EXHIBIT 10.1
STOCK-FOR-STOCK EXCHANGE AGREEMENT
This Stock-For-Stock Exchange Agreement (the "Agreement"), entered
into this 1st day of November 2002, is by, between, and among TROPICAL
LEISURE RESORTS, INC., a publicly held Nevada corporation (hereinafter the
"Purchaser"), EWORLDMEDIA, INC., a Nevada corporation (hereinafter the
"Target Company"), and the shareholders of the Target Company who are
listed on Exhibit "A" (or who may be added thereto prior to Closing) and
who have executed Subscription Agreements in the form of Exhibit "B" (the
"Shareholders").
RECITALS:
WHEREAS, the Purchaser wishes to acquire, and the Shareholders, by
executing Exhibit "B" hereto, are willing to sell, all, or substantially
all, of the outstanding stock of the Target Company in exchange solely for
a part of the voting stock of the Purchaser whereby the Shareholders would
acquire not less than 80% of the stock of the Purchaser; and
WHEREAS, the parties hereto intend to qualify such transaction as a
tax-free corporate reorganization pursuant to Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, based upon the stated premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants
and agreements set forth herein, the mutual benefits to the parties to be
derived herefrom, and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto approve
and adopt this Stock-For-Stock Exchange Agreement and mutually covenant and
agree with each other as follows:
1. Stock-For-Stock Exchange Transaction.
1.1 Transfer of Outstanding Target Company Shares to Purchaser. On
the Closing Date the Shareholders shall transfer to the Purchaser
certificates for the number of shares of the common stock of the Target
Company described in Exhibit "A," which in the aggregate shall represent
not less than ninety percent (90%) of the issued and outstanding shares of
the common stock of the Target Company. In addition to the shares to be
transferred as set forth in Exhibit "A," shares issued by the Target
Company from the date of this Agreement through the close of business the
business day immediately preceding the Closing Date shall be added,
provided that the total number of such additional shares shall not exceed
1,036,000 shares. Each certificate to be transferred to the Purchaser
shall be duly endorsed in blank by the Shareholder or accompanied by duly
executed stock powers in blank with the signature guaranteed.
Alternatively, the Shareholder may assign his rights to the shares if the
shares have not been physically issued in the form of stock certificates,
or if the certificates have been lost.
1.2 Issuance of Shares to Target Company Shareholders. In exchange
for the transfer of the common stock of the Target Company pursuant to
Section 1.1 hereof, the Purchaser shall on the Closing Date and
contemporaneously with such transfer of the common stock of the Target
Company to it by the Shareholders, issue and deliver to the Shareholders
the number of shares of common stock of the Purchaser specified on Exhibit
"A" such that the Shareholders shall own not less than 80% of the
outstanding common stock of the Purchaser. In addition to the shares to be
issued as set forth in Exhibit "A," the Purchaser shall issue shares to any
Shareholder purchasing shares from the Target Company in its current
private stock offering from the date of this Agreement through the close of
business the business day immediately preceding the Closing Date, provided
that the total number of such additional shares shall not exceed 1,036,000
shares. The rate of exchange of shares of the Purchaser for shares of the
Target Company shall be one-for-one. Certificates for the shares shall
bear restrictive legends pursuant to Rule 144 promulgated by the Securities
and Exchange Commission (the "SEC"), and to designate any lockup
arrangements pertaining to such shares.
1.3 Shares Issuable for Outstanding Stock Options and Warrants.
Effective as of the Closing Date, each outstanding option and warrant to
purchase shares of the Target Company's common stock as set forth in
Exhibit "C" shall be converted into and thereafter constitute an option or
warrant to acquire shares of Purchaser, on the same terms and conditions as
were applicable under the option plan, option agreement, or warrant
agreement to which such obligations were subject based upon the same number
of shares of Purchaser's common stock as the holder of the option or
warrant would have been entitled to receive pursuant to this Agreement in
accordance with Section 1.2 hereof had such holder exercised such option or
warrant in full immediately prior to the Closing Date; provided that the
total number of shares to be issued by the Purchaser pursuant to this
obligation shall not exceed 1,370,000 shares, and further provided that the
assumption of the options or warrants does not give the holder thereof
additional benefits which he, she, or it did not have under the terms of
the applicable option plan, option agreement, or warrant agreement.
Purchaser shall reserve sufficient shares to meet its obligation pursuant
to this section.
1.4 Shares Issuable for Contractual Obligations. Effective as of the
Closing Date, each outstanding contractual obligation of the Target Company
to issue shares of common stock pursuant to existing performance agreements
as set forth in Exhibit "D" shall be converted into and thereafter
constitute an obligation of Purchaser to issue its shares on the same terms
and conditions as were applicable under the performance agreements with the
Target Company based upon the same number of shares of Purchaser's common
stock as the contracting party would have been entitled to receive pursuant
to this Agreement in accordance with Section 1.2 hereof had such party
earned the shares in full immediately prior to the Closing Date; provided
that the total number of shares to be issued by the Purchaser pursuant to
this obligation shall not exceed 1,637,000 shares, and further provided
that the assumption of these obligations does not give the contracting
party additional benefits which he, she, or it did not have under the terms
of the applicable performance agreement, nor does it provide the
contracting party with any right of
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action against Purchaser, except as pertains to the obligation to issue
such shares. Purchaser shall reserve sufficient shares to meet its
obligation pursuant to this section.
1.5 Shares Issuable Pursuant to Promissory Note. Effective as of the
Closing Date, the outstanding obligation of the Target Company to issue
shares of common stock pursuant to terms of the promissory note dated
October 15, 2002, to Fiduciary Privacy, Inc. in the principal amount of
$25,000, shall be converted into and thereafter constitute an obligation of
Purchaser to issue its shares on the same terms and conditions as were
applicable under the promissory note based upon the same number of shares
of Purchaser's common stock as the contracting party would have been
entitled to receive pursuant to this Agreement in accordance with Section
1.2 hereof had such party been entitled to the shares in full immediately
prior to the Closing Date; provided that the total number of shares to be
issued by the Purchaser pursuant to this obligation shall not exceed 70,000
shares, and further provided that the assumption of this obligation to
issue shares does not give the note holder additional benefits which it did
not have under the terms of the promissory note, nor does it obligate
Purchaser to the obligation to repay the note, except as pertains to the
obligation to issue such shares. Purchaser shall reserve sufficient shares
to meet its obligation pursuant to this section.
