EXHIBIT 2.1
REORGANIZATION AGREEMENT
This REORGANIZATION AGREEMENT ("Agreement") is made and entered into
this 27th day of March, 2002, by and among Harmony Trading Corp., a New York
corporation with its principal executive offices at 000 Xx. Xxxxxxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 ("Acquiror"), Group Intercapital Inc., a
Canadian corporation with its principal executive offices at 000 Xx. Xxxxxxxxx,
Xxxxx 000, Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 ("GIC"), Nuvo Way Inc., a Canadian
corporation with its principal executive offices at 0000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 ("Acquiree"), Xxxxxxx Xxxxx, an individual with
an address at 0 Xxxxx Xxxxxx, Xxxxxx-Xxxxxx, Xxxxxx, Xxxxxx X0X 0X0 ("HB") and
the shareholders of Acquiree listed on Schedule 2.1 attached hereto and made a
part hereof (collectively referred to herein as the "Shareholders"). Acquiror,
Acquiree, GIC, HB and the Shareholders are referred to severally herein as a
"Party" and jointly as the "Parties".
PREAMBLE
WHEREAS, Acquiree has 5,000,000 shares of common stock, no par value
per share, issued and outstanding and owned by the Shareholders (the "Acquiree
Common Stock"); and
WHEREAS, Acquiror desires to acquire all of the Acquiree Common Stock
owned by the Shareholders, making Acquiree a wholly owned subsidiary of
Acquiror, in exchange for five million (5,000,000) shares of Acquiror's common
stock, $.000333 par value (the "Acquiror Common Stock"), and the Shareholders
similarly desire to make such exchange;
WHEREAS, Acquiror desires to sell to the Shareholders an aggregate of
three million, three hundred thirty three thousand, three hundred thirty four
(3,333,334) shares of Acquiror's redeemable, special voting, Series A Preferred
Stock, $.001 par value per share (the "Acquiror Preferred Stock"), at a price
equal to the par value, in direct proportion to each Shareholder's ownership in
Acquiree and the Shareholders similarly desire to make such purchase; and
WHEREAS, the Parties further desire to enter into a series of related
transactions, on the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the Parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
For convenience, certain terms used in this Agreement and not defined
above or elsewhere, are listed in alphabetical order and defined below (such
terms as well as any other terms defined elsewhere in this Agreement shall be
equally applicable to both the singular and plural forms of the terms defined).
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A. "Acquiree Contractors" means those contractors entitled to receive
shares of Acquiror's common stock as set forth in Section 2.8.
B. "Acquiror Indemnified Party" means Acquiror and each of its officers,
directors, shareholders, employees, agents and counsel.
C. "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition,
"control" when used with respect to any Person, means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
D. "Agreement" means this Reorganization Agreement and the Schedules
hereto.
E. "Assets" means, with respect to Acquiror or Acquiree, as shown by the
context in which used, all of the assets, properties, goodwill and
rights of every kind and description, real and personal, tangible and
intangible, wherever situated and whether or not reflected in such
Party's most recent financial statements, that are owned or possessed
by such Party.
F. "BCL" means the New York Business Corporation Law, as amended through
the date of this Agreement.
G. "Benefit Plan" means all employee benefit, health, welfare,
supplemental unemployment benefit, bonus, pension, profit sharing,
deferred compensation, severance, incentive, stock compensation, stock
purchase, retirement, hospitalization insurance, medical, dental,
legal, disability, fringe benefit and similar plans, programs,
arrangements or practices, including, without limitation, each
"employee benefit plan" as defined in Section 3(3) of ERISA.
H. "Business" means with respect to any Person the entire business and
operations of such Person.
I. "Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
J. "Charter Documents" means an entity's certificate or articles of
incorporation, and any amendments thereto.
K. "Closing" is defined in Section 2.9(a).
L. "Closing Date" is defined in Section 2.9(a).
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M. "Contract" means any written or oral contract, agreement, letter of
intent, agreement in principle, lease, instrument or other commitment
that is binding on any Person or its property under applicable Law.
N. "Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
0. "Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or
regulatory body or authority, or any arbitrator that is binding on any
Person or its property under applicable Law.
P. "Default" means (i) a breach, default or violation, (ii) the occurrence
of an event that with or without the passage of time or the giving of
notice, or both, would constitute a breach, default or violation or
(iii) with respect to any Contract, the occurrence of an event that
with or without the passage of time or the giving of notice, or both,
would give rise to a right of termination, renegotiation or
acceleration or a right to receive damages or a payment of penalties.
Q. "$" means United States dollars unless provided for otherwise herein.
R. "Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property
interest.
S. "Environmental Condition" means any condition or circumstance,
including the presence of Hazardous Substances which does or would (i)
require assessment, investigation, abatement, correction, removal or
remediation under any Environmental Law, (ii) give rise to any civil or
criminal Liability under any Environmental Law, (iii) create or
constitute a public or private nuisance or (iv) constitute a violation
of or non-compliance with any Environmental Law.
T. "Environmental Law" means all Laws, Court Orders, principles of common
law, and permits, licenses, registrations, approvals or other
authorizations of any Governmental Authority relating to Hazardous
Substances, pollution, protection of the environment or human health.
U. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
V. "GAAP" means United States generally accepted accounting principles
including those set forth: (a) in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified
Public Accountants, (b) in the statements and pronouncements of the
Financial Accounting Standards Board, (c) in such other statements by
such other entity as approved by a significant segment of the
accounting profession, and (d) the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant
to Section 13 of the Securities Exchange Act, including opinions and
pronouncements in
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staff accounting bulletins and similar written statements from the
accounting staff of the SEC.
W. "Governmental Authority" means any federal, state, local, municipal or
foreign or other government or governmental agency or body.
X. "Hazardous Substances" means any material, waste or substance
(including, without limitation, any product) that may or could pose a
hazard to the environment or human health or safety including, without
limitation, (i) any "hazardous substances" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C.Section 9601 et seq. and its implementing regulations, (ii)
any "extremely hazardous substance," "hazardous chemical" or "toxic
chemical" as those terms are defined by the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C.Section 11001 et seq. and its
implementing regulations, (iii) any "hazardous waste," as defined under
the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act, 42 U.S.C.Section 6901 et seq. and its implementing
regulations, (iv) any "pollutant," as defined under the Water Pollution
Control Act, 33 U.S.C.Section 1251 et seq. and its implementing
regulations as any of such Laws in clauses (i) through (iv) may be
amended from time to time, and (v) any material, substance or waste
regulated under any Laws or Court Orders that currently exist or that
may be enacted, promulgated or issued in the future by any Governmental
Authority concerning protection of the environment, pollution, health
or safety or the public welfare.
Y. "Intellectual Property" means any Copyrights, Patents, Trademarks,
technology, licenses, trade secrets, computer software and other
intellectual property.
Z. "Knowledge" of any Shareholder means that which such Shareholder
actually knows or, after diligent investigation commensurate with such
Shareholder's position with Acquiree, should have known. "Knowledge" of
Acquiror or Acquiree means that which an executive officer thereof
actually knows or, after diligent investigation, should have known.
AA. "Law" means any statute, law, ordinance, regulation, order, rule,
common law principles or consent agreements of any Governmental
Authority, including, without limitation, those covering environmental,
energy, safety, health, transportation, bribery, record keeping,
zoning, anti- discrimination, antitrust, wage and hour, and price and
wage control matters.
BB. "Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or
endorsement of or by any Person.
CC. "Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or
inquiry.
DD. "Material Adverse Effect" means a fact or event which has had or is
reasonably likely to have a material adverse effect on the Assets,
Business, financial condition or results of operations of Acquiror or
Acquiree, as the case may be, as indicated by the context in which
used, and when used with respect to representations, warranties,
conditions, covenants or
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other provisions hereof means the individual effect of the situation
to which it relates and also the aggregate effect of all similar
situations unless the context indicates otherwise.
EE. "Patents" means patents, patent applications, reissue patents, patents
of addition, divisions, renewals, continuations, continuations-in-part,
substitutions, additions and extensions of any of the foregoing.
FF. "Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
GG. "Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
HH. "Regulation" means any federal, state, local or foreign rule or
regulation.
II. "Schedule" means any Schedule attached to and forming part of this
Agreement including Schedules 2.1, 2.3, 2.5, 2.6, 2.7, 3.1 and 4.5.
JJ. "SEC" means the United States Securities and Exchange Commission.
KK. "Securities Act" means the Securities Act of 1933, as amended.
LL. "Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
MM. "Subsidiary" means any corporation or other legal entity of which
Acquiror or Acquiree, as the case may be (either above or through or
together with any other Subsidiary) owns, directly or indirectly, more
than 50% of the stock or other equity interests the holders of which
are generally entitled to vote for the election of directors or other
governing body of such corporation or other entity.
NN. "Taxes" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions, levies
and liabilities, including, without limitation, taxes based upon gross
receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment, insurance, social
security, business license, occupation, business organization, stamp,
environmental and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts.
OO. "Tax Return" means any report, return, election, notice, estimate,
declaration, information statement and other forms and documents
(including all schedules, exhibits and other attachments thereto)
relating to and filed or required to be filed with a taxing authority
in connection with any Taxes (including, without limitation, estimated
Taxes).
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PP. "Trademarks" means registered trademarks, registered service marks,
trademark and service xxxx applications and unregistered trademarks and
service marks.
QQ. "Transaction Documents" means this Agreement and the other agreements
described in Article III.
RR. "Transactions" means the purchase and sale of the Acquiree Common
Stock, Acquiror Common Stock and Acquiror Preferred Stock and the other
transactions contemplated by the Transaction Documents.
ARTICLE II
PURCHASES, SALES AND CANCELLATIONS OF
SHARES, ISSUANCE OF STOCK OPTIONS, AND
RELATED TRANSACTIONS
2.1 SALE OF ACQUIREE STOCK. Subject to the terms and conditions set
forth in this Agreement, the Shareholders shall sell to Acquiror and Acquiror
shall purchase from the Shareholders, an aggregate of 5,000,000 shares of
Acquiree Common Stock. In addition to its proportionate shares of the Acquiree
Common Stock, one of the Shareholders, 3073815 Canada Inc. will assign its
receivable from Acquiree to Acquiror in accordance with Section 2.7 hereof in
further consideration of its receipt of its proportionate share of Acquiror
Common Stock. Following the purchase of the Acquiree Common Stock, Acquiree
shall be operated as a wholly owned subsidiary of Acquiror. The amount of
Acquiree Common Stock to be sold by each Shareholder is set forth in Schedule
2.1 hereto. The Acquiree Common Stock currently represents and will represent at
Closing all of the issued and outstanding capital stock of Acquiree.
