SHARE EXCHANGE AGREEMENT Among Enigma Software Group, Inc., Colorado Stark and Alvin Estevez Dated June 28, 2006
Exhibit
10.4
Among
Colorado
Xxxxx
and
Xxxxx
Xxxxxxx
Dated
June 28, 2006
NY-446963 v5
TABLE
OF CONTENTS
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PAGE
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ARTICLE
I
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
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1
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Section
1.01
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Authority
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1
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Section
1.02
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No
Conflict With Other Instruments
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1
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Section
1.03
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Valid
Obligation
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1
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ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF ENIGMA
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2
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Section
2.01
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Organization
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2
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Section
2.02
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Capitalization
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2
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Section
2.03
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Absence
of Certain Changes or Events
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2
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Section
2.04
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Litigation
and Proceedings
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3
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Section
2.05
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No
Conflict With Other Instruments
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3
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Section
2.06
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Compliance
With Laws and Regulations
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3
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Section
2.07
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Approval
of Agreement
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3
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Section
2.08
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Valid
Obligation.
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3
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ARTICLE
III
PLAN OF EXCHANGE
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3
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Section
3.01
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The
Exchange.
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3
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Section
3.02
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Anti-Dilution
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4
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Section
3.03
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Closing
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4
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Section
3.04
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Closing
Events
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4
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ARTICLE
IV
SPECIAL COVENANTS
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4
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Section
4.01
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Indemnification
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4
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Section
4.02
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Sales
of Securities Under Rule 144, If Applicable
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5
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ARTICLE
V
CONDITIONS PRECEDENT TO OBLIGATIONS OF ENIGMA
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5
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Section
5.01
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Accuracy
of Representations and Performance of Covenants
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5
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Section
5.02
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No
Governmental Prohibition
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5
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Section
5.03
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Other
Items
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6
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ARTICLE
VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
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6
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Section
6.01
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Accuracy
of Representations and Performance of Covenants
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6
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Section
6.02
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Officer's
Certificate
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6
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Section
6.03
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Good
Standing
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6
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Section
6.04
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No
Governmental Prohibition
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6
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Section
6.05
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Consents
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6
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Section
6.06
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Other
Items
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6
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ARTICLE
VII
MISCELLANEOUS
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7
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Section
7.01
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Brokers
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7
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Section
7.02
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Governing
Law
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7
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Section
7.03
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Notices
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7
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Section
7.04
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Attorney's
Fees
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7
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Section
7.05
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Third
Party Beneficiaries
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8
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Section
7.06
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Expenses
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8
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Section
7.07
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Entire
Agreement
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8
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Section
7.08
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Survival;
Termination
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8
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Section
7.09
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Counterparts
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8
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Section
7.10
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Amendment
or Waiver
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8
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Section
7.11
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Best
Efforts
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8
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Exhibits
A.
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Exchange
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ii
THIS
SHARE EXCHANGE AGREEMENT (hereinafter referred to as this “Agreement”) is
entered into as of this 28 day of June, 2006, by and between Enigma Software
Group, Inc., a Delaware corporation (hereinafter referred to as “Enigma”), with
offices at 0 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 and the
stockholders of Enigma listed below (collectively, the “Stockholders”), upon the
following premises:
Premises
WHEREAS,
Enigma
is a publicly held corporation organized under the laws of the state of
Delaware;
WHEREAS,
the
Stockholders currently own an aggregate of 12,052,001 shares (the “Common
Shares”) of the common stock, $.001 par value per share, of Enigma (the “Common
Stock”) in the individual amounts set forth on Schedule A attached hereto,
constituting all of the shares of common stock including voting power, of Enigma
held by each such stockholder; and
WHEREAS,
the
Stockholders agree to return the Common Shares to Enigma in exchange (the
“Exchange”) for 7,433,988 shares (the “Preferred Shares”) of preferred stock,
$.001 par value per share (the “Preferred Stock”).
Agreement
NOW
THEREFORE,
on the
stated premises and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefits to the parties to
be
derived here from, and intending to be legally bound hereby, it is hereby agreed
as follows:
ARTICLE
I
REPRESENTATIONS
AND WARRANTIES OF THE
STOCKHOLDERS
The
Stockholders each hereby represent and warrant, jointly and not separately,
on
their own behalf, as of and at the Closing Date, as follows:
Section
1.01 Authority
.