1.6 Lockup of Tropical Shares. Each of the shareholders of Purchaser
set forth in Exhibit "E-1" shall execute and deliver at Closing a Lockup
Agreement in form as set forth in Exhibit "F-1." Each of the shareholders
of Purchaser set forth in Exhibit "E-2" shall execute and deliver at
Closing a Lockup Agreement in form as set forth in Exhibit "F-2."
1.7 Cancellation of Shares by Purchaser. At or prior to Closing the
Purchaser shall cancel 20,000,000 outstanding shares and return such shares
to the authorized but unissued shares of the company.
2. Representations and Warranties of the Target Company. The Target
Company represents and warrants to the Purchaser as set forth below. These
representations and warranties are made as an inducement for the Purchaser
to enter into this Agreement and, but for the making of such
representations and warranties and their accuracy, the Purchaser would not
be a party hereto.
2.1 Organization and Authority. The Target Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada with full power and authority to enter into and perform the
transactions contemplated by this Agreement. The Target Company does not
have any subsidiaries or own any interest in any other entity. The Target
Company has been duly qualified as a foreign corporation for the
transaction of business in, and is in good standing as a foreign
corporation under the laws of, the State of California, such jurisdiction
comprising the sole jurisdiction in which the Target Company owns or leases
any property, or conducts any business, so as to require such
qualification, except as designated in such Schedule 2.1, and except for
jurisdictions in which the failure to so qualify would not result in a
Material Adverse Effect on the Target Company. For purposes of this
Agreement, the
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term "Material Adverse Effect" shall mean a material adverse effect on
the business, financial condition, property, profitability, prospects,
or operations of the applicable entity.
2.2 Capitalization. As of the date hereof, the authorized capital
stock of the Target Company consists of 100,000,000 shares of common stock,
par value $.001, of which as of the date hereof, 11,620,000 shares are issued
and outstanding. Further, the Target Company has authorized the issuance of
up to an additional 1,036,000 shares which may be issued before the Closing.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. In addition, the Target
Company has (i) 3,000,000 shares authorized for issuance under its stock
option/stock issuance plan, of which 100,000 shares have been issued as
stock grants (and are included in the above outstanding shares) and
approximately 200,000 are reserved for issuance pursuant to outstanding
unvested options exercisable at $0.50 per share; (ii) outstanding options
to purchase 970,000 shares exercisable at $0.20 per share outside of this
plan; (iii) outstanding Series A Warrants to purchase 200,000 shares
exercisable at $0.50 per share; (vi) a promissory note in the amount of
$25,000, interest for which is payable in 20,000 shares and which is
secured by 50,000 unissued shares; and (v) outstanding obligations to issue
1,637,000 shares pursuant to agreements entered into for various
employment, consulting, and incentive arrangements. Except as set forth in
this Section 2.2, or except as set forth in Schedule 2.2, (a) no shares of
the Target Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by
the Target Company; (b) there are no outstanding debt securities; (c) there
are no outstanding shares of capital stock, options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of
capital stock of the Target Company, or contracts, commitments,
understandings or arrangements by which the Target Company is or may become
bound to issue additional shares of capital stock of the Target Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible
into, any shares of capital stock of the Target Company; (d) there are no
agreements or arrangements under which the Target Company is obligated to
register the sale of any of its securities under the Securities Act of
1933, as amended (the "1933 Act"); (e) there are no outstanding securities
of the Target Company which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by
which the Target Company is or may become bound to redeem a security of the
Target Company; (f) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of
the shares as described in this Agreement; (g) the Target Company does not
have any stock appreciation rights plans or agreements or any similar plan
or agreement; and (h) there is no dispute as to the class of any shares of
the Target Company's capital stock.
2.3 Directors and Officers. The names and titles of all directors
and officers of the Target Company as of the date of this Agreement are as
set forth in Schedule 2.3.
2.4 Authorization; Enforcement; Compliance with Other Instruments.
(i) The Target Company has the requisite corporate power and authority to
enter into and perform all actions required under this Agreement; (ii) the
execution and delivery of this Agreement by the Target
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Company and the consummation by it of the transactions contemplated hereby
have been duly and validly authorized by the Target Company's Board of
Directors and no further consent or authorization is required by the
Company, its Board of Directors, or its shareholders; (iii) this Agreement
has been duly and validly executed and delivered by the Target Company;
and (iv) this Agreement constitutes the valid and binding obligations of
the Target Company enforceable against the Target Company in accordance with
its terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
2.5 No Conflicts. The execution, delivery and performance of this
Agreement by the Target Company and the consummation by the Target Company
of the transactions contemplated hereby will not (i) result in a violation
of the Articles of Incorporation or the Bylaws, or (ii) conflict with, or
constitute a material default (or an event which with notice or lapse of
time or both would become a material default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
material agreement, contract, indenture mortgage, indebtedness or
instrument to which the Target Company is a party, or result in a violation
of any law, rule, regulation, order, judgment or decree (including United
States federal and state securities laws and regulations) applicable to the
Target Company or by which any property or asset of the Target Company is
bound or affected. Except as disclosed in Schedule 2.5, the Target Company
is not in violation of any term of, or in default under, the Articles of
Incorporation or the Bylaws, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Target Company, except for
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the
aggregate have a Material Adverse Effect on the Target Company. The
business of the Target Company is not being conducted, and shall not be
conducted, in violation of any law, statute, ordinance, rule, order or
regulation of any governmental authority or agency, regulatory or self-
regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect on the Target Company. Except as specifically contemplated
by this Agreement, and as required under the 1933 Act, the Target Company
is not required to obtain any consent, authorization, permit or order of,
or make any filing or registration (except the filing of a registration
statement) with, any court, governmental authority or agency, regulatory
or self-regulatory agency or other third party in order for it to execute,
deliver or perform any of its obligations under, or contemplated by, this
Agreement in accordance with the terms hereof.
2.6 Financial Statements. True copies of the financial statements
of the Target Company consisting of the balance sheets as of the fiscal
year ended December 31, 2001, the period ended August 31, 2002, (audited)
and the period ended September 30, 2002 (unaudited), and statements of
income, cash flow and changes in stockholder's equity for such year ended
December 31, 2001, and the period ended August 31, 2002 (audited), and
statements of income and cash flow for such interim period ended September
30, 2002 (unaudited) (the "Target Company Financial Statements"), have been
delivered to the Purchaser by the Target Company.