2.2 CONSIDERATION FOR THE ACQUIREE COMMON STOCK. As consideration for
the Acquiree Common Stock, Acquiror shall issue to the Shareholders an aggregate
of 5,000,000 restricted shares of Acquiror Common Stock. The Acquiror Common
Stock shall be allocated among the Shareholders in direct proportion to their
ownership of their Acquiree Common Stock, such that each Shareholder shall
receive the same number of shares of Acquiror Common Stock that the Shareholder
currently owns in Acquiree. An aggregate of 1,666,666 shares of Acquiror Common
Stock shall be issued to the Shareholders at the Closing. An aggregate of
1,666,667 shares of Acquiror Common Stock shall be issued to the Shareholders on
the first anniversary of the Closing Date. An aggregate of 1,666,667 shares of
Acquiror Common Stock shall be issued to the Shareholders on the second
anniversary of the Closing Date. Acquiror agrees that it shall, at all times
prior to the issuance of all of the Acquiror Common Stock, reserve from its
shares of authorized but unissued common stock a sufficient number of shares to
allow it to make the issuances of Acquiror Common Stock provided for in this
Section 2.2. If at any time prior to the second anniversary of the Closing Date,
the common stock of Acquiror shall be subdivided, combined, reclassified or
split into a greater or lesser number of shares, or into a different class of
shares,
a corresponding adjustment shall be made with respect to the remaining shares of
Acquiror Common Stock to be issued pursuant to this Agreement.
2.3 SALE OF ACQUIROR PREFERRED STOCK. Subject to the terms and
conditions set forth in this Agreement, Acquiror shall sell to the Shareholders
an aggregate of 3,333,334 shares
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of Acquiror Preferred Stock, $.001 par value per share. The terms of the
Acquiror Preferred Stock are set forth in Acquiror's Certificate of Amendment to
be filed with the New York Department of State as soon as practicable following
the execution of this Agreement, a copy of which is attached hereto as Schedule
2.3. The Acquiror Preferred Stock will be sold to the Shareholders in amounts
that are in direct proportion to their percentage ownership of the Acquiree
Common Stock. Acquiror agrees that it will not amend the terms of the Acquiror
Preferred Stock or take any action with respect thereto that would serve to
circumvent the intent of the Parties to this Agreement without the prior written
consent of all of the holders of the Acquiror Preferred Stock.
2.4 CANCELLATION OF CERTAIN ACQUIROR SHARES HELD BY GIC. Subject
to the terms and conditions set forth in this Agreement, at the Closing, GIC
will deliver 2,980,000 of the 5,205,000 shares of Acquiror common stock
currently owned by it to Acquiror for cancellation (the "GIC Share
Cancellation").
2.5 ISSUANCE OF ACQUIROR OPTIONS. Subject to the terms and conditions
set forth in this Agreement, within 30 days of the Closing Date, Acquiror will
issue an aggregate of 150,000 stock options to the persons and in the amounts
set forth in Schedule 2.5 hereto (the "Acquiror Options") pursuant to a
non-statutory stock option plan to be adopted by Acquiror. Each optionee is
currently an employee of Acquiree and shall continue to be so at the time of
option grant. Each option will be exercisable to purchase one share of
Acquiror's common stock for a period of five (5) years from the date of grant at
an exercise price of Cdn.$.5714 per share. Acquiror agrees that it shall, prior
to issuance of the Acquiror Options, register the underlying shares on a
Registration Statement on Form S-8. The Acquiror Options shall be restricted as
to exercise as provided in Section 2.10 hereof.
2.6 ASSIGNMENT OF GIC LOAN TO ACQUIROR. Subject to the terms and
conditions set forth in this Agreement, at the Closing, GIC shall assign to
Acquiror its Cdn. $800,000 receivable from Acquiree, which shall be treated by
Acquiror as a contribution to capital by GIC. The Assignment shall be made
pursuant to an Assignment Agreement among Acquiror, Acquiree and GIC in the form
annexed hereto as Schedule 2.6.
2.7 ASSIGNMENT OF 3073815 CANADA INC. LOAN TO ACQUIREE. Subject to the
terms and conditions of this Agreement, at the Closing, 3073815 Canada Inc.
shall assign to Acquiror its Cdn. $75,000 receivable from Acquiree, which shall
be treated by Acquiror as a contribution to capital by 3073815 Canada Inc. The
Assignment shall be made pursuant to an Assignment Agreement among Acquiror,
Acquiree and 3073815 Canada Inc. in the form annexed hereto as Schedule 2.7 and
shall be made in further consideration of 3073885 Canada Inc's receipt of
Acquiror Common Stock.
2.8 STOCK ISSUANCES TO ACQUIREE CONTRACTORS. Subject to the terms and
conditions set forth in this Agreement, at the Closing Acquiror shall issue (i)
60,000 shares of its restricted common stock to 3949559 Canada Inc. in
consideration of scientific services rendered to Acquiree; and (ii) 40,000
shares of its restricted common stock to Altwin Holdings Limited, a Virgin
Islands corporation, in consideration of marketing, branding and consulting
services rendered to Acquiree.
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2.9 CLOSING.
(a) The closing of the transactions set forth in Sections 2.1,
2.2, 2.3, 2.4, 2.6, 2.7, and 2.8 above (the "Closing") shall be held at the
offices of Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP in New York, New York as promptly
as practicable after the execution of this Agreement, (and in any event within
five (5) Business Days of the date of this Agreement) after satisfaction or
waiver of the conditions to the consummation of the transactions set forth in
Articles IX and X. The date on which the Closing occurs is referred to herein as
the "Closing Date."
(b) At the Closing, each of the Shareholders shall transfer to
Acquiror good and marketable title to the Acquiree Common Stock owned by such
Shareholder, free and clear of any and all liens, claims, encumbrances and
adverse interests of any kind, by delivering to Acquiror the certificates for
the Acquiree Common Stock in negotiable form, duly endorsed in blank, or with
stock transfer powers attached thereto. At the Closing, Acquiror shall provide
the Shareholders with good and marketable title to an aggregate of 1,666,666
restricted shares of Acquiror Common Stock and an aggregate of 3,333,334 shares
of Acquiror Preferred Stock free and clear of any and all liens, claims,
encumbrances and adverse interests of any kind by delivery to the Shareholders
of certificates for such shares. At the Closing, the Shareholders shall cause to
be made available the books and records of Acquiree to Acquiror. At the Closing,
each of the Shareholders, and each of the Acquiree Contractors shall deliver to
Acquiror an executed investment representation letter in the form annexed hereto
as Schedule 3.1. At the Closing, each of Acquiror and Acquiree shall deliver the
other closing documents referenced in Articles IX and X. At any time and from
time to time after the Closing, the Parties shall duly execute, acknowledge and
deliver all such further assignments, conveyances, instruments and documents,
and shall take such other action consistent with the terms of this Agreement to
carry out the transactions contemplated by this Agreement.
(c) Acquiror's board of directors currently consists of Xxxxx
Yersh and Denis St. Hilaire. At the Closing, Xxxxx Xxxxx and Xxxxxxx Xxxxx, the
designees of the Shareholders, shall be appointed to and added to the board of
directors of Acquiror. At the Closing, Acquiror's current officers shall resign
and be replaced by Xxxxxxx Xxxxx who will serve as president and chief executive
officer and by Xxxxx Xxxxx who will serve as treasurer, secretary and chief
financial officer. Following the Closing, GIC and the Shareholders agree to use
their best efforts to mutually locate and designate a fifth director, for
appointment to Acquiror's board of directors. Acquiror agrees to appoint such
designee to its board as promptly as practicable upon receiving notice of such
designation. The parties acknowledge and agree that no assurance can be given
that the Shareholders and GIC will successfully find a mutually acceptable
director.
Subsequent to the Closing, GIC and the Shareholders, in their capacity
as shareholders of Acquiror, hereby agree to vote their voting shares of
Acquiror, with respect to all votes taken by Acquiror for the election of
directors, so as to maintain a board that consists of an equal member of
directors designated by GIC and the Shareholders.
2.10 RESTRICTIONS ON EXERCISE OF ACQUIROR OPTIONS. The Acquiror Options
will be subject to restrictions on exercise for a period of five months from the
Closing Date. In connection therewith, no Acquiror Options will be exercisable
within 30 days of the Closing Date. During the period commencing on the 31st day
after the Closing Date and ending on the 60th day after
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the Closing Date, each holder of Acquiror Options, may exercise 25% of
such holder's Acquiror Options and thereafter transfer and sell the shares
underlying such Acquiror Options (the "Underlying Shares") such that an
aggregate of 37,500 Underlying Shares may be transferred and sold by the holders
of the Acquiror Options. During each 30 day period thereafter, each holder of
Acquiror Options may exercise an additional 25% of such holder's Acquiror
Options and thereafter transfer and sell the Underlying Shares such that an
aggregate of 37,500 additional Underlying Shares may be transferred and sold
during such 30 day period by the holders of the Acquiror Options.
2.11. EMPLOYMENT AGREEMENT WITH XXXXXXX XXXXX. Immediately following
the Closing, Xxxxxxx Xxxxx shall serve as Acquiror's president and chief
executive officer. In connection therewith, as soon as practicable following the
Closing Date, Acquiror and Xxxxxxx Xxxxx will enter into a written employment
agreement. The terms of the employment agreement will include the issuance to
Xxxxxxx Xxxxx of 100,000 shares of Acquiror's common stock as a signing bonus,
which shares shall be registered on a Registration Statement on Form S-8.
ARTICLE III
OTHER AGREEMENTS
3.1 INVESTMENT REPRESENTATION LETTER. At the Closing, each of the
Shareholders and each of the Acquiree Contractors shall execute and deliver to
Acquiror an investment representation letter, in the form annexed hereto as
Schedule 3.1.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Shareholders as follows:
4.1 CORPORATE. Acquiror is a corporation duly organized, validly
existing and in good standing under the Laws under which it was incorporated.
