standing...........................................41
Section 7.15 Purchaser Deliveries...................................41
Section 7.16 Litigation..............................................41
Section 7.17 Voting Agreement........................................42
Section 7.18 Employment Agreement....................................42
ARTICLE 8. Indemnification; Survival.......................................42
Section 8.1 Obligation of Seller to Indemnify........................42
Section 8.2 Obligation of Purchaser to Indemnify.....................43
Section 8.3 Claims Notice............................................43
Section 8.4 Opportunity to Defend Against Third Party Claims.........44
Section 8.5 Limitation on Indemnification............................45
Section 8.6 Survival.................................................45
Section 8.7 Indemnification Exclusive Remedy.........................45
ARTICLE 9. Termination.....................................................46
Section 9.1 Termination..............................................46
Section 9.2 Effects of Termination...................................46
ARTICLE 10. Miscellaneous..................................................46
Section 10.1 Notices.................................................46
Section 10.2 Entire Agreement........................................47
Section 10.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies........................................48
Section 10.4 Governing Law...........................................48
Section 10.5 Binding Effect; No Assignment; No Third Party
Beneficiaries ..................................................48
Section 10.6 Variations in Pronouns..................................49
Section 10.7 Counterparts............................................49
Section 10.8 Exhibits and Schedules..................................49
Section 10.9 Headings................................................49
3
SCHEDULE 4.3
SUBSIDIARIES AND AFFILIATES
None, except Xxx Xxxx in his capacity as Director and Shareholder or any
Purchaser who owns 10% or more of Purchaser's outstanding common stock.
4
SCHEDULE 4.4
OFFICERS AND DIRECTORS
Xxx Xxxx is the sole Director and the President of Purchaser. The only other
officer of Purchaser is Xxxx Crosse, the Secretary.
5
SCHEDULE 4.6
CAPITALIZATION
Purchaser has granted options to purchase shares of its common stock to the
following persons in the amount indicated opposite their respective names.
NUMBER OF SHARES
NAME SUBJECT TO OPTION
---- -----------------
Xxxxx XxXxxxxx 351,282
Xxxxx Xxxxxxx 526,923
Purchaser has entered into escrow agreements with the following individuals,
true and correct copies of which have been provided to Seller, that contain
provisions that obligate the Purchaser to repurchase certain shares of its
common stock on the terms and conditions set forth therein: Xxxxxxx Xxxxx,
Xxxxxx Xxxxxxxxxx, Xxxxx Xxxx, Xxxxxx X. Xxxxx, Xxxx Xxxxx, Xxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxx Xxxxxx, Xxxxx XxXxxxxx and Xxxxx Xxxxxxx.
6
SCHEDULE 4.7(a)
PURCHASER'S AUDITED FINANCIALS
7
SCHEDULE 4.7(b)
PURCHASER'S UNAUDITED BALANCE SHEET
8
SCHEDULE 4.8
LIABILITIES
None
9
SCHEDULE 4.13
CONTRACTS AND OTHER AGREEMENTS
Purchaser is a party to an Employment Agreement, Subscription Agreement and
Escrow Agreement with each of Xxxxx XxXxxxxx and Xxxxx Xxxxxxx. Purchaser is
also a party to a Subscription Agreement and a Escrow Agreement with each of the
parties listed in Schedule 4.6.
10
SCHEDULE 4.15
OPERATIONS OF PURCHASER
Since June 30, 1999, Purchaser has done the following:
a) Granted stock options to the individuals set forth in Schedule 4.6 and
sold an aggregate of 1,258,205 shares of its common stock to the persons
listed in Schedule 4.6
b) Entered into Employment Agreements with each of Xxxxx XxXxxxxx and Xxxxx
Xxxxxxx.
c) Used $10,000 in cash to pay legal fees in connection with the
Transactions.
d) Entered into Escrow Agreements with each of the persons listed in Schedule
4.6.
11
SCHEDULE 4.17
LICENSES, PERMITS AND CERTIFICATES
None
12
SCHEDULE 4.19
LABOR AGREEMENTS, EMPLOYEE BENEFIT PLANS
AND EMPLOYMENT AGREEMENT
Purchaser is a party to an Employment Agreement with each of Xxxxx XxXxxxxx and
Xxxxx Xxxxxxx.
13