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The year-end statements and the financial statements for the period ended
August 31, 2002, have been examined and certified by Bierwolf, Nilson &
Associates, Certified Public Accountants. Said financial statements are
true and correct in all material respects and present an accurate and
complete disclosure of the financial condition of the Target Company as
of September 30, 2002, and the earnings for the periods covered, in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Target Company as
of the dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). These financial statements comply
in all material respects with the requirements of Item 7(a) of Form 8-K
promulgated by the SEC.
2.7 Liabilities. Except as set forth in Schedule 2.7, there are no
material Liabilities of the Target Company, whether accrued, absolute,
contingent or otherwise, which arose or relate to any transaction of the
Target Company, its agents or servants occurring prior to the period
covered by the Target Company Financial Statements which are not disclosed
by or reflected in the Target Company Financial Statements. As of the date
hereof, there are no known circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may hereafter give rise to
Liabilities, except in the normal course of business of the Target Company.
For purposes of this Agreement, the term "Liability" shall mean any
liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due), including
any liability for taxes.
2.8 Absence of Certain Changes or Events. Except as set forth in
this Agreement, since the period covered by the Target Company Financial
Statements there has not been (i) any material adverse change in the
business, operations, properties, level of inventory, assets, or condition
of the Target Company, or (ii) any damage, destruction, or loss to the
Target Company (whether or not covered by insurance) materially and
adversely affecting the business, operations, properties, assets, or
conditions of the Target Company. The Target Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Target Company have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
2.9 Litigation. Except as set forth in Schedule 2.9, to the best
knowledge and reasonable belief of the Target Company, there are no legal,
administrative or other proceedings, investigations or inquiries, product
liability or other claims, judgments, injunctions or restrictions, either
threatened, pending, or outstanding against or involving the Target
Company, or its assets, properties, or business, nor does the Target
Company know, or have reasonable grounds to know, of any basis for any such
proceedings, investigations or inquiries, product liability or other
claims, judgments, injunctions or restrictions. In addition, there are no
material proceedings existing, pending or reasonably contemplated to which
any officer, director, or
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affiliate of the Target Company or as to which any of the Shareholders
is a party adverse to the Target Company or has a material interest adverse
to the Target Company.
2.10 Taxes. Except as set forth in Schedule 2.5 above, all federal,
state, foreign, county, and local income, withholding, profits, franchise,
occupation, property, sales, use, gross receipts and other taxes (including
any interest or penalties relating thereto) and assessments which are due
and payable have been duly reported, fully paid and discharged as reported
by the Target Company, and there are no unpaid taxes which are, or could
become a lien on the properties and assets of the Target Company, except as
provided for in the Target Company Financial Statements, or have been
incurred in the normal course of business of the Target Company since that
date. All tax returns of any kind required to be filed have been filed and
the taxes paid, except as set forth in Schedule 2.5. There are no disputes
as to taxes of any nature payable by the Target Company.
2.11 Environmental Laws. The Target Company (i) is in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws "); (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct its business; and (iii) is in compliance with all terms and
conditions of any such permit, license or approval where, in each of the
three foregoing cases, the failure to so comply would have, individually or
in the aggregate, a Material Adverse Effect on the Target Company.
2.12 Accuracy of All Statements Made by the Target Company. No
representation or warranty by the Target Company in this Agreement, nor any
statement, certificate, schedule, or exhibit hereto furnished or to be
furnished by or on behalf of the Target Company pursuant to this Agreement,
nor any document or certificate delivered to the Purchaser by the Target
Company pursuant to this Agreement or in connection with actions
contemplated hereby, contains or shall contain any untrue statement of
material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading.
3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Target Company and the Shareholders as set
forth below. These representations and warranties are made as an
inducement for the Target Company and the Shareholders to enter into this
Agreement and, but for the making of such representations and warranties
and their accuracy, the Target Company and the Shareholders would not be
parties hereto.
3.1 Organization and Good Standing. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada with full power and authority to enter into and perform the
transactions contemplated by this Agreement. The Purchaser does not have
any subsidiaries or own any interest in any other entity.
3.2 Capitalization. As of the date hereof, the authorized capital
stock of the Purchaser consists of (i) 100,000,000 shares of common stock,
of which as of the date hereof, 22,750,000
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shares are issued and outstanding, and 5,000,000 shares of preferred stock,
none of which shares are issued and outstanding. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully
paid and nonassessable. Except as disclosed in Schedule 3.2 no shares of
the Purchaser's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Purchaser; (ii) there are no outstanding debt securities; (iii) there are
no outstanding shares of capital stock, options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock
of the Purchaser, or contracts, commitments, understandings or arrangements
by which the Purchaser is or may become bound to issue additional shares of
capital stock of the Purchaser or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Purchaser; (iv) there are no agreements or arrangements under which the
Purchaser is obligated to register the sale of any of its securities under
the 1933 Act; (v) there are no outstanding securities of the Purchaser which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Purchaser is or may
become bound to redeem a security of the Purchaser; (vi) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the shares as described in this Agreement;
(vii) the Purchaser does not have any stock appreciation rights plans or
agreements or any similar plan or agreement; and (viii) there is no dispute
as to the class of any shares of the Purchaser's capital stock.
3.3 Authorization; Enforcement; Compliance with Other Instruments.
(i) The Purchaser has the requisite corporate power and authority to enter
into and perform all actions required under this Agreement; (ii) the
execution and delivery of this Agreement by the Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
and validly authorized by the Purchaser's Board of Directors and no further
consent or authorization is required by the Purchaser, its Board of
Directors, or its shareholders; (iii) this Agreement has been duly and
validly executed and delivered by the Purchaser; and (iv) this Agreement
constitutes the valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
3.4 SEC Documents; Financial Statements. Since at least December 31,
1997, the Purchaser has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of Section 13(a) of the Securities Exchange Act of
1934, as amended (the "1934 Act") through and including the Form 10-QSB for
the period ended September 30, 2002, (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Purchaser has
delivered to the Target Company or its representatives, or they have had
access through XXXXX, true and complete copies of the SEC Documents. As of
their respective dates,
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the SEC Documents complied in all material respects with the requirements of
the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Purchaser included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the
financial position of the Purchaser as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). No
other written information provided by or on behalf of the Purchaser to the
Target Company which is not included in the SEC Documents, including,
without limitation, this Agreement and the Schedules and Exhibits attached
hereto, contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements therein, in the light
of the circumstance under which they are or were made, not misleading.