Acquiror is qualified to do business as a foreign corporation in all
jurisdictions where it is required to be so qualified, except where the failure
to so qualify would not have a Material Adverse Effect. The Charter Documents
and by-laws of Acquiror have been duly adopted or ratified and are current,
correct and complete. The Charter Documents consist of Acquiror's Certificate of
Incorporation as filed with the State of New York Department of State on August
13, 1996 and amended on each of April 6, 1999; September 20, 1999; November 20,
2000; and January 29, 2001. Acquiror has all necessary corporate power and
authority to own, lease and operate its Assets and to carry on its Business as
it is now being conducted. Acquiror has no subsidiaries.
4.2 AUTHORIZATION. Acquiror has the requisite corporate power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions to be performed by it. Such execution,
delivery and performance by Acquiror has been duly authorized by all necessary
corporate and shareholder action. Each Transaction Document executed and
delivered by Acquiror as of the date hereof has been duly executed and delivered
by Acquiror and constitutes a valid and binding obligation of Acquiror
enforceable against Acquiror in accordance with its terms, and any Transaction
Document executed and delivered by Acquiror after
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the date hereof will be duly executed and delivered by Acquiror and will
constitute a valid and binding obligation of Acquiror, enforceable against
Acquiror in accordance with its terms, except as otherwise limited by
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally, and except that the remedy of specific performance or other
equitable relief is available only at the discretion of the court before which
enforcement is sought.
4.3 VALIDITY OF CONTEMPLATED TRANSACTIONS. The securities issuances to
be made by Acquiror pursuant to this Agreement will be made in compliance with
the Securities Act and applicable state securities Laws. The Form 8-K filing to
be made by Acquiror after the Closing with respect to the Transactions will be
made in compliance with the Securities Exchange Act. The amendment to be made to
Acquiror's Charter Documents with respect to the creation of the Acquiror
Preferred Stock will be made in compliance with the New York Business
Corporation Law. All required consents to the Transactions by Acquiror's board
of directors shall be obtained prior to the Closing. With the exception of the
above, neither the execution and delivery by Acquiror of the respective
Transaction Documents to which it is or will be a party, nor the performance of
the Transactions to be performed by it, will require any filing, consent or
approval under or constitute a Default, or result in a loss of material benefit
under, (a) to Acquiror's Knowledge, any Law or Court Order to which Acquiror is
subject, (b) the Charter Documents or bylaws of Acquiror, or (c) any Contracts
to which Acquiror is a party or by which any of the Acquiror Assets may be
subject.
4.4 ACQUIROR SEC REPORTS; FINANCIAL STATEMENTS. Acquiror has filed all
required forms, reports, statements, schedules and other documents with the SEC
(collectively, the "Acquiror SEC Reports"). Each of such Acquiror SEC Reports,
at the time it was filed or was amended, complied in all material respects with
all applicable requirements of the Securities Act and the Securities Exchange
Act, and with the forms and Regulations of the SEC promulgated thereunder, and
did not contain, at the time it was filed or was amended, any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The financial
statements, including all related notes and schedules, contained in the Acquiror
SEC Reports (or incorporated by reference therein) fairly present the financial
position of Acquiror as at the respective dates thereof and the results of
operations and cash flows of Acquiror for the periods indicated in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
for changes in accounting principles disclosed in the notes thereto) and subject
in the case of interim financial statements to normal year-end adjustments and
the absence of notes.
4.5 CAPITALIZATION AND STOCK OWNERSHIP. The total authorized capital
stock of Acquiror consists of 200,000,000 shares of common stock, par value
$.000333 per share and 5,000,000 shares of preferred stock, par value $.001 per
share. Of such authorized capital stock, on the date hereof 9,380,000 shares of
Acquiror Common Stock and no Shares of Acquiror Preferred Stock are issued and
outstanding. Following the GIC Share Cancellation referred to in Section 2.4
hereof, and not taking into account the issuance of the Acquiror Common Stock at
Closing or the issuances of shares of common stock of Acquiror to the Acquiree
Contractors at Closing, on the Closing Date, 6,400,000 shares of Acquiror Common
Stock will be issued and
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outstanding. Further, in connection with this Agreement, 3,333,334 shares of
Acquiror Preferred Stock are to be issued to the Shareholders at Closing as set
forth in Section 2.3 hereof. All of the currently issued and outstanding shares
of Acquiror's common stock are validly issued, fully paid and non-assessable and
all of the shares of Acquiror Common Stock, Acquiror Preferred Stock and other
shares of common stock of Acquiror to be issued pursuant to this Agreement will,
when issued, have been validly issued, fully paid and non-assessable. Other than
restrictions related to its status as stock not registered under the Securities
Act of 1933, as amended, no transfer or sale restrictions shall be applicable,
at the time of issuance, to the Acquiror Common Stock and other restricted
shares of common stock of Acquiror to be issued pursuant to this Agreement.
There are no existing options, warrants, calls, commitments or other rights of
any character (including conversion or preemptive rights) relating to the
acquisition of any issued or unissued capital stock or other securities of
Acquiror. Schedule 4.5 hereof sets forth (i) the capitalization of Acquiror that
exists as at the date hereof; and (ii) the capitalization of Acquiror that will
exist on the Closing Date following the issuance of the Acquiror Preferred
Stock, 1,666,666 shares of Acquiror Common Stock, and the issuances of common
stock of Acquiror to the Acquiree Contractors.
4.6 ACQUIROR FINANCIAL STATEMENTS. As at the Closing Date, the Acquiror
SEC Reports contain unaudited quarterly financial statements and audited year
end financial statements (singularly and collectively, the "Acquiror Financial
Statements"). The Acquiror Financial Statements fairly present the financial
position of Acquiror as at the respective dates thereof and the results of
operations of Acquiror for the periods indicated in accordance with GAAP applied
on a consistent basis throughout the periods involved. Acquiror has no material
contingent Liabilities except as otherwise set forth in the Acquiror Financial
Statements.
4.7 TAXES. Acquiror (i) has filed (or, in the case of Tax Returns not
yet due, will file) with the appropriate governmental agencies all Tax Returns
required to be filed on or before the Closing Date and all such Tax Returns
filed were true, correct and complete in all respects, and (ii) has paid (or, in
the case of Taxes not yet due, will pay), all Taxes shown on such Tax Returns.
Acquiror has (i) duly paid or caused to be paid all Taxes and all Taxes shown on
Tax Returns that are or were due, and (ii) provided a sufficient reserve on the
Acquiror Balance Sheet for the payment of all Taxes not yet due and payable. No
deficiency in respect of any Taxes which has been assessed against Acquiror
remains unpaid, and Acquiror has no Knowledge of any unassessed Tax deficiencies
or of any audits or investigations pending or threatened against Acquiror with
respect to any Taxes. Acquiror has not extended or waived the application of any
applicable statute of limitations of any jurisdiction regarding the assessment
or collection of any Tax or any Tax Return. There are no liens for Taxes upon
any assets of Acquiror except for liens for current Taxes not yet due. Acquiror
has to its Knowledge (i) complied with all provisions of the Code relating to
the withholding and payment of Taxes and (ii) has made all deposits required by
applicable Law to be made with respect to employees' withholding and other
payroll, employment or other withholding or related Taxes.
4.8 TITLE TO ASSETS AND RELATED MATTERS. Acquiror has good and
marketable title to the Acquiror Assets, free from any Encumbrances. Acquiror
owns all Acquiror Assets necessary or currently used in the operation of
Acquiror's Business.
4.9 REAL PROPERTY. As of the date hereof, Acquiror does not own any
real property.
15
4.10 LEGAL PROCEEDINGS; COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS.
(a) There is no Litigation that is pending or, to Acquiror's
Knowledge, threatened against Acquiror. To Acquiror's Knowledge, Acquiror is and
has been in compliance with all applicable Laws, including Environmental Laws
and applicable securities Laws, except where the failure to be in compliance
would not have a Material Adverse Effect. There has been no Default under any
Laws applicable to Acquiror, including Environmental Laws. There has been no
Default with respect to any Court Order applicable to Acquiror. Acquiror has not
received any written notice and, to the Knowledge of Acquiror, no other
communication has been received to the effect that it is not in compliance with
any applicable Laws.
(b) There is no Environmental Condition at any property
presently or formerly owned or leased by Acquiror or any of its Subsidiaries
which is reasonably likely to have a Material Adverse Effect.
(c) Acquiror has all material consents, permits, franchises,
licenses, concessions, registrations, certificates of occupancy, approvals and
other authorizations of Governmental Authorities (collectively, the
"Governmental Permits") required in connection with the operation of its
Business, all of which are in full force and effect. Acquiror has complied with
all of its Governmental Permits.
4.11 CONTRACTS AND COMMITMENTS. Each Contract to which Acquiror is a
party (i) is legal, valid, binding and enforceable by Acquiror except as
otherwise limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights generally, and except that the remedy of specific
performance or other equitable relief is available only at the discretion of the
court before which enforcement is sought, and (ii) Acquiror, and to Acquiror's
Knowledge, any other party, is not in Default under any such Contract. Acquiror
is not subject to any Contract limiting the freedom of Acquiror to compete in
any line of business, or with any Person, or in any geographic area or market.
4.12 EMPLOYEE RELATIONS. Acquiror is not (a) a party to, involved in
or, to Acquiror's Knowledge, threatened by, any labor dispute or unfair labor
practice charge, or (b) currently negotiating any collective bargaining
agreement, and Acquiror has not experienced any work stoppage.
4.13 BENEFIT PLANS. Acquiror has not sponsored or maintained any
Benefit Plans since its inception.
4.14 PATENTS, TRADEMARKS, ETC. Acquiror does not infringe upon or
unlawfully or wrongfully use any Intellectual Property owned or claimed by
another Person. Acquiror does not utilize any Intellectual Property in the
conduct of its Business.