He has
the full power, authority, and legal right and has taken all action required
by
law, and otherwise to consummate the transactions herein
contemplated.
Section
1.02 No
Conflict With Other Instruments
.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute a default under, or terminate, accelerate or modify
the
terms of any indenture, mortgage, deed of trust, or other material agreement,
or
instrument to which a Stockholder is a party or to which any of his assets
or
properties are subject.
Section
1.03 Valid
Obligation
.
This
Agreement and all agreements and other documents executed by Stockholder in
connection herewith constitute the valid and legally binding obligation of
Stockholder, enforceable in accordance with its or their terms, except as may
be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and subject to the qualification
that the availability of equitable remedies is subject to the discretion of
the
court before which any proceeding therefore may be brought.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF ENIGMA
As
an
inducement to, and to obtain the reliance of, the Stockholders, except as set
forth in the schedules of exceptions to these representations and warranties
to
be provided to the Stockholders by Enigma (the “Schedules”), Enigma represents
and warrants, as of the date hereof and as of and at the Closing Date, as
follows:
Section
2.01 Organization
.
Enigma
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has the corporate power and is duly
authorized under all applicable laws, regulations, ordinances, and orders of
public authorities to carry on its business in all material respects as it
is
now being conducted. Included in the Schedules are complete and correct copies
of the certificate of incorporation and bylaws of Enigma as in effect on the
date hereof. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of Enigma’s certificate of incorporation or bylaws. Enigma has taken
all action required by law, its certificate of incorporation, its bylaws, or
otherwise to authorize the execution and delivery of this Agreement, and Enigma
has full power, authority, and legal right and has taken all action required
by
law, its certificate of incorporation, bylaws, or otherwise to consummate the
transactions herein contemplated.
Section
2.02 Capitalization
.
Enigma’s authorized capitalization immediately prior to the closing consists of
(a) 100,000,000 shares of Common Stock, of which 16,243,267 shares are issued
and outstanding, and (b) 10,000,000 shares of Preferred Stock, none of which
are
issued and outstanding. All issued and outstanding shares are legally issued,
fully paid, and non-assessable and not issued in violation of the preemptive
or
other rights of any person.
Section
2.03 Absence
of Certain Changes or Events
Since
the
date of the most recent Enigma balance sheet:
(a) there
has
not been any material adverse change in the business, operations, properties,
assets or condition (financial or otherwise) of Enigma;
(b) Enigma
has not (i) amended its certificate of incorporation or bylaws except as
required by this Agreement; (ii) declared or made, or agreed to declare or
make
any payment of dividends or distributions of any assets of any kind whatsoever
to stockholders or purchased or redeemed, or agreed to purchase or redeem,
any
of its capital stock; (iii) made any material change in its method of
management, operation or accounting; (iv) entered into any transactions or
agreements other than in the ordinary course of business; or (v) made any
increase in or adoption of any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment, or
arrangement, made to, for or with its officers, directors, or employees;
and
(c) Enigma
has not (i) granted or agreed to grant any options, warrants, or other rights
for its stock, bonds, or other corporate securities calling for the issuance
thereof other than option granted in April 2006; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material obligation
or
liability (absolute or contingent) except liabilities incurred in the ordinary
course of business; (iii) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights, or canceled, or agreed to cancel,
any
debts or claims; or (iv) issued, delivered or agreed to issue or deliver, any
stock, bonds or other corporate securities including debentures (whether
authorized and unissued or held as treasury stock), except in connection with
this Agreement.
2
Section
2.04 Litigation
and Proceedings
There
are
no actions, suits, proceedings or investigations pending or, to the knowledge
of
Enigma after reasonable investigation, threatened by or against Enigma or
affecting Enigma or its properties, at law or in equity, before any court or
other governmental agency or instrumentality, domestic or foreign, or before
any
arbitrator of any kind except as disclosed in the Enigma Schedules. Enigma
has
no knowledge of any default on its part with respect to any judgment, order,
writ, injunction, decree, award, rule or regulation of any court, arbitrator,
or
governmental agency or instrumentality or any circumstance which after
reasonable investigation would result in the discovery of such
default.
Section
2.05 No
Conflict With Other Instruments
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, constitute a default under, or terminate, accelerate or modify
the
terms of, any indenture, mortgage, deed of trust, or other material agreement
or
instrument to which Enigma is a party or to which any of its assets, properties
or operations are subject.