The Purchaser, or any of its officers, directors, employees, or agents have
not provided the Target Company with any material, nonpublic information
which was not publicly disclosed prior to the date hereof and any material,
nonpublic information provided to the Target Company by the Purchaser or
any of its officers, directors, employees, or agents prior to the Closing
Date shall be publicly disclosed by the Purchaser prior to the Closing Date.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby will not (i) result in a violation of the
Articles of Incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock of the Purchaser or the
Bylaws, or (ii) conflict with, or constitute a material default (or an
event which with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract,
indenture mortgage, indebtedness or instrument to which the Purchaser is a
party, or result in a violation of any law, rule, regulation, order,
judgment or decree (including United States federal and state securities
laws and regulations) applicable to the Purchaser or by which any property
or asset of the Purchaser is bound or affected. Except as disclosed in
Schedule 3.5, the Purchaser is not in violation of any term of, or in
default under, the Articles of Incorporation, any certificate of
designations, preferences and rights of any outstanding series of preferred
stock of the Company or the Bylaws or its organizational charter or bylaws,
or any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to
the Purchaser, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have a Material Adverse Effect on the
Purchaser. The business of the Purchaser is not
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being conducted, and shall not be conducted, in violation of any law, statute,
ordinance, rule, order or regulation of any governmental authority or agency,
regulatory or self-regulatory agency, or court, except for possible violations
the sanctions for which either individually or in the aggregate would not have
a Material Adverse Effect on the Purchaser. Except as specifically
contemplated by this Agreement, and as required under the 1933 Act, the
Purchaser is not required to obtain any consent, authorization, permit or
order of, or make any filing or registration (except the filing of a
registration statement) with, any court, governmental authority or agency,
regulatory or self-regulatory agency or other third party in order for it to
execute, deliver or perform any of its obligations under, or contemplated by,
this Agreement in accordance with the terms hereof.
3.6 Absence of Certain Changes. Except as disclosed in Schedule 3.6
or the SEC Documents filed at least five (5) days prior to the date hereof,
since September 30, 2002, there has been no change or development in the
business, properties, assets, operations, financial condition, results of
operations or prospects of the Purchaser which has had or reasonably could
have a Material Adverse Effect on the Purchaser. The Purchaser has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Purchaser have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
3.7 Litigation. To the best knowledge and reasonable belief of the
Purchaser, there are no legal, administrative or other proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions, either threatened, pending, or outstanding
against or involving the Purchaser, or its assets, properties, or business,
nor does the Purchaser know, or have reasonable grounds to know, of any
basis for any such proceedings, investigations or inquiries, product
liability or other claims, judgments, injunctions or restrictions. In
addition, there are no material proceedings existing, pending or reasonably
contemplated to which any officer, director, or affiliate of the Purchaser
is a party adverse to the Purchaser or has a material interest adverse to
the Purchaser.
3.8 Taxes. All federal, state, foreign, county, and local income,
withholding profits, franchise, occupation, property, sales, use, gross
receipts and other taxes (including any interest or penalties relating
thereto) and assessments which are due and payable have been duly reported,
fully paid and discharged as reported by the Purchaser, and there are no
unpaid taxes which are, or could become a lien on the properties and assets
of the Purchaser, except as provided for in the financial statements of the
Purchaser, or have been incurred in the normal course of business of the
Purchaser since that date. All tax returns of any kind required to be
filed have been filed and the taxes paid. There are no disputes as to
taxes of any nature payable by the Purchaser.
3.9 Environmental Laws. The Purchaser (i) is in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws "); (ii) have received all permits, licenses or other
10
approvals required of them under applicable Environmental Laws to conduct
its business; and (iii) is in compliance with all terms and conditions of
any such permit, license or approval where, in each of the three foregoing
cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect on the Purchaser.
3.10 Legality of Shares to be Issued. The shares of common stock of
the Purchaser to be issued by the Purchaser pursuant to this Agreement,
when so issued and delivered, will have been duly and validly authorized
and issued by the Purchaser and will be fully paid and nonassessable.
3.11 Accuracy of All Statements Made by the Purchaser. No
representation or warranty by the Purchaser in this Agreement, nor any
statement, certificate, schedule, or exhibit hereto furnished or to be
furnished by the Purchaser pursuant to this Agreement, nor any document or
certificate delivered to the Target Company pursuant to this Agreement or
in connection with actions contemplated hereby, contains or shall contain
any untrue statement of material fact or omits to state or shall omit to
state a material fact necessary to make the statements contained therein
not misleading.
4. Covenants of the Parties.
4.1 Corporate Records.
a. Simultaneous with the execution of this Agreement by the
Target Company, if not previously furnished, such entity shall deliver to
the Purchaser copies of the articles of incorporation, as amended, and the
current bylaws of the Target Company, and copies of the resolutions duly
adopted by the board of directors of the Target Company approving this
Agreement and the transactions herein contemplated.
b. Simultaneous with the execution of this Agreement by the
Purchaser, if not previously furnished, such entity shall deliver to the
Target Company copies of the Purchaser Articles, and the current bylaws of
the Purchaser, and copies of the resolutions duly adopted by the board of
directors of the Purchaser approving this Agreement and the transactions
herein contemplated.
4.2 Access to Information.
a. The Purchaser and its authorized representatives shall have
full access during normal business hours to all properties, books, records,
contracts, and documents of the Target Company, and the Target Company
shall furnish or cause to be furnished to the Purchaser and its authorized
representatives all information with respect to its affairs and business as
the Purchaser may reasonably request. The Purchaser shall hold, and shall
cause its representatives to hold confidential, all such information and
documents, other than information that (i) is in the public domain at the
time of its disclosure to the Purchaser; (ii) becomes part of the public
domain after disclosure through no fault of the Purchaser; (iii) is known
to the Purchaser or any
11
of its officers or directors prior to disclosure; or (iv) is disclosed in
accordance with the written consent of the Target Company. In the event
this Agreement is terminated prior to Closing, the Purchaser shall, upon
the written request of the Target Company, promptly return all copies of
all documentation and information provided by the Target Company hereunder.
b. The Target Company and its authorized representatives shall
have full access during normal business hours to all properties, books,
records, contracts, and documents of the Purchaser, and the Purchaser shall
furnish or cause to be furnished to the Target Company and its authorized
representatives all information with respect to its affairs and business
the Target Company may reasonably request. The Target Company shall hold,
and shall cause its representatives to hold confidential, all such
information and documents, other than information that (i) is in the public
domain at the time of its disclosure to the Target Company; (ii) becomes
part of the public domain after disclosure through no fault of the Target
Company; (iii) is known to the Target Company or any of its officers or
directors prior to disclosure; or (iv) is disclosed in accordance with the
written consent of the Purchaser. In the event this Agreement is
terminated prior to Closing, the Target Company shall, upon the written
request of the Purchaser, promptly return all copies of all documentation
and information provided by the Purchaser hereunder.