4.15 ABSENCE OF CERTAIN CHANGES. Since September 30, 2001, the date of
the latest Acquiror balance sheet contained in an Acquiror SEC Report, Acquiror
has conducted its
16
business in the ordinary course, and, as of the date hereof, except as otherwise
provided in this Agreement, there has not been, nor as of the Closing Date, will
there have been:
(a) any Material Adverse Effect on the Acquiror
Business;
(b) any distribution or payment declared or made in
respect of Acquiror's capital stock by way of dividends, purchase or redemption
of shares or otherwise;
(c) any increase in the compensation payable or to
become payable to any current director or officer of Acquiror, nor any material
change in any existing employment, severance, consulting arrangements or any
Acquiror Benefit Plan;
(d) any sale, assignment or transfer of any Acquiror
Assets, or any additions to or transactions involving any Acquiror Assets, other
than those made in the ordinary course of business;
(e) other than in the ordinary course of business,
any waiver or release of any material claim or right or cancellation of any
material debt held by Acquiror;
(f) any change in practice with respect to Taxes, or
any election, change of any election, or revocation of any election with respect
to Taxes, or any settlement or compromise of any dispute involving a Tax
Liability;
(g) (i) any creation, or assumption of, any leases,
long-term debt or any short- term debt for borrowed money other than under
existing notes payable, lines of credit or other credit facility or in the
ordinary course of business (ii) any assumption, granting of guarantees,
endorsements or otherwise becoming liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; (iii) any
loans, advances or capital contributions to, or investments in, any other
Person; or (iv) any other material increase in Liabilities or capital
expenditures outside the ordinary course of business.
(h) any material agreement, commitment or contract,
except agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business;
(i) any authorization, recommendation, proposal or
announcement of an intention to authorize, recommend or propose, or enter into
any Contract with respect to, any (i) plan of liquidation or dissolution, (ii)
acquisition of a material amount of assets or securities, (iii) disposition or
Encumbrance of a material amount of assets or securities, (iv) merger or
consolidation or (v) material change in its capitalization;
(j) any change in accounting procedure or practice;
or
(k) any agreement or promise by Acquiror to (i) do
any of the foregoing or (ii) do anything that would likely result in any of the
foregoing.
17
4.16 CORPORATE RECORDS. The minute books of Acquiror contain accurate
and current copies of all Charter Documents and of all minutes of meetings,
resolutions and other proceedings of its Board of Directors and stockholders.
4.17 FINDER'S FEES. No Person is or will be entitled to any commission,
finder's fee or other payment in connection with the Transactions based on
arrangements made by or on behalf of Acquiror.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ACQUIREE AND THE SHAREHOLDERS
Acquiree and each Shareholder hereby represents and warrants to
Acquiror as follows:
5.1 CORPORATE. Acquiree is a corporation duly organized, validly
existing and in good standing under the Laws under which it was incorporated.
Acquiree is qualified to do business as a foreign corporation in any
jurisdiction where it is required to be so qualified, except where the failure
to so qualify would not have a Material Adverse Effect. The Charter Documents
and bylaws of Acquiree (all of which have been delivered or made available to
Acquiror) have been duly adopted and are current, correct and complete. The
Charter Documents consist of Acquiree's Certificate of Incorporation as filed
pursuant to the Canada Business Corporations Act on April 18, 2001 and amended
on March 26, 2002. Acquiree has all necessary corporate power and authority to
own, lease and operate the Acquiree Assets and to carry on the Acquiree Business
as it is now being conducted. Acquiree has no Subsidiaries.
5.2 AUTHORIZATION. Acquiree has the requisite corporate power and
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the Transactions to be performed by it. Such execution,
delivery and performance by Acquiree has been duly authorized by all necessary
corporate and Shareholder action. Each Shareholder has the capacity to execute
and deliver the Transaction Documents to which he is a party and to perform the
Transactions to be performed by him. Each Transaction Document executed and
delivered by Acquiree and any Shareholder as of the date hereof has been duly
executed and delivered by Acquiree and each such Shareholder and constitutes a
valid and binding obligation of Acquiree and each such Shareholder, enforceable
against Acquiree and each such Shareholder in accordance with its terms, and any
Transaction Documents executed and delivered by Acquiree and any Shareholder
after the date hereof will be duly executed and delivered by Acquiree and each
such Shareholder and will constitute a valid and binding obligation of Acquiree
and each such Shareholder enforceable against Acquiree and each such Shareholder
in accordance with its terms, except as otherwise limited by bankruptcy,
insolvency, reorganization and other laws affecting creditors' rights generally,
and except that the remedy of specified performance or other equitable relief is
available only at the discretion of the court before which enforcement is
sought.
5.3 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the execution and
delivery by Acquiree or any Shareholder of the respective Transaction Documents
to which he is or will be a party, nor the performance of the Transactions to be
performed by him, will require any filing, consent or approval which has not
already been obtained or constitute a Default, or result in
18
a loss of material benefit under, (a) to any Shareholder's Knowledge, any Law or
Court Order to which Acquiree or any Shareholder is subject, (b) the Charter
Documents or bylaws of Acquiree, (c) any other Contracts to which Acquiree or
any Shareholder is a party or by which any of the Acquiree Assets may be
subject.
5.4 CAPITALIZATION AND STOCK OWNERSHIP. The total authorized capital
stock of Acquiree consists of an unlimited number of common shares, an unlimited
number of Class A preferred shares and an unlimited number of Class B preferred
shares. Of such authorized capital stock, the only issued and outstanding shares
on the date hereof are 5,000,000 shares of Acquiree common stock. There are no
existing options, warrants, calls, commitments or other rights of any character
(including conversion or preemptive rights) relating to the acquisition of any
issued or unissued capital stock or other securities of Acquiree. All of the
issued and outstanding shares of Acquiree common stock are validly issued, fully
paid and non-assessable.
5.5 ACQUIREE FINANCIAL STATEMENTS. The financial statements of Acquiree
as at December 31, 2001 and for the period from April 18, 2001 (inception ) to
December 31, 2001 (the "Acquiree Financial Statements"), delivered to Acquiror
fairly present the financial position of Acquiree as at the respective dates
thereof and the results of operations of Acquiree for the periods indicated in
accordance with GAAP applied on a consistent basis throughout the periods
involved. For purposes of this Agreement, the Balance Sheet of Acquiree as of
December 31, 2001 is referred to as the "Acquiree Balance Sheet" and the date
thereof is referred to as the "Acquiree Balance Sheet Date." Acquiree has no
material contingent Liabilities except as otherwise set forth in the Acquiree
Financial Statements.
5.6 TAXES. Acquiree (i) has filed (or, in the case of Tax Returns not
yet due, will file) with the appropriate governmental agencies all Tax Returns
required to be filed on or before the Closing Date and all such Tax Returns
filed were true, correct and complete in all respects, and (ii) has paid (or, in
the case of Taxes not yet due, will pay), all Taxes shown on such Tax Returns.
Acquiree has (i) duly paid or caused to be paid all Taxes and all Taxes shown on
Tax Returns that are or were due, and (ii) provided a sufficient reserve on the
Acquiree Balance Sheet for the payment of all Taxes not yet due and payable. No
deficiency in respect of any Taxes which has been assessed against Acquiree
remains unpaid, and Acquiree has no Knowledge of any unassessed Tax deficiencies
or of any audits or investigations pending or threatened against Acquiree with
respect to any Taxes. Acquiree has not extended or waived the application of any
applicable statute of limitations of any jurisdiction regarding the assessment
or collection of any Tax or any Tax Return. There are no liens for Taxes upon
any assets of Acquiree except for liens for current Taxes not yet due.
5.7 TITLE TO ASSETS AND RELATED MATTERS. Acquiree has good and
marketable title to the Acquiree Assets, free from any Encumbrances. Acquiree
owns all Acquiree Assets necessary or currently used in the operation of
Acquiree's Business.
5.8 REAL PROPERTY. As of the date hereof, Acquiree does not own any
real property.
19
5.9 LEGAL PROCEEDINGS; COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS.
(a) There is no Litigation that is pending or, to Acquiree's
or any Shareholder's Knowledge, threatened against Acquiree. To Acquiree's or
any Shareholder's Knowledge, Acquiree is and has been in compliance with all
applicable Laws, including applicable securities Laws, except where the failure
to be in compliance would not have a Material Adverse Effect. There has been no
Default under any Laws applicable to Acquiree. There has been no Default with
respect to any Court Order applicable to Acquiree. Acquiree has not received any
written notice and, to the Knowledge of Acquiree or any Shareholder, no other
communication has been received to the effect that it is not in compliance with
any applicable Laws. No Shareholder has reason to believe that any presently
existing circumstances are likely to result in violations of any applicable
Laws.
(b) There is no Environmental Condition at any property
presently or formerly owned or leased by Acquiree which is reasonably likely to
have a Material Adverse Effect.
(c) Acquiree has all material consents, permits, franchises,
licenses, concessions, registrations, certificates of occupancy, approvals and
other authorizations of Governmental Authorities (collectively, the
"Governmental Permits") required in connection with the operation of its
Business, all of which are in full force and effect. Acquiree has complied with
all of its Governmental Permits.
5.10 CONTRACTS AND COMMITMENTS. Each Contract to which Acquiree is a
party (i) is legal, valid, binding and enforceable by Acquiree except as
otherwise limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights generally, and except that the remedy of specific
performance or other equitable relief is available only at the discretion of the
court before which enforcement is sought, and (ii) Acquiree, and to Acquiree's
and any Shareholder's Knowledge, any other party, is not in Default under any
such Contract. Acquiree is not subject to any Contract limiting the freedom of
Acquiree to compete in any line of business, or with any Person, or in any
geographic area or market.
5.11 EMPLOYEE RELATIONS. Acquiree is not (a) a party to, involved in
or, to Acquiree's and any Shareholder's Knowledge, threatened by, any labor
dispute or unfair labor practice charge, or (b) currently negotiating any
collective bargaining agreement, and Acquiree has not experienced any work
stoppage.
5.12 BENEFIT PLANS. With the exception of a group insurance plan,
Acquiree has not sponsored or maintained any Benefit Plans since its inception.
5.13 PATENTS, TRADEMARKS, ETC. Acquiree does not infringe upon or
unlawfully or wrongfully use any Intellectual Property owned or claimed by
another Person and no Person infringes on or wrongfully uses any Intellectual
Property owned or claimed by Acquiree. Acquiree owns or has valid rights to use
all Intellectual Property used in the conduct of Acquiree Business, free and
clear of all Encumbrances.