Section
2.06 Compliance
With Laws and Regulations
To
the
best of its knowledge, Enigma has complied with all applicable statutes and
regulations of any federal, state, or other applicable governmental entity
or
agency thereof. This compliance includes, but is not limited to, the filing
of
all reports to date with federal and state securities authorities.
Section
2.07 Approval
of Agreement
The
Board of Directors of Enigma has authorized the execution and delivery of this
Agreement by Enigma and has approved this Agreement and the transactions
contemplated hereby.
Section
2.08 Valid
Obligation.
This
Agreement and all agreements and other documents executed by Enigma in
connection herewith constitute the valid and binding obligation of Enigma,
enforceable in accordance with its or their terms, except as may be limited
by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification
that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefore may be brought.
ARTICLE
III
PLAN
OF EXCHANGE
Section
3.01 The
Exchange.
On
the
terms and subject to the conditions set forth in this Agreement, on the Closing
Date (as defined in Section 3.03), each Stockholder who shall elect to accept
the exchange offer described herein (the “Accepting Stockholders”) by executing
this Agreement, shall assign, transfer and deliver, free and clear of all liens,
pledges, encumbrances, charges, restrictions or known claims of any kind,
nature, or description, the Common shares. In exchange for the transfer of
such
Common Shares by the Stockholders, Enigma shall issue to the Stockholders the
Preferred Stock. At the Closing, each Stockholder shall, on surrender of his
certificate or certificates representing such Common Shares to Enigma or its
registrar or transfer agent, be entitled to receive a certificate or
certificates evidencing his proportionate interest in the Preferred
Shares.
3
Section
3.02 Anti-Dilution
The
number of shares of Common Stock issuable upon exchange pursuant to Section
3.01
shall be appropriately adjusted to take into account any other stock split,
stock dividend, reverse stock split, recapitalization, or similar change in
the
Common Stock which may occur between the date of the execution of this Agreement
and the Closing Date.
Section
3.03 Closing
The
closing (“Closing”) of the transactions contemplated by this Agreement shall
occur immediately following the filing of a Certificate of Designations of
Series A Preferred Stock of Enigma which shall effectuate the designation of
the
rights and preferences of the Preferred Stock. Such Closing shall take place
at
a mutually agreeable time and place (the “Closing Date”).
Section
3.04 Closing
Events
At
the
Closing, Enigma and each of the Accepting Stockholders shall execute,
acknowledge, and deliver (or shall ensure to be executed, acknowledged, and
delivered), any and all certificates, opinions, financial statements, schedules,
agreements, resolutions, rulings or other instruments required by this Agreement
to be so delivered at or prior to the Closing, together with such other items
as
may be reasonably requested by the parties hereto and their respective legal
counsel in order to effectuate or evidence the transactions contemplated hereby.
ARTICLE
IV
SPECIAL
COVENANTS
Section
4.01 Indemnification
(a) Enigma
hereby agrees to indemnify the stockholders as of the date of execution of
this
Agreement against any loss, liability, claim, damage, or expense (including,
but
not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever) (“Loss”), to which any of them may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentations made under Article II of this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and consummation of
the
transactions contemplated hereby and termination of this Agreement for one
year
following the Closing.
(b) The
Stockholders, individually and not jointly, agree to indemnify Enigma and each
of the officers, agents and directors of Enigma as of the date of execution
of
this Agreement against any Loss, to which it or they may become subject arising
out of or based on any inaccuracy appearing in or misrepresentations made under
Article I of this Agreement. The indemnification provided for in this paragraph
shall survive the Closing and consummation of the transactions contemplated
hereby and termination of this Agreement for one year following the
Closing.
4
Section
4.02 Sales
of Securities Under Rule 144, If Applicable
(a) Enigma
will use its best efforts to at all times satisfy the current public information
requirements of Rule 144 promulgated under the Securities Act so that its
stockholders can sell restricted securities that have been held for one year
or
more or such other restricted period as required by Rule 144 as it is from
time
to time amended.
(b) Upon
being informed in writing by any person holding restricted stock of Enigma
that
such person intends to sell any shares under Rule 144 promulgated under the
Securities Act (including any rule adopted in substitution or replacement
thereof), Enigma will certify in writing to such person that it is compliance
with Rule 144 current public information requirement to enable such person
to
sell such person’s restricted stock under Rule 144, as may be applicable under
the circumstances.