4.3 Actions Prior to Closing. From and after the date of this
Agreement and until the Closing Date:
a. The Purchaser and the Target Company shall each carry on its
business diligently and substantially in the same manner as heretofore, and
neither party shall make or institute any unusual or novel methods of
purchase, sale, management, accounting or operation.
b. Neither the Purchaser nor the Target Company shall enter
into any contract or commitment, or engage in any transaction not in the
usual and ordinary course of business and consistent with its business
practices.
c. Neither the Purchaser nor the Target Company shall amend its
articles of incorporation or bylaws or make any changes in authorized or
issued capital stock, except as provided in this Agreement.
d. The Purchaser and the Target Company shall each use its best
efforts (without making any commitments on behalf of the company) to
preserve its business organization intact.
e. Neither the Purchaser nor the Target Company shall do any
act or omit to do any act, or permit any act or omission to act, which will
cause a material breach of any material contract, commitment, or obligation
of such party.
f. The Purchaser and the Target Company shall each duly comply
with all applicable laws as may be required for the valid and effective
issuance or transfer of stock contemplated by this Agreement.
12
g. Neither the Purchaser nor the Target Company shall sell or
dispose of any property or assets, except products sold in the ordinary
course of business.
h. Neither the Purchaser nor the Target Company shall issue any
securities, or any rights to receive any securities, except that the Target
Company shall be permitted to complete its existing private stock offering
and issue up to 1,036,000 additional shares.
i. The Purchaser and the Target Company shall each promptly
notify the other of any lawsuits, claims, proceedings, or investigations
that may be threatened, brought, asserted, or commenced against it, its
officers or directors involving in any way the business, properties, or
assets of such party.
4.4 Submission of Transaction to Shareholders of Target Company. The
Target Company shall promptly submit to its shareholders the offer to
exchange their shares for shares of the Purchaser as set forth in this
Agreement and, subject to the fiduciary duties of the board of directors of
the Target Company under applicable law, shall use its best efforts to
obtain from each shareholder a subscription agreement to exchange the
shares. In connection with such offer, the Target Company shall prepare
and furnish to its shareholders a disclosure document meeting the
requirements of Rule 502(b) of Regulation D promulgated by the SEC. The
Purchaser shall furnish any information reasonably requested for such
disclosure document and shall have the right to review and provide comments
to the disclosure document prior to mailing to the shareholders of the
Target Company.
4.5 No Covenant as to Tax or Accounting Consequences. It is
expressly understood and agreed that neither the Purchaser nor its officers
or agents has made any warranty or agreement, expressed or implied, as to
the tax or accounting consequences of the transactions contemplated by this
Agreement or the tax or accounting consequences of any action pursuant to
or growing out of this Agreement.
4.6 Indemnification.
a. The Target Company shall indemnify Purchaser for any loss,
cost, expense, or other damage (including, without limitation, attorneys'
fees and expenses) suffered by Purchaser resulting from, arising out of, or
incurred with respect to the falsity or the breach of any representation,
warranty, or covenant made by the Target Company herein, and any claims
arising from the operations of the Target Company prior to the Closing
Date.
b. Purchaser shall indemnify and hold the Target Company and
any Shareholder harmless from and against any loss, cost, expense, or other
damage (including, without limitation, attorneys' fees and expenses)
resulting from, arising out of, or incurred with respect to, or alleged to
result from, arise out of or have been incurred with respect to, the
falsity or the breach of any representation, covenant, warranty, or
agreement made by Purchaser herein, and any claims arising from the
operations of Purchaser prior to the Closing Date.
13
c. Purchaser shall indemnify and hold Xxxxx Xxxxxxx
harmless from and against any loss, cost, expense, or other damage
(including, without limitation, attorneys' fees and expenses) resulting
from, arising out of, or incurred with respect to, or alleged to result
from, arise out of or have been incurred with respect to, any action or
omission of the Purchaser after the date of Closing.
d. At Closing Purchaser shall deliver an indemnification
agreement in form satisfactory to counsel for the Target Company in which
Xxxxx Xxxxxxx shall indemnify and hold the Target Company harmless from
and against any loss, cost, expense, or other damage (including, without
limitation, attorneys' fees and expenses) resulting from, arising out of,
or incurred with respect to, or alleged to result from, arise out of or
have been incurred with respect to, the falsity or the breach of any
representation, covenant, warranty, or agreement made by Purchaser herein,
and any claims arising from the operations of Purchaser prior to the
Closing Date.
e. The indemnity agreement contained herein shall remain
operative and in full force and effect, regardless of any investigation
made by or on behalf of any party and shall survive the consummation of the
transactions contemplated by this Agreement, but shall expire two years
from the Closing Date.
4.7 Publicity. The Purchaser and the Target Company agree that no
publicity, release, or other public announcement concerning this Agreement
or the transactions contemplated by this Agreement shall be issued by
either party hereto without the advance approval of both the form and
substance of the same by the other party and its counsel, which approval,
in the case of any publicity, release, or other public announcement
required by applicable law, shall not be unreasonably withheld or delayed.
4.8 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its own respective expenses incurred in
connection with the negotiation and preparation of this Agreement, in the
consummation of the transactions contemplated hereby, and in connection
with all duties and obligations required to be performed by each of them
under this Agreement.
4.9 Brokerage or Finders' Fees. Each of the parties hereto
represents that it has had no dealings in connection with this transaction
with any finder or broker who will demand payment of any fee or commission
from the other party.
4.10 Termination of Employment, Consulting, or Service Agreements.
All employment, consulting, or other service agreements to which the
Purchaser is a party shall be terminated at or prior to Closing, except as
provided in Sections 4.11 and 4.12, below.
4.11 Change of Transfer Agent. At or prior to Closing, the Purchaser
shall change the transfer agent for the company to Interwest Transfer Co.,
Inc., Salt Lake City, Utah; shall engage
14
Interwest as the transfer agent for its common stock; and shall transfer
all applicable books and records from the prior transfer agent to Interwest.
4.12 Change of Registered Agent. At or prior to Closing, the
Purchaser shall change its registered agent for the company in the State of
Nevada to the registered agent used or designated by the Target Company and
shall engage such registered agent as the registered agent for the
Purchaser in the State of Nevada.