20
5.14 ABSENCE OF CERTAIN CHANGES. Since the Acquiree Balance Sheet Date,
Acquiree has conducted the Acquiree Business in the ordinary course, and, as of
the date hereof, there has not been, nor as of the Closing Date, will there have
been:
(a) any Material Adverse Effect on the Acquiree Business;
(b) any distribution or payment declared or made in respect of
Acquiree's capital stock by way of dividends, purchase or redemption of shares
or otherwise;
(c) any increase in the compensation payable or to become
payable to any current director or officer of Acquiree, nor any material change
in any existing employment, severance, consulting arrangements or any Acquiree
Benefit Plan;
(d) any sale, assignment or transfer of any Acquiree Assets,
or any additions to or transactions involving any Acquiree Assets, other than
those made in the ordinary course of business;
(e) other than in the ordinary course of business, any waiver
or release of any material claim or right or cancellation of any material debt
held by Acquiree;
(f) any change in practice with respect to Taxes, or any
election, change of any election, or revocation of any election with respect to
Taxes, or any settlement or compromise of any dispute involving a Tax Liability;
(g) (i) any creation, or assumption of, any leases, long-term
debt or any short-term debt for borrowed money other than under existing notes
payable, lines of credit or other credit facility or in the ordinary course of
business (ii) any assumption, granting of guarantees, endorsements or otherwise
becoming liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person or (iii) any loans, advances or capital
contributions to, or investments in, any other Person; or (iv) any other
material increase in Liabilities or capital expenditures outside the ordinary
course of business.
(h) any material agreement, commitment or contract, except
agreements, commitments or contracts for the purchase, sale or lease of goods or
services in the ordinary course of business;
(i) any authorization, recommendation, proposal or
announcement of an intention to authorize, recommend or propose, or enter into
any Contract with respect to, any (i) plan of liquidation or dissolution, (ii)
acquisition of a material amount of assets or securities, (iii) disposition or
Encumbrance of a material amount of assets or securities, (iv) merger or
consolidation or (v) material change in its capitalization;
(j) any change in accounting procedure or practice; or
(k) any agreement or promise by Acquiree to (i) do any of the
foregoing or (ii) do anything that would likely result in any of the foregoing.
21
5.15 CORPORATE RECORDS. In all material respects, the minute books of
Acquiree contain accurate, complete and current copies of all Charter Documents
and of all minutes of meetings, resolutions and other proceedings of its Board
of Directors and stockholders.
5.16 FINDER'S FEES. No Person is or will be entitled to any commission,
finder's fee or other payment in connection with the Transactions based on
arrangements made by or on behalf of Acquiree.
5.17 OWNERSHIP OF SHARES. Each Shareholder is the record and beneficial
owner of the Shares as set forth next to such Shareholder's name on Schedule
2.1, and has sole management power over the disposition of such Shares. The
Shares owned by each Shareholder as set forth on Schedule 2.1 are free and clear
of any liens, claims, encumbrances, and charges. The Shares have not been sold,
conveyed, encumbered, hypothecated or otherwise transferred by any Shareholder
except pursuant to this Agreement. Each Shareholder has the legal right to enter
into and to consummate the Transactions contemplated hereby and otherwise to
carry out his or her obligations hereunder.
ARTICLE VI
JOINT COVENANTS OF THE PARTIES
6.1 NOTIFICATION OF CERTAIN MATTERS. Each of Acquiror, on the one hand,
and Acquiree and the Shareholders, on the other hand, shall give prompt notice
to each other of the following:
(a) the occurrence or nonoccurrence of any event whose
occurrence or nonoccurrence would be likely to cause either (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Closing Date, or (ii)
directly or indirectly, any Material Adverse Effect; and
(b) any material failure of such Party, or any officer,
director, employee or agent of any thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
6.2 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
Acquiror and Acquiree shall, and shall cause its officers, directors, employees,
auditors, counsel and agents to afford the officers, employees, auditors,
counsel, financial advisors and agents of the other Party complete access at all
reasonable times to such Party's officers, employees, auditors, counsel, agents,
properties, offices and other facilities and to all of their respective books
and records, and shall furnish the other with all financial, operating and other
data and information as such other Party may reasonably request.
6.3 PUBLIC ANNOUNCEMENTS. Acquiror and Acquiree (a) shall use all
reasonable efforts to develop a joint communications plan and each Party shall
use all reasonable efforts to ensure that all press releases and other public
statements with respect to the Transactions shall be consistent with such joint
communications plan or, to the extent inconsistent therewith, shall have
received the prior written approval of the other and (b) before issuing any
press release or otherwise making any public statements with respect to the
Transactions, will consult with each other as to its
22
form and substance and shall not issue any such press release or make any such
public statement prior to such consultation, except for each of (a) and (b)
above as may be required by Law (it being agreed that the Parties hereto are
entitled to disclose all requisite information concerning the Transactions in
any filings required with the SEC).
6.4 COOPERATION. Upon the terms and subject to the conditions hereof,
each of the Parties shall use its commercially reasonable efforts to take or
cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable to consummate as promptly as practicable the
Transactions and shall use its commercially reasonable efforts to obtain all
required consents, and to effect all necessary filings under the Securities Act
and the Exchange Act. Without limiting the generality of the foregoing, each
Party shall use all commercially reasonable efforts to take, or cause to be
taken, all other actions and to do, or cause to be done, all other things
necessary, proper or advisable to fulfill the conditions herein to the extent
that the fulfillment thereof is within a Party's control.
6.5 EXPENSES. Acquiror shall pay all of the legal, accounting and other
expenses incurred by Acquiror in connection with the Transactions. Acquiree
shall pay all of the legal, accounting and other expenses incurred by Acquiree
and the Shareholders in connection with the Transactions.
ARTICLE VII
COVENANTS OF ACQUIREE AND SHAREHOLDERS
7.1 OPERATION OF THE BUSINESS. Except as contemplated by this Agreement
or as expressly agreed to in writing by Acquiror, during the period from the
date of this Agreement to the Closing Date, Acquiree will conduct its operations
only in the ordinary course of business consistent with sound financial,
operational and regulatory practice, and will take no action which would have a
Material Adverse Effect on its ability to consummate the Transactions. Without
limiting the generality of the foregoing, except as otherwise expressly provided
in this Agreement or related Schedules, prior to the Closing Date, Acquiree will
not, and Shareholders shall not cause or permit Acquiree to, without the prior
written consent of Acquiror:
(a) amend its Charter Documents or bylaws (or similar
organizational documents);
(b) authorize for issuance, issue, sell, deliver, grant any
options for, or otherwise agree or commit to issue, sell or deliver any shares
of its capital stock or any other securities;
(c) recapitalize, split, combine or reclassify any shares of
its capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; or purchase, redeem or otherwise acquire any of its
securities or modify any of the terms of any such securities;
(d) (i) create, incur, assume or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing notes
payable, lines of credit or other credit facilities or in the ordinary course of
business; (ii) assume, guarantee, endorse or otherwise
23
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other or (iii) make any loans, advances or capital
contributions to, or investments in, any other Person;
(e) (i) increase in any manner the rate of compensation of any
of its directors, officers or other employees everywhere, (ii) pay or agree to
pay any bonus, pension, retirement allowance, severance or other employee
benefit except as required under currently existing Acquiree Benefit Plans,
except for holiday bonuses in an aggregate amount not to exceed holiday bonuses
for the prior year, or (iii) amend, terminate or enter into any employment,
consulting, severance, change in control or similar agreements or arrangements
with any of its directors, officers or other employees;
(f) enter into any material agreement, commitment or contract,
except agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business;
(g) other than in the ordinary course of business, authorize,
recommend, propose or announce an intention to authorize, recommend or propose,
or enter into any Contract with respect to, any (i) plan of liquidation or
dissolution, (ii) acquisition of a material amount of assets or securities,
(iii) disposition or Encumbrance of a material amount of assets or securities,
(iv) merger or consolidation or (v) material change in its capitalization;
(h) change any material accounting or Tax procedure or
practice;
(i) take any action the taking of which, or knowingly omit to
take any action the omission of which, would cause any of the representations
and warranties herein to fail to be true and correct in all material respects as
of the date of such action or omission as though made at and as of the date of
such action or omission;
(j) compromise, settle or otherwise modify any material claim
or litigation;
(k) permit any existing insurance policy insuring Acquiree
Assets to terminate; or
(l) commit, promise or agree to do any of the foregoing.
7.2 MAINTENANCE OF THE ASSETS. Acquiree shall use its reasonable best
efforts to continue to maintain and service the Acquiree Assets consistent with
past practice. Acquiree shall not directly or indirectly, sell or encumber all
or any part of the Acquiree Assets, other than sales in the ordinary course of
business or initiate or participate in any discussions or negotiations or enter
into any agreement to do any of the foregoing.
7.3 EMPLOYEES AND BUSINESS RELATIONS. Acquiree shall use commercially
reasonable efforts to keep available the services of its current employees and
agents and to maintain its relations and goodwill with its suppliers, customers,
distributors and any others having business relations with it.