(c) If
any
certificate representing any such restricted stock is presented to Enigma’s
transfer agent for registration or transfer in connection with any sales
theretofore made under Rule 144, provided such certificate is duly endorsed
for
transfer by the appropriate person(s) or accompanied by a separate stock power
duly executed by the appropriate person(s) in each case with reasonable
assurances that such endorsements are genuine and effective, and is accompanied
by a legal opinion that such transfer has complied with the requirements of
Rule
144, as the case may be, Enigma will promptly instruct its transfer agent to
register such transfer and to issue one or more new certificates representing
such shares to the transferee and, if appropriate under the provisions of Rule
144, as the case may be, free of any stop transfer order or restrictive legend.
(d) This
Section 4.02 shall survive the closing of this Agreement for a period of two
(2)
years.
ARTICLE
V
CONDITIONS
PRECEDENT TO OBLIGATIONS OF ENIGMA
The
obligations of Enigma under this Agreement are subject to the satisfaction,
at
or before the Closing Date, of the following conditions:
Section
5.01 Accuracy
of Representations and Performance of Covenants
The
representations and warranties made by the Stockholders in this Agreement were
true when made and shall be true at the Closing Date with the same force and
effect as if such representations and warranties were made at and as of the
Closing Date (except for changes therein permitted by this Agreement). The
Stockholders shall have performed or complied with all covenants and conditions
required by this Agreement to be performed or complied with by the Stockholders
prior to or at the Closing.
Section
5.02 No
Governmental Prohibition
No
order,
statute, rule, regulation, executive order, injunction, stay, decree, judgment
or restraining order shall have been enacted, entered, promulgated or enforced
by any court or governmental or regulatory authority or instrumentality which
prohibits the consummation of the transactions contemplated hereby.
5
Section
5.03 Other
Items
Enigma
shall have received such further opinions, documents, certificates or
instruments relating to the transactions contemplated hereby as
Enigma may
reasonably request.
ARTICLE
VI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF
THE STOCKHOLDERS
The
obligations of the Stockholders under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following
conditions:
Section
6.01 Accuracy
of Representations and Performance of Covenants
The
representations and warranties made by Enigma in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Enigma shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by
Enigma.
Section
6.02 Officer's
Certificate
The
Stockholders shall have been furnished with certificates dated the Closing
Date
and signed by duly authorized executive officers of Enigma, to the effect that
no litigation, proceeding, investigation or inquiry is pending, or to the best
knowledge of Enigma threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement
or,
to the extent not disclosed in the Schedules, by or against Enigma, which might
result in any material adverse change in any of the assets, properties or
operations of Enigma.
Section
6.03 Good
Standing
Enigma
shall have received a certificate of good standing from the Secretary of State
of the State of Delaware or other appropriate office, dated as of a date within
ten days prior to the Closing Date certifying that Enigma is in good standing
as
a corporation in the State of Delaware and has filed all tax returns required
to
have been filed by it to date and has paid all taxes reported as due
thereon.
Section
6.04 No
Governmental Prohibition
No
order,
statute, rule, regulation, executive order, injunction, stay, decree, judgment
or restraining order shall have been enacted, entered, promulgated or enforced
by any court or governmental or regulatory authority or instrumentality which
prohibits the consummation of the transactions contemplated hereby.
Section
6.05 Consents
All
consents, approvals, waivers or amendments pursuant to all contracts, licenses,
permits, trademarks and other intangibles in connection with the transactions
contemplated herein, or for the continued operation of Enigma after the Closing
Date on the basis as presently operated shall have been obtained.
Section
6.06 Other
Items
The
Stockholders shall have received further opinions, documents, certificates,
or
instruments relating to the transactions contemplated hereby as the Stockholders
may reasonably request.
6
ARTICLE
VII
MISCELLANEOUS
Section
7.01 Brokers
The
parties hereto agree that, there were no finders or brokers involved in bringing
the parties together or who were instrumental in the negotiation, execution
or
consummation of this Agreement. Enigma and the Stockholders each agree to
indemnify the other against any claim by any third person other than those
described above for any commission, brokerage, or finder's fee arising from
the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
Section
7.02 Governing
Law
This
Agreement shall be governed by, enforced, and construed under and in accordance
with the laws of the United States of America and, with respect to the matters
of state law, with the laws of the State of New York. Venue for all matters
shall be in New York, New York, without giving effect to principles of conflicts
of law thereunder. Each of the parties (a) irrevocably consents and agrees
that
any legal or equitable action or proceedings arising under or in connection
with
this Agreement shall be brought exclusively in the federal courts of the United
States. By execution and delivery of this Agreement, each party hereto
irrevocably submits to and accepts, with respect to any such action or
proceeding, generally and unconditionally, the jurisdiction of the aforesaid
court, and irrevocably waives any and all rights such party may now or hereafter
have to object to such jurisdiction.