4.13 Satisfaction of Outstanding Liabilities. At or prior to Closing
the Purchaser shall satisfy each and every outstanding Liability of the
company.
4.14 Notification of Stock Split. At or prior to Closing the
Purchaser shall furnish to the Target Company proof of compliance with SEC
Rule 10b-17 notice to the OTC Bulletin Board in connection with the most
recent one-for-fifty reverse stock split.
4.15 SEC Filings. Prior to Closing the Purchaser shall,
a. file with the SEC the quarterly report on Form 10-QSB for
the quarter ended September 30, 2002, and any reasonably necessary
amendments to prior filings with the SEC;
b. file with the SEC a current report on Form 8-K in compliance
with Item 1(b) of such form; and
c. file with the SEC and mail to its shareholders the notice
required pursuant to Rule 14f-1 of the 1934 Act at least ten (10) days
prior to Closing.
5. Conditions Precedent to the Purchaser's Obligations. Each and every
obligation of the Purchaser to be performed on the Closing Date shall be
subject to the satisfaction prior thereto of the following conditions:
5.1 Truth of Representations and Warranties. The representations and
warranties made by the Target Company in this Agreement or given on its
behalf hereunder shall be substantially accurate in all material respects
on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date.
5.2 Performance of Obligations and Covenants. The Target Company
shall have performed and complied with all obligations and covenants
required by this Agreement to be performed or complied with by it prior to
or at the Closing.
5.3 Officer's Certificate. The Purchaser shall have been furnished
with a certificate (dated as of the Closing Date and in form and substance
reasonably satisfactory to the
15
Purchaser), executed by an executive officer of the Target Company,
certifying to the fulfillment of the conditions specified in Sections 5.1
and 5.2 hereof.
5.4 Marketing Legal Opinion. The Purchaser shall have been furnished
with a copy of a written legal opinion issued to the Target Company not
more than fifteen (15) days prior to Closing, acceptable in form to the
Purchaser, certifying that the marketing practices of the Target Company,
including all actual and currently planned multi-level marketing efforts,
comply with and are lawful under any relevant material federal marketing
laws, rules, and regulations, or any such state requirements for any state
in which the Target Company is conducting business.
5.5 Corporate Legal Opinion. The Purchaser shall have been furnished
with an opinion from counsel for the Target Company (dated as of the
Closing Date), and addressed to Purchaser, in substantially the form set
forth in Exhibit "G."
5.6 No Litigation or Proceedings. There shall be no litigation or
any proceeding by or before any governmental agency or instrumentality
pending or threatened against any party hereto that seeks to restrain or
enjoin or otherwise questions the legality or validity of the transactions
contemplated by this Agreement or which seeks substantial damages in
respect thereof.
5.7 No Material Adverse Change. As of the Closing Date there shall
not have occurred any material adverse change, financially or otherwise,
which materially impairs the ability of the Target Company to conduct its
business or the earning power thereof on the same basis as in the past.
5.8 Shareholders' Execution of Subscription Agreement. Each of the
Shareholders shall have duly executed and delivered a Subscription
Agreement in the form as set forth in Exhibit "B" as of the Closing Date.
5.9 Non-accredited Shareholders. As of the Closing Date the Target
Company shall have not more than thirty-five (35) non-accredited
Shareholders as defined in Rule 501 of Regulation D promulgated by the SEC.
5.10 Number of Target Company Shares. At the Closing the number of
shares held by the Shareholders shall represent not less than ninety
percent (90%) of the total outstanding shares of the Target Company.
6. Conditions Precedent to Obligations of the Target Company. Each and
every obligation of the Target Company to be performed on the Closing Date
shall be subject to the satisfaction prior thereto of the following
conditions:
6.1 Truth of Representations and Warranties. The representations and
warranties made by the Purchaser in this Agreement or given on its behalf
hereunder shall be substantially
16
accurate in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made or
given on and as of the Closing Date.
6.2 Performance of Obligations and Covenants. The Purchaser shall
have performed and complied with all obligations and covenants required by
this Agreement to be performed or complied with by it prior to or at the
Closing.
6.3 Officer's Certificate. The Target Company shall have been
furnished with a certificate (dated as of the Closing Date and in form and
substance reasonably satisfactory to the Target Company), executed by an
executive officer of the Purchaser, certifying to the fulfillment of the
conditions specified in Sections 6.1 and 6.2 hereof.
6.4 Corporate Legal Opinion. The Target Company shall have been
furnished with an opinion from counsel for the Purchaser (dated as of the
Closing Date), and addressed to Target Company, in substantially the form
set forth in Exhibit "H."
6.5 Proof of Satisfaction of Liabilities. The Purchaser shall
provide to the Target Company evidence satisfactory to counsel for the
Target Company of the satisfaction of all Liabilities of the Purchaser as
of the Closing Date.
6.6 No Litigation or Proceedings. There shall be no litigation or
any proceeding by or before any governmental agency or instrumentality
pending or threatened against any party hereto that seeks to restrain or
enjoin or otherwise questions the legality or validity of the transactions
contemplated by this Agreement or which seeks substantial damages in
respect thereof.
6.7 No Material Adverse Change. As of the Closing Date there shall
not have occurred any material adverse change, financially or otherwise,
which materially impairs the ability of the Purchaser to conduct its
business.
6.8 No Liabilities. As of the Closing the Purchaser shall have no
Liabilities.
6.9 OTC Bulletin Board Quotation. Through the Closing the
Purchaser shall have retained the quotation of its common stock on the OTC
Bulletin Board.
6.10 Compliance with Takeover Provisions. Purchaser shall have
complied with all takeover or similar provisions of Nevada corporate law.
7. Change of Management. Upon and as a condition of Closing this
Agreement:
7.1 At Closing the Purchaser shall cause persons nominated by the
Target Company to be elected or appointed to serve as the sole directors of
the Purchaser effective immediately following the Closing of this
Agreement, and all existing officers and directors of the Purchaser at the
time of Closing shall tender their resignations effective immediately
thereafter. Prior to
17
Closing, and in compliance with Rule 14f-1 promulgated by the SEC, the
Target Company will furnish material information of such nominees to be
elected or appointed by the Target Company. Purchaser reserves the right
to refuse to cause the election or appointment of any or all such persons
as directors of Purchaser if, after review of the foregoing information
concerning said persons, it is the reasonable opinion of Purchaser that the
election of such persons would not be in the best interests of Purchaser.