24
ARTICLE VIII
COVENANTS OF ACQUIROR
8.1 OPERATION OF THE BUSINESS. Except as contemplated by this Agreement
or as expressly agreed to in writing by Acquiree and the Shareholders, during
the period from the date of this Agreement to the Closing Date, Acquiror will
conduct its operations only in the ordinary course of business consistent with
sound financial, operational and regulatory practice, and will take no action
which would have a Material Adverse Effect on its ability to consummate the
transactions required by this Agreement. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement or related
Schedules, prior to the Closing Date, Acquiror will not without the prior
written consent of Acquiree and the Shareholders:
(a) amend its Charter Documents or bylaws (or similar
organizational documents);
(b) authorize for issuance, issue, sell, deliver, grant any
options for, or otherwise agree or commit to issue, sell or deliver any shares
of its capital stock or any other securities;
(c) recapitalize, split, combine or reclassify any shares of
its capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; or purchase, redeem or otherwise acquire any of its
securities or modify any of the terms of any such securities;
(d) (i) create, incur, assume or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing notes
payable, lines of credit or other credit facilities or in the ordinary course of
business; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other or (iii) make any loans, advances or capital contributions to, or
investments in, any other Person;
(e) (i) increase in any manner the rate of compensation of any
of its directors, officers or other employees everywhere, (ii) pay or agree to
pay any bonus, pension, retirement allowance, severance or other employee
benefit except as required under currently existing Acquiree Benefit Plans,
except for holiday bonuses in an aggregate amount not to exceed holiday bonuses
for the prior year, or (iii) amend, terminate or enter into any employment,
consulting, severance, change in control or similar agreements or arrangements
with any of its directors, officers or other employees;
(f) enter into any material agreement, commitment or contract,
except agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business;
(g) other than in the ordinary course of business, authorize,
recommend, propose or announce an intention to authorize, recommend or propose,
or enter into any Contract with respect to, any (i) plan of liquidation or
dissolution, (ii) acquisition of a material amount of assets or
25
securities, (iii) disposition or Encumbrance of a material amount of assets or
securities, (iv) merger or consolidation or (v) material change in its
capitalization;
(h) change any material accounting or Tax procedure or
practice;
(i) take any action the taking of which, or knowingly omit to
take any action the omission of which, would cause any of the representations
and warranties herein to fail to be true and correct in all material respects as
of the date of such action or omission as though made at and as of the date of
such action or omission;
(j) compromise, settle or otherwise modify any material claim
or litigation;
(k) permit any existing insurance policy insuring Acquiror
Assets to terminate; or
(l) commit, promise or agree to do any of the foregoing.
8.2 MAINTENANCE OF THE ASSETS. Acquiror shall use its reasonable best
efforts to continue to maintain and service the Acquiror Assets consistent with
past practice. Acquiror shall not directly or indirectly, sell or encumber all
or any part of the Acquiror Assets, other than sales in the ordinary course of
business or initiate or participate in any discussions or negotiations or enter
into any agreement to do any of the foregoing.
8.3 EMPLOYEES AND BUSINESS RELATIONS. Acquiror shall use commercially
reasonable efforts to keep available the services of its current employees and
agents and to maintain its relations and goodwill with its suppliers, customers,
distributors and any others having business relations with it.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF
ACQUIREE AND THE SHAREHOLDERS
The obligations of Shareholders to consummate the Transactions shall be
subject to the satisfaction or waiver, on or before the Closing Date, of each of
the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Acquiror contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
an earlier date) shall also be true and correct on and as of the Closing Date,
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Closing Date.
9.2 AGREEMENTS, CONDITIONS AND COVENANTS. Acquiror shall have performed
or complied in all material respects with all agreements, conditions and
covenants required by this Agreement to be performed or complied with by it on
or before the Closing Date.
26
9.3 MATERIAL ADVERSE EFFECT. There shall have been no Material Adverse
Effect on Acquiror.
9.4 CERTIFICATES. Acquiree shall have received a certificate of an
executive officer of Acquiror to the effect set forth in Sections 9.1, 9.2 and
9.3, respectively.
9.5 REQUIRED CONSENTS. Acquiror shall have obtained all consents from
third parties necessary for consummation of the Transactions or the absence of
which would result in a Material Adverse Effect on Acquiror.
9.6 ANCILLARY DOCUMENTS. Acquiror shall have tendered executed copies
of the respective Transaction Documents to which it is intended to be a party.
9.7 LEGALITY. All required governmental approvals shall have been
obtained and any applicable waiting periods, shall have expired. No Law or Court
Order shall have been enacted, entered, promulgated or enforced by any court or
governmental entity that is in effect and that has the effect of making the
Transactions illegal or otherwise prohibiting the consummation of the
Transactions and no legal action shall be pending or threatened which is
reasonably likely to have a Material Adverse Effect on any Party.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR
The obligations of Acquiror to consummate the Transactions shall be
subject to the satisfaction or waiver, on or before the Closing Date, of each of
the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Acquiree and Shareholders contained in this Agreement shall be true and
correct on the date hereof and (except to the extent such representations and
warranties speak as of an earlier date) shall also be true and correct on and as
of the Closing Date, except for changes contemplated by this Agreement, with the
same force and effect as if made on and as of the Closing Date.
10.2 AGREEMENTS, CONDITIONS AND COVENANTS. Acquiree and Shareholders
shall have performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or complied
with by each of them on or before the Closing Date.
10.3 MATERIAL ADVERSE EFFECT. There shall have been no Material Adverse
Effect on Acquiree.
10.4 CERTIFICATES. Acquiror shall have received a certificate of an
executive officer of Acquiree and each Shareholder to the effect set forth in
Sections 10.1, 10.2 and 10.3, respectively.
10.5 REQUIRED CONSENTS. Acquiree and Shareholders shall have obtained
all consents from third parties necessary for the consummation of the
Transactions or the absence of which would result in a Material Adverse Effect
on Acquiree.
27
10.6 ANCILLARY DOCUMENTS. Acquiree and each Shareholder shall have
tendered executed copies of the Transaction Documents to which each of them is
intended to be a party.
10.7 LEGALITY. All required governmental approvals shall have been
obtained and any applicable waiting periods, shall have expired. No Law or Court
Order shall have been enacted, entered, promulgated or enforced by any court or
governmental entity that is in effect and that has the effect of making the
Transactions illegal or otherwise prohibiting the consummation of the Merger and
no legal action shall be pending or threatened which is reasonably likely to
have a Material Adverse Effect on any Party.
ARTICLE XI
TERMINATION
11.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time before the Closing Date:
(a) By mutual written consent of Acquiror and Shareholders
owning at least 51% of the Shares.
(b) By Acquiror or Shareholders owning at least 51% of the
Shares, if the Closing shall not have been consummated within five (5) business
days of the date of this Agreement (the "Termination Date"); provided, however,
that the right to terminate this Agreement under this Section 11.1(b) shall not
be available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing Date
to occur on or before the Termination Date;
(c) By Acquiror or Shareholders owning at least 51% of the
Shares if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued a Court Order (which Court
Order the Parties shall use commercially reasonable efforts to lift) that
permanently restrains, enjoins or otherwise prohibits the Transactions, and such
Court Order shall have become final and nonappealable;
(d) By Shareholders owning at least 51% of the Shares if
Acquiror shall have breached, or failed to comply with, in any material respect,
any of its obligations under this Agreement or any representation or warranty
made by Acquiror shall have been incorrect in any material respect when made,
and such breach, failure or misrepresentation is not cured within 3 days after
notice thereof, and in either case, any such breaches, failures or
misrepresentations, individually or in the aggregate, results or would
reasonably be expected to result in a failure to satisfy a condition to
Acquiror's obligations to consummate the transactions contemplated hereby;
(e) By Acquiror if Acquiree or any Shareholder shall have breached, or
failed to comply with, in any material respect, any of its obligations under
this Agreement or any representation or warranty made by it shall have been
incorrect in any material respect when made, and such breach, failure or
misrepresentation is not cured within 3 days after notice thereof, and in either
case, any such breaches, failures or misrepresentations, individually or in the
aggregate, results
28
or would reasonably be expected to result in a failure to satisfy a condition to
Acquiree's or any Shareholder's obligations to consummate the transactions
contemplated hereby;
11.2 EFFECT OF TERMINATION.
(a) Except as otherwise provided in Section 11.2(b) hereof, if
this Agreement is terminated pursuant to Section 11.1(a), (b) or (c), this
Agreement shall be terminated and there shall be no liability on the part of any
of the Parties. Notwithstanding the foregoing, nothing herein shall relieve any
Party from liability for any willful breach hereof; provided that the provisions
of Section 6.5, and this Section 11.2 shall survive the termination hereof.
(b) If this Agreement is terminated and it is determined that
Acquiror or Acquiree, as the case may be, during the forty-five (45) day period
ending on March 21, 2002, accepted or made any offer, entered into any
negotiations or discussions, or entertained any expressions of interest with a
third party, similar to or involving the transactions referred to herein,
liquidated damages in the amount of Cdn$600,000 shall be due and payable by the
Party engaging in such conduct to the other Party.
ARTICLE XII
GENERAL MATTERS
12.1 CONTENTS OF AGREEMENT. This Agreement, together with the other
Transaction Documents, set forth the entire understanding of the Parties hereto
with respect to the Transactions and supersede all prior agreements or
understandings among the Parties regarding those matters.
12.2 PARTIES IN INTEREST, ASSIGNMENT, ETC. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the Parties
hereto. No Party hereto shall assign this Agreement or any right, benefit or
obligation hereunder. Any term or provision of this Agreement may be waived at
any time by the Party entitled to the benefit thereof by a written instrument
duly executed by such Party. The Parties hereto shall execute and deliver any
and all documents and take any and all other actions that may be deemed
reasonably necessary by their respective counsel to complete the Transactions.
Nothing in this Agreement is intended or will be construed to confer on any
Person other than the Parties hereto any rights or benefits hereunder.
12.3 INTERPRETATION. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (d) "including," "includes" or similar words has the inclusive
meaning frequently identified with the phrase "but not limited to" and (e)
references to "hereunder" or "herein" relate to this Agreement. The section and
other headings contained in this Agreement are for reference purposes only and
shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, and Schedule
references are to this Agreement unless otherwise specified. The Schedules
referred to in this Agreement will be deemed
29
to be a part of this Agreement. Each accounting term used herein that is not
specifically defined herein shall have the meaning given to it under GAAP.
12.4 NOTICES. All notices that are required or permitted hereunder
shall be in writing and shall be sufficient if personally delivered or sent by a
nationally recognized overnight courier upon proof of delivery. Any notices
shall be deemed given upon receipt at the address set forth below, unless such
address is changed by notice to the other Party hereto:
If to Acquiror: Harmony Trading Corp.
000 Xx. Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxx X. Yersh, President
With a required copy to: Xxxxxx Gottbetter & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx Xxxxxxxxxx
If to Acquiree to: Nuvo Way, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx X0X 0X0 Xxxxxx
Attention: Xxxxxxx Xxxxx, President
With a required copy to: Spiegel Xxxxxx
0, Xxxxx Xxxxx-Xxxxx
Xxxxxx 0000
Xxxxxxxx, Xxxxxx X0X 0X0
Xxxxxx
Attention: Xxxxxxxx Xxxxxxxx- Xxxx
If to any Stockholder,
to such Stockholder
as follows: c/o Nuvo Way, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx X0X 0X0
Xxxxxx
12.5 GOVERNING LAW. This Agreement shall be construed and interpreted
in accordance with the Laws of the State of New York without regard to its
provisions concerning conflict of laws.