Section
7.03 Notices
Any
notice or other communications required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered to it or sent
by
telecopy, overnight courier or registered mail or certified mail, postage
prepaid, addressed as follows:
If
to
the
Stockholders, to:
0
Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000
If
to
Enigma, to the address set forth herein or such other addresses as shall be
furnished in writing by any party in the manner for giving notices hereunder,
and any such notice or communication shall be deemed to have been given (i)
upon
receipt, if personally delivered, (ii) on the day after dispatch, if sent by
overnight courier, (iii) upon dispatch, if transmitted by telecopy and receipt
is confirmed by telephone and (iv) three (3) days after mailing, if sent by
registered or certified mail.
Section
7.04 Attorney's
Fees
In
the
event that either party institutes any action or suit to enforce this Agreement
or to secure relief from any default hereunder or breach hereof, the prevailing
party shall be reimbursed by the losing party for all costs, including
reasonable attorney's fees, incurred in connection therewith and in enforcing
or
collecting any judgment rendered therein.
7
Section
7.05 Third
Party Beneficiaries
This
contract is strictly among Enigma and the Stockholders, and, except as
specifically provided, no director, officer, stockholder (other than the
Stockholders), employee, agent, independent contractor or any other person
or
entity shall be deemed to be a third party beneficiary of this
Agreement.
Section
7.06 Expenses
Subject
to Section 7.04 above, whether or not the Exchange is consummated, each of
Enigma and the Stockholders will bear their own respective expenses, including
legal, accounting and professional fees, incurred in connection with the
Exchange or any of the other transactions contemplated hereby.
Section
7.07 Entire
Agreement
This
Agreement represents the entire agreement between the parties relating to the
subject matter thereof and supersedes all prior agreements, understandings
and
negotiations, written or oral, with respect to such subject matter.
Section
7.08 Survival;
Termination
The
representations, warranties, and covenants of the respective parties shall
survive the Closing Date and the consummation of the transactions herein
contemplated for a period of two (2) years.
Section
7.09 Counterparts
This
Agreement may be executed in multiple counterparts, including by facsimile,
each
of which shall be deemed an original and all of which taken together shall
be
but a single instrument.
Section
7.10 Amendment
or Waiver
Every
right and remedy provided herein shall be cumulative with every other right
and
remedy, whether conferred herein, at law, or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the same or any other
default then, theretofore, or thereafter occurring or existing. At any time
prior to the Closing Date, this Agreement may by amended by a writing signed
by
all parties hereto, with respect to any of the terms contained herein, and
any
term or condition of this Agreement may be waived or the time for performance
may be extended by a writing signed by the party or parties for whose benefit
the provision is intended.
Section
7.11 Best
Efforts
Subject
to the terms and conditions herein provided, each party shall use its best
efforts to perform or fulfill all conditions and obligations to be performed
or
fulfilled by it under this Agreement so that the transactions contemplated
hereby shall be consummated as soon as practicable. Each party also agrees
that
it shall use its best efforts to take, or cause to be taken, all actions and
to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective this Agreement
and the transactions contemplated herein.
Signature
Page Follows
8
IN
WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
be
executed by their respective officers, hereunto duly authorized, as of the
date
first-above written.
By:
/s/
Colorado Xxxxx
Name:
Colorado Xxxxx
Title:
Executive Chairman
STOCKHOLDERS:
Colorado
Xxxxx
/s/
Colorado Xxxxx
Colorado
Xxxxx, as an individual
Xxxxx
Xxxxxxx
/s/
Xxxxx Xxxxxxx
Xxxxx
Xxxxxxx, as an individual
9
Exhibit
A
EXCHANGE
|
Name
|
Number
of Shares of
Common
Stock Cancelled
|
Number
of Shares of Preferred Stock
to
be Issued
|
|
Colorado
Xxxxx
|
6,056,872
|
3,736,036
|
|
Xxxxx
Xxxxxxx
|
5,995,129
|
3,697,952
|
|
TOTAL
|
12,052,001
|
7,433,988
|