Purchaser shall furnish such information to its shareholders, and file such
information with the SEC, in compliance with Rule 14f-1 at least ten days
prior to Closing.
7.2 The Target Company reserves the right to terminate this Agreement
if nominees selected by it are not elected or appointed as set forth above.
8. Closing.
8.1 Time and Place. The Closing of this transaction ("Closing")
shall take place at 00 Xxxx 000 Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx, at
10:00 am, on November 15, 2002, or at such other time and place as the
Purchaser and the Target Company shall agree upon. Such date, as may be
amended by such parties, is referred to in this Agreement as the "Closing
Date."
8.2 Documents To Be Delivered by the Target Company. At the Closing
the Target Company shall deliver to the Purchaser the following documents:
a. Executed copies of Exhibit "B" executed by all of the
Shareholders and the certificates for the number of shares of common stock
of the Target Company in the manner and form required by Section 1.1
hereof.
b. A stock certificate in the name of the Purchaser
representing not less than ninety percent (90%) of the outstanding shares
of stock of the Target Company.
c. The officer's certificate required pursuant to Section 5.3
hereof.
d. The legal opinions required pursuant to Sections 5.4 and 5.5
hereof.
e. A copy of a certificate of good standing from the State of
Nevada dated not more than twenty (20) days prior to Closing.
f. A signed consent and/or minutes of the Target Company's
directors approving this Agreement and each matter to be approved under
this Agreement.
g. Such other documents of transfer, certificates of authority,
and other documents as the Purchaser may reasonably request.
8.3 Documents To Be Delivered by the Purchaser. At the Closing the
Purchaser shall deliver to the Target Company the following documents:
18
a. Certificates for the number of shares of common stock of the
Purchaser as determined in Section 1.2 hereof.
b. The lockup agreements required pursuant to Section 1.6
hereof.
c. Proof of cancellation of the 20,000,000 shares as required
pursuant to Section 1.7 hereof.
d. The indemnification agreement as required pursuant to
Section 4.6(d).
e. The officer's certificate required pursuant to Section 6.3
hereof.
f. The legal opinion required pursuant to Section 6.4 hereof.
g. A certificate of good standing from the State of Nevada
dated not more than twenty (20) days prior to Closing.
h. A signed consent and/or minutes of the Purchaser's directors
approving this Agreement, assuming the obligations set forth in Sections
1.3, 1.4, and 1.5 hereof, and reserving the shares for such obligations,
and each other matter to be approved under this Agreement.
i. All original books and records of the Purchaser reasonably
requested by the Target Company, including, but not limited to, (i) the
original or state certified copies of the articles of incorporation and all
amendments thereto; (ii) the original copy of the current bylaws;
(iii) original or corporate certified copies of all board and shareholder
actions or minutes since inception; (iv) a copy of the Form 10 registration
statement, including exhibits, and all amendments thereto; (v) all SEC
filings, including exhibits, since December 31, 1997, not otherwise
available in electronic format on the SEC web site; (vi) signature pages
bearing original signatures for all documents filed electronically with the
SEC within the last five years; and (vi) all corporate tax returns for the
years beginning 1997 with supporting documentation.
j. Such other documents of transfer, certificates of authority,
and other documents as the Target Company may reasonably request.
9. Termination and Waiver.
9.1 Method of Termination. This Agreement may be terminated at any
time prior to closing:
a. by mutual written consent of the Purchaser and the Target
Company;
19
b. by the Shareholders owning a majority of the outstanding
shares of the Target Company, acting together, by the Purchaser, or by the
Target Company, by written notice to the other parties hereto if the
exchange of the shares as contemplated by this Agreement shall not have
been consummated on or before November 30, 2002 (or such later date as
these parties may agree), provided that the party or parties terminating
this Agreement shall not then be in material breach of any of its or their
obligations under this Agreement;
c. by the Purchaser if (i) there has been a material
misrepresentation, breach of warranty, or breach of covenant by the Target
Company or any Shareholder under this Agreement, or (ii) any of the
conditions precedent of Closing set forth in Section 5 have not been met on
or before the Closing Date, and, in each case, the Purchaser is not then in
material default of its obligations hereunder; or
d. by the Target Company if (i) there has been a material
misrepresentation, breach of warranty, or breach of covenant by the
Purchaser under this Agreement, or (ii) any of the conditions precedent of
Closing set forth in Section 6 have not been met on or before the Closing
Date, and, in each case, the Target Company is not then in material default
of its obligations hereunder
9.2 Effect of Termination.
a. In the case of any termination of this Agreement, the
provisions of Sections 4.2, 4.6, 4.8, and 11.2 shall remain in full force
and effect.
b. Upon Termination of this Agreement as provided in Section
9.1(a), except as stated in subsection (a) above, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of any party hereto or their respective directors, officers,
employees, agents, or other representatives.
c. In the event of termination of this Agreement as provided in
Section 9.1(b), (c), or (d) hereof, such termination shall be without
prejudice to any rights that the terminating party or parties may have
against the breaching party or parties or any other person under the terms
of this Agreement or otherwise.
9.3 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits
thereof. Any waiver effected pursuant to this Section 9.3 shall be binding
upon all parties hereto. No failure to exercise and no delay in exercising
any right, power, or privilege shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power, or privilege preclude
the exercise of any other right, power, or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a waiver of
any preceding or subsequent breach of the same or any other covenant or
agreement. The rights and remedies of each party under this Agreement are
in addition to all other rights and remedies, at law or in equity, that
such party may have against the other party or parties.
20
10. Post-Closing Covenants.
10.1 Registration Rights; Lockup of Registered Shares. Within thirty
(30) days following the Closing, the Purchaser shall prepare and file a
registration statement on Form SB-2, or other appropriate form of
registration statement, to resister for resale approximately 3,426,500 of
the shares (the "Registerable Shares") to be issued to the shareholders of
the Target Company at Closing, as designated in Exhibit "A." The
requirement to register the Registerable Shares shall be subject to the
following conditions:
a. Lockup Agreements. Each of the shareholders beneficially
owning in excess of 40,000 Registerable Shares to be included in the
registration shall execute and deliver a lockup agreement in form as set
forth in Paragraph 5(a) of Exhibit "B."
b. Registration Rights Agreement. Each of the shareholders
holding Registerable Shares to be included in the registration shall
execute and deliver at Closing the Registration Rights Agreement in form as
set forth in Exhibit "I."