12.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
30
12.7 WAIVERS. Compliance with the provisions of this Agreement may be
waived only by a written instrument specifically referring to this Agreement and
signed by the Party waiving compliance. No course of dealing, nor any failure or
delay in exercising any right, will be construed as a waiver, and no single or
partial exercise of a right will preclude any other or further exercise of that
or any other right.
12.8 MODIFICATION. No supplement, modification or amendment of this
Agreement will be binding unless made in a written instrument that is signed by
each of the Parties to this Agreement.
12.9 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or equity.
12.10 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable Law in an acceptable manner to the end that the
Transactions are fulfilled to the extent possible.
12.11 FURTHER ASSURANCES. The Parties hereto agree to execute and
deliver such further instruments and documents as may reasonably be requested by
another Party in order to carry out fully the intent and accomplish the purposes
of this Reorganization Agreement and the Transactions referred to herein.
[Signatures on following page]
31
IN WITNESS WHEREOF, this Agreement has been executed by the Parties
hereto as of the day and year first written above.
ACQUIROR: SHAREHOLDERS:
Harmony Trading Corp. 3073815 Canada Inc.
By: /s/ Hershey J. Yersh By: /s/ Xxxxxxx Xxxxx
----------------------------------- -------------------------------------
Name: Hershey J. Yersh Name: Xxxxxxx Xxxxx
Title: President Title: President
ACQUIREE:
Nuvo Way, Inc.
3949559 Canada Inc.
By: /s/ Xxxxxxx Xxxxx
----------------------------------- By: /s/ Xxxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxx ---------------------------------------
Title: President Name: Xxxxxxxx Xxxxxx
Title: President
Group Intercapital, Inc.
0000-0000 Xxxxxx Inc.
By: /s/ Xxxxxx Xxxxxxx
----------------------------------- By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxxx ---------------------------------------
Title: President Name: Xxxxxx Xxxxxx
Title: President
/s/ Xxxxxxx Xxxxx
-----------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxx Xxxxxx
-------------------------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxx
-------------------------------------------
Xxxxx Xxxx
/s/ Xxxxx Xxxxx
-------------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
32
OPTIONEES (SOLELY WITH RESPECT TO SECTION 2.10):
/s/ Xxxxx Xxxxx
-----------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
-----------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxx
-----------------------------------------
Xxxxx Xxxx
/s/ Xxxxxxx Xxxxxx
-----------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxxxxxxxx
-----------------------------------------
Xxxx Xxxxxxxxxxxx
33
SCHEDULE 2.1
NUMBER OF ACQUIREE
SHAREHOLDER SHARES TO BE SOLD ADDRESS
----------- ----------------- -------
3073815 Canada Inc. 925,000 0000 Xxxxxx Xxxxxx, Xx-Xxxxxxx,
Xxxxxx X0X 0X0
3949559 Canada Inc. 325,000 0000 Xxxxxx Xxxxxxxx, Xxxxxxxx,
Xxxxxx X0X 0X0
0000-0000 Xxxxxx Inc. 1,075,000 000 xxxxxxxx Xxxx, Xxxxxxxxx
Xxxxxx X0X 0X0
Xxxx Xxxxxx 350,000 0000 Xxxx Xx Xxx, Xxx. 0,
Xxxx Xx. Xxx, Xxxxxx X0X 0X0
Xxxxx Xxxx 675,000 00000 Xxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxx X0X 0X0
Xxxxx Xxxxx 825,000 0000 Xxxxxxx Xxxxxx,
Xxxxxxxx Xxxxxx X0X 0X0
Xxxxxx Xxxxxx 825,000 0 Xxxxx Xxxxxx, Xxxxxx Xxxxxx,
Xxxxxx X0X 0X0
TOTAL 5,000,000
34
SCHEDULE 2.3
ACQUIROR'S CERTIFICATE OF AMENDMENT
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
HARMONY TRADING CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
THE UNDERSIGNED, being the President of HARMONY TRADING CORP., hereby certifies:
The name of the corporation is Harmony Trading Corp. (the "Corporation").
1. The certificate of incorporation of said Corporation was filed by the
Department of State on the 13th day of August, 1996.
2. The certificate of incorporation of the Corporation is hereby amended
to create and designate a series of preferred stock to be referred to as Series
A Preferred Stock.
3. To accomplish the foregoing, Article Fourth of the certificate of
incorporation relating to the capital stock of the Corporation is hereby amended
to read as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 205,000,000 of which 200,000,000 shares shall
be designated as common stock, par value $.000333 per share, 3,333,334
shares shall be designated as Series A Preferred Stock, par value $.001
per share, and 1,666,666 shares shall be designated as Preferred Stock,
par value $.001 per share.
Series A Preferred Stock shall have the following powers, preferences,
rights, qualifications, limitations and restrictions:
Voting Rights. The Series A Preferred Stock will be pari passu with the
common stock with respect to voting rights. Accordingly, the holder of
each share of Series A Preferred Stock shall
35
have the right to one vote for each such share held on any matter,
question or proposition whatsoever that may properly come before the
stockholders of the Corporation at meetings of stockholders of this
corporation at which holders of common stock are entitled to vote or with
respect to any other circumstance in which a stockholder of common stock
is entitled to vote or to consent. With respect to such vote, each share
of Series A Preferred Stock shall carry the same voting power as each
share of common stock. As long as any shares of Series A Preferred Stock
are issued and outstanding, the Corporation may not take any corporate
action that would serve to diminish the voting rights of holders of the
Series A Preferred Stock in a manner different from the voting rights of
holders of the Corporation's common stock without the prior written
consent of persons holding at least 2/3 of the then outstanding shares of
Series A Preferred Stock.
Dividend Rights. The Series A Preferred Stock will be pari passu with the
common stock with respect to dividend rights. Accordingly, the holder of
each share of Series A Preferred Stock shall be entitled to receive
dividends out of any assets legally available therefor, on the same basis,
at the same time and in the same amount as the holder of each share of
common stock of the Corporation, when, as, and if declared by the board of
directors.
Liquidation Rights. The Series A Preferred Stock will be pari passu with
the common stock with respect to liquidation rights. Accordingly, in the
event of any liquidation, dissolution or winding up of this corporation,
either voluntary or involuntary, the holder of each share of Series A
Preferred Stock shall be entitled to receive, on the same basis, at the
same time, and in the same amount, as the holder of each share of common
stock of the Corporation, the holder's proportionate share of the assets
of the Corporation distributed as part of such liquidation, dissolution or
winding up.
Automatic Redemption. Subject to applicable law, the Corporation shall
automatically redeem shares of Series A Preferred Stock, for an amount per
share equal to $.001, in direct proportion to, and at the time of, the
issuance of shares of the Corporation's common stock, which shall be on
the first and second anniversaries of the closing date of a Reorganization
Agreement dated March 27, 2002 among the Corporation, Group Intercapital,
Inc., a Canadian corporation, Nuvo Way, Inc., a Canadian corporation
("NUVO"), Xxxxxxx Xxxxx, and the shareholders of NUVO. From and after each
redemption date, all rights of the holders of redeemed Series A Preferred
Stock shall cease with respect to such shares, and such shares shall not
thereafter be deemed to be outstanding for any purpose whatsoever.
Restrictions on Transfer. The Series A Preferred Stock may not be
transferred or assigned by the individual or entity to which it is
granted, otherwise than by will or the laws of descent and distribution.
36
The undesignated shares of Preferred Stock may be issued from time to
time in one or more series or classes. The Board of Directors is hereby
expressly authorized to provide by resolution or resolutions duly
adopted prior to issuance, for the creation of each such series and
class and to fix the designation and the powers, preferences, rights,
qualifications, limitations, and restrictions relating to the shares of
each such series. The authority of the
Board of Directors with respect to each series of Preferred Stock shall
include, but not be limited to, determining the following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof if different from the par
value thereof;
(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the term
of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable on any shares
of stock of any other class or any other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any distribution of
the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or other Corporation
purposes and the terms and provisions relating to the operation thereof;
(g) whether the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or any other
series of Preferred Stock or any other securities and, if so, the price or
prices or the rate or rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of conversion or
exchange;
(h) the conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of Preferred
Stock or of any other class; and
(i) any other powers, preferences and relative, participating,
options and other special rights, and any qualifications, limitations and
restrictions, thereof.
37
The powers, preferences and relative, participating optional and other
special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. All
shares of any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that shares of
any one series issued at different times may differ as to the dates
from which dividends thereof shall be cumulative."
The foregoing amendment was authorized by the unanimous written consent
of the Board of Directors of the Corporation. Under Section 502 of the Business
Corporation Law, shareholder approval was not required for this action.
IN WITNESS WHEREOF, I have signed this certificate on the 27th day of
March, 2002, and I affirm the statements contained herein as true under
penalties of perjury.
/s/ Xxxxx X. Yersh
------------------------------
Xxxxx X. Yersh
President
38
SCHEDULE 2.5
LIST OF PERSONS RECEIVING ACQUIROR OPTIONS
NUMBER
NAME OF OPTIONS ADDRESS
---- ---------- -------
Xxxxx Xxxxx 25,000 0000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx,
Xxxxxx X0X 0X0
Xxxxxxx Xxxxx 25,000 0 Xxxxx Xxxxxx, Xxxxxx Xxxxxx,
Xxxxxx, Xxxxxx X0X 0X0
Xxxxx Xxxxxx 25,000 0 Xxxxx Xxxxxx, Xxxxxx-Xxxxxx,
Xxxxxx, Xxxxxx X0X 0X0
Xxxxx Xxxx 25,000 00000 Xxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxx
Xxxxxx X0X 0X0
Xxxxxxx Xxxxxx 25,000 000 XxxxXxx 000
Xx. Xxxxxxx, Xxxxxx
Xxxxxx X0X 0XX
Xxxxx Xxxxxx 12,500 000 Xxxxxxx, X.X. Xxx 00
Xxxxxx, Xxxxxx,
Xxxxxx JOP 1HO
Xxxx Xxxxxxxxxxxx 12,500 000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx,
Xxxxxx X0X 0X0
39
SCHEDULE 2.6
FORM OF ASSIGNMENT AGREEMENT AMONG
ACQUIROR, ACQUIREE AND GIC
ASSIGNMENT AGREEMENT
This Assignment Agreement (the "Agreement") is entered into as of the
3rd day of April 2002 by and among Group Intercapital Inc., a Canadian
corporation (the "Assignor"); Harmony Trading Corporation, a New York
corporation (the "Assignee"); and Nuvo Way, Inc., a Canadian corporation
("Nuvo"). Assignor, Assignee and Nuvo are referred to severally herein as a
"Party" and jointly as the "Parties"
PREAMBLE
WHEREAS, Assignor has periodically made loans to Nuvo
with respect to which Nuvo is presently indebted to Assignor
in the amount of CDN $800,000, which loan to Assignor
represents an account receivable (the "Receivable"); and
WHEREAS, Assignor is a shareholder of Assignee; and
WHEREAS, Assignor, Assignee, and Nuvo are Parties to
a Reorganization Agreement dated March 27, 2002, pursuant to
which Assignor has agreed to assign and transfer the
Receivable to Assignee as a contribution to capital; and
WHEREAS, the Parties desire that the transfer and
assignment of the Receivable to Assignee be accomplished in
accordance with the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration,
the sufficiency of which is hereby acknowledged the Parties
hereto agree as follows:
1. ASSIGNMENT.
Assignor hereby transfers and assigns to Assignee, and Assignee accepts
the assignment of, Assignor's interest in the Receivable from Nuvo. Assignee
agrees to treat the assignment of the Receivable to it as a contribution to
capital by Assignor.
40
2. CONSENT OF NUVO.
Nuvo hereby consents to the assignment by Assignor of Assignor's
rights, title and interest in the Receivable to Assignee, and agrees to treat
Assignee for all purposes as the owner of the Receivable.
3. FURTHER ACTIONS.
Assignor, Assignee and Nuvo hereby agree to execute and deliver any and
all documents and to take any and all actions reasonably requested by the other
to effect the assignment hereunder or to otherwise effect the transactions
contemplated hereby.
4. SEVERABILITY.
If one or more of the provisions of this Agreement shall be determined
by a court of competent jurisdiction to be invalid, illegal or unenforceable in
any respect, the portion of such provision not so held, and the remaining
provisions of this Agreement shall be construed as if such invalid, illegal or
unenforceable provision were not included herein.
5. AMENDMENTS, MODIFICATIONS AND WAIVERS.
No provision of this Agreement may be waived, modified or amended
except in a written instrument signed by the Party against whom such waiver,
modification or amendment is sought to be enforced. No waiver of any provision
hereof shall be deemed to be a waiver of any other provision or to imply any
future waiver of the same provision.
6. SUCCESSORS AND ASSIGNS.
The provisions hereof shall be binding upon and shall inure to the
benefit of the Parties and their respective successors and assigns.
7. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to any conflicts of laws
provisions thereof. The Parties agree to submit any dispute under this Agreement
to the exclusive jurisdiction of the courts of the State of New York.
8. COUNTERPARTS.
This Agreement may be executed in one or more counterparts which, when
taken together, shall comprise one and the same document.
41
IN WITNESS WHEREOF, the undersigned have set their respective hands as
the date first above written.
GROUP INTERCAPITAL INC. HARMONY TRADING CORP.
("ASSIGNOR") ("ASSIGNEE")
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Yersh
------------------------------------ -------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxx X. Yersh
Title: President Title: President
NUVO WAY INC.
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
42
SCHEDULE 2.7
FORM OF ASSIGNMENT AGREEMENT AMONG
ACQUIROR, ACQUIREE AND 3073815 CANADA INC.
ASSIGNMENT AGREEMENT
This Assignment Agreement (the "Agreement") is entered into as of the
3rd day of April 2002 by and among 3073815 Canada Inc., Canadian corporation
(the "Assignor"); Harmony Trading Corporation, a New York corporation (the
"Assignee"); and Nuvo Way, Inc., a Canadian corporation ("Nuvo"). Assignor,
Assignee and Nuvo are referred to severally herein as a "Party" and jointly as
the "Parties"
PREAMBLE
WHEREAS, Assignor has periodically made loans to Nuvo
with respect to which Nuvo is presently indebted to Assignor
in the amount of CDN $75,000, which loan to Assignor
represents an account receivable (the "Receivable"); and
WHEREAS, Assignor, Assignee, and Nuvo are Parties to
a Reorganization Agreement dated March 27, 2002, pursuant to
which Assignor will exchange shares of Nuvo owned by Assignor
together with the Receivable to Assignee in exchange for
shares of Assignee's common stock; and
WHEREAS, the Parties desire that the transfer and
assignment of the Receivable to Assignee be accomplished in
accordance with the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration,
the sufficiency of which is hereby acknowledged the Parties
hereto agree as follows:
1. ASSIGNMENT.
Assignor hereby transfers and assigns to Assignee, and Assignee accepts
the assignment of, Assignor's interest in the Receivable from Nuvo. Assignee
agrees to treat the assignment of the Receivable to it as a contribution to
capital by Assignor.
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2. CONSENT OF NUVO.
Nuvo hereby consents to the assignment by Assignor of Assignor's
rights, title and interest in the Receivable to Assignee, and agrees to treat
Assignee for all purposes as the owner of the Receivable.
3. FURTHER ACTIONS.
Assignor, Assignee and Nuvo hereby agree to execute and deliver any and
all documents and to take any and all actions reasonably requested by the other
to effect the assignment hereunder or to otherwise effect the transactions
contemplated hereby.
4. SEVERABILITY.
If one or more of the provisions of this Agreement shall be determined
by a court of competent jurisdiction to be invalid, illegal or unenforceable in
any respect, the portion of such provision not so held, and the remaining
provisions of this Agreement shall be construed as if such invalid, illegal or
unenforceable provision were not included herein.
5. AMENDMENTS, MODIFICATIONS AND WAIVERS.
No provision of this Agreement may be waived, modified or amended
except in a written instrument signed by the Party against whom such waiver,
modification or amendment is sought to be enforced. No waiver of any provision
hereof shall be deemed to be a waiver of any other provision or to imply any
future waiver of the same provision.
6. SUCCESSORS AND ASSIGNS.
The provisions hereof shall be binding upon and shall inure to the
benefit of the Parties and their respective successors and assigns.
7. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to any conflicts of laws
provisions thereof. The Parties agree to submit any dispute under this Agreement
to the exclusive jurisdiction of the courts of the State of New York.
8. COUNTERPARTS.
This Agreement may be executed in one or more counterparts which, when
taken together, shall comprise one and the same document.
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IN WITNESS WHEREOF, the undersigned have set their respective hands as
the date first above written.
3073815 CANADA INC. HARMONY TRADING CORP.
("ASSIGNOR") ("ASSIGNEE")
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Yersh
------------------------------------ -------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxx X. Yersh
Title: President Title: President
NUVO WAY INC.
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
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SCHEDULE 3.1
FORM OF INVESTMENT REPRESENTATION LETTER TO BE EXECUTED BY
EACH OF THE SHAREHOLDERS, AND THE ACQUIREE CONTRACTORS
INVESTMENT REPRESENTATION LETTER
In connection with my acquisition of shares of common stock (the
"Shares") of Harmony Trading Corp., a New York corporation ("Harmony"), as
described in the Reorganization Agreement dated March 27, 2002 among Harmony,
Group Intercapital, Inc., a Canadian corporation, Nuvo Way Inc., a Canadian
corporation ("Nuvo"), Xxxxxxx Xxxxx, and the Nuvo Shareholders, the undersigned
represents, and warrants to Harmony that:
(i) The undersigned understands and acknowledges that (A) none of the
Shares have been registered under the Securities Act of 1933, as amended (the
"Securities Act") or the securities laws of any state, based upon exemptions
from such registration requirements; (B) the Shares are and will be "restricted
securities" as said term is defined in Rule 144 of the Rules and Regulations
promulgated under the Securities Act; (C) the Shares may not be sold or
otherwise transferred unless they have been first registered under the
Securities Act and all applicable state securities laws, or unless exemptions
from such registration provisions are available with respect to said resale or
transfer; and (D) Harmony is under no contractual obligation to the undersigned
to register the Shares under the Securities Act or any state securities laws.
(ii) The undersigned will not sell or otherwise transfer any of the
Shares, or any interest therein, unless and until (A) said Shares shall have
first been registered under the Securities Act and all applicable state
securities laws; or (B) the undersigned shall obtain a written opinion from
Harmony's counsel to the effect that the proposed sale or transfer is exempt
from the registration provisions of the Securities Act and all applicable state
securities laws.
(iii) The undersigned is acquiring the Shares for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Shares or any part thereof or interest therein, without prejudice, however,
to the undersigned's right to sell or otherwise dispose of all or any part of
such Shares pursuant to an effective registration statement under the Securities
Act and in compliance with applicable federal and state securities laws or under
an exemption from such registration.
(iv) The undersigned has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment in the Shares, and has so evaluated the
merits and risks of such investment.
(v) The undersigned understands that the certificates representing the
Shares will bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER SAID ACT OR (II) AN OPINION OF COMPANY COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
Very truly yours,
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SCHEDULE 4.5
ACQUIROR CAPITALIZATION AT TIME
OF EXECUTION OF THIS AGREEMENT
Shares of Common Stock Outstanding: 9,380,000
Shares of Preferred Stock Outstanding: 0
ACQUIROR CAPITALIZATION
IMMEDIATELY FOLLOWING CLOSING
Shares of Common Stock Outstanding: 8,166,666 (1)
Shares of Preferred Stock Outstanding: 3,333,334
(1) An additional 3,583,334 common shares are being reserved for issuance with
respect to (i) 150,000 common shares underlying the Acquiror Options, (ii)
100,000 common shares to be issued to Xxxxxxx Xxxxx pursuant to her
employment agreement with Acquiror, and (iii) an aggregate of 3,333,334
shares of Acquiror Common Stock to be issued to the Shareholders on the
first and second anniversaries of the Closing Date.
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