10.2 Prohibition of Certain Actions. The Shareholders agree that for
a period of twelve (12) months from the Closing Date they will cause the
Purchaser to take all steps reasonably required to prevent the Purchaser
from:
a. reverse splitting the outstanding stock of the Purchaser,
except as may be reasonably required to meet the inclusion or maintenance
requirements of NASDAQ or any exchange upon which the stock of the
Purchaser is traded, or upon approval of shareholders holding not less than
eighty percent (80%) of the voting power of the Purchaser;
b. selling all or substantially all of the assets of the
Purchaser without the approval of shareholders holding not less than eighty
percent (80%) of the voting power of the Purchaser; and
c. issuing shares for cash at less than $1.00 per share, except
for obligations existing at Closing to issue shares in connection with the
exercise of options or warrants as set forth herein, and unless after
ninety (90) days following Closing the average closing sale price of the
common stock for the twenty (20) days prior to such proposed issuance shall
be less than $1.50.
10.3 Stock Option/Stock Issuance Plan. Within thirty (30) days
following the Closing, the Purchaser shall adopt a Stock Option/Stock
Issuance Plan similar to the existing plan of the Target Company, which
plan shall be limited to 1,500,000 shares during the eighteen (18) months
following the Closing, unless such number shall be increased by the vote of
shareholders holding not less than eighty percent (80%) of the voting power
of the Xxxxxxxxx.
00
00. Miscellaneous.
11.1 Notices. All notices, requests, demands, and other
communications required to or permitted to be given under this Agreement
shall be in writing addressed to the other party at the address set forth
below and shall be conclusively deemed to have been duly given when
(i) hand-delivered to the other party; (ii) received when sent by facsimile
at the facsimile number set forth below; (iii) the next business day after
same have been deposited with a national overnight delivery service,
shipping prepaid, addressed to the parties as set forth below with next-
business day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider; or
(iv) three business days after mailing if mailed from within the continental
United States by registered or certified mail, return receipt requested,
addressed to the parties as set forth below.
Purchaser: 0000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, President
Facsimile No.: (000) 000-0000
With Copy to: Xxxxxx X. Xxxxx
Attorney at Law
0000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Target Company: 000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, CFO
Facsimile No.: (000) 000-0000
With Copy to: Xxxxxx X. Xxxxx
Attorney at Law
00 Xxxx 000 Xxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Shareholder: As provided in Exhibit "B"
11.2 Default. Should any party to this Agreement default in any of
the covenants, conditions, or promises contained herein, the defaulting
party shall pay all costs and expenses, including a reasonable attorney's
fee, which may arise or accrue from enforcing this Agreement, or in
pursuing any remedy provided hereunder or by the statutes of the State of
Utah.
22
11.3 Assignment. This Agreement may not be assigned in whole or in
part by the parties hereto without the prior written consent of the other
party or parties, which consent shall not be unreasonably withheld.
11.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and assigns.
11.5 Partial Invalidity. If any term, covenant, condition, or
provision of this Agreement or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder
of this Agreement or application of such term or provision to persons or
circumstances other than those as to which it is held to be invalid or
unenforceable shall not be affected thereby and each term, covenant,
condition, or provision of this Agreement shall be valid and shall be
enforceable to the fullest extent permitted by law.
11.6 Entire Agreement. This Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all negotiations, representations, prior discussions,
letters of intent, and preliminary agreements between the parties hereto
relating to the subject matter of this Agreement.
11.7 Recitals, Schedules, and Exhibits. The recitals, schedules, and
exhibits to this Agreement are incorporated herein, and, by this reference,
made a part hereof as if fully set forth at length herein. The following
is a list of Exhibits to this Agreement:
Exhibit "A" List of Shareholders
Exhibit "B" Form of Subscription Agreement
Exhibit "C" List of Option and Warrant Holders
Exhibit "D" List of Shares Issuable Pursuant to
Contractual Obligations
Exhibit "E-1" List of Purchaser Shareholders Owning 350,000
Shares Subject to Lockup
Exhibit "E-2" List of Purchaser Shareholders Owning
2,071,170 Shares Subject to Lockup
Exhibit "F-1" Form of Lockup Agreement for Purchaser
Shareholders Owning 350,000 Shares
Exhibit "F-2" Form of Lockup Agreement for Purchaser
Shareholders Owning 2,071,170 Shares
Exhibit "G" Form of Target Company Legal Opinion
Exhibit "H" Form of Purchaser Legal Opinion
Exhibit "I" Form of Registration Rights Agreement
11.8 Interpretation of Agreement. This Agreement shall be interpreted
and construed as if equally drafted by all parties hereto.
11.9 Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement, or in any
writing delivered pursuant hereto or
23
at the Closing, shall survive the Closing and the consummation of the
transactions contemplated hereby (and any examination or investigation by or
on behalf of any party hereto) until the first anniversary of the Closing
Date.
11.10 Further Action. The parties hereto agree to execute and
deliver such additional documents and to take such other and further action
as may be required to carry out fully the transactions contemplated herein.
11.11 Amendment. This Agreement or any provision hereof may not
be changed, terminated, or discharged except by means of a written
supplemental instrument signed by the party or parties against whom
enforcement of the change, termination, or discharge is sought.
11.12 Full Knowledge. By their signatures, the parties
acknowledge that they have carefully read and fully understand the terms
and conditions of this Agreement, that each party has had the benefit of
counsel, or has been advised to obtain counsel, and that each party has
freely agreed to be bound by the terms and conditions of this Agreement.
11.13 Construction. The descriptive headings of the various
sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof. As
used in this Agreement, the masculine, feminine, or neuter gender, and the
singular or plural, shall be deemed to include the others whenever the
context so requires.
11.14 Counterparts. This Agreement may be executed in any number
of counterparts and all such counterparts taken together shall be deemed to
constitute one instrument. Delivery of an executed counterpart of this
Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by facsimile also shall deliver a
manually executed counterpart of this Agreement, but the failure to deliver
a manually executed counterpart shall not affect the validity,
enforceability, or binding effect of this Agreement.
11.15 Governing Law and Venue. This Agreement shall be governed
by and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Utah. Any and all actions to enforce the
provisions of this Agreement shall be brought in a court of competent
jurisdiction in the County of Salt Lake, State of Utah, and in no other
place.
IN WITNESS WHEREOF, the parties hereto executed the foregoing Stock-
For-Stock Exchange Agreement as of the day and year first above written.
PURCHASER: Tropical Leisure Resorts, Inc.
By /s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx , President
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TARGET COMPANY: eWorldMedia, Inc.
By /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx, President
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